Mba Jordan Gp


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Strategie opdracht voor Executive MBA (RSM)

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Mba Jordan Gp

  1. 1. Strategic Management Rotterdam School of Management EMBA 09 – Team B5 13 February 2009 Our F1 Team: Criticaster; kept team on track, took care for precise content and dared to challenge the drivers Pit babe 2 Antoinette Meys Introvert, but critical feedback, provided valuable insights which improved overall quality Pit babe 1 Atsuyo Kawaguchi-Van Mil Always delivering the tools needed for success, took care for short pit stops if process catched 1 st Mechanical Krzysztof Lewinski Creator, applied new models, good research, tested and challenged others Driver 2 Jassar El Jabouri Inspirator, from start to finish; from data research, to producer of rough structure and finished with layout Driver 1 Roel Kock Overall coordinator, time keeper, quality keeper and took care for logical flow Team Principal Martijn van der Knaap Nice to know: Title: Name:
  2. 2. JordanGP sees strategy through an experience lens but F1 is changing in a design lens. Value network: Jordan is mainly focussed on the channel and customer value chain and less on the supplier value chain which supplies competitive advantage. PESTEL: The environmental changes of F1 influences the critical succesfactors of F1 and the future performance of Jordan GP. Start Four future scenarios ’ for JordanGP. From ‘dead end’ to ‘bullet proof’. Strategic drift: JordanGP switches engines, drivers and fails for attracting long term sponsoring and cooperation. Strategic Capabilities and competitive advantages of JordanGP remained more or less the same and this was succesful during the 90’s. Rise Fall Exit Summary: Strategic position of Jordan Summary SWOT reveals the strategic position of JordanGP compared to its competitors. SWOT analysis indicates that JordanGP has several opportunities.
  3. 3. Overview of rise and fall of JordanGP 15 years of sport, motor racing, music, and element of adventure and a bit of irreverence. 1991: Team 7up Jordan debuts at a 5 th place in the Formula 1. Because of an unsigned contract Michael Schumacher could leave to Benetton after just one race. Because of a lower budget Jordan had to switch to the cheaper Yamaha engines. 1992: In the second year Jordan switches to two new drivers and a new engine supplier but only scored one point. They also had 59% retirements which was an all time high. 1993 Saw further changes; new engine supplier (Hart) and again new drivers. 1994: Signs of stability with the return of two of last years most winning drivers (Barrichello and Irvine) and the same engine supplier. With 28 points a second time on the 5 th place of the Formula 1. 1995: This earmarked a change for JordanGP. With again the return of Barrichello and Irvine, a new engine supplier (Peugeot) and a new sponsor gave JordanGP a 6 th place. In 1996 Jordan established the team as a solid mid-pack with a series of fourth places and another 5 th place. 1998: JordanGP again switches to a new engine supplier (Mugen-Honda) and due to reliability problems failed to score a single point. JordanGP established a 4 th position in the Formula 1. And the first time win of a Grand Prix. 1999: A former driver from Jordan F3000 (Frentzen) was an immense success with two wins in the GP. 61 points and a 3th position in the Formula 1. 1999 was the best year for JordanGP. After this successful year, Jordan slipped back to the mid-position by finishing 6 th and 5 th in resp. 2000 and 2001. During 2001 Jordan was battling with the BAR team over the long term use of Honda engines. The succes of Honda in 2000 made Honda want to return to Formula One with the intention of buying JordanGP. Jordan rejected the proposal. 2002: Due to a decrease of 30% of its sponsor budget, Jordan had to cut back on its development of its new car. The season showed many technical problems. The team changed to Ford Cosworth engines. 2003: Honda engines leaves Jordan to supply BAR and next to their old-time sponsor Benson & Hedges the team has a decrease in sponsors. Despite a win, under extraordinary circumstances, the team hardly scores any points. 2004: Cosworth was sold by Ford and switched to Toyota. Jordan scored only 5 points and finished second to last. One driver has sponsor problems and had to skip one race. 2005: The team was sold to Midland for $ 60 million. In their last year the team has only one moment of success 3tn and 4 th place in Indianapolis. 5 13 11 5 6 5 5 4 3 6 Finishes w/out point, Finishes with points, Retirements Total points per season Season Place Jordan timeschedule 5 6 9 9 9
