Business Strategy Report
N1079
CandNo: 134492
Rolls-Royce Holdings plc
Business Strategy Report – Rolls-Royce Holdings plcCandNo: 134492
Executive Summary
Civil aero engine is a mature industry with intensive competition among competitors. Rolls-Royce
Holdings plc. is one of the three major manufacturers dominating the industry. It is a British
multinational public holding company founded in 1906 by Henry Royce and Charles Rolls in
Manchester. This report aims to analysis the failure of Rolls-Royce and suggest possible solutions for
the company to overcome the problems.
In external analysis most of the factors are stable except that the company will need to face the
worldwide political issues and unstable economic factor. In internal analysis, the company does not
have a positive working culture which leads to the failure of the company. Under a highly
competitive environment, the company will need to implement strategies to retain its customers
and ensure the supply of materials. It is also essential for Rolls-Royce to strength its key success
factors and to maintain its competiveness.
With the analysis and the tools to generate strategy, a few strategies are suggested, including
Vertical integration, Engine replacement scheme, New geographical markets, Flight record system,
Retain talented people strategy and Reward and punishment scheme. After using different ranking
methods to rank the strategies, Vertical integration and Engine replacement scheme are highly
recommended for the company, Retain talented people strategy and Reward and punishment
scheme will also be suggested. Vertical integration with small component and electronic control
manufacturer aiming to lower the production cost and to encourage the creation of new engines.
Engine replacement scheme aims to retain customers by providing them an improved engine with
discount. Retain talented people strategy and Reward and punishment scheme aim to change the
working culture to a more encouraging and innovative place.
2
[Type text] [Type text] [Type text]
Table of ContentsEXECUTIVE SUMMARY....................................................................................................................2
1.1 PROFILE OF THE INDUSTRY, SECTOR, COMPETITORS, CONSUMERS & COMPANY.............................................51.1.1 The company.........................................................................................................................51.1.2 The trend – civil aero engines...............................................................................................61.1.3 Industry key players..............................................................................................................61.1.4 Market share........................................................................................................................7
1.2 ORGANIZATIONAL PURPOSE................................................................................................................91.2.1 Mission..................................................................................................................................91.2.2 Vision....................................................................................................................................91.2.3 Value statement:..................................................................................................................91.2.4 Mission, Vision and Value statement analysis....................................................................101.2.5 Financial analysis................................................................................................................11
1.3 EXTERNAL, INTERNAL AND COMPETITIVE ENVIRONMENT........................................................................121.3.1 External analysis - PESTEL..................................................................................................121.3.2 External analysis - SWOT....................................................................................................131.3.3 Internal analysis - SWOT.....................................................................................................131.3.4 Internal analysis – VRIN......................................................................................................151.3.5 Competitive environment - Porter’s 5 forces.......................................................................15
1.4 BASIC OF COMPETITION & KEY SUCCESS FACTORS................................................................................17
2. STRATEGIC DEVELOPMENT.......................................................................................................182.1 EXISTING STRATEGY(S)....................................................................................................................18
2.1.1 Business stream level..........................................................................................................202.1.2 Corporate level....................................................................................................................21
2.2 GENERATION OF STRATEGIC OPTIONS.................................................................................................232.2.1 External strategies..............................................................................................................232.2.2 Internal strategies...............................................................................................................25
2.3 EVALUATION AND RANKING OF OPTIONS.............................................................................................292.3.1 Ranking of Strategies..........................................................................................................292.3.2 Evaluation - SAFe Criteria....................................................................................................30
2.4 CHOICE OF STRATEGY......................................................................................................................31
3. IMPLEMENTATION....................................................................................................................323.1 GANTT CHART...............................................................................................................................32
REFERENCE...................................................................................................................................33
APPENDIX.....................................................................................................................................38
3
Business Strategy Report – Rolls-Royce Holdings plcCandNo: 134492
Table of Tables Table 1: Rolls-Royce financial analysis ................................................................................................11
Table 2: PESTEL....................................................................................................................................12
Table 3: SWOT - OT..............................................................................................................................13
Table 4: SWOT - SW.............................................................................................................................14
Table 5: VRIN.......................................................................................................................................15
Table 6: Porter's 5 forces.....................................................................................................................16
Table 7: Rolls-Royce Value Chain analysis...........................................................................................26
Table 8: Marketing Assets....................................................................................................................27
Table 9: Rolls-Royce Dynamic marketing capabilities..........................................................................29
Table 10: Strategies Ranking ...............................................................................................................29
Table 11: SAFe Criteria ........................................................................................................................30
Table of FiguresFigure 1: Global Commercial Engine Market Share Trend 2011 – 2015 ................................................7
Figure 2: Commercial Engine Market Share Trend - GE, PW & RR 2011-2015.......................................8
Figure 3: Generic routes to competitive advantage creation ..............................................................19
Figure 4: Porter's generic strategies I .................................................................................................20
Figure 5: Ansoff Matrix I .....................................................................................................................20
Figure 6: BCG ......................................................................................................................................21
Figure 7: ADL .......................................................................................................................................22
Figure 8: Porter's generic strategy II ...................................................................................................23
Figure 9: Ansoff Matrix II ....................................................................................................................24
Figure 10: Value Chain ........................................................................................................................25
Figure 11: Dynamic marketing capabilities .........................................................................................28
Figure 12: Gantt Chart.........................................................................................................................32
4
[Type text] [Type text] [Type text]
1. Strategic Analysis 1.1 Profile of the industry, sector, competitors, consumers & company
1.1.1 The company Rolls-Royce Holdings plc. is a British multinational public holding company founded in the 1906 by
Henry Royce and Charles Rolls in Manchester, and is a manufacturer of luxury cars (48). The company
was mainly responsible for the production of road vehicles until 1973 when the company diverged in
order to expand their business, creating another company known as Rolls-Royce Motors. Rolls-
Royce is well known for their aero engines (48). They created their first aircraft engine in 1914, and
by 1920, majority of Rolls-Royce’s business comprised of aero engine production. Rolls-Royce has
customers from over 150 countries and operates in more than 50 countries worldwide, with an
estimated of 550,000 employees. Rolls-Royce Holding plc. provides a wide range of products and
services, including civil aerospace, Defence aerospace, Nuclear, Marine and Power system (48).
