EXECUTIVE SUMMARY This research pertains to the company Rolls Royce that is a part of the Renewable energy and Electric utilities sector. It combines my analysis of the company through the Pestle, Porter’s 5 models; VRIO and SWOT framework to understand its corporate strategies, its areas for further development and what its internal and external business environment factors are. The research pertains to the analysis through the following areas of description; 1. Current standing and statistics of the company. 2. Analysis of the External business environment through the PESTLE framework. 3. Analysis of the Industry/sector of the company’s operations through Porter’s 5 Model framework. 4. Analysis of the Internal Business environment through the VRIO framework. 5. Identification of the company’s strategic position through the SWOT analysis framework. I have tried my best to concisely add all the points of importance in these 5 aspects to brief on the subject matter. Each of these aspects analyses the company in a different light for better description and identification of the core principles, values, market entry barriers, and other factors that relate to the success of Rolls Royce. CONTENTS INTRODUCTION 5 EXTERNAL BUSINESS ENVIRONMENT ANALYSIS-MACRO FACTORS (PESTEL) 6 1. POLITICAL FACTORS 6 2. ECONOMIC FACTORS 7 3. SOCIAL FACTORS 7 4. TECHNOLOGICAL FACTORS 7 5. LEGAL FACTORS 7 6. ENVIRONMENTAL FACTORS 8 INDUSTRY/SECTOR ANALYSIS (PORTER’S FIVE FORCES MODEL) 8 1. The threat of New Entrants 8 2. Competitive Rivalry 8 3. The threat of Substitute Products 9 4. Bargaining Power Of Suppliers 9 5. Bargaining Power of Customers 9 INTERNAL BUSINESS ENVIRONMENT ANALYSIS-CAPABILITIES (VRIO FRAMEWORK) 9 1. Value 9 2. Rarity 10 3. Imitability 10 4. Organization 10 STRATEGIC POSITION OF ROLLS ROYCE (SWOT ANALYSIS) 11 1. Strengths of Rolls Royce 11 2. WEAKNESSES OF ROLLS ROYCE 11 3. OPPORTUNITIES FOR ROLLS ROYCE 11 4. THREATS TO ROLLS ROYCE 12 CONCLUSION 12 REFERENCES 14 APPENDICES 15 1. PESTLE ANALYSIS 15 2. PORTER’S FIVE FORCES MODEL 15 3. VRIO FRAMEWORK 16 4. SWOT ANALYSIS 16
INTRODUCTION Rolls Royce is a company dealing with the designing, manufacturing, and distribution of the power and propulsion systems for automotive, aviation, marine and energy sectors with the headquarters in London. Rolls Royce is an organization that represents a structure having close reflections of the markets in which it operates (Connor et al., 2012). It was founded in the year 1906 and is a publicly owned company working in the Renewable energy and Electric utilities sector. The company’s current CEO is Warren East, and it has an annual revenue of $ 20.4B. 50,000 employees work at Rolls Royce currently. As of now, BMW has acquired the assets and managed the manufacturing plants of Rolls Royce in the recent developments (Gong, 2013). The company’s initial outline was dealing with automotive products and industry after which they expanded to the marine, aviation, and energy sectors in time. Their main highlighted product is the Rolls Royce Trent 1000 engine, used for powering the Boeing 787 dream liner that has recently replaced Boeing 767, providing the added technology and experience of the four previous generations of Trent engines. Some of many advantages of the Trent 1000 engine are given as follows; • It has an IP power off-take which helps it in efficiently driving the aircraft’s electrical systems while also improving the operability and handling of engines at low power. • It is the quietest engine on the Boeing aircrafts today with a 10.1 bypass ratio. • Delivers superior performance retention through improved FOD protection and maximizing of the airflow through its low hub tip ratio. • It reduces the operational burden in cold climates or high moisture environments through a heated ESS (Engine Section Stator) system. • It has an adaptive HP cooling system that lowers fuel burn in general. • The new HP turbine system with an advanced cooling system helps in providing more thrust and efficiency (Rolls Royce, 2015). The key competitors of Rolls Royce include General Electronics, United Technologies, and Honeywell in the proper order of most threats to the company, with GE as its top competitor. The goals of the company include gaining a competitive edge through innovation in the energy and aviation fields, expanding their portfolio, seeking to increase the skills and motivation of the company’s workforce and working towards growth in the new markets. The business strategy of the company includes maintaining the reputation of the company as the most skilled and experienced British manufacturing company that continues to produce unique and innovative products for the global markets. The company also focuses on excellence, evolution through R&D and motivation of the employee workforce to remain at its current position as engineering pioneers of the world, all of which are factors that contribute to its enviable position (Beale, 2012). EXTERNAL BUSINESS ENVIRONMENT ANALYSIS-MACRO FACTORS (PESTEL) The analysis of the External business environment of Rolls Royce can be done through the PESTEL framework for macro factors involved as follows; 1. POLITICAL FACTORS • Factors: – Business based in the UK, International agreements, and Nuclear power in the UK. • Business Impact: – The political factors have resulted in the departure of Rolls Royce from the EU Department and have led them to nationalization. Change in the company policies and adaptation to the rules made by the government of the countries that the company operates in. 2. ECONOMIC FACTORS • Factors: – Apprenticeships, the 6th largest Defence provider. • Business Impact: – The economic factors have resulted in the stagnant Defence budget set by the company and have also impacted the demand, reducing it further, and creating an increase in the fuel costs for the company. 