Abstract

Formula 1 is a global phenomenon and is the pinnacle of motorsports around the world for
open wheel car racing. It is not only popular for the sheer speeds involved, but also for the
complete aura that it brings along with it. It is the only platform where the high end
technology of engineers meets the cutting edge skills of drivers, who not only steer the car
but also the teams brand image. Formula 1 is the coming together of science, art, money and
glamour - everything that makes it awesome to watch on television or live at the race track.

F1 is about many activities which have further sub-activities to win a race, such as
aerodynamics, brakes, cornering, drivers’ fitness, engine, gear box, tyres, pit stops and race
strategy, which all play a very important role.

In this study, semi structured telephone interviews, followed up in person with meetings to
collect data. This study proposes that Formula 1 has a determinative impact upon the
motorsport associated business industry in terms of marketing communication tool and
financial aspect.

This study addresses the issues & problems of sponsorships especially tobacco sponsorships
& it supports a number of case studies both in the favour and against. This study also
proposes activities over operations, teamwork, competition to Formula 1(Deutsche
Tourenwagen Masters (DTM)) and motorsport development & its scope in India. A full list
of references is presented at the end of the report.

The 2009 Formula 1 season which began in despair because of huge global crunch where by
many established teams indicated to withdraw as Honda F1 racing did just few weeks before
the start of season leaving behind two seasoned drivers Jenson and Ruben at cross roads.

Thus Formula 1 isn’t just about superfast cars and their charismatic drivers. Being the
pinnacle of all motorsports events the Formula 1 road show is followed by glitz and glamour.

In the whole study I found the industry is way too secretive. Team personnel don’t want to
share knowledge and information. As competition is fierce among the teams and teams are
operating at the highest level of professionalism to keep up the brand image.

All teams are striving to achieve highest level of organisational performance from every
source available within the organisation.

Page | 1
Acknowledgement

One of the hardest tasks for writing this Management Report was to know where to start from
and how to say thank you to many people who contributed their views.

Formula 1, both as a sport and business, takes huge commitment and effort in all areas. But
despite these pressures, most of the people whom I have spoken to gave some of their free
time, experience and knowledge to assist me in the creation of this report.

I would sincerely like to express my gratitude to all those who helped me in completing this
project.

My sincere thanks go to Mr. Ovin, Manager at Cambrian Tyres shop in Aberystwyth for
giving me valuable access to motorsport tyre industry. His positive response to my request
enabled me to meet some of the great names in the sport and business of Formula 1.

To Charles Bradley (Deputy Editor, Autosport), Matthew Burn (Editor, Haymarket

Publishing), Will Buxton, Sam Bird (Mercedes GP Reserve Driver), Karun Chandhok (Team
Lotus F1 Reserve Driver) for their valuable feedback. Margaret Simpson(Chief Marshal at
Oulton Park), Allan Farrimond (Senior Incident Officer), Nadine Lewis (Post Chief &
Marshal Training Officer), Gordon Head(Chief Flag Marshal, Oulton Park), Dave Cleavely
(Clerk of the Course, Oulton Park), Sophie Owen(Operations Manager, Oulton Park),
Stephanie Ashley (Events Administrator, Oulton Park), John Eldridge (Chief Scrutineer,
Oulton Park), Mike Harris (Mentor of Trainee Scrutineer NorthWest zone), Mildred
Wiltshire(Chief Marshal at Brands Hatch) and Katie Dickens(Group HR Head, MSVR,
Brands Hatch) for giving me the marshal training and allowing me to marshal at various club
and championship events. Through marshalling I learnt how the motorsport industry works. It
helped me understand motorsport and enabled me gain valuable knowledge and experience
for successful completion of this report.

I am greatly indebted to Ms Sophie and Ms Stephanie administrators of operations at Oulton

Park for allowing me to work part time during British Super Bike and British Touring Cars
Championships rounds and gain valuable track operations experience.

From Aberystwyth University, I would particularly like to thank my dissertation supervisor

Dr. John Follett for his continual support and guidance since semester two. He helped me to
solve wide variety of difficulties & problems that arose during this study.

I would like to thank Mr. John Morgan and Mr.Elton Andrew W St George for his kind help
with valuable inputs.
Page | 2
 Table of Contents Page No(s)

Declaration of Originality

Abstract 1

Acknowledgements 2

Table of Contents 3-4

List of Figures & Tables 5

1) Introduction 7-8

1.1) Background to Motorsport & Formula 1 9

1.2) Why Formula 1? 10

1.3) Estimate of money spent by Formula 1 Team 10-16

1.4) Revenue & Profit 16-17

2) Methodology 18

3) Limitations 18

4) Motorsport- A race out of place 18-19

4.1) SWOT Analysis 19-21

4.2) TOWS Analysis 21

4.3) PESTLE analysis 21

5) Sustainability in motorsports 22

5.1) Sponsorship & its role 22-23

5.2) Role of Monaco GP in F1 branding 23-26

5.3) Pit stop 26-32

5.4) Teamwork & Branding 32-33

6) Sustainability of Formula 1 33-34

6.1) Business of Formula 1 34-35

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6.2) Marketing 35-36

7) Sponsorship in F1 37-38

7.1) Formula 1 Case Studies 38

7.1.1) Case Study 1: Anheuser-Busch 38-39

7.1.2) Case Study 2: Sea world adventure parks 39-40

7.1.3) Case Study 3: PETRONAS & Motorsport 40

7.1.3 (A) The Objectives 40-41

7.1.3 (B) PETRONAS involvement in motorsports 41-42

8) Tobacco sponsorship in Formula 1 43

8.1) British American Racing 43

8.2) Benefits of sponsorship & BAT 43-44

8.3) Media & BAR merchandising 44-45

8.4) Reaching emerging markets 45-46

8.5) Tobacco exposure through Third Party Advertising 46-50

8.6) Enhancement of Tobacco imagery through co-branding 50-51

8.7) Ban on Tobacco sponsorship 53-54

9) Role & importance of Licensing & Merchandising in branding 54-55

10) DTM-Competition to Formula 1 57-62

11) Conclusion 63

12) Appendix 64-71

13) References 72-78

Page | 4
List of Figures & Tables Page No(s)

Figure-1 Estimated F1 team budget split 15

Figure- 2 SWOT Matrix 20

Figure- 3 Model of Consumer Focused Sponsorship 36

Figure- 4 BAT advertisement show car in cigarette box 45

Table-1 Cost of Formula 1 Car 17

Table -2 Brand Terminology 35

Table- 3 Tobacco sponsorship summary points 52

Page | 5
Picture 1) BMW Sauber Formula One Team 2008 show car displayed at the main
entrance of Sepang F1 circuit, during 2009 PETRONAS Grand Prix of Malaysia.
(Source: Authors own collection)

Picture 2) Starting grid moments before the start of the 2009 PETRONAS Grand Prix
of Malaysia. Source: authors own collection

Page | 6
 1) Introduction

Formula One is an exhilarating combination of adrenaline-charged racing and glamour. The

most expensive sport in the world is closely associated with sharply-dressed playboys,
glamorous women and never ending parties.

Formula 1, both as a sport and a business, takes huge commitment and effort in all areas.
There are two perspectives to the Grand Prix experience, the public, external world of the
fans and the insiders view of those who either work there or are privileged enough to be
allowed inside the inner workings of the formula 1 world.

As truly said by late legendary F1 driver “Ayrton Senna”

“In many ways F1 and its drivers is a dream for people and not a reality. That counts in your
mind. It shows how much you can touch people." (Rubython T, 2006)

The external world at the circuit includes the public grandstands, vending area, program
sellers, campsites, huge parking areas and tens of thousands of people hoping to catch a
glimpse of their favourite driver or perhaps celebrity drawn to the glamour, excitement and
extensive press coverage of these events.

The internal world exists within an area controlled by the FOM (Formula One Management).
Entry requires an electronic security pass issued by them. This is the World (with a capital
W) of Formula 1- the teams, drivers, media, agents and myriad movers and shakers within the
sport.

This ‘exclusivity’ is what sponsors, guests and VIP’s expect. It is a place where deals are cut,
partnerships developed and, sometimes, where relationships are ended. It is a hive of
international sporting powerbrokers and business men and women that buzz around the
racing event itself.

One of the critical aspects of Formula 1 is that it requires all the teams to attend fixed race
meetings (approx 18) around the world. There can be therefore no possibility of a car not
being ready for these events.

“In Formula 1, image and performance go hand in hand. Performance benchmarking is

always relative to the competition and a team’s performance is only as good as the last
race.”(Jenkins M, 2005)

The first thing that got me thinking about the various Formula 1 teams was a challenge in an
area of strategy which is essentially saying that companies are able to achieve high levels of
Page | 7
performance because they have unique and distinctive resources & strategies at their disposal
and the great thing about Formula 1 is that the teams are very much similar - they are of
similar sizes, they are even located quite closely together and yet some are able to outperform
the others.

Every company is different and every company achieves its performance in a different way.
How organisations achieve performance levels at the limits of their financial, technological
and human potential.

Picture 3) Robert Kubica of Renault Formula 1 Team in action during the 2010
PETRONAS Grand Prix of Malaysia at Sepang F1 Circuit. Source: Authors own
collection.

Page | 8
 1.1) Background to Motorsport

Motorsport or motorsports is the group of sports which primarily involve the use of
motorized vehicles, whether for racing or non-racing competition. Moto-Sport refers to
motorcycle racing specifically and includes off-road racing such as motocross and Moto GP.

Motor racing is the subset of motorsport/ motosport activities which involve competitors
racing against each other.

Forms of motor racing include:

 Auto racing(Formula 1, Indy Racing, NASCAR)

 Motorcycle racing
 Air racing
 Boat racing
 Snowmobile racing
 Hovercraft/ powerboat racing
 Truck racing

Picture 4) Jenson Button of McLaren Mercedes during the race at Sepang F1 circuit in the
2010 PETRONAS Grand Prix of Malaysia. Source: Authors own collection.

Page | 9
1.2) Why Formula 1?

The reason to choose Formula 1 motorsport is because it provides a number of important ingredients
to explore the nature of organisational performance. Also it integrates the fundamental resources of
organisations: human, financial and technological and relies on the continual development of
knowledge to ensure competitive performance. It provides a stimulating context of issues related
with teamwork, project management, client relationships and business dynamics.

It is primarily a “people based industry” but also one which requires large sums of cash (Approx
US$ 40 million) to fund the technological development and human resources needed to generate
superior performance.

(Source:http://argent.fia.com/web/fia-
public.nsf/6ECEB23C18BE679DC1257329003450E4/$FILE/14General_Prescriptions_a.pdf)

The key issue in Formula 1 is teams have got money financial resources, technical resources, and
skill full human resources. They need to combine them together to outperform the competition. And
that is at the nub of what most organizations are trying to do.

1.3) Estimate of money spent by Formula 1 teams:

The amount of money spent in Formula 1 is disgustingly large, and is secretively kept as most
people probably know. Formula 1 Links heaven reports that Business F1 magazine has produced
estimates of F1 teams’ budgets.