This report will mainly focus on the civil aero engine business stream. Rolls-Royce mainly focus on
two main markets:
1. Sales of brand new aircraft engines to aviation industry leading manufacturer Airbus industry
and Boeing and to some other airlines as well (48).
2. Spare part to those old purchase engines and aftermarket services and maintenance to its
customer airlines. This segment of market consists competitors who specialized in
maintenance (48).
Recently, their civil aero engine performance deteriorated significantly. Financial professionals
identified a few main problems that the company faced. The problems have been listed below:
1. Global economic downturn: the drastic drop of oil prices from 2014 until present day (58) (See
appendix 1)
a. Which led to extensive cancellation of different programs and orders. This has cost
Rolls-Royce a huge loss during this period of time.
2. Decision to exit IAE and not join Pratt & Whitney in developing the Geared Turbofan for the
single aisle market (1).
a. Lost the chance of sharing information and resources with other competitors (55).
b. Reduced chances of joining the group and working on huge projects, which could be
beneficial in the long run.
5
Business Strategy Report – Rolls-Royce Holdings plcCandNo: 134492
3. Imbalance in the allocation of resources as well as the inability to develop successor out-of-
date engines (1).
a. With inequitable resource allocation, the research and development on some
engines will be slower and it will give the competitors a chance to take over the
market. For example, the company has devoted heavy resources to A380 but not
AE3007, which gave Pratt & Whitney, GE and Sanfran the chance to dominate the
market of AE3007 (40).
4. First loss in a Gulfstream engine competition (1).
a. The image and reputation have dropped substantially after they lost in the
competition, because this is the very first time they lost in the Gulfstream engine
competition, with rumours speculating that they lost their talents in order to create
better engines.
1.1.2 The trend – civil aero engines The industrial trend is to reduce the number of in-flight engine shutdowns, abort take-offs and flight
delays through the use of advanced engine health monitoring technology (38). Currently, Rolls-Royce
invests monumental effort in reducing the number of in-flight engine shutdowns, aborted take-offs
and flight delays through the use of advanced engine health monitoring technology (44), which is
beneficial to society. There is an inherent shift in the emphasis placed by the companies, where
instead of selling engines to customers, there is a fundamental shift to adopt the power-by-the –
hour contracts. These airlines make fixed regular payments based on the number of hours flown and
the engine manufacturer retains responsibility for engine maintenance (35). To support this new
approach, improvements made to the in-flight monitoring of engine have been introduced with the
collection of more detailed data on the operation of the engine. More Boeing 737 is dominated by
CFM, GE Aviation is taking action to dominate Boeing 747, 767 and 777 plane (23); with Pratt &
Whitney dominating the geared turbofan engine which suitable for Airbus A320 neo (38)(40).
Although Rolls-Royce launched their TrentXWB engine for the redesigned A350XWB (53), the period
between the development and the launch will take a long time, which may not be fast enough to
compete with its competitors.
1.1.3 Industry key players There are 3 major manufacturers dominating the large commercial jet engine – GE Aviation (GE)
corporate parent is GE, Pratt & Withney (PW) corporate parent is Limited Technology Corp. and
Rolls-Royce PLC (RR). GE, the biggest competitor for Rolls-Royce, they have the biggest market share
in the industry and during the past 5 years, they maintain over 40% of market share in the past 5
years (22).