  4. 4. <ul><li>’ 91-’95: In 1991 Eddie Jordan entered the market with $ 3 million. JordanGP had a hard time finding sponsors while most of the Formula One teams had parent companies sponsoring them. During this period Formula One began to professionalize. Team budgets were still very low compared to the average yearly team budget in 2003. Jordan’s team budget was still far away from the average yearly team budget. </li></ul><ul><li>‘ 96-’00: JordanGP got better sponsor contracts enabling them to work further on their success. Eddie Jordan added a further layer of managers to enable the shift from entrepreneurial challenge to corporate organization. At the same time the Formula One professionalized even further. Teams with parent companies got even higher budgets.The curve started to bend exponentially. </li></ul><ul><li>‘ 01-’04: Again JordanGP could not find sponsors easily. Declining budget forced Eddie Jordan to cut in the employee base. This, while by 2003 the yearly Formula One team budgets averaged $ 214 million. JordanGP by that time had a budget of $ 79 million. Ferrari had a yearly budget of $ 440 million of which went to engine development ($ 175 million) and test ($ 88 million) (see pie-chart). </li></ul><ul><li>Future: JordanGP has findbetter sponsorship contracts. A dramatic change in terms of sponsoring needs to be achieved otherwise JordanGP will disappear from Formula One. If this change is achieved, Jordan GP will be able to track performance better in combination with a higher operating budget. Better racing results will deliver higher sponsor budgets. Racing results and sponsor budgets enforce each other. </li></ul>‘ 96-’00 ‘ 91-’95 ’ 01-’04 Time  Average Formula One team yearly budget in million $ Future  After the successful years JordanGP could not keep up with the pace of its competitors anymore. Jordan Strategy 214 130 79
  5. 5. Supplier value chains Engine supplier: 50% of costs is engine. Large critical success factor. F1 labour pole; drivers, technicians, engineers. The specific Jordan spirit attracts a special group of workforce; you have to be crazy about your sport as it is expected that a person spends a lot of hours. Sponsors provide budget if the team spirit is related to their preferred image and if the team is successful. High retirements rate does not match with a successful image. Eddy Jordan brings spirit to the Jordan team: enthusiasm, charm, sense of humor, winning spirit, fast, hard work and a lot of fun. Compared to parenting teams, Jordan is small and efficient, but lacks a parenting company who provides them with the latest technology and multinational support. This formula worked until ’99, but when teams became more professional and required higher budgets, Jordan failed in obtaining long sponsor contracts. Media / TV stations who pay broadcasting fees. F1 GP organization that awards winning team with prices. Channel value chains Thousands of fans who visit F1 races at grand prix’s. Millions of fans who want to be part of the ‘Jordan spirit’ buys shirts, caps, etc. Sponsors (companies) of F1 teams. Customer Value chains Shops that sell Jordan merchandising. Millions of fans who watch F1 races at home. JordanGP value chain Strong connection Weak connection Most important Less important The value network of Jordan shows that Jordan is mainly focused on the channel and customer value chain and less focus on the supplier side. The supplier side is more important in order to achieve good racing results. The channel and customer value chain side is nice and glamorous, but is quite superficial and does not deliver results. PESTEL vs JordanGP