 Approximate estimates of F1 teams in 2003 which is further broken into 10 spending

categories:

Total $2,141,100,000

$443,800,000 Ferrari
$353,300,000 Williams
$304,600,000 McLaren
$290,400,000 Toyota
$225,100,000 BAR
$206,800,000 Renault
$119,500,000 Sauber
$ 79,200,000 Jordan
$ 78,800,000 Jaguar
$ 39,600,000 Minardi
1) Engine budgets $931,000,000

Page | 10
$185,000,000 Williams
$175,000,000 Ferrari
$150,000,000 Toyota
$140,000,000 McLaren
$110,000,000 Renault
$105,000,000 BAR
$ 24,000,000 Sauber
$ 18,000,000 Jordan
$ 15,000,000 Minardi
$ 9,000,000 Jaguar
2) Operating the cars at tests $260,800,000
$88,000,000 Ferrari
$48,000,000 Williams
$29,100,000 McLaren
$24,700,000 Toyota
$22,000,000 BAR
$19,800,000 Sauber
$14,600,000 Renault
$ 7,500,000 Jaguar
$ 3,700,000 Jordan
$ 3,400,000 Minardi
3) Team salaries $194,000,000
$41,400,000 Ferrari
$32,300,000 Toyota
$30,300,000 McLaren
$24,000,000 Williams
$16,500,000 Renault
$12,800,000 BAR
$12,700,000 Sauber
$10,600,000 Jaguar
$ 8,800,000 Jordan
$ 5,300,000 Minardi
4) Operating the cars at races $187,300,000
$28,500,000 Ferrari
$22,500,000 Toyota

Page | 11
$20,800,000 Williams
$19,200,000 McLaren
$19,000,000 Renault
$18,200,000 Sauber
$17,600,000 BAR
$17,000,000 Jaguar
$16,000,000 Jordan
$ 8,500,000 Minardi
5) Research and development $173,000,000
$35,000,000 McLaren
$21,500,000 Toyota
$20,300,000 Williams
$20,000,000 Ferrari
$16,900,000 Renault
$16,500,000 BAR
$15,400,000 Jaguar
$14,600,000 Sauber
$12,600,000 Jordan
$ 200,000 Minardi
6) Driver salaries $132,000,000
$44,000,000 Ferrari
$24,000,000 BAR
$20,000,000 Williams
$13,500,000 McLaren
$ 8,000,000 Jordan
$ 7,500,000 Toyota
$ 6,800,000 Sauber
$ 6,200,000 Renault
$ 1,500,000 Jaguar
$ 500,000 Minardi
7) Wind tunnel operating costs $93,600,000
$15,100,000 Ferrari
$12,900,000 McLaren
$12,200,000 Williams
$11,600,000 Toyota

Page | 12
$10,400,000 Sauber
$10,100,000 BAR
$ 8,000,000 Renault
$ 5,500,000 Jaguar
$ 4,500,000 Jordan
$ 3,300,000 Minardi
8) Travel and accommodation $86,600,000
$18,000,000 Ferrari
$13,000,000 McLaren
$12,000,000 Toyota
$ 9,300,000 Williams
$ 7,900,000 BAR
$ 7,500,000 Renault
$ 6,800,000 Sauber
$ 5,300,000 Jaguar
$ 4,500,000 Jordan
$ 2,300,000 Minardi
9) Corporate entertaining and catering $62,850,000
$12,200,000 Williams
$ 9,700,000 Ferrari
$ 8,900,000 McLaren
$ 7,200,000 BAR
$ 6,700,000 Renault
$ 6,300,000 Toyota
$ 5,600,000 Jaguar
$ 4,300,000 Sauber
$ 1,600,000 Jordan
$ 350,000 Minardi
10) Car manufacturing costs $19,250,000
$4,100,000 Ferrari
$2,700,000 McLaren

$2,000,000 Toyota
$2,000,000 BAR
$1,900,000 Sauber
$1,500,000 Jordan

Page | 13
$1,500,000 Williams
$1,400,000 Renault
$1,400,000 Jaguar
$ 750,000 Minardi

(Source: The price of Formula 1; http://www.fastmachines.com/f1/the-price-of-formula-1/)

 Approximate estimates of F1 teams in 2006

McLaren: $ 400m
Toyota: $ 393m
Honda: $ 382m
BMW: $ 378m
Ferrari: $ 329m
Renault: $ 300m
Red Bull: $ 201m
Williams: $ 134m
Super-Aguri: $ 95m
Midland: $ 75m
Toro Rosso: $ 66m

Figure 1) Source: F1 racing (March 2008); http://www.f1racing.co.uk/archives

Page | 14
This list high lights a few notable things. Firstly, the FIA is right to be pursuing cost-cutting
measures (although whether or not such measures really work is another matter).

Secondly, the biggest spenders are not the most successful teams — although everybody will have
suspected that anyway. McLaren, Toyota and Honda clearly all have way more money than sense,
and all three teams have fundamental problems. Renault, slap bang in the middle of the list, has
dominated the championships with ease.

A similar story appears in F1 Racing from time to time, and just a few months ago (in the March
2006 edition) they estimated teams’ 2005 budgets. If anything its estimates were even higher.

Toyota — $ 499.05m

Ferrari — $ 432.98m

McLaren-Mercedes — $ 419.95m

B.A.R-Honda — $ 360.16m

BMW-Williams — $ 360.12m

Renault — $ 287.81m

Sauber-Petronas — $ 161.32m

Red Bull — $ 139.22m

Jordan — $ 104.20m

Minardi — $ 50.31m

The magazine therefore estimated that £1,581,908,857 at the end of 2006 season is sunk into F1.

(Source: F1 Racing(March 2006); http://www.f1racing.co.uk/archives)

1.4) Revenue & Profits

Formula One is profitable for most parties involved—TV channels make profits from broadcasting
the races, and teams get a slice of the money from the sale of broadcasting rights and from the
sponsor's logos on their cars.

The cost of building a brand new permanent circuit like the Chinese Shanghai International Circuit
can be up to hundreds of millions of dollars, while the cost of converting a public road, such as
Albert Park, into a temporary circuit is much less. Permanent circuits, however, can generate
revenue all year round from leasing the track for private races and other races, such as Moto GP.
The Shanghai circuit cost over $300 million. (Benson, Andrew (27 September 2004); Source: http://

Page | 15
"BBC SPORT / Motorsport / Formula One /High price takes shine off F1"; BBC News)

The owners are hoping to break-even by 2014. The Istanbul Park circuit cost $150 million to build.
("Pioneer Investors", Pioneer Investors;http://www.pioneerinvestors.com/news2.asp?newsid=2785.)

Not all circuits make profits—Albert Park, for example, lost $32 million in 2007. ("F1 Preview:
Australian organizers confident of GP future, but rule out night racing — International Herald
Tribune";International Herald Tribune. 29 March 2009; Source:
http://www.iht.com/articles/ap/2008/03/06/sports/AS-SPT-CAR-F1-Australian-GP.php)

In March 2007, F1 Racing published its annual estimates of spending by Formula One teams.
("How Much Does It Cost To Build An F1 Car?"; Netcars; Source:
http://www.netcars.com/blogs/netcars-official-blog/how-much-does-it-cost-to-run-an-f1-car/394/.)

The total spending of all eleven teams in 2006 was estimated at $2.9 billion US. This was broken
down as follows: Toyota $418.5 million, Ferrari $406.5 m, McLaren $402 m, Honda $380.5 m,
BMW Sauber $355 m, Renault $324 m, Red Bull $252 m, Williams $195.5 m, Midland F1/Spyker-
MF1 $120 m, Toro Rosso $75 m, and Super Aguri $57 million. (F1 Racing, March 2007)

Costs vary greatly from team to team. Honda, Toyota, McLaren-Mercedes, and Ferrari are estimated
to have spent approximately $200 million on engines in 2006, Renault spent approximately $125
million and Cosworth's 2006 V8 was developed for $15 million. (F1 Racing, March 2007)

In contrast to the 2006 season on which these figures are based, the 2007 sporting regulations ban
all performance related engine development. (Source: http://www.fia.com/regulations2007)

Page | 16
The Price of F1 car:

Costs for an F1 car

Parts Single price Needed Total amount
Monocoque $117.900 1 $117.900
Bodywork $8.500 4 $34.000
Rear wings $12.900 10 $129.000
Front wings $21.500 10 $215.000
Engine $214.300 22 $4.708.000
Gearbox $128.600 4 $514.400
Exhaust $11.600 22 $255.620
Telemetrie $107.150 1 $107.150
Fire extinguisher $3.200 1 $3.200
Brake disks $1.200 120 $144.000
Brake lining $190 240 $45.600
Brake saddle $2.200 8 $17.600
Wheel $1.300 50 $65.000
Tire $650 448 $291.200
Shock absorber $1.300 48 62.400
Pedals $2.200 1 $2.200
Dashboard $3.200 1 $3.200
Steering $4.300 1 $4.300
Mirror $650 2 $1.300
Steering wheel $320 1 $320
Tank $10.700 1 $10.700
Under work $8.600 10 $86.000
Suspension $1.300 40 $52.000
Total amount: $6,868,000

Table 1) Source: Cost of F1 car; http://www.f1-country.com/f1cost.html

Page | 17
 2) Methodology

This study was conducted using a literature search & analysis of electronics, Formula 1 books &
magazines, newspaper & journal articles, semi- structured telephone interviews with team
personnel’s, authors, suppliers together with teams and circuit press releases which also provided
the basic data.

3) Limitations

During the whole course of preparing the report I met numerous eminent personalities in the field
of motorsports and followed them up with emails and phone calls, but was neglected after a certain
period in most of the instances. As Formula 1 is a very secretive industry, team personnel and
journalists couldn’t speak very openly even if they met me. On occasions despite having
appointments, they were turned down at the last minute. Many noted personnel did not want to
have their names in the reference list. Thus I had to rely on my research findings and this overall
report is my interpretation of the conversation that I had with them. I have referenced it with
nearest possible citations. I have extensively used my personal experience of Formula 1 as a fan
and as a participant as a pit lane marshal, time keeper and tyre scrutineer.

4) Motorsport - a race out of place?

The key thing for organisation and teams to learn from the global slump is don’t wait for the dive to
happen. Think through our strategy in terms of :
 What is going to happen if Multinational Companies (MNC) takes this kind of hit on their
business?
 Have MNC’s got contingency plans in place?
 Have MNC’s thought through how they are going to respond to this?

It is about identifying these parts of the business that are most valuable to get them through this kind
of phase.
Formula 1 is a global phenomenon. The nature of Formula 1 as the pinnacle of motorsport
technology allows organisations to focus on the role of technology in supporting competitive

Page | 18
performance. Formula 1 always runs in parallel with other businesses, and I think we are going to
see a contracting across the board in all kinds of organisations.

R&D is the foundation, the bedrock on which a team is based thus it will not disappear, R&D will
have to be more cost focussed, they will have to do more with less. But the race is still there. The
need to develop new innovations, improve performance, won’t go away. So the teams will still be
doing that, but not perhaps on the scale which was getting a bit ridiculous that they were operating
in currently.

Motorsports events to be staged in significant urban places supports the growth of conspicuous
consumption, pollution and the use of fossil fuels, both directly via the events themselves and in the
long-term impacts on the behaviour of motorists and consumers. Motorsports events and their
associated corporate interests represent many of the attitudes and behaviours that will need to be
changed or abandoned to limit resource depletion and greenhouse gas creation."

