Coventry University MBA Global Business 2019 (PT119)
EXECUTIVE SUMMARY
This part of the research pertains to the strategic management aspect of the study. It includes my research on how Rolls Royce manages its strategic decisions and outlines them for optimal results through various analyses, including the SAF, BCG matrix, and the Ansoff matrix analysis. This helped me in narrowing down what the Key performance indicators for the company were and how they were different from its ompetitors in the same industry.
Following the research and analysis, I have also made some recommendations for the company to follow which include the following;
Moving the manufacturing sectors of the company
Value addition for the customers
Growing market share worldwide
Competitive portfolio
Investments
Addressing the global markets
Strategic management of the stakeholders
These recommendations can help the company implement a successful operational and strategic plan that caters to all sorts of markets globally. This strategic research also helped enhance my abilities of data analysis and the evaluation of how a company determines its strategies and what more can be done to enhance its processes.
CONTENTS
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 industry/sector that Rolls Royce operates in is the Renewable energy and Electric utilities sector. This industry is responsible for holding companies that create energy from a variety of sources such as coal, fuel oil, and even used energy sources to create materials that can be used again. The industry is worth $ 1.3 Trillion globally and is bound to grow. The scope of this industry is widespread due to climate change factors and the pressing need for creating products that are energy efficient and emit fewer waste products or recycle more.
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).
BUSINESS STRATEGY OF ROLLS ROYCE
The business strategy of the company can be explained through the statement which includes maintaining the reputation of Rolls Royce as the most skilled and experienced British manufacturing company that will continue to manufacture and design unique and innovative products for not only Britain but the Global market. It is important for the strategic features of the company because it gives a direction to the company’s progress and success (Johnson, 2011).
Strategic Position Analysis
The strategic position of Rolls Royce in the industry of Renewable energy and electronic utilities can be analyzed through the understanding and comparison of the strategic practices of the company and one of its main competitors out of the following;
General Electronics
Honeywell
United Technologies
Rolls Royce Key Performance Indicators
The ranges of financial and non-financial indicators for Rolls Royce are as follows;
Underlying revenue
Underlying profit before financing
Cash flow
Return on capital employed
Net research & development charge
Gross research & development expenditure
Net research & development expenditure as a proportion of underlying revenue
Capital expenditure
Order book
Training and development
Underlying revenue per employee
Engine deliveries
Installed thrust-civil aerospace
Percentage of the civil fleet under management
Underlying services revenue
Emissions (Ar.rolls-royce.com, 2019)
General Electronics Key Performance Indicators
The key performance indicators for GE are as follows;
Industrial segment (GAAP)
Industrial segment organic (Non-GAAP)
GE industrial orders and backlog
GE industrial costs
GE industrial profit margins
Earnings per share
GE CFOA & GE industrial free cash flows (Ge.com, 2019).
Strategic KPI Differences
The lists of KPI for Rolls Royce and its main competitor General Electronics reveal that Rolls Royce focuses more on the development of their employees whereas the main focus of GE is their stability in terms of product enhancement and market penetration. The annual revenue and the overall strength of the company in terms of employees are more evident in the reports of General Electronics as they have a higher number of products as well as multi-dimension businesses and almost double the number of employees that Rolls Royce has. Through this comparison, it can be identified that Rolls Royce lacks in terms of the growth of the company, employees, and product innovation. They are staying true to their heritage but focus more on the side of research, instead of implementing their findings to design new products and services for the market and business problems.
STRATEGIC DIRECTION ANALYSIS
Strategic direction is the alignment of a series of actions that help and lead ultimately to achievements of the organization’s strategy. The development of the strategic direction of each department of the company helps in ensuring that all the employees and workers are aware of their own job descriptions and tasks and the severity of completing them on time. Rolls Royce also has a direction for their strategy, and it can be associated with the business model of the company which clearly puts emphasis on keeping the employees and workforce of the company up to date with their jobs and motivated to perform efficiently.
Ansoff Matrix Analysis
This matrix relates to discussing the diversification of strategies and product investment within a company. This matrix is crucial for determining the specialized business strategy developed by the competitor for research and development purposes. This matrix consists of the following four areas of supervision;
Products expansion strategy (For new products in the existing market)
Combination strategy (For new products in the new market)
Market penetration strategy (For existing products in the existing market)
Market development strategy (For existing products in the new market)
The Ansoff matrix can be used by the company to come up with an efficient strategy for new product development or new market penetration as it can help the manager of the enterprise in making a specific strategy for each product and market type (Yin, 2016).
Product Expansion Strategy Rolls Royce
This strategy of Rolls Royce can be described through the addition of new products and services and making them available through their existing market in Britain and European countries. This requires product development, research, and design along with the strategy to introduce the new products to their existing customers.
Combination Strategy Rolls Royce
This strategy of Rolls Royce can be described through the penetration of new international/global markets with a newly developed portfolio of products that have been newly designed and developed for the specific use of new market penetration.
