Formula One Constructors -Strategic Management

In this paper i will analyse and evaluate competetivenes of Formula one Motorsport industry and its dynamic characterictisc influenced by external and internal factors to critically understand and explore strategic management thoery of sustained competetive advantege and its significant importance in order of carrier succes of any Formula one constructors .I will try to clerly identify external and internal issues and changes , affecting (facing ) development of sustainable competetive advantage within formula One Teams , by presenting and demonstrating appropierate strategic management frameworks and approches . F1 industry its one of the most competetive and dynamic popular motorsport and specialist business worth E 350 billion to E400 billion(A. T Kearney Zygband et, 2011) ,within which many teams , effectivelly compete with each other in designing and constructing bolids prototypes to achieve succes and survival and competetive advantege agaisnt other rivals .There is significat questions frustrating F1 constructors since decades , regarding to how most effeectively and efficientyly achieve competetive advantege for thier teams to outperform and step ahead of other competitors in industry and how to achieve sustainable competetive advantege for dominance in numbers of seasons . This essay will be devided on four part in which first part will give brief overview about Formula one Industry, then i will demonstrate theories related to sustiable comepetetive advantege with reflection to achievement of the success in the Formula One motorsport .In the Next part of this paper i will critically eveluate generic model and strategic capabilities based on resource based view and knowledge based view of the startegy which requires constant reference to the resources and knowledge of competitors to achieve competitve advantege . In this section i will focus on the Williams ‘s team during thier dominance and technological reveloution in mid of 1990, where also i w ill provide my own point of view of why they didnet keep thier dominance and what they could do better at this time to sustain thier sucess futher .This is industry is strongly competetive and is perceived as very dynamic and very difficult to sustain at the leading position for numbers of season which is proved by the fact that since the start of of the World Championship (1950) only two F1 constructors won the Chapionship consecuitevely more than four times MClaren(1988-1291) and Ferrari (1999-2004). In the end i will write my opinion of which team has created the best source of the competetive advantege and also finally i will draw conclusion based on my analysys and my findings obtained throughout analysing of this case .Formula one Motorsport became one of the most popular and technologicaly innovative motorsport and sport TV event around the world which enjoyed the third highest audience in the world staright after Olimopics and World cup soocer . Unfortunately being fromula O ne constructor requires to generate sponsor revenues through increasignly sophiticated marketing strategies and also need to design , develop manufacture and race open wheel signle seat racecar.This is extremly expensive and requires huge amount of funds from sponsors and stakholders which are essentila to create competetive advantage againts key marekt competitors by implemeting new revolutionary technology innovation into their bolids sucha as the most powerful and reilable engines with innovative design of the chasis with all aerodymanims . in 2008 the top 3 teams were Ferrari , Mclaren and Williams cvbvd ciag dalszy ,. t is not only an season motorsport event its a strong and competetive individual industry within which F1 constructors are business organisations competing with each other for the survival and the success in the every single F1 season . its seen to to be very simply enough to achieve sustained competetive advantege and succeed in in this indystry while having the best car ,the best driver , the best supporting team and all supported by finanse from sposnsors.Unfortunaterly it does not so simple as not many F1 constructor up to date were not able to manage and linked all available all stretegic capabilieties based on resources and competence to work effectively together to achieve sustained competetive advantege in long term . such as 3 or 4 year or more . Todays strongly competetive and dynamic business environmnet requires from all organsiation and companies to seek developments of their susiable competetive advantege which enables then to stay attractive and innovative for the market and survive in competiton with their competitors .According to Alderson (1965) firms should strive for unique characteristics in order to distinguish themselves from competitors in the eyes of the consumer for a long period of time that is, sustainable competitive advantage. Sustainable competitive advantage is the ability to offer superior customer value on a n enduring or consistent basis, a situation in which competitors are unable to easily imitate the firm? capacity for value creation (Collis and Montgomery, 1995). According to Barney (1991), sustainable competitive advantage arises when the firm? s resources are