Porters Five Forces Framework Or Model Business Essay

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Federation Internationale de I ‘Automobile (FIA) in 1945 established Formula A which was over the years referred to as Formula One (F1) .In mid 1960’s F1 went further on and transformed into a specialised business where leading and competitive technologies were used to built cars. Within no time F1 was one of the most popular TV sporting event which had the third highest audience in the world. Around 2008, more than 14 car manufacturers or constructors were competing in F1 out of which the top three teams were Ferrari , McLaren and BMW.

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The finest teams would typically test and develop their own systems and would generally employ 450 to 800 employees. The employees will include the highly qualified race engineers, designers, aerodynamicist, composite experts and system specialist. In addition to the sponsorship the individual teams have, Revenue is generated through the price money generated by the inning championship points which is negotiated on behalf of teams by Bernie Eccles tone’s Formula One Group (FOG).In 2009 around 15 percent of Ferrari’s budget was estimated to have come from price money.


Formula one is a extremely competitive industry and is based on a swiftly changing environment, which can be defined and projected with the help of Porter’s five forces “Porter’s five force model is a framework designed for industry analysis and strategic development for businesses by Michael Porter in 1979.It helps organisation to derive five forces that determines the competitive intensity of the organisation/ industry.” (https://globaleduc.files.wordpress.com/2012/09/5-forces.png) Fig 1.1 a graphical view of Porters Five Forces Model

Porters Five Forces For Formula One Constructors

Threat of New Entrants:

High start up and running cost. High amount of experience and expertise required to meet the technology challenges

Bargaining Power of Buyers:

The buyers in Formula One are of high intensity because of the high power of the game. They play an important role in bringing out the contribution for funds for the teams. They basically are: Fans Media Sponsors

Competitive Rivalry within the Industry:

Formula One is a highly intense and competitive industry. Each team places prominence in different capacities on a number of aspects like: Engineers and Designers Technology Drivers and Management Sponsorships

Bargaining Power of Suppliers:

The suppliers of Formula One constructors play an extreme important role. It is so crucial so that in a few instances, primary suppliers have been the grounds of the end of the dominant period of some constructors.

Threat of Substitutes:

For Formula One the popular sporting events can be a threat as they may end up being more popular among people and may take away resources such as money,

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