Market Penetration Strategy Rolls Royce
This strategy of Rolls Royce can utilize the products that it already has like the Trent 1000 engine but through development and enhancement for even better and efficient usage to tackle the ones produced by its competitors in the same market. Market research and development investment will be required to achieve this factor of manufacturing better products for the existing customers.
Market Development Strategy Rolls Royce
This strategy of Rolls Royce can work through the existing engines for aviation and their modification purposes to cater to the new customers in the international market. For this aspect as well, research will have to be conducted, primarily on the new market, new customers, and their demands along with the policies and regulations of that country.
BCG Matrix
The BCG matrix will be used for evaluating the strategic direction of Rolls Royce and will with the analysis of investment on whether certain products need funds for development and enhancement or should be simply removed from the strategic plan of the company. The BCG matrix is a simple portfolio matrix that helps organizations in deciding whether it has a healthy balance of products in its range of products/services. The usage of the BCG matrix will also help Rolls Royce in achieving success through their business procedures. The organization’s market share and growth rate are also highlighted and analyzed through this matrix (Mohajan, 2017).
Cash Cows
Some products generated by firms get high sales and return on investment due to the quality and demand for that product. The product pertaining to the cash cow factor for Rolls Royce is the Trent 1000 engine which is a pioneer and genuine problem solver in the field of aviation. It is associated with many advantages such as low fuel consumption, low heating rate, high efficiency in terms of automated control of the plane even at low power and the crown for being the quietest engine on the planet as of now. Rolls Royce is the primary source of earning for its owner management of BMW, which it manages along with the growth of the company in recent years. Rolls Royce not only shined in the aviation department but also in the automotive aspect, by becoming the brand with the highest car sales in the US in the year 2015.
STARS
Stars are associated with the emerging products that growth prospects in the future by great margins and have the possibility of becoming future cash cows for the company. They are the products having already high market shares and prospects of growth and high sales for themselves in the future through development, research, and re-designing along with adaptation to the new times and markets. The Star products for Rolls Royce are the other engines that it has in store for development purposes and these will upon finishing and development, become the next cash cows for the company as they will bring forward new solutions to business problems and advantages that the previous models did not have.
QUESTION MARKS
The products associated with question mark symbol are the ones with uncertain future prospects. Since they can either be successful or fail in the market as their margins of success or failure are not guaranteed; they are a subject of risk in terms of selection for investment. These products should be thoroughly researched and re-designed to manufacture them the best way possible and to increase the chances of them being profitable by the maximum. These are a barrier when it comes to entrepreneurs who cannot take risks. The products that Rolls Royce should focus on developing and being up to date with the market are SUV’s, which are increasingly gaining popularity in both Western and Eastern markets across the globe.
DOGS
These are the products that are associated with the lack of financial gains and profits for the company. These products are not associated with the success and profitability of the company as they don’t help in yielding success and sales. In some cases that span different companies across the globe, the companies decide to either continue with the funding and development of these products while some stop the research and manufacture of these products to save assets altogether. The Trent 1000 engine by Rolls Royce is an efficient engine for airplanes, equipped with the latest technology to cater to the growing aviation and energy needs but even after this, two planes have been recently involved in an accident that was newly built and equipped with this engine. Rolls Royce continues to develop and enhance this aspect of its product manufacture to tackle the problems that it faced and to increase the efficiency of these engines.
CRITICAL EVALUATION OF THE ORGANIZATION’S STRATEGY (SAF FRAMEWORK)
This framework provides an insight to the company for better evaluation of future prospects, better strategy development, and the overall general standing/current position of the company in terms of the strategies devised through research. The SAF framework is a strategic management tool with three basic components for measurement as follows;
Suitability
Acceptability
Feasibility
These features measure how a company is planning and adapting its operational strategies to cope with the market competition, in this case, it will overlook the strategic outline of Rolls Royce to develop an understanding how the company has managed to live up to its name and maintained an enviable reputation in the market against its competitors. Evaluation of a company’s strategy is also important because it helps in identifying what strengths the company has, what weaknesses it needs to overcome, what opportunities it must look forward to/take risks for and what threats it faces from the internal, external environment and the competitors especially. It also helps the company in identifying if it has enough resources to properly keep up with the proposed strategies of the company (Proctor, 2014).
The SAF component analysis of the Rolls Royce case can be made as follows;
STAKEHOLDERS:
The stakeholders of the company are not directly involved in the implementation process of the decisions that they make. Involving them with the analysis of the company’s progress will help provide them with an understanding of the company’s current situation and will help boost the morale of the employees in terms of apprehension from the management.
Development Problem:
The main development problem faced by the company is the allocation of funds/assets and their justifications. The analysis is done in this research help with that aspect and the general satisfaction with the decision made.
