Internal Analysis
SWOT Analysis
Value Chain
Primary/Direct Activities
- Constantly introducing new engines for new racing sports
- Effective operations management
- Internal support from staff, drivers, and team members, mainly in a family-like setting but with a gradual change to more structured cross-functional communication patterns. The company has recognized that Formula One is a sport built on teamwork and thus no driver wins a race on his own. In addition, there is a strong focus on the personal requirement for engineers and mechanics, who prefer to spend weekends with their families.
- There is a focus on strong promotional activities and publicity for additional revenues.
These activities target the fast-growing Far East, new investors, and sponsors.
Indirect Activities
- The company’s accounting system supports its revenue generation strategies, specifically when searching for sponsors and investors and rewarding drivers.
- The legal support has not favored the company, particularly in the lawsuit against Vodafone.
Instead of fair compensation for the breach of an agreement, the company suffered bad publicity, questionable ethics, and showed a lack of understanding of modern marketing methods.
- Jordan GP has thrived on its human resources. The strong leadership and support provided by Eddie Jordan, senior executives, team members, drivers, mechanics, engineers, and external consultants have favored this company.
Profit margins
- The company has realized some profit margins, on several occasions, it has however failed to control rising operational costs. It also has recorded bad deals from its relations with Ford, Vodafone, Mugen Honda, and broadcasting rights due to the withdrawal of sponsors and partners.
- Some good deals have emanated from other revenue-generating ventures, sponsorship from Benson & Hedges, and DHL.
External Analysis
PESTEL
Political
The GP is rarely affected by political instability because it mainly operates in stable countries. However, regimes had introduced new rules to control tobacco advertisement, which affected its main sponsor, Benson & Hedges. September 11 also affected the company’s activities.
Economic
In 2001, the economic downturn affected Formula One activities, and Jordan GP was not spared. The industry has experienced a situation of rising costs of operations and inadequate revenues from broadcasting rights. Moreover, many sponsors and investors have withdrawn their financial supports.
The company can only thrive when a lean and efficient and therefore low-cost strategy is necessary (Johnson, Scholes, & Whittington, 2008).
Social
Not all people like motor racing. The company must therefore add sports, music (rock and roll), elements of adventure, and a bit of irreverence to create powerful effects on fans. At the same time, it must appeal to the cultural orientation of the natives to attract fans.
Technological
The company must rely on technologically advanced engines and cars used in Formula One racing competitions. Inability to acquire these technologies could eliminate it from the industry. Strong, large brands such as Mercedes Chrysler, Jaguar, and others have access to such technologies and more advanced engines. Jordan GP could only rely on the customized engine from Ford, which had a double disadvantage in terms of costs and performance.
Environmental
Although the company reported no advance effects from bad weather, it is noted that bad weather patterns could affect the sports negatively and lead to the cancellation of races.
Legal
Jordan GP decided to sue Vodafone for a breach of a verbal contract. It, however, lost the lawsuit and suffered a tarnished reputation and loss of possible compensation. The industry has opted for trials and courts of justice to get rid of troublesome competitors.
Porter’s Five Forces
Buyer power
Buyer power is low. The industry depends on motor enthusiasts and fans while many sporting events have schedules. Many fans, however, are loyal to certain drivers, specific brands, and sponsors. This could affect fan enthusiasm.
Intensity of Rivalry
There is fierce competition in the industry. Small teams without the required financial resources, technologies, investors, and sponsors such as Jordan GP find it difficult to overcome well-established companies and thus they continue to struggle for their survival. Hence, the intensity of rivalry is a major challenge to companies’ competitive abilities. Such companies may be forced to rely on weak, customized engines.
Threat of substitutes
Not all people like motor racing. There are other forms of leisure activities such as football and music among others, which could affect the fan base of this sport. Any company must be creative to attract fans.
Supplier power
Supplier power is extremely high in the industry. Companies in Formula One require third parties to develop and provide superior engines and cars. These third parties, however, may terminate contracts at will. In some instances, small teams may be forced to use poor, customized engines for the race, which leads to financial burdens and poor performances.
Threats of new entrants
There is a limited threat of new entrants. A new company will require substantial investments to meet the costs of developing advanced engines, supporting staff, drivers, and senior executives. In addition, current companies like Jordan GP struggle to find stable sponsors and investors while revenues from other sources such as advertisement, broadcasting rights, and endorsements remain inadequate.
Reference
Johnson, G., Scholes, K., & Whittington, R. (2008). Exploring corporate strategy: Text & Cases (8th ed.). Harlow Essex: Financial Times Prentice Hall.