  6. 6. Impact on JordanGP Tabaco advertsements are being forbidden so may teams has to look for a new, global sponsor contract. Tabac sponsors are underpressure Politic Change from gas-guzzling image into high-tech pioneers and leaders in fighting climate change with a series of rule changes that would include a switch to smaller engines running on bio-fuel. Also to keep the F1 relevant for the automobile industry. change to ‘greener’ sport Environment Change from focus on engine power to high tech.machines with focus on e.g. engine power, weight, bio-fuel, downforce and safety. At full speed, downforce of two and a half times car’s weight can be achieved; principle is enough downforce to ‘drive on the ceiling’. From power to computer Technological Shifted from a European / Western focussed sport to a more international sport. New races are added e.g. Singapore (first night race in history) and India in 2010. From local to worldwide Social Formula one has grew is several years from a multi million business into a multi billion business and therefore ‘corporate politics’ as entered the racing sport. Turning millions into billions Economic More safety, environmental and advertisement regulations. The FIA worked to improve the sport's safety standards since that a driver lost his life in an accident. More focus on safety Legal JordanGP lost their sponsor. So poolitics forces them to look for new cash. Time and money not spend on R&D and testing. … again looking for cash Politic Jordan is an ‘enterpreneurial’ team. Jordan is in the Formula One for the Formula One racing fun. Large other teams are in the Formula One to gain ‘car’ knowledge for their core business. This does not apply for JordanGP. No push for ‘greener’ sport Environment JordanGP is facing fewer sponsor and lesser budget. This will negativily influence enginge development and testing results. Survive vs. improving Technological The change from a more or less European/Western sport to a world wide sport made the Formula One a sport for the multi-nationals who want to have an world wide exposure. This increases the budgets; lowers the possibility of entry of new teams and lowers the chances of survival of smaller teams. Globalisation kills entrepreneur Social The image of JordanGP is still ‘rebellious’ which can attract new companies but they have lesser cash or can attract multi nationals which would like to obtain a ‘rebel’ image. The performance / future of JordanGP is uncertain and causes problems when attraction global, multinationals. Uncertainty all over the place Economic As stated above JordanGP has lesser cash to do R&D which also negativily influences safety R&D. Besides this the ‘sponsor’ of JordanGP does not benefit from safety R&D (Renault does). No benefit for JordanGP in safety Legal The environmental changes of F1 influences the critical succesfactorsof F1 and the future performance of JordanGP. PESTEL vs JordanGP
  7. 7. The JordanGP team had a unique competitive advantage, but this was not enough to beat competitors after 2000. Jordan executed a lot of external activities (business stretched related) and some which caused bad reputation (court trial Vodafone). The perception of sponsors is that Eddie Jordan is no longer serious enough about the real core business: being the racing. His reputation does no longer connect to the fast changing environment where innovation is the most important competitive competence. Strategic capabilities and competitive advantage of JordanGP were successful until 2000. Thereafter, competitors became more professional, and Jordan lost the innovation race from to its competitors. Competitve Advangtage of Jordan Resources Competences Threshold capabilities <ul><li>Threshold resources </li></ul><ul><li>Physical resources: cars, machines, computers </li></ul><ul><li>Employees, engineers, planners, drivers, test drivers, pitstop, mechanics </li></ul><ul><li>Budget; at least $ 40 million </li></ul><ul><li>Threshold competences </li></ul><ul><li>Performance driven team </li></ul><ul><li>Knowledge and skills to operate the system technology (car, computers, communication, etc) </li></ul>Capabilities for competitive advantage <ul><li>Unique resources </li></ul><ul><li>Tangible: </li></ul><ul><li>Eddy Jordan’s personality </li></ul><ul><li>Small team advantage: not being large and slow </li></ul><ul><li>Jordan facilities; unique paddock atmosphere </li></ul><ul><li>Online shop and JordanGP Originals showroom </li></ul><ul><li>Intangible: </li></ul><ul><li>Brand identity; fun, succes, rebel and cool </li></ul><ul><li>Irish nationality as a strong brand </li></ul><ul><li>Irish network as provider of capital </li></ul><ul><li>Core competences </li></ul><ul><li>Human capital: </li></ul><ul><li>The family culture. This makes them a great place to work </li></ul><ul><li>Leadership style of Eddy Jordan </li></ul><ul><li>Applied adrenaline, mentality of going strong </li></ul><ul><li>Energetic way of life which attracts other energetic people </li></ul><ul><li>Strive for winning formula by being the most creative </li></ul>
