Factors Influencing Competitive Balance in Formula One

Abstract

This research paper examines the critical factors influencing competitive balance in Formula One (F1) racing, a premier global motorsport championship. It explores the historical context of competitive imbalances, highlighting periods of dominance by teams such as McLaren, Ferrari, and Mercedes, which have led to reduced fan engagement and interest. Through a comprehensive literature review, the paper identifies key elements affecting competitive balance, including budget disparities, human resource management, and regulatory changes. Utilizing quantitative analysis and regression methods, the study measures the impact of these factors on championship standings, race outcomes, and overall competition. The findings indicate that budget is the most significant determinant of competitive balance, followed by human resources and policy changes. The paper also proposes actionable strategies to enhance competitive equity, such as stricter spending limits, increased support for underperforming teams, and the adoption of successful practices from other motorsport series. Ultimately, this study aims to contribute to the ongoing discourse on improving competitive balance in Formula One, ensuring a more engaging and equitable championship for fans and teams alike.

Introduction

Formula One is a global top-class motorsports championship of single-seaters. It consists of 10 different teams with 20 drivers racing 20 cars on the grid. During a normal formula one season, it approximately contains 20 or so races across different racetracks around the world. In one race weekend, it contains 3 practice sessions, a qualifying session, and a race deciding the final positions. In 2021, the FIA introduced a special sprint race on Saturday in 3 race weekends, this then decides the starting positions of the final race, which not only increases the broadcast revenue but also increases outcome uncertainty. At the end of each race, championship points would be awarded to the top 10 drivers (in the format of 25, 18, 15, 12, 10, 8, 6, 4, 2, 1). At the end of the season, the driver who earns the greatest number of points would win the driver’s championship. The team who scored the greatest number of points by their drivers would win the constructors championship.

Throughout the history of Formula One, competitive balance has always been its main concern, an entire domination of one manufacturer is certainly not going to benefit the Formula One organization and its fan bases. Competitive imbalance could be traced all the way back to the McLaren age of Ayrton Senna during the 80s, to the Michael Schumacher domination with Ferrari during the beginning of the 21st century, and to Mercedes ruling of the grid from 2012 to 2020. It might be the fact that these ages created a glorious myth for only one hero, but to the entire championship, races became boring with low outcome uncertainty, and competitive imbalance led to a huge gap between factory teams like Mercedes to private-owned teams like Haas, these results definitely would not please the fans, leading to a loss of enthusiasm. During my paper, I will first briefly introduce several factors that might lead to competitive imbalance, and weigh them according to their importance. Lastly, I will also suggest possible solutions from theorizing and other motorsport events

Literature Review

Competitive balance is a very important topic around sports, it refers to the extent that all teams have an equal chance of winning the race (Szymanski, 2003). Usually, if a sport event contains higher competitive balance, the fans will show a greater preference towards this championship as illustrated by measuring the correlation between formula one outcome uncertainty and fan enthusiasms in Germany (Dominick et al, 2018). Moreover, fan enthusiasms could build up the popularity of this sport, leading to an increase in the broadcast revenue (Petróczy et al, 2021), that ensures the normal profit of formula one under its private ownership, more of this money could then be allocated to different teams, increasing the ability of small teams to invest, or spend the revenue on other relevant activities like advertisements and business collaborations to increase the global popularity of this sport. For example, the Netflix documentary drive to survive, that talks about formula one stories behind the scenes. It brings an 10% increase in the US fan base since its debut at the end of the 2018 season. A contributing cause which allow formula one to host three race weekends at America in the 2023 season. In other literature about competitive balance, measurement about how to calculate competitive balance is also introduced. Kemeny distance, by counting how many switches are needed to transform one ranking on the championship standing to the other (Peeters et al, 2023). This can induce the extent of dominance, rather than simply a  change of positions. Through this measurement technique, the paper also found out that the level of competitiveness is highly relatable to the FIA’s rule change implementations. During the 2005 season, FIA issued a rule stating a grid drop penalty for too much engine switches, this forced teams to build more reliable engines, hence decreasing the outcome uncertainty due to less engine blow ups (Budzinski et al, 2022). In terms of factors that might affect the variations on championship standing, thus competitive balance, the present literature also provides us with some insight. Normally, there are four factors which can affect this, the skill of the driver, the quality of the car and team, variation shared between drivers and teams, unexplained variation due to random factors (Rockerbie et al, 2022). Amongst these four factors, interactions between the drivers and team are the most important one, since the valuable feedback can be an useful component in developing and improving the car. As a result, under my field of research on competitive balance, both the drivers and teams should be analyzed.