3. SOCIAL FACTORS • Factors: – Labor that is outsourced and workforce from the off-shore. • Business Impact: – The social factors have impacted Rolls Royce through the workforce that is influenced by Politics and various unions. It has also increased its UK Redundancy Uncertainty factor through this aspect. 4. TECHNOLOGICAL FACTORS • Factors: – A Global reach, Reputation for funding R&D practices and nuclear investments in the UK that are long term contracts. • Business Impact: – The Technological factors have impacted Rolls Royce through the increased Cyber threats of various types and the tough competition in the same industry that use its R&D findings to create their advanced products. Another factor associated with this aspect is the dependence on technology to provide not only products and services to the customers but complete business solutions that cater to the whole community (Smith, 2013). The information systems can be made use of to contribute to innovation in the company’s technological processes (Barrett et al., 2015). 5. LEGAL FACTORS • Factors: – Joint contracts (UK/Fr, US/UK), and 5EYES. • Business Impact: – The Legal Factors have impacted Rolls Royce through the Legislative changes that are specific to the countries that the company operates in. 6. ENVIRONMENTAL FACTORS • Factors: – Sustainability focused on fuel technology and nuclear through life-control. • Business Impact: – The Environmental Factors have impacted Rolls Royce through Climate change’s increasing demand for products with fewer emissions (RR) and Green energy. INDUSTRY/SECTOR ANALYSIS (PORTER’S FIVE FORCES MODEL) The analysis of the Industry/sector that Rolls Royce works can be done through Porter’s five forces model as follows; 1. The threat of New Entrants The emerging markets and segments in the Global industry pose a huge threat to the stability of the company as new markets will pave the way for new businesses that have more advanced and developed products and services available. International companies in the same sector pose a dangerous threat to the success of Rolls Royce as they are capable of better functioning engines and energy efficient systems. Compliance legislation can become a barrier to entry in the new market for Rolls Royce and its aviation-related products. 2. Competitive Rivalry Rolls Royce is differentiated by being British and has an overall good reputation in the Global market. This gives it a competitive edge over the other companies as British born and operating companies are trusted and relied on all over the world for having good quality and cost-effectiveness along with heritage and innovation. The lack of research & development in some areas puts it behind some companies in terms of growth and sustainability, as well as the introduction of new advanced products with better technology. 3. The threat of Substitute Products Rolls Royce manufactures and distributes the Trent 1000 engine for aviation companies all over the world. Continuous research and development in this area have to lead to other companies/competitors developing the engines that can tackle the advantages of this product and can be more advanced as well. 3D printing, Quantum computing, Scramjets, UAV, and other energy sources also pose a threat to the company as substitute products. The company should, therefore, focus on developing new products from time to time to stay in the market. 4. Bargaining Power Of Suppliers The bargaining power of the suppliers can be highlighted through the strengths of the international competition, limitations of resources availability, and the knowledge of the demand for such products that the suppliers have. 5. Bargaining Power of Customers The bargaining power of the customers can be highlighted through the increase in knowledge and awareness of the demand for such products that Rolls Royce provides, the International Defence Agreements; the information strategy demands the capability and Defence activities/strategies. INTERNAL BUSINESS ENVIRONMENT ANALYSIS-CAPABILITIES (VRIO FRAMEWORK) The analysis of the internal business environment of Rolls Royce and its capabilities can be done in the light of the VRIO framework as follows; 1. Value The value of Rolls Royce lies in its main product and prototype the Trent 1000 engines that come with multiple engineering and technological advancements such as the title of being the least noise engine in the world, the ability to deliver superior performance retention through maximizing of the airflow and a new HP turbine system that efficiently provides more thrust for the flight among many. 2. Rarity The rarity lies in the combination of heritage, R&D, staying true to the roots and the overall focus on excellence that the company has focused on since its formation. Another rare factor is the equal share of quality when it comes to any department, product, or sector of the company as they are all monitored closely for enhancements and development. The resources used for this aspect of production, however, are not limited to only this company as suppliers are making the materials available to its competitors across the globe. 