Formula 1 in particular has embraced the concept with new races in Valencia and Singapore being
added to the traditional Grand Prix in Monaco. "The dependence of motorsport and its followers on
the consumption of natural resources for the manufacture and ongoing use of racing machines, and
the passenger vehicles they inspire, is an example of motorsport's relationship with unsustainable
patterns of consumption.

In a situation where environmental problems are changing government policy and creating new
markets, marketers of motorsport are likely to need to give serious consideration to how they might
make their events genuinely sustainable. (Max Mosley, former FIA F1 president; 2007 FIA Annual
Meeting; Source: http://www.fia.com/archives)

Overall in general it is believed that a great deal of more research is needed on the environmental
impact of sport, but that Formula 1 will become greener in the coming decades if it has to survive.

4.1) Strengths, Weaknesses, Opportunities and Threats (SWOT)

SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of
planning and helps marketers to focus on key issues. SWOT stands for strengths, weaknesses,
opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats
are external factors.

Page | 19
Figure (2) SWOT Matrix

A SWOT analysis helps find the best match between environmental trends (opportunities and
threats) and internal capabilities.

 A strength is a resource or capacity the organisation can use effectively to achieve its
objectives.
 A weakness is a limitation, fault, or defect in the organisation that will keep it from
achieving its objectives.
 An opportunity is any favourable situation in the organisation's environment. It is usually a
trend or change of some kind or an overlooked need that increases demand for a product or
service and permits the firm to enhance its position by supplying it.
 A threat is any unfavourable situation in the organisation's environment that is potentially
damaging to its strategy. The threat may be a barrier, a constraint, or anything external that
might cause problems, damage or injury.

In general, an effective strategy is one that takes advantage of the organisation's opportunities by
employing its strengths and wards off threats by avoiding them or by correcting or compensating for
weaknesses.

The first part of any SWOT analysis is to collect a set of key facts about the organisation and its
environment. This will include facts about the organisation's markets, competition, financial
resources, facilities, employees, inventories, marketing and distribution system, R&D;,
management, environmental setting (e.g. Technological, political, social, and economic trends),
history and reputation.

The second part of a SWOT analysis is to evaluate data to determine whether they constitute
strengths, weaknesses, opportunities or threats for the organisation. It is important to note that any
given fact may give rise to more than one evaluation, and so to ask - "How may this fact be

Page | 20
considered as an opportunity as well as a threat?"; "How may this apparent strength turn out to be a
weakness?"; "How does this weakness really represent strength?" The answers to these and similar
questions may give managers new insights into choosing appropriate strategies. (Source:
http://www.ifm.eng.cam.ac.uk/dstools/paradigm/swot.html)

4.2) TOWS Analysis

It is a variant of the classic business tool, SWOT Analysis. TOWS and SWOT are acronyms for
different arrangements of the words Strengths, Weaknesses, Opportunities and Threats.

By analyzing the external environment (threats and opportunities), and organisations internal
environment (weaknesses and strengths), teams can use these techniques to think about the strategy
of their whole organization, a department or a team. Formula 1 can also use them to think about a
process, a marketing campaign, or even its own skills and experience.

At a practical level, the only difference between TOWS and SWOT is that TOWS emphasizes the
external environment whilst SWOT emphasizes the internal environment.

(Source: http://www.mindtools.com/pages/article/newSTR_89.htm)

4.3) PESTLE Analysis:

PESTLE stands for - Political, Economic, Sociological, Technological, Legal, Environmental. The
term PESTLE has been used regularly in the last 10 years and its true history is difficult to establish.

PESTLE analysis is in effect an audit of an organization’s environmental influences with the

purpose of using this information to guide strategic decision-making. The assumption is that if the
organization is able to audit its current environment and assess potential changes, it will be better
placed than its competitors to respond to changes.

An organization on its own cannot affect these factors, nor can these factors directly affect the
profitability of an organization. But by understanding these environments, it is possible to take the
advantage to maximize the opportunities and minimize the threats to the organization.

A PESTLE analysis is a useful tool for understanding the ‘big picture’ of the environment in which
an organization is operating. Specifically a PESTLE analysis is a useful tool for understanding risks
associated with market (the need for a product or service) growth or decline, and as such the
position, potential and direction for an individual business or organization. (Source:
http://www.cipd.co.uk/hr-resources/factsheets/pestle-analysis.aspx)

Page | 21
 5) Sustainability in motorsports:

There are socio-cultural, economic and environmental consequences to locating major motorsports
events in significant urban public spaces.

The prestige of a city’s public spaces is strength and it adds legitimacy to the sport of motor racing
and the messages and impacts associated with motorsports events. The symbolic impact of
motorsports events in these spaces is a powerful signifier of consumerist lifestyles. Their location
helps to promote activities and products that are incompatible with a responsible approach to
climate change and peak oil. These two challenges are now emerging as significant threats to
economies and societies.

The locations of the events are significant in terms of national symbolism, historic cultural
significance or their relevance as an international tourist destination. Allowing motorsports events to
be staged in significant urban places supports the growth of conspicuous consumption, pollution and
the use of fossil fuels, both directly via the events themselves and in the long-term impacts on the
behaviour of motorists and consumers.

Motorsports events and their associated corporate interests represent many of the attitudes and
behaviours that will need to be changed or abandoned to limit resource depletion and greenhouse
gas creation, a big weakness for motorsport particularly Formula 1 which hosts 18 races across 5
continents every year.

Sustainability looks at the origins of the modern environmental movement, from which the concept
of sustainability emerged, and then discusses the associated concepts of the ‘triple bottom line’ and
‘natural capital’ in order to offer alternatives to more conventional methods of understanding
motorsport and the resources it requires.

The importance of sustainability in the 21st century and the current situation with regard to
achievement of sustainability are considered, and the latest United Nations environmental
assessment is drawn upon to place sport, and specifically motorsport, in a global environmental
context.(Source: http://www.unep.org/greeneconomy/)

5.1) Sponsorship and its role:

Sponsors' role is most important in promoting Formula One teams which approximately gets 80-
85% of their total income from sponsorship. Rest of 15-20% comes from TV revenue and prize
money. Sponsorship is an equal partnership - an exchange of services.
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Global sponsorship spending hit an all time high $33.8 billion in 2006, a 10.8% increase on the
$30.5 billion of 2005 and is forecasted to hit $ 80 billion by 2016. That rise reflects that sponsorship
has steadily risen up the marketing agenda to the point where it is now a fundamental part of the
marketing mix. For many brand owners – such as Coca-Cola, Shell, Gillette and Vodafone – sports
sponsorship has been pivotal in their marketing communication campaigns and provided these very
different brand owners with a global brand communication platform.(Stotlar K.D, Second Edition)

At the same time sports sponsorship is evolving to take advantage of emerging technologies and the
proliferation of media channels, while ethical considerations, measurement and cause related
marketing are becoming increasingly important.

In 2009, North American-based companies spent a total of US$16.51 billion on sponsorship, 68% of
which (US$11.28 billion) was spent with sports properties such as the US Olympic Committee, the
National Football League and hundreds of local teams and athletes (IEG, 2010).

Many have studied sponsorship’s impact on business results, such as increases in sales and market
share (Smolianov & Shilbury, 2005), and several, including Farrell and Frame (1997), Miyazaki and
Morgan (2001), Ozturk, Kozub and Kocak (2004) and Cornwell, Pruitt and Clark (2005), have
examined the stock price performance of sponsors of one particular property, including Olympic
sponsorships and official sponsorships of the National Football League (NFL), Major League
Baseball (MLB), the National Hockey League (NHL) and the Professional Golfers Association
(PGA). However, no studies appear to exist that examine the relationship between the larger group
of companies that invest significantly in sponsorship and their business performance over an
extended period.( Burridge B.M, Walton J., 2001)

Effective sponsorship provides a powerful insight into how globalisation, behaviour, permission-
based marketing and technology have conspired to affect the ability of a brand to make its voice
heard above the competition.

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5.2) Role of Monaco Grand Prix in F1 branding, sponsorships and other heritage race tracks
along with threats they are facing.

What is general image of a Formula 1 driver on an evening off? Chances are he’s in a Monte Carlo
casino sipping a cocktail, a Rolex on one arm, a former Miss World on the other and a pile of chips
on the table.

What’s the equivalent image for a NASCAR driver? A neon lit bar in a backwoods town in the
Deep South, a can of Bud in one hand, a Marlboro in the other and a bag of chips on the table?
The two extremes are exaggerated and the image of both drivers is perhaps a little dated, but the
point is that Formula 1 has, consciously or not, developed an image of jet-set glamour and
exclusivity that no other sport on earth has achieved. And a big part of that image is down to the
heritage of the sport in Europe where wealthy young gentlemen raced the streets of Monaco as
royalty, film stars and business tycoons watched on from luxury yachts.

Formula 1 has created such a brand image that too exist within this society every organisation
associated with it has to outperform its fellow competitors. Teams have to continuously enhance
their strategies and especially at Monaco where the stage for the best show is set. Its existence is
very much important for the whole Formula 1 business along with other heritage tracks. “The
Mediterranean principality has been on F1 calendar since 1955 and is the only race which pays no
hosting fees”.

Picture 5) A view of Monaco street circuit and the yacht marina from Fairmont Hotel. Source:
Authors own collection.
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When Bernie Ecclestone recently announced at a press conference that the Monaco Grand
Prix was the latest European race on his hit list? How important is Monaco GP for F1
branding?

It created ripples and sent shock waves around the globe particularly in the big motorsport business
communities of high end corporate who get their majority business decision and expansion done
through such high end meets. Fascinating hospitality, picturesque views of the city along with
harbour docked with the most expensive yachts and cruise ships at anchor off the bay that makes the
Monaco GP so special and a win in Monaco is something special both to the team and the driver
along with the sponsors.

Basically Ecclestone has said that European circuits are paying too little to host Grand Prix’s and
that Monaco, which was paying nothing, was first in the dock. This week it got a reprieve with a
new ten-year contract. The incident has, however, highlighted some serious issues facing F1, which
sponsors, without whom the sport would not exist, F1 need to keep a careful eye on.
(Source;

http://www.totalf1.com/full_story/view/347129/Ecclestone_says_Monaco_GP_could_be_scrapped/)

Ecclestone’s attacks on European circuits do have justification. He has, for example, also criticised
the standard of spectator facilities, in particular at Britain’s Silverstone circuit, which inevitably fall
well short of those at the brand new facilities in the Middle East and Asia. The real issue, however,
is that commercially F1 needs to be a truly global event to attract its massive TV and sponsorship
revenues and to achieve this some races will have to be dropped.(Lovell T, 2008)

In recent years China, Malaysia, Bahrain, Abu Dhabi, Korea, Istanbul and Singapore have been
added to the roster and the plan is to bring in Russia, South Africa and India in the next few years.
Already Austria, San Marino, France and the German staging of the European Grand Prix have been
dropped from the calendar (although the European Grand Prix remains as a street race in Valencia).

From a purely commercial point of view, the European circuits now struggle to compete with Asia
and the Middle East in particular. Venues such as Malaysia, Abu Dhabi and Bahrain, for example,
are thought to be using the Grand Prix for political ends. European track owners therefore struggle
to balance the need to pay for hosting rights with the need to invest in new facilities, which can run
into tens of millions of dollars. Silverstone, for example, could really do with around $150m (and
possibly more) to build new grandstands and other spectator and racing facilities.

