Former Bayern Munich goalkeeper Oliver Kahn says head coach Carlo Ancelotti will be "under observation" this season and has warned the club they must start to spend big to remain among European football's elite.

Bayern won their fifth successive Bundesliga title in Ancelotti's first campaign in charge last term but exited the Champions League in the quarter-finals, losing 6-3 on aggregate to eventual winners Real Madrid.

The Italian has overseen an unconvincing 2017-18 pre-season, Bayern needing penalties to defeat Borussia Dortmund earlier this month following a 2-2 draw in the DFL-Supercup.

Although they dispatched third-tier side Chemnitzer 5-0 in the DFB-Pokal, Kahn knows Ancelotti still has plenty to prove in Germany, despite his impressive record with the likes of AC Milan, Chelsea, Paris Saint-Germain and Madrid. 

"Of course Carlo Ancelotti is under observation," he told Kicker. 

"The benchmark is the Champions League, as with [Ancelotti's predecessor] Pep Guardiola, but also, the integration of young players into the team is a criterion."

Of some poor friendly results, including losses to Napoli, Liverpool, Inter and Milan, Kahn said: "If, according to my experience, the preparations were very bumpy, this also carried on into the season."

Bayern broke their transfer record to sign Corentin Tolisso from Lyon for €41.5million in June and captured James Rodriguez on a cost-effective two-year loan move from Ancelotti's former side Madrid.

The outlay for Tolisso appears insignificant compared to the extraordinary sum of €222m Paris Saint-Germain parted with to prise Neymar away from Barcelona. 

Bayern president Uli Hoeness has made no secret of his distaste for the state of the inflated transfer market, but Kahn has warned his old side they may have to be willing to increase their expenditure to retain a competitive advantage in the Champions League.

"If Bayern want to be among the three, four best teams in Europe, there is no way around [the fact] that they have to get involved with the very big transfers," he said.

And Kahn also feels his former club's sustained dominance of the Bundesliga could make it more difficult to attract star talent from elsewhere. 

"It is not harmless for Bayern if the competition for the championship in the league remains so unbalanced," he said.

"If the German championship is nothing special anymore, it would make me, as a player, no longer have fun. This is why [the] competition has to become stronger.

"In Spain and England the favourite teams fight hard for the title." 

Bayern open the Bundesliga season at home to Bayer Leverkusen on Friday.