  8. 8. <ul><li>Strong leadership: Family feeling, fun, applied adrenaline. </li></ul><ul><li>Strong network enables Eddie Jordan to find sponsorship funds. </li></ul><ul><li>A history of success. Historical brand image. The up-and-coming brand. The underdog position has been maintained. </li></ul><ul><li>Strong responsive and flexible ability of Eddie Jordan and JordanGP because of size and culture. </li></ul><ul><li>Strong marketing feeling (innovation in marketing). Strong merchandising capabilities supported by the fact that the Formula One is an international sport limited to one league. </li></ul><ul><li>New Formula One rules make it easier to reach the top for the small teams. It’s a way to quantify the performance of the lower ranked teams. </li></ul><ul><li>Irish investor club with new money. Brings back the Irish pride. As if JordanGP has again been nationalized. Ireland has seen high economic growth. Ireland has a good reputation within the EU. </li></ul><ul><li>Tobacco industry sponsorships because they are not allowed to sponsor other sports. Tobacco companies will search for team without parent motor company. </li></ul><ul><li>High entry barriers for new Formula One entrants (40 million Euros). This will enable them to focus on the main competitors instead of their attention being diverted by new entrants. </li></ul>S O W T S O W T 1 S W O <ul><li>Future sponsoring needs to be significantly higher to maintain the performance development curve (test driving and beter engines). A lot more funding is needed for the last bits of small development. It is becoming a sport that is hard to be sponsored. </li></ul><ul><li>Stronger competitive environment. Widening of the sub-top. Strong professionalization. </li></ul><ul><li>Formula One is susceptible to economic changes </li></ul><ul><li>Further reputational damage Eddie Jordan and other external influences that might affect Eddie Jordan negatively. </li></ul>T 4 O T S <ul><li>Brand and company dominated by one man </li></ul><ul><li>Reputational damage Eddie Jordan because of Vodafone-gate and the idea of Eddie Jordan not focusing on the core business </li></ul><ul><li>Strong reliability on drivers because of the small size of JordanGP </li></ul><ul><li>No parent company. This never shall give them the technological advantage and the sustainability of funds, human and technological capital in turbulent times </li></ul><ul><li>To be up-and-coming the team needs to show constant performance improvements. The last years there was a lack of continued performance improvements. </li></ul>W 3 SWOT reveals the strategic position of JordanGP compared to its competitors. SWOT of Jordan 2
  9. 9. <ul><li>New Formula One rules make it easier to reach the top for the small teams. JordanGP’s strength is that they have maintained the underdog position. Their strong responsive character makes them a good candidate to take profit from the new rules. Yet their weakness is that they do not have a parent company. This will make it harder for them to take advantage of these rules. More or less as a result of this there was a lack of performance the last years. The threats include the strong professionalization trend and the widening of the sub-top. </li></ul><ul><li>Irish investor club with new money. Combined with the strong marketing feeling Eddie Jordan possesses this is a powerful chance for a new breakthrough. As the Formula One is susceptible to economic changes there needs to be a good understanding within the Irish investors club that financial performance is not just a result of the track performance. Many factors play a role in