Three reasons why Honda, BMW and Toyota left F1

November 11, 2009

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The lemming: A role model for strategy makers in many organisations

There’ve been various theories thrown around as to why some of the manufacturers have left F1 recently, here are three of mine:

1. Changes in the global car market: With the car market dropping by around 30-40% in unit sales the car makers are having to cut production and clear inventories in order to stay in business. This means closing or moth-balling plants. Despite the millions of dollars required to be involved in F1, the costs are not hugely significant for the car makers budgets, but the symbolism is. F1 is a luxury product and if times are hard and people are losing their jobs a more frugal profile is needed and that is not one of F1’s brand attributes.

2. Changes in the regulations of F1: The freeze on engine development in F1 essentially reduced the opportunity for manufacturers to innovate and develop their engine technologies, it became less exciting for their engineers and it also meant that engines became a less critical factor in performance (unless they failed of course) and so there was less coverage of engines, in the same way that Bridgestone experienced reduced coverage on tyres when they became sole supplier.

3. The lemming effect: This should not be underestimated. Much research on business strategy refers to the kind of convergence that happens in many industries. With increased benchmarking and use of the same consultants firms strategies are getting more and more similar, so if one firm does something different (Honda pulls out) then everyone starts to wonder if they know something they don’t, and suddenly they’re all jumping over the cliff. It’s interesting that one of the most successful manufacturers in F1 in recent times is Mercedes and they seem to be going in the opposite direction, investing more when their competitors are pulling out. All of this is part of a cycle that’s been going on in F1 since 1950, manufacturers come and they go and then they come back again.

The irony is that the cost inflation in F1 over the last ten years has been largely driven by the entry of large manufacturers such as Toyota and Honda. Now they are leaving it is likely that costs will reduce to a more sustainable level, this can only be good news for F1, and perhaps over the next few years we’ll see some different manufacturers entering the race and the lemming effect will start all over again.

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One Response to “Three reasons why Honda, BMW and Toyota left F1”

  1. bmw service Says:

    F1 is seriously corrupted, Don’t blame BMW and the rest for leaving.


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