Project Goal:
The main aim of the projects developed at Rolls Royce emphasize on the quality and excellence along with innovativeness of their products.
Main Problem:
The main problem that becomes a hurdle in this process of development and achieving goals is the proper allocation of funds and identification of what products need development and innovation, along with the balance in types of products offered by the company.
Project Objectives:
The project exists to highlight the main featured products of the company, including the most advanced and popular product, which is the Trent 1000 engine for the aviation industry.
Communication Objectives:
There are communication barriers between the management and employee workforce of the company due to which many of them are being attracted by the competitor companies or result in their lack of motivation to work for the company in question. This is an important factor as companies in the service industry are using Information systems and technological methods to make better use of this aspect and to gain competitive advantage (Barrett et al., 2015).
Outputs:
The research and development investments have led the company into introducing the new air-cooled turbine blades and also the installment of feature analysis (Xu et al., 2015).
Indicators:
These involve the key performance indicators of the company, which includes but are not limited to training and development, capital expenditure, engine deliveries, order books, and emissions, etc.
Means of Verification:
The comparison of reports will show the progress of the company after implementing the regulatory and development measures that are suggested.
RECOMMENDATIONS
Through research and evaluation of the strategic and corporate position of Rolls Royce, the following recommendations can be made to further enhance the highlight features of the company and work on the areas that require more development in various aspects;
1. Moving Manufacturing Sectors
Manufacturers usually bundle equipment sales to facilitate themselves, and this is also an area of development for the company (Ng et al., 2012). Rolls Royce should consider moving to countries that are developing and have low costs and labor available as a large workforce is needed in the manufacturing industry. Moving to a country with low wage labor will help the company in manufacturing products from a cost-effective perspective.
2. Value Addition for the Customers
The company should focus on the creation of value for its customers and make their brand resonate with their ideal products. Aftermarket services will not only add value but reliability and trust in the company’s products in the customer perspective.
3. Growing Market Share Worldwide
Growing market share will increase the base price and quality of the product, along with it being highlighted and preferred in foreign countries across the globe.
4. Competitive Portfolio
Rolls Royce should update their portfolio and add some new products and services that add to their existing success and help in the sustainability of and exploring the new markets. As of now, the competitors of Rolls Royce have a large variety of products, even in a single category of development for providing business solutions. If Rolls Royce accomplishes this feat of developing new prototypes and designing new products that are technologically advanced, it will become easy for the company to gain a competitive advantage over its competitors like General Electronics.
5. Investments
The investments in terms of technology, research & development, the capability of the employees through training and investments in the infrastructure relating to the company’s manufacturing of the different products should be made by the company for sustainability and better prospects in the future and to stand out in the market. Technological investments will help the company stay up to date with the advances in this aspect. The use of technological tools also enhances the development process of products and services (Foden and Berends, 2010). The increase in investment in the R&D practices for the company will also aid in the enhancement and development of products and services that the company has to offer. Through this step, more innovative and environmentally friendly products can be designed and manufactured by the company.
6. Addressing the Global Markets
It is necessary to incorporate the global markets in the strategies for expansion of the business. It will help in increase of revenue through the spread of business in the international markets and will open more cost-effective manufacturing prospects for the company as well, another way for increasing profits and sustainability. The spread of business in the developing countries will not only facilitate Rolls Royce but also the people of that country as there will be more prospects for job and employment. The company should address the four global markets in question that are Civil Aerospace, Defence Aerospace, Marine and Energy, as these are the most profitable dimensions in Europe and American markets.
7. Strategic Management of The Stakeholders
It is necessary that Rolls Royce maintain the strategy for involving its stakeholders in the decision making and implementing processes of the company. It is an understood fact that paying attention to the management of stakeholders of a company can have a powerful effect through the achievement of the strategic goals of the company (Ackermann & Eden, 2011).
If followed with research, these recommendations can help catapult the business into a new era of success and development through strategic planning and management of duties and ideas. Various modes of analysis of the company have resulted in this array of recommendations that suit best the company in question.
CONCLUSION
The research can be concluded with the findings of the analysis through three different models that included the SAF framework, the BCG matrix, and the Ansoff matrix analysis. It helped in the understanding of what the strategic direction and planning of Rolls Royce are and what departments are there in which it lacks in comparison with its competitors of the same industry, such as General Electronics.
A variety of recommendations have also been proposed at the end of the research to show the findings of the study in a reflective manner and to facilitate the company with the list of available options to cater to the problems at hand. The efficient use of these recommendations can not only rectify the situation for Rolls Royce, but also provide them an upper hand in terms of competitive advantage. It is imperative that Rolls Royce not only stays true to its heritage of delivery quality and excellence but also adapt its products and services according to the times and advancements in technology. For this, the company will have to invest more in the R&D practices to get enhanced products and better plans that are powerful strategically.
REFERENCES
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APPENDICES
SAF FRAMEWORK
BCG MATRIX
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