valuable and the resources help the firm create valuable products and services, they are rare and competitors can not get acces to them, inimitable competitors cannot easily replicate them and appropriate when the firm owns them and can exploit them . .36 KCA JOURNAL OF BUSINESS MANAGEMENT: VOL. , ISSUE 1 (2009). The competetive advantege of an organisation such as Formula One construcotors is likely to be based on strategivc capabilities that are valuable and contribute to its long -term survival or competetive advantage . There are two main components of strategic capabilities resources and competence(ksiazka kopiowana)Resources are the asstes that organisation have or can call upon and competence are the ways those assets are used or deployed effectively.In this case of formula one constructores resouresec are machinces ,patents ,computer systems , managers , engenires and deisgners as resources are all assets controlled and possessed by the firm (Barney, 1991) and competences are productivity ,organisational values, managerial competencies, organisational structure, process and technology ,knowldege flexibility and experance ,skills as a core competencies according to Prahalad and Hamel (1990) and which are the collective knowledge about how to coordinate the business.Unfortynately efficiency and effectiveness of physical resources or financial resources or the people in F1 team depend not just on their existence by on the system and processes by which they are managed ,its depend of reletaioshiops and cooperation of the people in the team thier adaptability, thier innovatory capicity and and thier experciance and learnbing about what works well what does not which and develop core competencies wit hin the firm or team .Core competences are crucial as they linked set of skills ,activities and recourses that togehter deliver value,differentiate business from its competitors . To core competences of teams competing in F1 we may include effective communication between the constructors and the driver, ability to negotiate sponsorships, leadership and motivating abilities of CEOs, efficient use of the budget and royalties, skills, knowledge and experience of the team as a whole. According to Teece (Teece, et al. 1997) firm’s capabilities necessary for effective operations ill not support company’s superior performance. Strategic capabilities of the firm or in this case F1 costructors team can not be static they need to dynamic and change ,renew and recreate to meet the needs of the changing environmnet where Formula one Industry is most technologically developed and competretive motorsprort industry . Dynamic capabilities confirms that in order to remain competitive c ompany must possess the competence to renew and adjust their strategic capabilities to operate effectively and efficiently in changing environment.As It is significant for F1 team to work on design and development of both engine and car chassis on everyday changing basis, to maintained existing but also retain new sponsors which are crucial for any F1 team , to continuingly motivate and also recruit the new talents. These knowledge resources and capabilities, resulting from learning processes implies an improvement in response capacity through a broader understanding of the dynamic and competetive environment (Dodgson, 1993; Sinkula, 1994).The organizational learning process such as in F1constructors Team helps tem to discover why problems are seen in a one dimensional frame work posing questions of the current systems and challenging paradoxes as they occur (Murray and Donegan, 2003) . [†¦ ] We believe that the careful study of how capabilities and competition mutually influen ce each other could be one of the next great opportunities for the field of strategy research. †Henderson and Mitchell, introduction to the ‘Summer 1997 Special Issue: Organization and Competitive Interactions’ of the Strategic Management Journal. The issue of firm performance and what startegic approch they should select to achieve sutainale competetive advantege has been disccuesed for decades and encompasses most other questions that have been raised in the field, as for instance, why firms differ, how they behave, how they choose strategies and how they are managed (Porter,1991) (Ansoff, 1976). n this case there are two different startegic approches are presented the positioning approach and the resource based view . In itiated in the mid-1980s by Wernerfelt (1984), Rumelt (1984) and Barney (1986), the resource-based view (RBV) has since become one of the dominant contemporary approaches to the analysis of sustained competitive advantage. A central premise of the resource-based view is that firms compete on the basis of their resources and capabilities (Peteraf and Bergen, 2003). Resource based view theories suggest that in order to take the part of F1 race the team must retain tangible resources such as highly qualified technical staff which would include race engineers, designers, aerodynamicist, composite expert, system specialist, but also CEO, budget, sponsorship and also the driver as the core competent resource inluencing succes of the team .The positioniong approch for business says that the best way to predict the future is to create it, and companies