Formula One’s strategy problem

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Formula One is a sport defined by strategy. Pit stops, race tyres and fuel loads can make the difference between winning a world championship or being at the back of the pack.

In spite of this, the Formula One Group appears to have made an astonishing series of strategic blunders in recent times. However, these strategic missteps are not sporting; instead, they are commercial. 

Most commercial strategists would define ‘strategy’ as a series of actions and plans which are designed to obtain a wider objective. Last year, Formula One unveiled such an objective: We Race as One was intended to tackle racism, improve diversity within the sport and address sustainability issues. However, Formula One’s recent actions appear to constitute a strategy that does not meet this objective. 

As Daniil Antonov has discussed, the sport’s organisers have signed new race deals with countries that have notorious human rights abuses and massive fossil fuel investments; neither of which support the sport’s We Race as One message. As a result, one might argue Formula One’s recent strategic actions are not aligned with their wider objectives. 

it is not inconceivable that car manufacturers would consider withdrawing from the sport

There are many reasons to be concerned about such strategic misalignment. Not only do such actions raise speculation as to whether Formula One’s We Race as One message is sincere, but there are genuine commercial implications, which could inflict significant damage upon the sport and its stakeholders in the long-term. 

Indeed, Formula One’s strategic incoherence may harm the sport’s relationship with car manufacturers, as well as affect their involvement in the series. If Formula One further undermines its sustainability message, there is a real risk car manufacturers will reconsider their involvement in the sport.

The automotive industry is moving towards the use of more sustainable technologies, particularly through electrification, and car manufacturers are desperately trying to develop their green credentials in the hope of boosting their electric vehicle sales.

As a result, the last thing these companies would want is to associate their brands with a sport that does not take sustainability seriously. Doing so could tarnish their brands and adversely affect their reputation, all to the detriment of their electric vehicle sales.

Thus, if Formula One’s sustainability message is undermined by strategic incoherence, it is not inconceivable that car manufacturers would consider withdrawing from the sport in order to protect their sustainability strategies (as Honda appear to have done).

Arguably, this would have massive ramifications for Formula One; teams may collapse, engine supplies may become more difficult to obtain, and significant marketing revenue may be lost.

Therefore, the damage Formula One’s strategic incoherence could inflict on the wider sport could be enormous.    

Similar arguments can be made from a diversity and inclusion standpoint. Would brands that place equality at the heart of their marketing messages want to associate themselves with a sport that undermines its own message? Probably not. However, if this were to continue to happen, Formula One would risk losing substantial amounts of sponsorship revenue.

This could have a profound commercial effect on the Formula One Group and its owner, Liberty Media because their revenue and share prices would undoubtedly suffer if the Formula One cash cow were to become a less profitable problem child.

Therefore, one might fear for Formula One’s future. If the sport’s We Race as One objectives are not met, due to strategic decisions which are ill-fitting, the long-term commercial damage could be huge.

Whether the Formula One World Championship can survive in the long-run, as a result of what (at present) appears to be an incoherent commercial strategy, remains to be seen.

Image: Renzopaso via Creative Commons

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