The real engine that drives the Canadian Grand Prix
From June 6 to 8, aficionados of Formula One (F1) racing are converging on Montreal for the Canadian Grand Prix.
On June 4, the John Molson School of Business (JMSB) and the British Consulate-General in Montreal co-hosted “Young Entrepreneurs Symposium: The Business of Grand Prix.” The guest speakers included Marussia F1’s president Graeme Lowdon, as well as Vincent Fraser, CEO of the aerospace and automobile company Processia Solutions.
The event’s moderator was Alexandra Dawson, an associate professor in the Department of Management at Concordia. Here is her take on the economic engine behind the speed, the noise and the glamour.
Having grown up in Italy, Formula One was always about red Ferraris, celebrity drivers and glamorous parties for me. Taking part in JMSB’s event has, however, given me the opportunity to learn a lot more about F1 and to realize how closely related it is to my teaching and research interests, which centre around entrepreneurship.
Formula One is a very popular sport worldwide. According to industry statistics, it is estimated to generate $4 billion annually. It is among the most-watched sports in the world, with around 500 million TV viewers each season. Formula One has had close ties with Canada since 1961, when it hosted its first Grand Prix. After stints in Bowmanville, Ontario, and Mont Tremblant, Quebec, it arrived in Montreal in 1978; that year, Quebec-born superstar Gilles Villeneuve won the race for Ferrari.
The Canadian Grand Prix is a huge opportunity for local business. According to Tourism Montreal, in 2011 it generated approximately $90 million in spending, including $75 million from tourists. More than 300,000 people attended the race and qualifying sessions, boosting hotel occupancy rates to 95 per cent that weekend.
Formula One also relies on thousands of micro, small and medium-sized entrepreneurial businesses, which form its supply chain. Many of these businesses are based in the United Kingdom, partly for historical reasons. Out of the 22 cars on this year’s F1 grid, 16 were manufactured in a 100-mile entrepreneurial cluster known as Motorsport Valley, located in the middle of the U.K., with Oxford at its centre.
According to the U.K.’s Motorsport Industry Association, Motorsport Valley is home to 4,300 companies that employ 40,000 people, with a combined annual turnover of around £9 billion — or $16.4 billion. Almost a quarter of this turnover is from F1-related business.
Given their size, these businesses are typically entrepreneurial, spending large proportions of their annual turnover on research and development, offering specialist manufacturing capabilities, working on short lead times and ensuring great flexibility.
On a macro level, a few big trends are driving innovation and research and development in the Formula One business. For example, safety concerns have resulted in a “nose job” on the front of the vehicles themselves, improving their stability and protecting drivers in side-on collisions. At the same time, environmental concerns are fuelling a move away from gas-guzzling V8 engines and towards the introduction of new, more environmentally friendly hybrid alternatives.
Another entrepreneurial aspect of Formula One comes from knowledge spillovers. Some of the massive research and development that goes into Formula One can benefit other sectors. For example, research and development on energy-efficient technologies for F1 cars can be used to improve mass transportation, and cutting-edge car technology can be applied to the equipment used in sports like cycling or bobsled.
“The Business of Grand Prix” symposium addresses the economic engine that is becoming an ever-bigger part of Formula One — specifically, how entrepreneurs, along with small and medium-sized enterprises, are using the sport to market their technologies and develop their businesses in the process.
What does the future hold for Fomula One? No one can be sure, but it looks like it will make a profit.
Alexandra Dawson is an associate professor in the Department of Management at the John Molson School of Business. Her teaching and research focus on entrepreneurial businesses. Find out more about what she has to say about entrepreneurship in Quebec.