are often able to position themselves in ways which set and exploit the basis of competition to their advantage. The positioning approach is strongly linked with Porter strategic view , who argues that in order to achieve superior performance company must to understand the structure of the industry, in which it operates.This will allow the firm to adjust their strategy and exploit the underlying economic factors within the industry even better than their competitors do which might allow to outperform them . From other point of view of (Barney, 1991, Rumelt, 1984) this approch is criticised , as it assumes that all businesses operates on an equal organisational field. As Formula one industry is quite closed industry , creates field of constant formal or imformal shareing of common technoligies innovations , regulationa as also tacticts and stategic approches .According to Porter (1985) attractiveness of the sector can be defined by the implementation of the five forces model. Implication of this model to F1 motorsport industry presents that this industry is very difficult to enter industry with the low threat of new entrants due to high start-up costs and investments , there is quite low bargain power of customers due considerable number of viewers, power of suppliers is not really strong and very low level of potential substitute within industry but with very strong competetive high intensity of rivalry .F1 has passed trough maturity stage around 1970-1980’s, an this demonstrat that the major players are in industry for good while what makes them well experiance and determined to achive competetive advantege agaist other top F1 constructors . And this raises the question what can be done to obtain and sustain competitive advantage in such environment? According to the positioning approach business can gain competitive advantage either through cost leadership or product differentiation (Porter, 1979).A cost leadership strategy requires that a business define the source of cost advantage, which allows it to sell its products and services cheaper than rivals. Differentiation strategy on the other hand concentrates mostly on developing the product which will differ from those manufactured by a business’s competitors. within this type of industry sucha s Formula one motorsport there is no aplication for cost leadership stertegy as F1 constructor are focused on winning championships not looking at spending cost alomst at all .Formula one Teams using differentiation strategy which is enebling them to used thier avaiable resources in most innovative and attriactive way to achieve competetive advantege which something proved that this is still not enough to suceeddd in the longer term as all F1 constructors are strongly focus on differrttinagn and constant innovating of their teams agaisnt oders competiotrs .Another singnisicant external factor incluencing sucess of any constructors team are shifts anbd changes in environmnt which can suddenly change the value and importance of particular resoures and this is fundamental to understand and predict this before other to sustain advantege and this is what Williams constructors team has done in mid of 1990s. Williams team presents technological revolution in mid of 1990 by focusing on engerring aspetc which enables them to use many of innovations developed by othe rs teams .During the period 1992-1994 Williams cars won 27 out of 48races and they secured F1 consctrucor title for there years and they won Race championship in 1992 aand 1993 . By both Frank Williams and Patrick Head designs which were even more functional and innovative than this used in competitiors teams ,they makes thier bolides both very fast and reliable. The car development process was always top priority for Mr . Willinams and Patrick Head where importance of drivers took second less important place in their management of competetive advantege .Unfortunately they didnet realised importance of the good test driver role which who could help technicain to define and solve the probllems with the car to developed thier deisgn and set up evnen more effectively . Main a source of competitive advantage for Wiilliam team was thier technical excellence created by William and Head and attention in building relationships with thier engine supplier Renault which was very valuable due t o human and finacnial resources invested into the project.Most importnat for Williams’s team was to gain a constructor leadership, by the development of innovative combination of engine and the car chassis. Thier differentiated strategy which focused on the deelopment process of engine and the boilids become also a base of the sustainable competitive advantage where driver was perceived as less important movable resources as they do not belive putting milions in to driver is nessersary , since the development of outstanding bolide . Frank williams and his ‘masculino' approch unfortunateky was negatively effecting drivers relationships within thier F1 team .Actually Williams team dominance in mid 1990 was also resulted of many other internal and external factors such as innovative development of thier competitors such as ground effect and active suspension developed by Lotus , carbon-composite monocoque developed by McLaren