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It has already embarked on a construction programme but finding a return on investment is difficult
when the facility has only a couple of bumper weekends (it also hosts Moto GP in Britain) each
year. But what the major European circuits do offer is huge crowds of passionate and
knowledgeable fans, something that can’t be said for some of the new venues. Ecclestone knows
that the bumper pay day that such circuits receive means that, financially and for a circuit’s
branding, it’s imperative that they retain the Grand Prix.

The eminent threat for F1 is that in its rush to go global, it could lose a major part of its brand
heritage. The sport has arguably already lost a lot of its character as corporate have taken over from
people. Sir Frank Williams is about the only team owner anyone can now name and drivers have a
small army of PR minders to ensure that never a word is said out of place or that, heaven forbid;
they come into contact with a member of the public.

Admittedly Monaco has not been great for overtaking for many years, but it is a special part of the
sport’s heritage, as are such circuits as Spa in Belgium, Monza in Italy, Hockenhein and
Nurburgring in Germany and Britain’s Silverstone. They are the brand name for Formula 1.

F1 can address environmental concerns, particularly through highlighting the energy savings
delivered to production vehicles as a result of research and development in motorsport. But the sport
hasn't really succeeded in putting across a strong Corporate Social Responsibility (CSR) message to
date. So was Bernie seriously ready to see an end to cars flying along the sea front in Monaco, one
of sport’s great iconic images, or was he simply trying to extract a few million out of the
Grimaldis?.

Public announcements of his confrontational stance have worked well in this respect.
The question is – will Bernie Ecclestone confront the fact that F1’s brand needs very careful
management? International, hi-tech motor racing in modern circuits is relatively easy to arrange.
What is difficult is to create a global audience that is passionate because it senses the sport has a
future as glorious as it’s past.

5.3) Pit stop (Teamwork)

They have been a regular feature at the formula 1 for many years. But contrary to popular belief
they were not introduced by regulation to liven up the racing. Contemporary pit stops were created
by the innovative Brabham BT50 or pit stop car. The point of the pit stop car was that it was not just
a technical innovation, but an innovative race & business strategy that enabled a lighter, more
nimble car to outpace the opposition to the extent that it would be able to enter the pits, stop, refuel,

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fit new wheels and tyres, return to the circuit and still be in front. It is a classic race of problem
solving and lateral thinking to win the race and get more sponsors. (Gordon Murray, Founder of pit
stops, former Technical Director of Brabham and McLaren), ( Jenkins M. 2008)

Pit stops are of significant importance both from technical and commercial point of view. It is one
of the strongest marketing communication tools in Formula 1 and its use has been widely exploited
over years by numerous sponsors. Organisations, Brands, Circuits all have used pit stops for their
brand promotion.

Strategically a race can be won or lost depending upon pit stop. When a car cruises into the pit lane
from 200 mph and slows down to less than 40 mph into the pits before coming to ground halt and
gets refuelled ( banned from 2010) and tyre changes and exits back to the race track via pit lane exit
the total time lost is “minimum 24 seconds”.

It is this time which has significant importance commercially as the pit camera has full focus on it
right from its entry to exit including pit stop in which camera is focussed from the top showing all
the sponsors on the car including pit crew overhauls. Every aspect of pit stop is shown from all the
angles. More the no of pit stops better for the sponsors sponsoring particular team’s car as more air
time is available which is broadcasted to millions of viewers round the globe. On the contrary it may
not be worth for technical side owing to the loss of valuable track time.

“Choosing the optimum pit strategy of how many stops to make and when to make them is crucial
in having a successful race”. It is also important for teams to take competitors' strategies into
account when planning pit stops, to avoid being "held up" behind other cars. An unscheduled or
extended stop, such as for a repair, can be very costly for a driver's chance of success, because while
the car is stopped for service, cars remaining on the track can rapidly gain distance on the stopped
car.

Often wrong pit stops hampers teams image and brings negative branding to the sponsors
sponsoring it. As race can be won or lost depends a lot upon pit stops, a wrong pit stop which
resulted the team a race creates a tussle between sponsors and the team. Although every aspect of
race situation is dealt in the terms and conditions of sponsors.

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Picture 6) A view of Pit lane from Grand stands at the Sepang F1 circuit, PETRONAS Grand
Prix of Malaysia, 2009. Source: Authors own collection

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Picture 7) F1 team pit crew wait for their car to turn up for pit stop practice during 2009
PETRONAS Malaysian Grand Prix at Sepang. Source: Authors own collection

Picture 8) Fernando Alonso's Renault pit crew carry out a pit stop at the 2008 Chinese Grand
Prix. Actual Source:http://www.flickr.com/photos/zilpho/2964148062/in/set-72157608258436956/

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As can be seen from the above picture the ING Renault F1 car is dealt by its pit crew. The camera is
positioned right above the team garage giving access to every minute detail along with side cameras
nothing goes hidden from the eyes of millions of spectators round the globe.

Sponsors sponsoring the team to take full advantage of pit stop for enhancing their brand image.
Until 2009 pit stop average time was 7 seconds owing to refuelling. Currently 4 seconds is the time
per car but owing to faster degradation of tyres, the numbers of pit stops have significantly
increased balancing out the lost time in refuelling.

Picture 9) Felipe Massa of Ferrari F1 team pit stops during 2009 PETRONAS Grand Prix of
Malaysia F1 free practice from the grand stands. Source: Authors own collection.

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Picture 10) Williams F1 team pit stop practice during Australian GP at Melbourne.

Actual source: http://www.flickr.com/photos/28135215@N00/3390323781/

One of the key things team principals talk about in general is a 'no blame' culture and that's one of
the twee terms but essentially what it means is what goes on here. The minute you start to blame
people, you start to hide mistakes – you get the cover-up mentality because you know you're going
to get blamed. So how do you create a situation where people feel- are able to say “I messed up
there” and this is what went wrong. All this activities helps to improve teams brand image which in
turn improves the image of its sponsors.

Everyone in a team understands why they are there. In many organizations, the overall performance
of the business is not what's uppermost in people's minds. It's their own personal situations, the
situation of their department, protecting their resources rather than seeing that whole and moving
together to actually achieve that overall performance outcome because it often means to get the
overall outcome you've got to trade off between the resources and there are some areas that perhaps

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don't need to perform fantastically.

A great quote from Ross Brawn (Former Ferrari F1 Team Technical Director 1996-2006)

“This isn't about making the best engine; it’s not about the best aerodynamics, the best chassis. It's
about making a Ferrari. It is how these parts work together that's the critical bit and organizations
are no different”. ( Jenkins M., 2008)

5.4) Team Work & Branding

At no time during a Grand Prix is the essence of teamwork more exemplified than during a pit stop,
when the pit crew springs into action in a desperate race against time. In those frantic few seconds –
fraught with danger and drama, when the combined effort of organised co-operation by a group of
people working for a common cause is stressed to the maximum – races can be won or lost. When
duty calls, the pit crew works with split-second precision operation, executing minutely
choreographed moves that seem as balletic as they are purposeful. (Donaldson G; 1998)

A quote from Pat Symonds, Engineering Director for Renault Formula 1:

“We like people who think as individuals but behave as team players.” (Jenkins M., 2005)

In other words teams want people to have creative ideas; they want people to think outside the box
because otherwise you don't move forward. But those people have to work together and team
personnel have to understand the team and that team and I'm not talking about team in a cosy,
everyone's friendly and loving each other, they are all challenging each other but they work and
listen to each other and they work together to get that performance outcome.

It is a lot more than just money. Absolutely, I wouldn't say it is nothing to do with money because
the work they have looked at, and there are examples, typically the most well funded teams will be
at the top end of the performance and the least funded teams will be at the bottom. There is often a
correlation at the top and the bottom. The interesting thing is what's going on in the middle. So what
we often find, for example, in 2006, Renault were the F1 Constructors and Drivers champions.
th th
They were first among 11 teams. Their budget is ranking around 5 and 6 out of those teams. So
they far outperformed their budget relative to the other teams. In contrast Toyota has the biggest
budget and still has not won a Grand Prix since 1999 when they started. (Jones B., 2006)

“They haven't been able to convert the financial resource into performance”. So it's not a hard and
fast rule. It's at those kinds of exceptions where it's interesting to see why was one team on a small
budget having to perform so well and another team on a very big budget can't actually convert that
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into performance.

6) Sustainability of Formula 1

With the global slump hitting hard at the end of 2008. F1 the pinnacle of motorsport too was hit
badly with major engine manufacturers thinking of pulling out following the withdrawal of Honda
F1 team. With teams failing to attract new and retain existing sponsors Formula 1 had to cut down
cost for longer term sustainability. Although the new move held the strategic maneuvoures of the
mighty Ferrari and McLaren to a halt as to fill up the grid entrance cost was lowered and engine
standardisation was brought which meant new race car technology from giant teams couldn’t be
transferred to their road cars program.

Strategically the move hit the big names but on the other side enabled new teams to showcase their
talent with low budget operations and sustainability such as building a Formula 1 car without use of
Wind tunnel.

Of all the Formula 1 teams Honda were among the most well resourced, the most committed – they
have been in Formula 1 for quite some time now as an engine suppliers in 1980’s & 1990’s, nearly
eight years as an individual team. In this phase of their development and so it was a big shock and it
sent shock waves all the way through the Formula 1 community.

Honda had very much written off the 2008 season, they did very badly by their standards in 2008
and they focussed all their resources and effort on 2009. That made it all the more surprising that
they had pulled the plug at this particular point in time because they can’t therefore get the benefits
of all that investment. (Hilton C; The Brawn Story(2009); Haynes Publishing)

However their withdrawal made an excellent package for someone who is looking to come into
Formula 1, to get a team who have been investing hugely in the new technology – in 2009 the cars
will be using kinetic energy recovery systems, or KERS as they are known, and Honda have put a
lot of effort into that particular technology. So if someone has the cash and they can afford to come
in, they could get a real bargain with Honda Racing.

One of the things about Honda is that they don’t supply technology to any of the other teams – in
terms of engine supply. So that means Honda could move out on their own and it won’t have an
immediate effect for any of the other teams. Clearly the big issue was the production car market. We
have seen 25, 30, 40 per cent drops in car sales and that was the primary reason why Honda had
pulled out. (Hilton C., 2009)

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With Honda pulling out of 2009 Formula 1 season it did not had a domino effect on other
manufacturers in that season but 2010 saw BMW and Toyota pulling out as well owing to
sponsorship and credit issues.

6.1) Business of Formula 1

Picture 11) Robert Kubica of Renault F1 team and Sebastian Buemi of Scuderia Torro Rosso
F1 team fight out each other for track position at the Hairpin of Sepang F1 circuit during the
2010 PETRONAS Grand Prix of Malaysia. Also PETRONAS logo & hoardings can be seen in
the image. They are the title sponsor for the Malaysian Grand Prix. Source: Authors own
collection.

Formula One is a global industry generating over $4 billion per year. The sport’s commercial rights
alone produce $1 billion in annual revenue and its top teams run on budgets of over $400 million,
backed by global corporations. The F1 World Championship is the most widely watched annual
sports event in the world, with 580 million unique viewers per year. ( Jenkins M., 2010)

And it is still expanding. In the last few years there have been races in China, Turkey and the
Middle East for the first time and countries such as Russia, Mexico and South Africa are keen to get

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on the calendar. There are many opportunities still to be exploited. With more and more races
happening in Asian continent and Indian GP being the latest addition to the 2011 calendar a shift of
trend has been seen and analyzed by modern management consultants.