In my latter suggestion section, I would also compare formula one rules to other motorsports. One iconic example of success in competitive balance is formula e and NASCAR. They contain certain characteristics that can be copied by formula one to increase its own competitive balance. The general research question that I am proposing is to measure the degree of factors such as budget, company size, sponsorship, technology, drivers and human resource on competitive balance. My hypothesis is listed as following:

H1 - Higher gaps in budget between teams will decrease competitive balance

H2 - Higher gaps in human resources and human capital will decrease the competitive balance

H3 - Rule and policy changes will increase the competitive balance

Empirical Context

Nowadays, the amount of research on competitive balance is increasing, especially in formula one, since it is not only a globally influential championship with a lot of revenue generated, but also the addition of fan preferences and enthusiasms is what makes it so special. Some literature had explored on the effects of policy changes on competitive balance. For instance, the abolishment of refueling at the end of 2009 season might increased safety standards due to less hazards, but it definitely decreased competitive balance since smaller teams had less flexibility over their strategies and outcome uncertainty of races will be low. Another study investigates the effect of adding grid penalties for too much engine replacements, it turns out that it also decreases the competitive balance since this regulation forced teams to give up on their more aggressive engines and focus on more reliable engines, so outcome uncertainty decreases. To sum up, rule changes definitely have impact on competitive balance, and the exact impact will be further analyzed throughout this paper.

Data

During this research, quantitative analysis would be the main approach, and regression analysis would be implemented to compare the relationships between factors and competitive balance, competitive balance would be measured by 3 indicators:

Seasonal competitive balance: championship standings of teams and drivers across one season

Race competitive balance: Lead and position changes/change of points after one race

Distance competitive balance: The extent of the leading gap and distance between drivers

The data bases that we are going to use are Wikipedia, formula one official website, auto sports and Kaggle. All these websites are going to provide information on pit stops, tyre strategies and team management, which belongs to the human resource factor. There was also information on lap times that can be relevant to further investigation on car and driver performances.

Human Resource Management

Table 1.1 The time of the first pitstop of the 20 teams during the first 5 races of the 2018 season

Human resource management is especially important in formula one racing, since formula one is not only a sport about drivers, but a team sport when its crew members can play an equally significant role. Human resource management contains pit crews, race strategists, engineers that operates the entire team behind the spotlight. In table 1.1, it comprises the time (changing tyres at the pit box + exit and entrance on the pit lane) of the first pitstop during the first 5 races of the 2018 season. It includes both driver’s time so that average could be taken to ensure accuracy (Some boxes did not have data due to retirements of drivers). The teams were also arranged based on the 2018 constructors’ championship standing (Mercedes at the top, Sauber at the bottom). As a result, the final average generally illustrates the trend teams who performed well in this championship generally possessed a shortened pitstop time. An almost three seconds gap could be pretty

 significant between the top and the bottom when the speed of exit and entrance on the pitlane is limited to 60km/h. The only factor that induced these variations were the uncertainties on the pit box. So, the natural difference between the skill level of the pit crews can be a factor which influences the race competitive balance in the championship.

