Background of the case
The case is about motor sports formulae one competition that has been dominated by different companies as sponsors; the case dwells on three main companies that have had contrasting management approach with the sole aim of earning high financial and reputational rewards associated with the sport.
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Motor sport at premiership level was established in 1945 by the federation Internationale de I’Automobile (FIA) and named it as Formulae 1, in 1950, drivers got the first chance to have a world championship competition that saw reputational and financial rewards exchange hands; the first champion was Giusepper Farina of Italy.
Other than the original idea of a sport, the sport emanated to be effective marketing tools to car manufacturers where they would interact with the customers and using the sports to promote their products.
In the efforts large sums of money were invested in the sector, for instance in 2006, Renault, Ferrari and McLaren were estimate to have committed between $250 and $350 million to the sport with Toyota believed to have hit $billion. The large sum of money that is used in the sport comes from the company promoting its brand and other third parties.
The Strategies Pursued By Ferrari 1975-1978
The company had a strong brand name being among the first companies in the racing world; other than the name, it was able to make some of its parts thus it was making them for the good of their trade. From the onset, the company had the sport as a hobby, thus it was willing to fund the undertaking from its earnings, the company had strong financial base thus it would cater for the needs of the sports effectively.
Although Ferrari is one of the most successful motor sports constructors, it hardly has as many sponsors as other companies; they make other range of cars that they get the funds from then invest in the racing sport, from the onset, Ferrari has taken the sport as a hobby that he has the responsibility of funding and making fit.
In 1969, Ferrari merged with Fiat was a major boost to financing of the company as it allowed Fiat to make the road machines and Ferrari to concentrate on racing.
The company has a number of resources in expertise, physical resources, and experience that offered it an opportunity of being one of the best teams in the industry; the structures were better than those employed by its competitors.
One weakness that has been found in the company was its products development approach where the case illustrates that Ferrari relied on information from third parties to model and design their products instead of moving out and fetching the designs. This is probably seen as one of the weakness that led to its failure in later years.
The major threat that the company had was from an increasing competition from other companies in the industry like McLaren and Williams, they came in the industry with new technology and expertise that made the competition more competitive.
The race also started to dominate in the sporting sector that it attracted some political influences and it was moving the people of different ages. People became interested in the game and Ferrari was the team that they were willing to associate with, the social dynamic was so large that Italians see the brand as one of their country’s heritage.
The reliability of the cars that were made in 1971 to 1973 were wanting with some not being able to finish a race; this was even made worse by health condition of Enzo who had early acted as a main motivator of the team.
To ensure that the company remained competitive, there were some strategic alliances that were made to improve things, they include alliance with Fiat, the adoption of Mauro Forghieri in 1973 as the technical director; this offered the team with experienced managers who were able to turn things around for the benefit of the team.
The move was also a compete change of the management with new faces being called to task to assist the technical bench come with rewarding strategies; the move also saw the team recruit some talented drivers.
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What are they key elements of successful F1 team
The main elements that have made the company successful include;
A dedicated and experienced management and technical team, other than Ferrari himself, the company recruited management and technical bench that was composed of people with wide experience in the racing competition, the people offered the team required knowledge and timely information.
In the racing history, one company that has suffered greatly financially is Ferrari, there are loyalists and some companies who are willing to finance the team; this creates a highly motivated team like drivers, mechanics and other technical team members.
The company has had a strong brand name that has continued to make it the choice of many Italian; this by itself is enough motivation to make the team work hard to fulfill the big burden that the society seems to have placed on its shoulders.
The team had a number of benefit from the garage that it maintained; the garage was able to make accustomed products like Engines and gears of the team motor a move that made the vehicles reliable and a choice of many talented drivers.
Main causes of the problems experienced by the Ferrari in the early 1970 and how they overcome them
The company had taken motor sport as a sporting activities and had invested minimal in the research and development; the case study illustrated that Ferrari relied on media news to make out the approach that he was to take in the sport, this likely was a disadvantage to the company as other companies were going out and fetching the right design and approach.
Another likely problem that the racing team might have experienced is the increased competition for better engines by racing teams that had sponsors; there is high likelihood that the company was not able to compete financially with other teams thus chances of underperforming.
Identify the main elements of the strategic policies followed by each of the 3 teams which lead them to their success and ultimately failure
The company used the approach of in-house development and autocratic leadership approach; this is where it aimed at making their own parts and engines and followed the able leadership of Enzo Ferrari. The main mission and vision of the team was to successfully compete with other machines and prove their dominance, they thus worked hard to develop the best in the market.
The failure of the strategy was experienced when other team became keen on the sector and came up with machines that were better than those maintained by Ferrari. Also the central concentration of power was challenged by human factors like diseases.
The team had the sponsorship approach; the approach ensured that the team was financially well off and could develop machines that are required in the race. Some sponsors that have seen some of the teams succeed include Phillips Morris which financed McLaren in 1974 to 1996 in the efforts of advertising its Marlboro brand of Cigarettes.