6.2) Marketing

Basic marketing theory states that global companies must decide how best to adapt their
promotional efforts to the local regions in which they sell. Some global companies adopt a
standardized approach to promotions, using the same basic advertisements and promotional
strategies across markets. (Hooley J.G., 1998, Second Edition)

Standardised promotional efforts are usually lower in cost and relatively easier to manage than
adapted promotions, which require increased management but may result in more effective
communications efforts.

The decision to adopt a standardised or adapted approach affects how companies manage their
brands in different parts of the world. Brand terminology and definitions are summarised in table 1.
Companies with a standardised promotional approach will strive for customers to perceive a similar
brand image across markets while those adopting an adaptive approach may allow customers to
perceive differing images for the same brand with the goal of establishing the highest equity for that
brand in each local market.

Table 2: Brand Terminology. Source: URL: http://www.jstor.org/stable/20747850.

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Figure 3

Source: URL: http://www.jstor.org/stable/4189295

Figure 3 shows a model of consumer-focused sponsorship-linked marketing communications
that brings together current theoretical understanding. This model does not consider
business-to-business? Focused sponsorship or sponsorship-stakeholder communications such
as those directed at financial institutions or non-consumer audiences.

The model does consider:

(1) individual- and group-level factors that influence processing of sponsorship messages and
responses;
(2) market factors that impact sponsorship outcomes and are largely uncontrollable, at least in the
short term;
(3) management factors that are controllable and can strongly influence both processing and
outcomes;
(4) The mechanics of processing (5) consumer-focused outcomes of sponsorship.
The performance of the team together with cutting edge automotive components is especially
transparent in motorsports. The experiences and exposures in high-tech racing directly
influence the business and technical developments for sponsors.
Page | 36
 7) Sponsorships in Formula 1

Picture 12) AIRTEL the title sponsor of the Indian Grand Prix at the commemoration also in
the picture Bernie Ecclestone ( R), Formula 1 CEO. Source: Authors own collection.

Sponsorship has been defined as "a cash and/or in-kind fee paid to a property (typically a sports,
entertainment, non-profit event or organization) in return for access to the exploitable commercial
potential associated with that property" (IEG 2000). Sponsorship-linked marketing, then, is "the
orchestration and implementation of marketing activities for the purpose of building and
communicating an association to a sponsorship" (Cornwell 1995, p. 15).

These two definitions together highlight central differences between advertising and sponsorship.
Whereas sponsorship involves a fee paid in advance for future potential communication values,
advertising offers a more knowable and more controlled communication. Furthermore, whereas
sponsorship requires leveraging (pro-motional spending in addition to the sponsorship fee) to obtain
the greatest value, advertising is often sponsorship s most valuable leverage.

Sponsorship of sports, causes, the arts, and events forms a major portion of the so-called
unmeasured media spending for many firms. Unmeasured media is the catchall category for the
various other promotional expenditures of firms and nonprofits outside the major media such as
television, radio, print, and outdoor advertising (e.g., billboards, transit cards). Moreover,
sponsorship spending (estimated $28 billion worldwide in 2004; IEG 2003) for some firms is now
the "tail that wags the dog," with more and more advertising (measured media) being thematically
tied to sponsorship investments.( Burridge M.B., Walton J, 2001)
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Communication associated with sponsoring, while impoverished in nature, is also embedded, by
design, in some event or activity, which is intended to be of interest to the individual. Thus, in the
main, individuals are not expected to be highly involved with sponsorship communications relative
to the event experience. Moreover, in their use of signage, title sponsorship announcements, logos,
and the like, sponsorship contexts are not able to carry involving messages.

While mere-exposure effects are relevant to particular sponsorship situations (and may be influential
in the individual's prior experience with the brand), it is perhaps low-level pro-cessing and the
reactivation of previously held brand associations that have the broadest application in sponsorship
communication processes. For example, arena exposures to sponsor messages have been shown to
influence memory for sponsors (Cornwell et al. 2000), but the field study in which this was found
lacked control for corresponding advertising exposures. ( Burridge M.B., Walton J, 2001)

From a business perspective, the broadcast audience (rather than the attending audience) and their
exposure to peripheral event signage (e.g., location-based, scoreboard and uniform sponsor
identification) and computer-generated graphics (e.g., presenting sponsor logo) is even more
important. It is interesting to note that media exposure to computer-generated logos holds more
promise for controlled experiments and marketers, but processing of these peripheral cues has not
received much of researcher’s attention.

7.1) Formula 1 Case Studies:

Williams F1 is one of the world's most successful privately owned Formula One teams. Formed in
1977 by Sir Frank Williams and Patrick Head, the company has secured 16 FIA Formula One
World Championship titles and won 112 Grand Prix’s. The company today employs around 500
personnel on a 40ha technology campus outside Oxford, UK. In 2000, the company entered a major
partnership with BMW, and together, the Anglo-German BMW WilliamsF1 Team has won eight
Grand Prix. (Autosport,2000)

7.1.1) Case Study 1: Anheuser-Busch, Inc.: Budweiser sponsors BMW WilliamsF1 Team

 'King of Beers' builds upon global sports marketing leadership with first Formula One deal

Budweiser, the world's best-selling beer, and the BMW WilliamsF1 Team, a global leader in
Formula One, today announced the "King of Beers" will serve as an "official sponsor" of the BMW

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WilliamsF1 Team. The multi-year agreement is Budweiser's first sponsorship in Formula One and
builds upon the brand's international sports marketing portfolio.

As part of the agreement, the Budweiser logo will be featured on race cars driven by two of the
sport's hottest drivers - Juan Pablo Montoya and Ralf Schumacher as well as on driver and team
uniforms. The brand also will have rights to use the drivers' images, team logo and team cars in
advertising and sales promotion initiatives.

The sponsorship announcement comes on the heels of two consecutive one-two finishes for
Schumacher and Montoya at the European Grand Prix on June 29 and the French Grand Prix on
July 6. Budweiser will debut its sponsorship of the BMW WilliamsF1 Team at the British Grand
Prix in the United Kingdom on July 20. ( Source: http://www.anheuser-busch.com/; Distributed by
PR Newswire on behalf of Anheuser-Busch)

7.1.2) Case study 2: SeaWorld Adventure Parks

To Be Featured With BMW WilliamsF1 Team
During 2005 French Grand Prix. (Picture 13).
Source: Sutton images.

ST. LOUIS (June 30, 2005) – Busch Entertainment

Corporation (BEC), Anheuser Busch’s family
entertainment subsidiary, today announced that
SeaWorld Adventure Parks will represent the
company on the BMW WilliamsF1 cars of Mark Webber and Nick Heidfeld during their race this
weekend in Magny-Cours, France.

Webber and Heidfeld will feature the logo that represents all three U.S.-based marine life adventure
parks – SeaWorld Orlando, SeaWorld San Diego and SeaWorld San Antonio – on the “air boxes
and nose cones” of their Formula One cars during the race and pre-race qualifying and practice
sessions.

“We’re excited about partnering with Mark, Nick and the BMW Williams F1 Team for Sunday’s
race,” said Robin D. Carson, corporate marketing vice-president, Busch Entertainment Corporation.

“Having SeaWorld imagery on cars is a rare opportunity for us, and we know the increased
visibility will not only reach avid Formula One racing fans and Budweiser beer drinkers but also
thousands of potential visitors to our parks in the United States.”Budweiser, an official sponsor of

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the BMW WilliamsF1 Team, first joined forces with the race team in July 2003 and expanded its
partnership last year.

(Source: http://web.archive.org/web/20060322062113/http://www.seaworld.org/)

7.1.3) Case Study 3: PETRONAS and Motorsports

When PETRONAS entered the competitive world of Formula One in 1995, it took the first step
towards positioning itself as a global brand. PETRONAS has since matured into a global player
with operations across more than 30 countries mainly in Asia, Europe, Africa, the Middle East and
South America.

Picture 14) Sauber-PETRONAS Ford F1 team at the 2000 F1 Testing at the Sepang F1 circuit.
Source: Authors own collection.

7.1.3(A) The Objectives

PETRONAS’ foray into Formula One (F1) began with the sponsorship of the then Red Bull-Sauber-
Ford Racing Team. In line with its vision to be a “Leading Oil and Gas Multinational of Choice”,
the sponsorship helped accelerate its branding efforts, positioning both PETRONAS and Malaysia
on the global stage. The efforts were further enhanced when it secured the F1 Grand Prix title
sponsorship rights for Malaysia in 1999, which helped boost PETRONAS’ corporate image and
brand presence and promote Malaysia as a new venue for international motor sports in the region.

Its involvement in F1 has not only increased global awareness of the PETRONAS brand but has
also strengthened the company’s technical and technological capabilities through continuous engine
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and product research and development (R&D) efforts based on F1 technology. As the most intense
and unforgiving of all motor sports, F1 poses the toughest challenge to man and machine, pitching
the world’s best in an ultimate test of speed, performance and endurance.

7.1.3(B) PETRONAS' Involvement in Motorsports

PETRONAS’ involvement into motor sports dates back to 1988, when it became evident that motor
sports was the ideal platform to promote its lubricant products domestically. It began with the
sponsorship of a Malaysian rally team competing in the national, regional and selected world
championships. This then led to the sponsorship of other motor sports teams in the high endurance
touring car circuits. (Source: http://www.petmos.com.my/en/About-PETMOS/PETRONAS-and-
Motorsports.aspx)

Picture 15) PETRONAS sponsored touring cars in action at 2003 FIA GT1 round at Sepang
F1 circuit. Source: Authors own collection

The involvement in motorsports also provided the ideal test bed environment for PETRONAS in the
promotion of research and development in the areas of fuel and lubricants. It also became an avenue
for the company to nurture indigenous technological and human capabilities within the group.The
motorsports experience of almost two decades has also helped to position the Corporation in its
venture into other lubricant retail markets on a global scale.

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Picture 17(T) Sauber-PETRONAS Engineers at the Hinwil Factory in Switzerland, Picture
18(B) Public demonstration of Pit stop by Sauber-PETRONAS F1 car in Kuala Lumpur,
Malaysia as a part of PETRONAS community programme. Source: Authors own collection

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 8) Tobacco Sponsorship in Formula 1
 British American Tobacco And Formula One Motor Racing

Sponsorship of sport has become central to the marketing operations of transnational tobacco
companies as more direct forms of tobacco advertising have been curtailed by regulation. Tobacco
sponsorship of motor sports still remains an efficient way to reach young boys and young men who
form the majority of smokers around the globe.

The influence of tobacco companies has contributed to races increasingly being held in emerging
markets throughout Asia that have minimal regulation or negotiated exemptions; races in more
regulated countries such as Austria, Belgium, and Canada have been threatened or withdrawn. In
2007 Canadian GP was withdrawn from the F1 calendar owing to shortage of funding for hosting
the race and not letting tobacco giant Marlboro to have its bill board and hoarding around the
circuit. Although they were sponsoring Ferrari F1 team and was the only tobacco brand to still be
associated with a Formula 1 team.( F1 Racing, 2007)

In 1999, a new development emerged, when British American Tobacco (BAT) established its own
Formula One racing team, British American Racing. Sponsorship of Formula One motor racing by
tobacco companies is thus a powerful challenge to public health legislation aimed at reducing
smoking although for F1 teams it is a vital source of existence.(WHO, 2002)

8.1) British American Racing

Unlike the major influential tobacco sponsors of other Formula One racing teams, BAT was the
majority shareholder in the British American Racing company.

