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Russell Hotten, in his book titled 'Formula One'[1], quite aptly starts with the following line, 'Formula One is where sport meets technology for the business of entertainment'.

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Introduction

INTRODUCTION Russell Hotten, in his book titled 'Formula One'1, quite aptly starts with the following line, 'Formula One is where sport meets technology for the business of entertainment'. The core concept behind this industry is most definitely 'motorsport racing'. By definition, Formula One is a set of technical regulations for single-seater racing cars, which is published annually by the FIA (F�d�ration Internationale de l'Automobile). Motorcar racing started in the late 1800s and in those days existing cars were simply raced on a track. The sport was formalised by the early 1900s and restrictions were made on weight, cylinder capacity and seats to give rise to the name 'Formula One' by 19482. The motorsport industry contains various types of car racing from F1, F3, Grand Prix, and so forth. This report will concentrate on a brief industry analysis of the F1 industry as to where it is today and where it is likely to go in the future. AN INDUSTRY OVERVIEW What started out in 1950 as seven Grand Prix races with barely four constructor teams, gradually peaked to host, as of today, 17 races in a year with a total of 12 constructors participating with two teams each representing them. Although primarily categorised as being a part of the motorsport industry, F1 most definitely has links to more than just this environment. Industries directly linked to F1 are those with technical concerns related to the field such as engine manufacturers, chassis manufacturers, tyre industry, lubricants and fuel industry and so forth. Companies such as Bridgestone, Honda, Cosworth and Mobil all have their incomes largely dependent on outcomes of decisions that take place within the F1 industry. Due to the sport having moved from simply being targeted at serious racing professionals to any racing enthusiast, has led the industry to be directly linked to other unrelated industries such as the entertainment industry. F1 was initially meant for viewing pleasure of those people who would be present live at the race circuits to watch the event. ...read more.

Middle

Threat of new entrants is therefore relatively high and so is the level of competition within the industry. Bargaining power of suppliers Majority of the constructors buy in their central components such as engines, brakes, gears, etc from suppliers like Ford and Honda. Bargaining power of these suppliers is high as switching costs for them are low. They move on from one buyer to another depending on the performance of the constructor, company goals and objectives, and in many cases they may supply to more than once buyer. Component manufacturers always want to be linked with the winning teams because this boosts their own image and reliability and efficiency of their parts. For example, * In 1987 Honda withdrew from its contract with Williams due to concerns over the team's future after the accident of Frank Williams and started supplying to Lotus, * Honda withdrew from its exclusive engine supply contract with McLaren once its organizational objectives were fulfilled, * And Renault, in their objective to dominate the industry, started supplying to Benetton whilst already supplying to the Williams team In case of F1, racing drivers and engineering technicians may also be considered as suppliers as they provide the constructor with their talent and expertise. They too, like the suppliers of components, have considerable power as they can easily switch from one team to another as competitors are always working towards attracting the best engineers and drivers in the circuit. Therefore the bargaining power of the suppliers is relatively higher, once again implying a high competitive force rising from there. Bargaining power of buyers Buyers, or as mentioned earlier, the customers in this industry are the spectators or the TV audience that watch and enjoy the sport. The bargaining power of buyers can be considered relatively high as they can easily move from one form of motor racing to another or from one sort of entertainment, sports or recreational activity to another without the involvement of a great deal of switching costs. ...read more.

Conclusion

within the industry * Other uncertainties exist due to the constant dynamic environment that regulates this industry such as the switching of loyalties of sponsors, technicians, designers and even drivers. Future Scenarios Strategic Choice Position Created Likely Outcomes Risks involved Viability to create strategic advantage Optimistic Scenarios * Technological advancements may aid in the development of faster more reliable cars * FIA set higher standards of entry into the industry, leading to increased barriers to entry. Therefore limiting the competition within the industry, which may be positive for the existing players within the industry as the threat of new entrants is reduced. * Internet Technology - used for enhancing image, creating and maintaining relationships and building brand loyalty * Internet Technology - used for the purchase of component parts, helping reduce dependence on single supplier as it may prove to be a quick source of supplies from across the globe * Diversification in to other less sophisticated Formula racing, i.e. Formula 3, Formula 3000 Pessimistic Scenarios * Social/Cultural shift towards less dangerous sporting and recreational activities * Continued inconsistency in team members due to inability to maintain long term relationships with suppliers, technicians and drivers, resulting in continued inconsistency in performance and lack of industry domination 1 'Formula One - The people, money and profits that power the world's richest sport', Hotten, R., Orion Business Books, 1999 2 As mentioned in the Formula One FAQ section in http://www.atlasf1.com/ref/fiafaq.html as accessed on 2nd Feb, 2003 3 As evident in the case titled 'The Formula One Constructors', Jenkins, M., 2002, 'Exploring Corporate Strategy: Text & Cases' 6th edition, Johnson & Scholes, Prentice Hall 4 As evident in the Lotus Team website on http://www.classicteamlotus.co.uk as accessed on 2nd Feb 2003 5 As evident in the BMW Williams F1 Team website on http://www.bmw.williamsf1.com as accessed on 2nd Feb 2003 6 As advocated in 'Principles & Practices of Marketing', Jobber, D., 2nd edition, McGraw Hill, 1998 7 As exhibited in Appendix 4 Strategic Decision Making Report Christina Samuel (2532256) ...read more.

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