The sponsors signed contracts with the team and promises to cater for some of their expenses like salaries, wages and upkeep in the efforts of having their products advertised in the context. They would fund development of different machines, technology and automation of the motors.
The failure of the approach was when sponsored withdrew or changed their team, this left the team without an option other than getting to the drawing board.
The team used the technological approach, with the development in technology; the company was able to make machines that were durable and reliable depending with the terrain of a certain race. The approach was successful but was challenged by fast development of technology were the team needed to be on its toes to get the technology always.
What issue facing each 3 teams in this case study were strategically flawed and how would you have overcome them
The main issue that cut across the three teams is the lack of reliable talented drivers; the drivers that were available are not seen to be taking the sport as their hobby or talent; some come to benefit from the financial benefits in the sport that lacks the commitment required.
Like any other sport, talent in the particular sport plays a crucial role in its success; with the lack of talents, then each team is left with a far felt deficit when a team member quits or fails to participate.
Since the sport is rewarding enough, to have a continuous flow of drivers, I would enact a talent establishing, nurturing and development approach, with such an approach, I would suggest to have racing sports even in high schools so that those people who can do the racing and are talented get a chance to exploit their talents.
What were the strategic that provide each of the 3 team with success?
In all the three teams, one thing stands out, the quality of human capital they have and the machines they are using for racing. When every team won, it was during the period that it had been able to combine its human, information, and physical resources effectively. Drivers, mechanics, researchers and developers, and technical teams, were the main work force that saw the company succeed.
Research played a crucial role in the success of a team; when a team researched extensively, it was able to make such effective strategies that saw their team succeeds amidst the challenge that was present at that particular time.
When reading the case and determining the strengths that saw the teams succeed, the main issue that was coming out is the benefit and advantage that can be derived from a team that is well constituted and utilizes the resources it has effectively.
What are the essential elements of success F1 team and how should the management structure be constructed
The main success elements that F1 requires can be divided into three main areas;
Under this subtitle, the management and the team needed to gather such quality information that would assist them when making their machines. When a team had quality information, then it was able to have the best from the team.
To have a winning team, the racing team needs to have talents, experienced and dedicated people in the sector and area that they are being involved in; for example there is need to have drivers, mechanics and effective management teams.
The motors used in the race needs to be quality and have high reliability; this would help them compete successfully in the racing.
To ensure that all the above success elements are available, as a manager, I would ensure that every department is well staffed and there is an orchestrate team in the company.
Team funding sources
Motor sports is an expensive sports that involves much fixing of the car to be used as well as training of people to be involved in the sports. Expenses can be seen in the form of fixing costs, labor costs, training, and research cots.
For instance in large teams, there are about 450 to 800 employees that travel the world almost fortnightly to look for the best approach to their teams; they are mandated with the task of researching the best approach to adopt in the sport. For an effective sport, a company that aims to use the sport as its advertising tool will have to look for means that the costs will be catered for: the following are the main approach adopted:
Sponsors: According to the case, about one fifth of the operational costs in the sports come from sponsors who come in the game with different ideas and agendas to meet with the sport.
When a car has been upgraded to compete in the race, the sponsor come in handy to offer funds for some services and additions like painting the car in the colors of the company, advertisings the race, and providing some financial contacts to the drivers, engineers and other stakeholders.
The brand name company: As a matter of meeting some of the cost incurred in the sports, some brand companies have some testing and development equipments which include wind tunnels and other facilities development; some of the services and fixing are done as normal service of cars while some have been accustomed to the benefit of the cars that are involved in the sport.
The company may have the option of making some of the parts that are used in the sporting cars like gearbox, and Engines; this format is the most dominant with Ferrari which has been a leader in the industry, or the companies may decide to buy the parts from different places and assemble them for quality machines.
In Germany the race can be seen to be more divided between the constructors of the motor and the sponsors, after the constructors have made the best they can, the sponsor comes in and offer some accustoming services to make the vehicle attractive and representative of their brand as the sponsors. This is an advertising method where companies seek to be associated with the success of the sport.
Financial reward: Other than the prestige that the sports come along by, the sport has some financial reward to the companies that are participating or have won. The reward is used to finance some essences of the sport like media loyalty coverage expenses.
Other than the reward money, there is some revenue that is negotiated on their behalf by Bernie Ecclestone’s Formula One Administration (FOA); the amount has become another reliable source of funds to the sport. In 2003, prize rewards accounted for 9.7% of the total revenue that was in the port, the amount was about $30 million.
The overall winner has a much higher financial reward with McLaren and Ferrari being the only constructors to have won the championship for four consecutive years 1988-1991 and 1999 to 2004 respectively.
Recommendation for more funding
All the three companies have their strategy of raising funds however none of them has membership subscriptions as its main source of fund; this is so despite the potential that the teams have to get funds from their loyal members.
Companies should consider this approach to raise of funds; it would probably make the financial base of the company stronger.