JordanGP’s financial position. </li></ul><ul><li>Tobacco industry sponsorships because they are more and more to sponsor other sports. The fact that JordanGP has no parent company is in this case in it’s favor. The tobacco industry will sponsor orphan teams like JordanGP. Eddie Jordan may use his strong marketing feeling to attract tobacco companies to sponsor his team. Yet, the reputational damage he has been subject to might endanger this. JordanGP’s bad brand identity might result in some companies hesitation towards sponsoring JordanGP. On the other hand associating the tobacco industry with JordanGP might endanger the brand name. JordanGP has to be aware of this risk and act in such a way to minimize these risks. </li></ul><ul><li>High entry barriers for new Formula One entrants (40 million Euros). JordanGP in this way might be an easy target for a takeover which a disadvantage. But as new competitors will have to spend 40 million Euros this will bring a financial advantage for JordanGP as the other team’s budget will be lower. </li></ul>S O W T JordanGP needs to focus on the future opportunities while realizing that despite its strengths there is also a strong linkage between opportunities and the weaknesses and threats. SWOT of Jordan
  10. 10. Positive Negative JordanGP has to move from the ‘dead end’ to the ‘bullet proof’-scenario, as this is the most sustainable. Doing this directly is a “mission impossible” as it is too complicated. There are two ways to move to ‘bullet proof’; via ‘Put aside ego’ and via ‘personal branding EJ’. Eventually, if JordanGP wants to reach the bullet proof scenario, Eddy Jordan needs to step back, share power, be flexible, focus on the core business racing and commit to strong financial long term partners. Ferrari Future of JordanGP (after 2003) depends on the ability of bending a demaged image into a top racing image and the ability of changing a personal leaded team into a team with a structure which is not sensitive for succession problems. Future scenario’s of Jordan Scenario 1: ‘ Dead end ’ This represents the situation of JordanGP in 2003, which is a ‘dead end’ scenario. Because of the strong linkage between owner and brand, taking out the owner might damage the brand. Eddy Jordan is the brand. The brand value is also low as it is perceived as not very serious or sustainable. Scenario 2: ‘ Put aside ego’ This scenario shows the combination of a weak brand value and a weak linkage between brand name and the owner. This scenario displays what really happened with the Jordan team; JordanGP was taken over by Midland in 2005 (team still called Jordan) and in 2006, Eddy Jordan and the brand Jordan disappeared from the F1. Scenario 3: ‘ Personal branding Eddie Jordan ’ JordanGP can move into this box by improving Eddy Jordan's reputation. By improving Eddie Jordan reputation the brand value will be improved. Dependent on the dominancy displayed by the owner, succession will be less or more an issue. For Eddy Jordan, sharing power and put aside his ego, would be a difficult thing to do. Scenario 4: ‘ Bullet proof ’ This scenario decouples Eddie Jordan’s personal image from the brand name and creates an independent brand identity and is independent from any individual. On the long term, success cannot sustain without a strong brand value, because it attracts sponsors and needs some sort of independency regarding their leader if succession will not become a major problem. Strong Weak Williams JordanGP Linkage between brand and owner Mclaren (2007) Brand perception Armani IKEA Google Apple Mercury 1 3 2 4
  11. 11. JordanGP has incrementally developed itself, based on Jordan’s individual experience. In 2003 JordanGP (i) lost his lawsuit case against Vodafone, (ii) changed to Honda as their engine supplier, (iii) had ongoing problems with the reliability of their car and (iv) aside from the unlikely win none of the two drivers (one new) was able to have any sort of success in the Jordan team. Even before entering the Formula One arena Eddie was known for making deals where none had existed and his rebel attitude The experience of Eddie Jordan made JordanGP to what it is today so why challenge the problems that JordanGP is facing in 2003. Eddie Jordan is the enactor