Secondly, engineers can also be a major game player at formula one, when they not just build race cars, but also adjust setups to make them suitable for their drivers and the track. Generally speaking, a lot of people might mistakenly believe that the greater the power and straight-line speed, the faster the race car will be on a track. However, in formula one when cars are all racing in corners, the importance of high corner speed definitely outweighs the importance of straight-line speed. Corner speed is heavily influenced the downforce a car can generate. Higher down force means that a force is acting downwards on the car, allowing the tyres to have more grip, hence producing higher speed around corners. This point can be validated by using data from Monza, a traditional racetrack where high straight-line speed can have the most advantage, since 75% of the time, drivers are going full throttle. However, the result reveals that straight-line speed is still insignificant. Sebastian Vettel who only had the fourth lowest speed trap result in the race of 314.7km/h still managed to complete the second fastest lap of the race. In addition, Romain Grosjean who managed to reach the third fastest straight-line speed of 328.8km/h is 7km/h down in average speed around the track compared to Sebastian Vettel’s. This really reveals the importance of the corner speed and downforce of the car, in which a lot of the times can be used to determine who wins.  Engineers served the role to alter this by changing certain parts of the car, so that it fits with the natural characteristics of a circuit. For example, in a low downforce track, the rear wing endplate would be flattened, so incoming airflow can pass smoothly out of the car without being influenced by body parts, hence creating less drag. To sum up, the role of engineers can definitely impact the competitive balance.

Table 1.2 Gaps to the leader in Qualifying 1 during Spanish and Italian GP

Table 1.2 is another strong evidence supporting my hypothesis that engineers are consequential towards race outcome uncertainties (within race competitive balance). The heading Spanish GP and Italian GP means different circuits. The track in Spain Barcelona requires high downforce and grip, whereas the track in Italy Monza demands less downforce and comparatively emphasized more on engine powers or straight-line speed. The data in the columns means the gap to the leader in Qualifying 1(Q1). This is the only time when all 20 cars managed to compete together for a lap or two. After that, five cars would eliminate out of contention. Moreover, track revolution (more rubber on the track can increase grip) can also impact the lap times, this is why qualifying 1 was chosen when teams are actually competing together. By calculating the standard of deviation between time gaps, it reveals that the average gaps between different race cars on Monza is bigger than expected, even greater than the differences in spain, since it should be an great opportunity for small teams to catch up with their high horsepower setup on a low downforce circuit. In addition, driver’s difference in performance should also be excluded at this circumstance, because it would be impossible for driver errors to build such variations. Thus, it really indicates the hypothesis that how engineers manipulate certain body parts can influence the performance intensively, therefore human resource management is a strong factor under competitive balance in formula one.

Budget

Budget means the balance between income and expenditure of a company. In formula one racing, budget is also a key factor that decides the overall competitiveness of a team. Formula one teams are usually separated into two types. The first type are factory teams, when actual car manufactures like Mercedes and Ferrari opened their own racing department to compete in championships like formula one and WEC (World Endurance Championship). The advantage is that it not only provides them with extensive popularity and exposure to media, but also technology and innovation that can be implemented back to their main production line (family cars) to gain market share. The second type are private teams like Williams or Haas. They were usually owned by private owners like company bosses. However, this nature also forms their natural lack of resources, with no ability to create a self-made race car, forcing them to buy certain car parts from the stronger factory teams. Later, these limits can form a major challenge to formula one racing, competitive imbalance.

Table 1.3 Teams’s constructer championship ranking along with their total monetary investment during the 2017, 2018, and 2019 season.

A well planned and abundant budget can allow teams to spend more money on human resources, driver training systems and the maintenance cost of operating a team without running into debt. Table 1.3 outlines the constructor championship standings between 2017 to 2019 and the amount of money they invest throughout the year. Firstly, we noticed that the teams who are always at the top spend much more compared to teams at the bottom, except for McLaren, when they suffered from engine problems and reliability issues. Moreover, the difference between them is phenomenal, sometimes even up to 4 times between Mercedes and Williams in 2018. By using within season competitive balance, the top 3 across the 2018 F1 season is always in the hands of the Big Three (Mercedes, Ferrari, Red Bull), even their competition came to a halt after Canada Grand Prix (the seventh race of a 20-race calendar), when the top 3 remains unchanged for the rest of the season. As a result, we can see that there is a substantial lack of flexibility and change of positions which is certainly not going to be pleasing for fans and their enthusiasms.  To sum up, the difference in budget can severely impact the competitive balance, and this natural gap can sometimes be extremely hard to alter.