and and semi automatic gearbox developed by Fer rari . Close business relations with Renault and priceless long-lasting relationship between Patrick Head and Frank Williams. Frank strategy was successful only for three season in constructors championship, longer due to series of negative events occurring between 1994 and 1995 .Williams team the best driver Ayrton Senna, died in the tragic accident during a San Marino Grand Prix in Imola in 1194. This accident shekad with whole Formula one industry as A. Senna was the most talented driver in F1. After year In 1995 Renault, decided to start manufacture, the engines as well for Benetton team. Furthermore one of Williams ex designers helped Benetton with car development, in which many technological innovations used by Williams in thier boilids influencing slow process of loosing competetive advantege of their tea . Another External factor which imacpt on fuutere ledarship of williams team was that M.Schumacher joined Benneton team . Thankfully for Williams, Schumacher shortly moved t o less competitive Ferrari, giving Williams team a clear way for gaining their sustain competetive advantege lost. Frank strategy was successful only for three season in constructors championship, longer due to series of negative events occurring between 1994 and 1995 . Williams team the best driver Ayrton Senna, died in the tragic accident during a San Marino Grand Prix in Imola in 1194. This accident shekad with whole Formula one industry as A. Senna was the most talented driver in F1.After year In 1995 Renault, decided to start manufacture, the engines as well for Benetton team. Furthermore one of Williams ex designers helped Benetton with car development, in which many technological innovations used by Williams in thier boilids influencing slow process of loosing competetive advantege of their tea . Another External factor which imacpt on fuutere ledarship of williams team was that M. Schumacher joined Benneton team . Thankfully for Williams, Schumacher shortly moved to less com petitive Ferrari, giving Williams team a clear way for gaining their sustain competetive advantege lost.The critical elements which impact Williams losss of sustainable competitive advantage after mid of 1990 were based of their priority focus on developments of engerering resources to win constructors championship , and laack of startegic management of thier capabilieteis and ability to linked then to each other to achieve superrior performance avoinding crating disadvantege threshold capabilities. I am of the opinion that in some way it created disadvantage for the team. Previously mentions Knowledge based view mentioned confirmed how important or even most important are human resources and the ability to share gathered information. nfortynatek within Williams F1 team this approcha was not really respected especially in relation to the role of the dirver and thier proffesional knowledge that they possesed even if they changed each season . Aityan (2012) described that to expect a high level of loyalty from the employee, the organisation should show similar or even higher level of loyalty to them where in Williams team , Patrics Head together with Franks autocratic leadership style to drivers does not practice that at all and was also blocking flow of valuable information between departments . hats why drivers were leaving after one season (e. g. Mansel, Prost). I i have described Formula one indusrty as closed industry with low probabiolity of new entrants FranK did NOT realised that by this management approch he was disadbventing his team by letting drivers and even engeneires share their knowlded and concepts obtiane in williams team with other competitor teams . According to Pickett (2004) when people leave, their knowledge also does. . Tymon et al. 2010) found that the key predictors of employee’s intention to leave are satisfaction with and pride in the organization and perception of it being socially responsible. Williams’s management to secure their competitive advantage should have a better developed career developemnt program for their key employees where they should be empowerd in decision makin process within the team and and drivers should be respect and not treated as the recruits . The best teamFerrari would not be able to achieve the succes even with this all tangible resources without proper and effective management strtegies allow all this available resources to be linked together and effiently Ferrari apooitned new boos who was twenty five year old, connected to Fiat owners, lawyer Luca di Montezemolo perceived as young and not necessary familiar with the industry surprisingly he appeared to be a perfect fit for the role due to his managerial skills and ability to put the order into day to day operations.At the same time new technical director – Mauro Forghieri and a new leading driver Niki Lauda were appointed. Ferrari constructors team with thier autocratic style and thier respect for the import ance of human resoursec in any developmnets precess proved to crrate and sustain the best source of competetive advatege by linkeages all tangible and in tangible resourses working together in appropiete manner wirh great copoeration of the key members of the team within the team .