of experience with JordanGP Jordan and his team were well known for a &quot;rock and roll&quot; attitude which added colour and character to Formula One in the 1990s. This image had led them to a 5 th position in their first year (1995) and their biggest success (3 rd position) in 1999. The culture of JordanGP is based on the passed experience of Eddie Jordan. “And if you put together sport, motor racing an element of adventure and a bit of irreverence, it’s something very powerful”. This “rock and roll” and adventure explain why in 2003 Eddie Jordan planned a reality show for amateur drivers to compete in a Grand Prix. JordangGP also launched a new approach of sponsorships by turning cars and drivers into endorsers of cultural and sporting venues. And by bringing in the first Chinese F1 driver, a clever move since F1 become more and more popular in the Far East. Before 2003 2003 After 2003 Rationality Rationality Rationality Legitimacy Legitimacy Legitimacy Innovation Innovation` Innovation <ul><li>Competition </li></ul><ul><li>More technological advances of the 1990s </li></ul><ul><li>Rose of the cost of competing </li></ul><ul><li>Four teams‘ dominance (largely funded by big car manufacturers). </li></ul><ul><li>JordanGP </li></ul><ul><li>Entering F1 without a sponsor </li></ul><ul><li>Various engine switches and various ‘innovative’ sponsor deals. </li></ul><ul><li>The strategy of JordanGP is solely based on the experience and past success of Eddie (Experience Lens) </li></ul>“ Intuitive, motivating people, knowing the F1 people, media and the sponsors” are making Eddie Jordan the leader with an experience lens on strategy but the F1 has changed from a Piranha Club into a multi-billion dollar industry. <ul><li>Competition </li></ul><ul><li>Large engine budget (e.g Ferrari $ 173 million and large testing budgets (e.g. Ferrari $ 88 million) make the industry shift from experience to more rational (Design Lens) in order to optimize economic performance </li></ul><ul><li>Competition </li></ul><ul><li>More domination by the world wide car manufacturers are increasing the budgets and turning F1 more and more into a sport where sponsors and finance dominates </li></ul><ul><li>Formula One is switching from a European / Western sport into a world wide sport. </li></ul><ul><li>More long term strategic decisions. </li></ul><ul><li>JordanGP </li></ul><ul><li>Engine supplier leave Jordan over Team BAR. </li></ul><ul><li>Decrease in budget because of decrease in number of sponsors </li></ul><ul><li>Jordan brand creates a new source of revenues (e.g. GP Originals) in a year when the team future is insecure. </li></ul><ul><li>Jordan sued Vodafone and lost (agreeing to pay both costs). </li></ul><ul><li>JordanGP </li></ul><ul><li>Long time sponsor partner Benson & Hedger leaves JordanGP. Cash problems causes Jordan driver to miss a Canadian Grand Prix. </li></ul><ul><li>JordanGP switches to ‘on shelves’ engine of Toyota. </li></ul><ul><li>No indications that JordanGP is switching towards the adopted ‘strategy lens’ of the industry. </li></ul>Strategic lens of Jordan
  12. 12. <ul><li>M.P. Vercesi, 2004, ‘Jordan: Formula One at heartbeat speed’ (Exploring Corporate Strategy, Classic Case Studies) </li></ul><ul><li>The Sunday Times, 2004, ‘Jordan turns corner with E7.5m profit forecast’ </li></ul><ul><li>Sunday Business Post, 2004, ‘Jordan speeds up plans for Dubai sale’ </li></ul><ul><li>Irish Independent, 2004, ‘Auditors query Jordan's filing of stg£15m fee’ </li></ul><ul><li>The Sunday Times, 2004, ‘Jordan picks up E3m for grand prix wind tunnel’ </li></ul><ul><li>Belfast News Letter, 2005, ‘Motorsport – Formula One: Jordan saved!’ </li></ul><ul><li>Associated Press Worldstream, 2005, ‘Jordan sold to Midland Group’ </li></ul><ul><li>The Financial Post, 2006, ‘Dutch car company Spyker buys out Midland Racing to join F-1 circuit’ </li></ul><ul><li>The Sunday Times, 2008, ‘Here's to Russian's fresh bid for F1?’ </li></ul><ul><li>Montreal Gazette, 2008, ‘Mallya's billions make India a Force in Formula One’ </li></ul><ul><li>The Guardian, 2008, ‘National: Formula one: The teams: Will they hit the cash barrier?’ </li></ul><ul><li>Johnson et all, 2008, Exploring Corporate Strategy, 8 th Edition </li></ul>References