To ensure that its association with Reynard Racing Cars would not interfere with brand
communication and consumer profits. BAT was determined to name the team British American
Racing.( Source: http:// hondaf1racing.com/archives)

Formula One team are typically known by the car makers; Marlboro may sponsor Ferrari, but the
team is known by the name Ferrari although it was officially mentioned as Marlboro Scuderia
Ferrari F1 team till 2007 F1 season.

8.2) Benefits of sponsorship for BAT

Although British American Racing did not produced a competitive car until the year 2003, but it
started having its effect of the sponsorship on the fortunes on its key brands, specifically among

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adult smokers under. BAT was able to develop the global appeal of its brands through extensive
broadcast media coverage specifically directed at young people, merchandising proposals and
activities aimed at children and young people, and race sponsorships in emerging markets in
Asia.(Formula 1, 2004, Constructors championship).

The prospect of maintaining a visible presence on television screens to mediate the effect of
advertising bans was fundamental to the appeal of sports sponsorship, allowing BAT to develop its
Lucky Strike and State Express 555 (SE 555) brands more effectively on a global basis. Formula
One was seen as particularly valuable because "TV coverage is massive around the world for each
of the sixteen races" and "there is a genuine association with the team, vital for image
building."(Rubython T, 2002)

In 1985, exploitation of the immaculate performances of Ayrton Senna in a Lotus F1 car in the
distinctive black and gold livery of John Player Special was seen as having revitalised the brand in
Brazil: "Research confirmed that it had a younger image than before, is more dynamic, more human
and credible and quite clearly international."(Formula 1 Constructors Table, 1999-2003)

8.3) Media & Merchandising

Media & Merchandise are the marketing communication tools used by team to propel their brand
image and expand their fan base. It is one of the strongest tool for branding and an effective source
for revenue. Through video games, internet and social networking sites such as Facebook, Twitter
F1 teams can expand fan base virtually and through merchandise can have their presence felt
everywhere. As cameras are rolling all over the circuit, team logo on the merchandise is seen by
millions of viewers round the globe.

BATs entrance into Formula One was accompanied by its Lucky Tribe campaign. This campaign
had an estimated direct advertising value of $20m (GBP 1lm, Euro16.5m) and a public relations
value of $60m during the first quarter of team's launch in 1998. It was created to build awareness of
the Lucky Strike brand by "targeting young people on an international scale" through "cable, digital
and new media broadcasting.” (WHO,2003)

BAT also explored merchandising products target in young children and young people such as
racing car models. A memorandum in May 1999 from the Merchandising Group to Tom Moser,
head of global sponsorship at BAT, describes a proposal for distributing three million toy model
cars with a Brazilian news paper from August to October 1999. A BAT document from around 1999
depicts a model car, such as the one described, encased in a Lucky Strike cigarette box (fig 4).(Jones

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B., 2006)

BAT’s decision to launch the British American Racing car was more of a strategic decision to
accomplish several business goals, including obtaining name recognition. More substantively, it
played a key part in the strategy of internationalising Lucky Strike and SE 555 brands by providing
extended television exposure, creating merchandising opportunities targeting young adults, and
reaching key emerging Asian markets through planned race sponsorship.( Autosport,1999)

During its first four years and a $500m10 investment by BAT, the team has never achieved higher
than fifth place. However, the partnership has been rather more successful in the business of selling
cigarettes. (Source:http://www.formulal.com/ archive/team/2003).

Figure 4) BAT advertisement showing model car in cigarette box. Source: Getty images

8.4) Reaching emerging markets

BAT has sponsored rally races in China for several years under its SE 555 brand. In1992 A pan-
European study identified Formula One as being more influential in "the less economically
developed markets." By 1997, BAT wanted to expand into Formula One through the grand prix of
China" where tobacco branding restrictions are minimal. This would allow teams to run tobacco
sponsored cars with their full branding thus allowing more return on investments.(Autosport, 1997)

The first Chinese grand prix will take place in Shanghai in September 2004. BATs Formula One

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Lucky Strike and SE 555 public relations plans for Asian markets" included prewritten stories
developed for print media” and planned media seminars to "incentivize journalists to consistently
write stories and publish photos" about British American Racing.”BATs market research suggested
that its efforts in Asia were successful. By June 2000, a significant increase in awareness of Formula
One sponsorship by SE 555 was seen alongside significant declines for Marlboro and Mild Seven (a
Japan Tobacco International brand)."(F1 Magazine, 2004)

Critically, Formula One seems comparatively content to be reliant on funding by tobacco companies
and to be used to advance their global interests. The structure of the sport is changing so as to more
effectively promote the interests of its sponsors, shifting races from heavily regulated European
markets towards important emergent markets, particularly in Asia.

8.5) Tobacco exposure through Third Party Advertising

Strategic alliances or partnerships formed with auto racing co-sponsors provide tobacco
manufacturers with opportunities to attain visibility and exposure for their respective brands through
co-sponsors' third party advertising. In such advertising, the symbolic imagery that is linked with
particular cigarette brand names may be enhanced when surrounded by other products possessing
similar desired symbolic qualities.

Third party advertising potentially serves a third purpose since co-advertisers in some cases share
the advertising costs, permitting each respective company to get a greater share for their buck (that
is, given a set budget, a greater number of exposures are achieved).

Cigarette brand names are visible through the promotion of unrelated products, which are auto
racing co-sponsors. A 1990 Philip Morris document acknowledged that, in Taiwan, they had
"developed an Fl alliance with TAG Heuer watches, whereby TAG Heuer places print as well as
outdoor advertising, two restricted mediums, in which our car is prominently featured. Newspaper
circulation alone exceeded 2 million".(Anon. Marlboro 1990)

Like Philip Morris, Swiss watch manufacturer TAG Heuer has been a long time Fl sponsor. TAG
Heuer has provided timing services for Fl auto racing events since 1969, initiated its timekeeping
assistance to the Fl Ferrari race team in 1971, and has acted as the official timekeeper of the Fl
championships since 1992. TAG Heuer is now a partner of the McLaren race team, and as a result
of this partnership, West is a cigarette brand presently attaining exposure through third party
advertising (Picture 19 & 20). (Anon. TAG Heuer Website)

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According to the watch manufacturer's website, "in 2001, TAG Heuer is naturally pursuing its
privileged partnership with West McLaren Mercedes". TAG Heuer currently supports a few select
athletes and among them are McLaren Fl drivers Mika Hakkinnen and David Coulthard.

Honda, Hewlett-Packard, and Molson represent additional companies that have repeatedly engaged
in third party advertising for tobacco manufacturers. Honda is a technical partner and engine
supplier for the BAR and Jordan Fl teams.15 With Lucky Strike and Benson and Hedges as
respective co sponsors of these teams, the cigarette brands have been gaining significant visibility
through Honda promotions (Picture 21). Honda is also the engine supplier for the Marlboro Penske
and KOOL Green CART teams, and through feature articles on the race teams in its custom
magazine Velocity, has provided expo sure for the Marlboro and KOOL brands.(Proffit A., 2000)

Hewlett-Packard has been a Jordan sponsorship partner and technology provider since 1990, the
year the Jordan team began racing in Fl. Hewlett-Packard has engaged in advertising that not only
gives visibility to Benson and Hedges, but surprisingly uses the colours linked with Benson and
Hedges packaging as opposed to the colours representative of their own company (Picture 22).(F1
Racing , 2000)

Picture 19(L) & 20 ( R) Cigarette package graphics (left) and TAG Heuer/West advertisement
(right). Source: West cigarettes were purchased at a duty free shop at Gatwick airport in
London, UK on 16 July 2001; advertisement was featured in Maclean's, Canada's weekly
news magazine, 4 June 2001.

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Picture 21) Honda advertisement, with Lucky Strike and Benson and Hedges depicted.
Source: Formula 1 Magazine, May 2001.

Picture 22: Hewlett-Packard/Benson and Hedges advertisement. Source: Fl Racing, May 1999.

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Additional objectives for sport sponsorship are cross-promotional/co-sponsorship opportunities, as
well as enhancement of trade relations and goodwill. Tobacco companies are seldom the exclusive
sponsors of an event or team, and in the case of auto racing, multiple sponsors are inevitable
considering the exorbitant operating budgets that characterise the sport.

Scuderia Ferrari Marlboro, McLaren Mercedes, and British American Racing (BAR) Honda
represent the Formula One (Fl) racing teams with the largest budgets for the 2001 season, spending
$284.4 million, $274.6 million, and $194.5 million, respectively. Although there is a long list of
sponsors for each of these teams, tobacco companies represent a particularly significant source of
funding. (Formula 1 Magazine 2001, March; l: 24)

Philip Morris, in its partnership with Ferrari, spends roughly $23 million each year toward race car
driver Michael Schumacher's salary, and about $65 million toward having Marlboro placed in
multiple locations of the race car, helmet, and overalls of Schumacher and his team mate Rubens
Barrichello. (Formula 1 Magazine 2001, March; l: 24)

German cigarette manufacturer Reemtsma, through its West brand, is a key sponsor of the McLaren
team, spending $37 million annually for similar sponsor name locations.13 British American
Tobacco, as the primary backer of BAR, contributed about $47 million during the 2000 season.14
Collectively, tobacco manufacturers annually spend $250 million toward Fl teams.(Le Monde 10-11
June 2001:14)

The final factor in understanding third party tobacco advertising is the art director's point of view.
Credibility is an important agency consideration when the creative goal is to exploit a brand's
connection with racing as much as possible; according to Peri Luel of Mol star, maximum leverage
of the property is the core lesson of "Sponsorship Marketing 101". (Stotlar K.David)

This principle in action has potential advantages for tobacco marketers, because tobacco branding
has been strongly associated with motor sports for many years, and to avoid showing it in a racing
advertisement might under some circumstances be perceived by the professionals who create these
ads as slightly jarring to the target consumer (that is, undermining rather than reinforcing the
advertiser's connection with the sport).

Even if the sponsorship contract permitted it, a digitally altered or "cleaned up" car would not, from
the perspective of the agency creative department, be as compelling an image as the real thing?
Cluttered, colourful, and in many cases (depending on the racing team and circuit) displaying a
tobacco message.

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Through third party advertising, tobacco brand names continue to attain visibility and the symbolic
value of the brands are further enriched as a result of surrounding product complements. While cost
efficiencies may also be fulfilled through third party advertising and co-branding activities, the
senior advertising practitioners interviewed for this paper consistently maintained that tobacco
companies are highly unlikely to assist with the costs of such advertising.

Third party advertising, much like sponsoring broadcast sport events, represents an opportunity for
tobacco manufacturers to circumvent tobacco promotion regulations. As tobacco control policies are
developed, such loopholes need to be anticipated and accounted for. What remains problematic,
however, are jurisdictional issues. When the European Commission stipulated that tobacco
sponsorships in Fl would be banned in 2006, for example, it was threatened that races might be
moved out of Europe and held in alternative locations such as China, South Korea, and Indonesia
(where restrictions on tobacco promotion are much less severe). (Marketing Week (1999), January
21 ; 21: 51 -3)

Since domestic bans on tobacco sponsorship are typically not applicable to foreign media imported
or transmitted into the respective country, many of Fl's 300 million television viewers watching
each race would remain exposed to tobacco promotions. In light of such opportunities to exploit
loopholes, a global treaty that deals with transnational and trans-border dimensions of tobacco
promotion appears justified.