Rules and Policy Changes

Rules and policies in formula one can outline potential infringements that may lead to penalties, and strict regulations on the dimensions of car parts or safety concerns. Every year, the FIA (Fédération Internationale de I’Automobile) would change certain parts of the regulations to try and increase competitive balance or to increase safety standards. During some occasions, major rule reforms would appear, causing every team to start from zero. These rules must be scrupulously designed; every small flaw being identified by teams can allow them to build rocket ships which completely dominate the field. For example, the F-duct by McLaren (2010) and the double diffuser by Brown GP (2009) are all innovations created under a loose rule setting. In these years, the competitive balance is low when other teams did not possess this technology and therefore did not have the same pace.

Table 1.4 Constructer championship standings between the two eras of 2016 to 2017 and 2021 to 2022

The 2017 season and 2022 season marks two new eras for formula one racing. During the winter of 2016, changes of regulations include the dimensions of tyres and major car parts like rearing wing, front wing, side pods and the rear diffuser. In the 2022 season, new regulations comprise of a new ground-effect floor to increase downforce and reduce drag, new types of tyres with a wider rim. However, by looking at table 1.4, we noticed that there is a limited change in the championship standings even after the 2017 season, perhaps indicating that the policy change did not have an immediate effect on the competitive balance. In addition, by comparing the constructor championship standings between 2021 and 2022, the change of championship standings generally happened in the mid-field, when each team has about equal budget for the season, and the domination of Red Bull, Mercedes, Ferrari still persist. From these investigations, the weaknesses of these rule changes were revealed, and it seemed to be that the budget factor is a more essential factor rather than policy changes. The regulation reforms might alter some team’s performances like McLaren in 2017 and Mercedes in 2022, but the certain domination of one manufacturer always exist in the grid, which is no difference for the general fans. This is also why competitive balance in formula one can be so hard to improve.

Expected Findings

Under the research, some key points is that there are a lot of factors which can influence the competitive balance of a championship. Budget is definitely the major factor since it also correlates with the other factors like policy changes and human resource management. So, approach to limit the spending of the top formula one competitors can be necessary. Currently, the FIA introduces a scheme called budget cap, when each team can not spend over a certain amount of money. Even though this limit might be hard to reach for the privately-owned teams, but for the big factory teams, this can definitely hamper their development. Fans can already see the effectiveness of this method when Mercedes were lacking a bit of speed at the start of the 2022 season. Normally, Mercedes can just pour in investments and try to improve the car, but with the budget cap and a series of other limits on wind tunnel testing or CFD simulations, the work that Mercedes can accomplish on their car is minimal. The impact is that they are still struggling for pace one year after. On the other hand, it evoked another problem, Red Bull’s domination starts to form. Here are some suggestions and theories to continue increase competitive balance

Solutions:

1.  Impose further restrictions on car body parts, company sizes and budget cap

2. The teams at the bottom should get more bonuses rather than the top teams which are gaining additional money from championship bonuses etc.

3. Formula one can also copy strategies used by other motorsport events. For example in GT Racing, there is a concept of BOP (Balance Of Performance), the car with an advantage in qualifying or the previous race would receive sanctions like added weights, slower fuel pump speed and less horsepower produced. This means that all the cars competing for the final race would all approximately have the same pace, hence increasing the competitive balance and outcome uncertainty of the championship. Moreover, the formula E championship has a regulation called the Attack Mode, each driver has to at least drive offline to take the attack mode twice, this naturally causes position switches and the additional electrical power it offers for the race car also allows it to have more speed to the cars in front, so overtaking can be very frequent in this championship and thus increasing its competitive balance. There should be zero cost for the FIA to operate these rules, and the improvements on competitive balance can be substantial.

Conclusion

In general, this study examines certain factors and how they can affect the competitive balance in formula one. Results indicate that all factors like budget, human resource management and policy changes will alter competitive balance. However, the degree is different. Budget is definitely the most influential factor, then human resources and them FIA policy changes. Last, but not least, solutions are also pointed out to increase competitive balance, including limit on spending, increase in bonus for the weaker teams and copying other championships.

Works Cited

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