3. Imitability Rolls Royce is known for products and services that are genuinely constructed and designed through research and development practices and also the fact that most of their products are the ones that were made for the first time in history for a certain purpose. The products will be unique, but there is little guarantee that there will be no imitation prospects because many of its competitors are coming up with technology and engineering marvels that are capable of performing the same tasks through even more efficiency at times. 4. Organization The amounts of funds from Rolls Royce that go into the company’s department for R&D are limited, hence restraining the quick development of new prototypes and products that are more advanced. It shows that the company is not ready to invest heavily in new products and wants to keep developing its existing ones, which might put it behind its competitors in terms of innovation and variety. STRATEGIC POSITION OF ROLLS ROYCE (SWOT ANALYSIS) The strategic position analysis of Rolls Royce can be done in the light of the SWOT analysis framework as follows; 1. Strengths of Rolls Royce The strengths of the company can be given as follows; • Reputation for heritage and quality of products/services. • British origin of the company. • Skills and experience of the management and workforce of the company. • Successful business in the International markets. • An established name in a variety of sectors. • The international wide investment portfolio of the company. 2. WEAKNESSES OF ROLLS ROYCE The weaknesses of the company can be given as follows; • The expensive workforce that is out-sourced. • Lack of morale and motivation of the workforce. • Increased competition due to market evolution. 3. OPPORTUNITIES FOR ROLLS ROYCE The opportunities for the company can be given as follows; • Investment in the education sector. • Much more focused International partnership for entering new markets. • Ability to operate offshore successfully. • Advancements in technological abilities through R&D and IS. • Growth prospects in the Nuclear Industry worldwide. 4. THREATS TO ROLLS ROYCE The threats to the business conducted by the company can be given as follows; • Formation of competitors companies that attract the workforce of Rolls Royce • Workforce trade unions • Oil developments and other global trends in the market that other companies gain success through • The opinion of the general public regarding the nuclear sector and industry and involvement (Do Quang, 2017). CONCLUSION Through the study of the Rolls Royce Company, the following conclusions can be driven to narrow down the understandings regarding the analysis; • Limited products that are updated but still lacking when compared to products made by the competitors. • Lack of investment in the research and development sector. • Increase in the strength and number of competitors that Rolls Royce has in the same industry. • An expensive workforce that is highly skilled but not motivated. • The company lacks in highlighting its main product, the Rolls Royce Trent 1000 engine which is the backbone of its aviation department for manufacturing. Rolls Royce is a heritage company with shared values and one that focuses on excellence and quality. Some factors discovered through this research the areas of development where some work can increase the efficiency of the company and make it stand out from its competitors by gaining competitive advantage and sustainability as well. This study also narrowed down the analysis through different frameworks to ease in the understanding of the current position of the company and what prospects can help it with its image and revenue.
REFERENCES Barrett, M., Davidson, E., Prabhu, J., and Vargo, S.L., 2015. Service innovation in the digital age: key contributions and future directions. MIS Quarterly, Vol. 39(1), pp.135-154. Beale, S., 2012. Precision engineering for future propulsion and power systems: a perspective from Rolls-Royce. Philosophical Transactions of the Royal Society A: Mathematical, Physical and Engineering Sciences, Vol. 370(1973), pp.4130-4153. Connor, G., McFadden, M., and McLean, I., 2012. Organizational design. Developing people and organizations, pp.1-35. Do Quang, H., 2017. Marketing SWOT Analysis of Rolls-Royce Motor Cars (Doctoral dissertation, Empire State College). Gong, Y., 2013. Globalization of Operations. In Global Operations Strategy (pp. 43-68). Springer, Berlin, Heidelberg. Monroy, C.R., and Arto, J.R.V., 2010. Analysis of global manufacturing virtual networks in the aeronautical industry. International Journal of Production Economics, Vol. 126(2), pp.314-323. Rolls Royce, P., 2015. The jet engine. John Wiley & Sons. Smith, D.J., 2013. Power-by-the-hour: the role of technology in reshaping business strategy at Rolls-Royce. Technology analysis & strategic management, Vol. 25(8), pp.987-1007. Teece, D.J., and Linden, G., 2017. Business models, value capture, and digital enterprise. Journal of Organization Design, Vol. 6(1), p.8. APPENDICES 1. PESTLE ANALYSIS
2. PORTER’S FIVE FORCES MODEL 3. VRIO FRAMEWORK
4. SWOT ANALYSIS
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