8.6) Enhancement of Tobacco imagery through Co-Branding

Sponsorship provides co-branding opportunities, which may enrich the symbolic value of cigarette
brands, as well as that of their co-sponsors. Co-branding is defined as placing two or more brand
names on a product, its package, or additional elements of the promotional mix. The objectives of
co branding are best realised if the associations of each brand are strong and complementary. The
associations among brands are strengthened if there has been a long standing relationship and it is
well promoted.

The complementarities of brands, meanwhile, may be based on either their functional or symbolic
properties. From the perspective of tobacco manufacturers promoting a particular brand, co-
sponsors (and co-advertisers) should ideally include products or services with complementary
functions, brand images, or identities. A promotion featuring Marlboro cigarettes and a Zippo
lighter would exemplify co-advertisers serving complementary functions (that is, how the products
may be used together).

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Applying this concept to Fl co-sponsors, the Tic-Tac and Marlboro logos were located side by-side
on the helmet, upper arm, and racing car livery of Michael Schumacher during the 2001 season,
whereby consumers were reminded that the mints could be used to combat bad breath resulting from
smoking.

Citing Sponsors Report, it has been reported that Marlboro received nearly 3.5 hours of in-focus
exposure during the 15 races of the 1989 Championship Auto Racing Teams (CART) season and a
videotape recording of the Marlboro Grand Prix on 16 July 1989 revealed that Marlboro was seen or
mentioned 5933 times. More recently, Sponsors Report data indicate that from 1997 through 1999
tobacco companies achieved 169 hours of television advertising exposure through sponsoring motor
sports events held in the USA, which was estimated to be equivalent to US$411 million in
advertising.(Stotlar K. David)

With respect to Racing sponsors are often bound by the terms of their sponsorship deals to use
official team photographs in any piece of communication that exploits their connection to the world
of motor sports. At the very least, teams ask for final approval of the advertising, which can be
withheld if other sponsors are being treated unfairly. Approved images clearly display the names or
logos of team sponsors, and this is especially true in the case of key sponsors who occupy the most
"real estate" on the cars and other team assets.

Brands such as TAG Heuer, Honda, and Hewlett-Packard enter an odd creative relationship with
tobacco brands, with their one degree of separation being the racing property itself.

The end result Sponsorship creates a unique advertising space in this way. Relationships develop
between brands that would never have been possible through open, direct negotiation because of the
serious public relations risks involved for all parties.

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Table 3) Tobacco Sponsorship summary points. Source: http://www.jstor.org/stable/25458194

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8.7) Ban on Tobacco Sponsorships

Comprehensive global ban on tobacco advertising and promotion is an international policy that most
directly answers globally standardised tobacco marketing strategies. A standardised global ban
would rob tobacco companies of their ability to substitute traditional ads with new forms of media
and new promotional strategies in different countries. 6874 The Framework Convention on Tobacco
Control's comprehensive ban on advertising, trademark diversification, sponsorship, and promotions
is a first step in the international battle against global tobacco brands and marketing.(WHO, 2002)

Once cigarette advertising was banned from the broadcast media in the UK in 1965, in the USA in
1971, and in Canada in 1972, individual tobacco companies increasingly turned toward sponsoring
broadcast sports events to compensate for lost advertising exposure. Despite cigarette advertising
not being permitted on television in such countries, auto racing sponsorship serves as a particularly
good example of how tobacco companies continuously gain widespread exposure for their
respective brands. (Stotlar K. David, Second Edition)

TAG wanted the association with motor sports, and the tobacco logos came along with that. Of
course the tobacco company would have been very happy about this." The two advertising industry
sources quoted in this paper cannot point to even one example of traditionally planned co-branded
advertising activity that includes a tobacco brand, unlikely to assist with the costs of such
advertising.

Numerous countries have granted advertising ban exceptions to Formula One in order to prevent the
loss of coveted national races. This reduces the financial incentives to find alternative sponsors and
has been exacerbated by the Federation Internationale de l'Automobile's recent abandonment of its
earlier commitment to become tobacco-free in 2006.
(Source:http://www.news.bbc.co.uk/sportl/hi/ motorsport/formula_one/3020348.stm)

Recent events highlight how Formula One has become a core feature in the ongoing globalisation of
the tobacco pandemic. The World Health Organization's Framework Convention on Tobacco
Control encourages countries to enact comprehensive bans on tobacco advertising, sponsorship and
promotion and could greatly undermine the value of Formula One to the tobacco industry. (WHO,
2003)

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Considering the long standing, dominant presence of tobacco companies in motor sports, however,
the advertising practitioners continued by claiming that many co-sponsors likely depict tobacco
livery in their advertising in an effort toward being "authentic" and to adhere to the stipulations
outlined in sponsorship contracts. As tobacco sponsorship becomes less commonplace in auto
racing as a result of newly implemented policies within many jurisdictions, it will be important to
monitor that the prevalence of tobacco imagery depicted in advertising declines accordingly.

Member states should move rapidly to ratify the convention to stop the continued use of Formula
One racing to promote tobacco products.

9) Role and importance of Licensing & Merchandising(L&M) in team branding

Picture 23) Ferrari F1 official licensed product stall near the main entrance of mall area at the
Sepang F1 circuit, PETRONAS Grand Prix of Malaysia, 2009. Source: Authors own collection

“Sports licensing is a near universal phenomenon, yet one which remains poorly understood”
(Anonymous)

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Industry analysts estimate the value of the global market for sales of licensed merchandise is in
excess of $170 billion per year (License! Magazine, 2005) and sport accounts for about 11 percent
of the global market. For sports rights owners of all sizes, L&M is an essential part of the business
mix, both producing revenue and re-enforcing the sense of fan identity and belonging. (Source:
http:// www.sportbusiness.com/files/merch_sum.pdf)

L&M is one of the most powerful contemporary forms of marketing and brand extension available
to brand owners today and it is being used in ever increasingly sophisticated ways. Sports rights
owners s face a raft of issues from accessing new and developing markets to establishing the limits
of brand extension. From maximising retail performance to fulfilling the ever growing potential of
new media.( Stotlar K. David , Second Edition)

L&M not only meets the need for robust and analytical research in an area of sports marketing that's
still not well understood by a vast majority of sports brands, but it also provides a novel brand and
financial management toolkit that is focused on the commercial exploitation of intellectual property
rights.

Maximising the Value of Licensing & Merchandising is one of the growing areas of concern for the
current crop of Formula 1 teams to generate revenue and cash flow so as to retain existing sponsors
and bring in new sponsors.

“Licensing & Merchandising is a must know for the sport industry - not just in terms of realizing
new revenue opportunities, but on how to use licensing to take therr brand to the consumer.
Licensing can make or break any sports – entertainment brand”. (Michael Payne, Special Advisor
to Bernie Ecclestone. Former Marketing Director, IOC), (Jennings C; Burning Rubber(2010);
Quercus)

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Picture 25(T) & 26(B) BMW Sauber Formula 1 team merchandise marquee at the
PETRONAS Malaysian Grand Prix 2009. Source: Authors own collection.

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 10) DTM - Competition or Threat to Formula 1
 Deutsche Tourenwagen Meisterschaft (DTM)

Picture 27) DTM podium stands at the 2011 Brands Hatch race weekend. Source: Authors
own collection

The Deutsche Tourenwagen Masters (DTM, German Touring Car Masters) is a touring car racing
series based in Germany, but also with rounds at other circuits in Europe. It is also called as the
Formula 1 of touring cars. DTM (Deutsche Tourenwagen Masters) lays on a spectacle of racing
excitement that is unmatched by any other touring car championship, also called as the F1 of touring
cars. The 2010 series was broadcast on TV channels in 213 countries around the world. In Germany
last year, total coverage of DTM amounted to more than 89 hours, which generated around 480
million TV contacts; on an average race weekend, approximately 1.85 million viewers tuned in to
watch the qualifying sessions and the race itself on the ARD national network. (IEG,2010)

By comparison, RTL’s coverage of Formula One last year pulled in audiences of 8.46 million
viewers for each live broadcast – so DTM nonetheless achieved a respectable 22 percent of the
Formula One figure. Worldwide, DTM accounted for more than 5,881 hours of TV time, with

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qualifying and races being shown live or recorded on 83 channels. Starting with the 2011 season,
DTM will be broadcasted in high-resolution (1080i50) HDTV format. (IEG,2010)

Picture 28) Sussie Stoddart from Scotland the only female driver in the line up adding glitz
and glamour to DTM series in her AMG Mercedes C Klasse at the 2011 Brands Hatch race
weekend. Source: Authors own collection.

Thrilling battles, spectacular pit-stops and renowned top drivers such as Ralf Schumacher, Mattias
Ekström, David Coulthard and Timo Scheider along with upcoming drivers such as Oliver Jarvis,
Martin Tomczyk, Sussie Stoddart (the only female driver) are just some of the reasons for the
media’s big interest in DTM. The media data of the 2010 season demonstrate the positive
development of the most popular international touring-car series. German TV station ARD covered
all the qualifying sessions and races of the 2010 season live. (Autosport, 2010)

Presence of former Formula 1 driver such as David Coulthard has always been the pride for DTM
which is an alternative as well as a road to Formula 1. Paul D Resta the reigning(2010) DTM
champion drove for AMG Mercedes in 2010 and following the victory got a seat as a third driver
with Force India Formula 1 team before getting fully promoted as teams No 2 driver in 2011 . Most
of the technology on the DTM cars is adapted from Formula 1 thus enabling driver get the feel of
ultimate racing.
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Picture 29) Pit Crew of David Coulthard’s car in action during the free practice session of
2011 Brands Hatch race weekend. Source: Authors own collection.

Picture 30) Timo Scheider in action during qualifying driving Audi (A4) at the 2011 Brands
Hatch round of DTM. Source: Authors own collection.
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The race coverage attracted an average TV audience of 1.2 million viewers, representing an average
market share of 11 per cent. Meanwhile, Sport1, DMAX, n-TV and the third programmes also
covered DTM, last year. Altogether, the DTM coverage on German TV added up to a total of 89:56
hours. (Source: http://www.dtm.com/tv.php)

The international orientation of the most popular international touring-car series also is reflected by
the international TV-coverage figures: compared to 2009, the figures could be increased in nearly
every category. In 621 TV programmes (2009: 580), DTM was covered live or relive for a total of
888:07 hours (2009: 580). In 213 countries and regions (2009: 175), the TV viewers were provided
DTM TV coverage.(Autosport, 2010)

Picture 31) Former McLaren Mercedes driver Ralf Schumacher in AMG Mercedes C Klasse
sponsored by Salzgitter in the 2011 DTM round of Brands Hatch. Source: Authors own
collection.

The biggest increase was achieved when it comes to the international highlight shows: in 2010, the
round-up of the DTM race weekends was broadcasted 12,464 times (2009: 4,311), representing a
broadcasting duration of 2,107:14 hours (2009: 891:36). Just as it was the case in the previous years,

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the print media also covered DTM extensively. Altogether, 4,781 stories (2009: 4,519) on DTM
were published and achieved a total print run of 1.34 billion (2009: 1.28 billions). In 2010, the
official website www.dtm.com achieved 7.3 million page views (2009: 6.9 millions), representing a
monthly average of 608,161 page views (2009: 573,599). (IEG,2010)

Picture 32) Former McLaren Mercedes driver David Coulthard in AMG Mercedes C Klasse
sponsored by Deutsche Post in the 2011 DTM round of Brands Hatch. Source: Authors own
collection.

