The Formula One Constructor

8/3/2019 The Formula One Constructor

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THE FORMULA ONE CONSTRUCTOR



FORMULA ONE

Formula One companies are the highest class of single-seat, open wheel, formula auto racing in the world assuch car designers and manufacturers on the circuit workunder continuous and intense pressure to design andrace the fastest car.

established during the year 1977 as Williams GrandPrix Engineering

Williams F1 is an independent organization that has wonsixteen World Championships

one of the sport’s most successful teams alongsideFerrari and McLaren, having achieved over 100 racevictories and today,

it is one of few wholly independent teams in the sport



CASE HIGHLIGHTS

This case enables us to explore sources ofcompetitive advantage using the context of FormulaOne (F1) motorsport. The case highlights the ways inwhich three particular F1 teams created four

situations of competitive dominance for a sustainedperiod. It allows the us to consider individual teamsand the generic issues needed to succeed in thisspecialised context. The case is organised into fiveparts. The first is a brief overview designed to give

those unfamiliar with F1 some understanding of itshistory and structure. This is followed by four detaileddescriptions of particular periods of dominance by anF1 team



CONT…

The introduction to the case describes the overall natureof Formula One motorsport and its origins in Europe afterWorld War II. It identifies some of the central aspectsof being an F1 constructor, such as the need to generatesponsor revenues through increasingly sophisticated

marketing strategies, and also the need to design,develop, manufacture and race open-wheel single-seatrace cars. Note: the term ‘constructor’ differentiates F1from other racing series in which race teams competewith bought-in race cars. F1 constructors are effectively in

the business of designing and constructing prototypes – each car being unique to each constructor but within a setof pre-definedrules that cover weight, dimensions andother basic parameters.



RENAISSANCE

This is followed by four accounts of sustained competitiveadvantage (here we define sustained as three or fouryears of dominance) featuring Ferrari in the mid-1970s,McLaren in the late 1980s, Williams in the mid-1990s and Ferrari from 1999 –2003.

Each account explores the background to the constructor,from the formation of these entrepreneurial businessesthrough to their development into a world-classorganisation.

The focus is on the build-up to their period of competitiveadvantage, but each case also then relates to the loss ofthe advantage for the constructor in this period



FERRARI AND THEIR RENAISSANCE IN THE MID

1970S

Ferrari were successful because they have always had a hugewealth of technical expertise and resources,

they had their own unique approach (e.g. they built their ownengines and gearboxes) it was very difficult for other competitorsto imitate them, as they did not have access to the same

technology as Ferrari. The reason for Ferrari’s loss of advantage can be isolated into

two factors: first, the discontinuity created by the promotion ofMontezemolo to head up the whole of Fiat’s motorsport operation,and Lauda’ s accident, which took him out of racing for around sixmonths. Second, Ferrari’s unique approach constrained them in

terms of responding to new innovations, most notably theintroduction of ground-effect, which required a slim ‘V’configuration engine rather than Ferrari’s traditional flat 12. Thisraises the point about whether an organisation that does all itsactivity in house can keep pace with the combined efforts of themany ‘generic’ suppliers used by the other teams.



MCLAREN AND HONDA DOMINATION IN

THE LATE 1980S

They secured exclusive use of the Honda engine at atime when it was the most powerful and reliable; theywere also able to secure the services of the bestdrivers around (Senna and Prost). This was due to

the high level of funds made available by sponsorPhilip Morris. Another issue that often comes up is the commercial

and leadership skills of Ron Dennis. here is theirdecision to recruit the two best drivers. Was this a

good idea or did it create more problems thanbenefits? It raises the question of locking in resourcesnot just to maximise your performance, but also todeny your competitors access to them



CONT…

The reasons for McLaren’s demise were very simple.Honda pulled out of Formula One. This in turn broke thevirtuous circle that attracted the best drivers, and AyrtonSenna moved to Williams. This raised the question ofwhat value McLaren themselves generated, as the key to

success seemed clearly to reside in Honda engines andthe skills of Ayrton Senna, both of which were relativelymobile resources.

In terms of what they could have done, there is certainlyevidence to suggest that McLaren chief Ron Dennis

should have considered the possibility of a Hondawithdrawal more seriously. It illustrates how phenomenalsuccess can blind management to the possibility ofchange.



WILLIAMS AND THE TECHNOLOGICAL

REVOLUTION: THE MID 1990S

Williams’ success was due to their engineering focus, whichenabled them to take many of the innovations developed by otherteams and turn these into a car that was both fast and veryreliable. This engineering focus can be attributed to the long-standing partnership of Frank Williams and Patrick Head.Williams were notable in their disregard for drivers and theirattention to building a wide-ranging relationship with their enginesupplier Renault

It raises issue around the different choices which firms have interms of the kinds of resources on which they focus. From oneaspect Williams’ strategy makes a great deal of sense in that they

are more able to appropriate the benefit of engineering resources,whereas driver resources are highly mobile



CONT…

In the case of Williams, their advantage was erodedthrough a series of events: first the loss of exclusiveaccess to the Renault engine when Renault decided toprovide engines to the Benetton team; second, theleakage of some of their know-how through their junior

designers moving to other teams – mainly because theywould be unable to gain a senior position in Williams aslong as Patrick Head was there; and third the recruitmentof superior drivers (specifically Michael Schumacher toBenetton) leading to the Williams car’s advantage being

eroded. However, it could also be argued that Williams were still in

a position to dominate. When Michael Schumacher leftBenetton to join Ferrari the Benetton team failed tosustain their advantage, and Williams once again became

dominant.



FERRARI: THE RETURN TO GLORY: 1999–2003

This account is in marked contrast to the Williams approach inthat Ferrari based their resource strategy primarily around driverMichael Schumacher. The usual conclusion here is that it is alldown to Schumacher, but closer examination reveals this not tobe the case. Whilst Schumacher was undoubtedly a key elementin the success, he probably would not have achieved it withoutthe rebuilding of the technical team and their close partnershipwith Bridgestone tyres.

Ferrari are still enjoying a period of unparalleled dominance. Thequestion therefore needs to be amended to consider the factorswhich might create a loss of dominance and also how they would

deal with this in a strategic sense. The most obvious factor is theretirement of Michael Schumacher: it is possible that when heleaves many of the key people around him may also take theopportunity to move on whilst their employment value is very high – or alternatively take early retirement to enjoy the fruits of theirlabours

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The Formula One Constructor