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Picture 33) Audi (A4) of Martin Tomczyk sponsored by INA Schaeffler at the Brands Hatch
(2011) race weekend. Source: Authors own collection.

The web-TV presence www.dtm.tv also attracted clearly more visits, with the access to the web-TV
programmes amounting to an average of 330,660 (2009: 231,000).
(Source: http://www.dtm.com/tv.php)

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 11) Conclusion

Whilst Formula1 is a global motor racing spectacle, each team relies heavily on business prospects,
technology and the ability to continually innovate in order to outpace the competition. Innovating is
concerned with continuously enhancing performance. It is about creating new opportunities,
whether these are related to a product, technology or process. Formula 1 now is much more a case
of detailed development rather than innovation.

Teams need to create a brand image for themselves and it can be done only by getting closer to the
fans both virtually and physically. Teams needs to host promotions, autograph session to get the
crowd in action and pull them back to the race tracks. They need to use marketing communication
tools more effectively than before as there has been a tremendous shift in trend and fan behaviour.

There are similarities between Formula 1 and other businesses, there are real differences in terms of
the pace and intensity of innovating. The pace of innovation is significantly faster in Formula 1 than
other technology industries. In Formula 1 we see not only technological innovation but many
creative ideas, such as the development of ‘trade deals’ rather than direct cash sponsorship, new
standards in mobile hospitality, and new marketing communication tool such as taxi rides with
drivers during race weekends.

Teams can enhance their brand image by having collaboration with engineering and management
universities by allowing students to work for the team as an intern or trainee allowing him/her to get
involved with team and develop requisite skills required to be in the organisation and in Formula 1.
Have live demonstration of various aspects of Formula 1 in the universities. This improves teams
brand image and CSR actions.

Through third party advertising of events such as British Super Bikes, British Touring Cars and
CART auto racing, tobacco brand names still continue to attain visibility to a vast audience directly
or indirectly. Motor racing provides not only an exciting context, but also exemplifies how
organisations are able to create and sustain the basis for optimised performance.

To survive and prosper today in Formula 1 the organisation of today has to be both lean and agile,
creative and efficient, effective at recruiting, motivating and retaining the highest calibre of staff,
and also able to restructure and redeploy these individuals into teams across a range of challenging
tasks and locations.

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 12) Appendix

Force India Formula 1 team and Motorsport Development & Scope in India

 LAUNCH THE FORCE

The Force India Formula One Team launched its 2008 FIA Formula One World
Championship car and unveiled its new livery against the backdrop of the historic Gateway of
India in Mumbai. Force India presented its new challenger, the VJM01, in its new livery of
gold, tungsten and white.

Picture 35) Adrian Sutil of Force India F1 Team in action during the qualifying of 2010
PETRONAS Grand Prix of Malaysia at the Sepang F1 circuit. Source: Authors own
collection.

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"The Force India Formula One Team is among one of the only eleven elite teams guaranteed
an entry into the FIA Formula One World Championship races. The Force India Formula
One Team is the new global face of an emerging superpower and is today increasingly
viewed as a Team that will change the dynamics of Formula One, bottom up and a Team that
dares to dream. Most importantly, the Force India Formula One Team has come to epitomize
the dream of every Indian and is powered by the passion of a billion hearts!” added Dr.
Mallya.( Source: http://www.formula1.com/news/headlines/2008/2/7338.html)

 GETTING INDIA ON THE MAP

The Force India Formula One Team marks India's first truly global sports foray and embodies
all the values that make India a force in the modern world: grit and determination, youth,
dynamism and most importantly an unmatched sense of passion. The management at the
newly formed Force India Formula One Team has firmly put down pillars on which the
vision would be achieved. Key amongst these would be the commitment to constant
innovation and technological progress, continuous commitment of resources and creation of
robust infrastructure to support the team and grass root development of the sport in India.

Picture 36) An isometric plan of Indian F1 tracks near New Delhi, India. Source:
Authors own collection.

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  From dream to reality Inaugural Indian GP in October 2011.

Motorsports is an expensive sport. At its most competitive, it needs sponsorship. As the

fastest growing sport in India, given the fascination and unambiguous appeal it has for people
of all ages and backgrounds.

The proof is all there. TV ratings are heading skywards. The Internet traffic from India to the
top motorsports websites of the world is amongst the global top 3. F1 is here for economic
reasons. Everyone wants to own a car, and then, to only own a more powerful car. All the
famous sports cars have set up shop. The sport captures the imagination like no other, and
imagery to that effect is being used flagrantly by all and sundry in brand communication. It is
much more than a sport.

Picture 37) A view of North Main Grand Stand of the Budh International Circuit, the
host for the Inaugural Indian F1 GP. Source: Authors own collection.

The provisional 2011 Formula One calendar includes the race. This listing in itself should be
seen as a victory of sorts since the previous attempts to get Formula One to India failed
miserably. India has shown interest in Formula One since the late 1990s, with major Indian
cities and their governments attempting to attract Bernie Ecclestone and his circus.

Mumbai, Kolkata, Bangalore and Hyderabad have been the frontrunners, but a lack of
government support and, of course, the huge burst of funds that a Formula One Grand Prix
requires were the primary reasons for the failure of all these attempts. In 2003, a strong
attempt was made by a famous Indian politician, Chandrababu Naidu, to bring Formula One
to his state of Andhra Pradesh. Naidu was the chief minister of the state and a Formula One

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fanatic who used not just his political powers but also the glamour bridge to try and bring
Formula One to India.

While the attempt was a legitimate one and Ecclestone was, of course, interested, it failed to
materialize after Naidu lost power. However, in October 2007, the Jaypee SK Group, backed
by one of India’s most powerful politicians, the president of the Indian Olympic Association,
Suresh Kalmadi, bagged the rights to host the Indian Grand Prix.

Picture 38) A view of the South Main Grand Stand of the Budh International Circuit,
the host for the Inaugural Indian F1 GP. Source: Authors own collection.

The Jaypee SK Group’s bid to host Formula One received a setback when the Ministry of
Sport in India declared Formula One as entertainment and not sport. Following their
statement case a host of actions, which only made it tougher for the Jaypee SK Group to
clinch their rights (the rights fee transfer of US$36.5 million was stopped). However, the
Jaypee SK Group is now working as an independent and private investor in its attempts to
bring the Grand Prix to India and is investing US$350 million in Formula One alone.
Assisting them in their tough task is Vicky Chandhok, father of India’s second-ever Formula
One driver Karun Chandhok and a key figure in the Indian motorsport industry.

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Picture 39) Sameer Gaur(C) VP Jaypee Sports International Limited with Narain
Karthikeyan (L) of HRT F1 team and Karun Chandhok ( R) of Team Lotus with Indian
GP Ticket at the launch of tickets show. Source: Authors own collection

The idea is to promote all sports under one roof. Also, taking a leaf from Jaypee Group’s
lineage, there will be housing developments around the circuit, allowing them to not expect
returns from Formula One alone.”India’s growth in Formula One circles has been slightly off
the pace, but is perhaps ready for a power boost. It all started with Narain Karthikeyan’s
debut in 2005, which was followed by Vijay Mallya’s ownership of the Force India team in
2007.

2010 season has seen the signing up of Chennai-born Karun Chandhok, driving for the new
Hispania Racing team. The BRIC countries have been a prime target for Bernie Ecclestone
and it is no surprise to see a Russian driver, Vitaly Petrov, and an Indian driver on the grid,
alongside Grands Prix in Brazil and China in 2010. The growth opportunities in India are
underlined by the numbers: ESPN Star, the channel that broadcasts Formula One in India, has
seen over a 70 per cent increase in Formula One viewership between 2002 and 2009.

With Chandhok and a more competitive Force India on the grid this season, the total
viewership is expected to exceed 22 million across the country. The internet too has shown
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some healthy trends. Indians are amongst the biggest followers of motorsport around the
world. Indian fans make up the third largest share of visitors to the official Formula One
website. (Source: http:// www.motorev.com)

“A Formula One Grand Prix will get India onto the world map and prove our capabilities of
hosting technology-perfect sport. It is a perfect positioning to everyone – that we are no
longer a third-world country. I would compare this opportunity with hosting the
Olympics.”(Vicky Chandhok, President, FMSCI)

The motorsport industry in India can be easily valued in the region of Rs. 1500 cr (US$320
million) out of which a large part is the real estate that the 40-plus go-karting tracks and the
two main racing circuits take up. The next few years will see a surge in not just infrastructure
alone, but also endorsements for drivers and teams and of course local events.

If India proves it selves to the international racing fraternity in the next two years – not only
as a good market, but also as a good host for motor-racing events, it is expected that
motorsport industry to grow three times of its current size. Never before has India had such
an opportunity: it has an Indian driver competing and an Indian team. Indians are patriotic
and passionate people and there is surely no better way to connect with them than
‘Indianising’ Formula One.

However the only sport that has succeeded in being fully digested by Indians is cricket. Many
have tried and failed – tennis, golf, rugby, beach volleyball and power boating to name just a
few. The first few years of the race will see excitement fill the near 200,000 circuit capacity
of the Indian Grand Prix circuit, but to draw the crowds further the likes of Karun Chandhok
and Force India will need to weave their magic on track.
(Source: http://www.sportspromedia.com/notes_and_insights/india_gets_in_gear/)

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Picture 40) Karun Chandhok pit garage at 2010 PETRONAS Grand Prix of Malaysia.
Source: Authors own collection.

Picture 41) Force India Formula 1 Team pit garage at the 2010 PETRONAS Grand
Prix of Malaysia. Source: Authors own collection.

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  BMW Plans DTM Entry in 2012 with M3
For the first time in the last few months, BMW confirmed their interest in joining the DTM
series. However, according to the marque's motorsport director Mario Theissen, a potential
entry into the highly competitive German championship will not happen in 2011, but in 2012.
The Munchen officials are still evaluating such a decision.

“The planned return to the DTM is an exciting challenge for our team. Over the coming
months we will be making all the necessary technical preparations that should allow us to be
competitive right from the start should we join the series in 2012. Thanks to its great
tradition in production car racing, the BMW M3 is predestined to be used as the basic car,”

( Mario Thiessen, Technical Director, BMW Motorsport, 2011 BMW Annual Forum)

BMW had agreed to build a DTM car in order to debut in the series in 2012, on the condition
that the series' organizers ITR will agree to certain requirements of the technical rules due to
be implemented from next season onwards. If that were to happen, BMW will return to the
series after exactly two decades, as their last participation in the DTM took place in 1992.

However, BMW's return to the DTM – our view is that it's only a matter of time until it will
be officially confirmed – will not necessarily lead to the German manufacturer pulling out of
the FIA World Touring Car Championship, as rumored by some media lately. In fact,
Theissen confirmed that BMW is developing a brand new engine that will comply with the
S2000 rules to be implemented by the FIA from 2011 onwards.

(http://www.autoevolution.com/news/bmw-plans-dtm-entry-in-2012-with-m3-19866.html)

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