6
[Type text] [Type text] [Type text]
7
Business Strategy Report – Rolls-Royce Holdings plcCandNo: 134492
1.1.4 Market share
2011 2012 2013 2014 20150%
20%
40%
60%
80%
100%
120%
62%
38% 38% 39% 41%
9%
21% 22% 19% 22%
14%
10% 10% 10%11%
6%
12% 12% 12%10%
5%13% 13% 11%
12%4% 6% 5% 9% 4%
Global Commercial Engine Market Share Trend 2011-
2015CFM GE Aviation (GE) IAEPratt & Withney (PW) Rolls-Royce PLC (RR) Others
Figure 1: Global Commercial Engine Market Share Trend 2011 – 2015 (4)(9) (34) (36) (45) (63)
From the above figure 1, we can see the general trend of market share. The market share of Rolls-
Royce only decreased by 2% in 2014 and it went up again by 1% in 2015. It appears that the
company’s performance is considerably decent. However, there are lots of joint ventures in this
industry. For example, the CFM, having the highest market share among all the companies, is a joint
venture company where 50% of the share belongs to GE. Therefore, if we recreate the market share
bar chart, the real changes during this past few years can be seen.
8
[Type text] [Type text] [Type text]
2011 2012 2013 2014 2015
40.00% 40.00% 42.00% 39.00% 42.50%
10.55% 18.50% 18.50% 18.50% 17.15%9.55%13.00% 13.00% 11.00% 12.00%
39.90%28.50% 26.50% 31.50% 28.35%
commercial engine market share trend - GE, PW & RR 2011 - 2015
GE Aviation (GE) Pratt & Withney (PW)Rolls-Royce PLC (RR) Others
Figure 2: Commercial Engine Market Share Trend - GE, PW & RR 2011-2015 (2) (7) (14) (15) (20) (36) (63)
The above recreated chart shows that the market share of Rolls-Royce is relatively small, and as they
exited, the IAE and PW purchased all its shares. This indicates that Rolls-Royce is being threatened
by the other 2 competitors, and they will need a strategy to be more competitive and boost its
market share.
9
Business Strategy Report – Rolls-Royce Holdings plcCandNo: 134492
1.2 Organizational purpose 1.2.1 Mission“Trust to Deliver Excellence” (46) (48) (50)
They embody the values of the business: trust, deliver and excellence, in which they define the
terms as following:
Trust: is something we know can only be earned. It comes from the way we behave towards our
colleagues, our customers, shareholders and partners. They need to know that we can be relied on
to do the right things in the right way (48) (50).
Deliver: part of earning trust is delivering on our promises. We seek to meet our customers’ needs
by ensuring the quality, performance and reliability of our products and matching this with first-class
services that has value and can be replied upon (48) (50).
Excellence: standard, a way of life; few companies can aim higher. If we can be trusted and we
deliver on our promises, then we will be regarded as an excellent company; one that people are
proud to work for, work with and invest in (48) (50).
1.2.2 VisionTheir vision is to create a “better power for a changing world” as the world is changing constantly
around us (51) (52), Rolls-Royce believe that they can help by developing a power system, enhancing
the quality and continue to strive for the better and create new standards for business to conduct.
Rolls-Royce is the leading aero engines manufacturers in UK, with the largest market share (over
50%) in UK. They export their civil engines to worldwide companies, and also work with
governments and provide defence aerospace marine engines to them.
1.2.3 Value statement: 1. Being part of Rolls-Royce team means (51) (52)
o Being trusted to deliver excellence for our customers, business and people
o Leading with openness and honesty
o Being personally valued and recognized, with a voice that is heard
o Enjoying your work and sharing mutual respect with your colleagues.
2. Creating a culture that drives performance (48) (51):
o We have nurtured a culture where managers lead by example and our employees
are focused and flexible team players. Rolls-Royce is all about performance, where
they create high expectations and unlock potential. They recognize exceptional
10
[Type text] [Type text] [Type text]
contributions and inspire others to reach the same heights. They have a role in
exploiting individuals and their collective talents.
1.2.4 Mission, Vision and Value statement analysis However, the working environment is good as the company has previously alluded to. In the
reviews, both the present and ex-staff have pointed out a few key problems with regards to the
internal issues in the company.
1. The biggest problem is that the company is adopting a slow pace, which will take the
company a long time to solve a problem (24) (see appendix)
2. Decision-making is a long and complex progress, and may ultimately lead to a poor
communication of change (42).
3. It is a very bureaucratic company and people are not willing to change (24)
4. Difficulty in retaining good talent due to antiquated ways of managing staff (24)
5. The enterprise information systems project implementation is unsuccessful because of poor
management and implementation process, including poor communication (24)
From the reviews, we can see that the company does not have schemes to encourage employees to
be more innovative and create new engine models.
Secondly, the company stated that employees’ opinions and feedback will be reviewed. However,
the truth is that the company is a hierarchical one and there are lots of layers in management, and
employees said it is not easy to communicate and to express their ideas to senior managers.
11
Business Strategy Report – Rolls-Royce Holdings plcCandNo: 134492
1.2.5 Financial analysis 2011 2012 2013 2014 2015
Profit before tax (£m)
1105 2766 1700 67 160
Operating profit (£m)
1186 1373 1479 1390 1499
Cost of Sales (£m)
8676 9416 11482 10533 10459
ROCE 21.24% 41.27% 21.10% 1.72% 2.91%Turnover (£m)
11,124 12,161 15,513 13,736 13,725
Current ration
1.20 1.33 1.31 1.46 1.48
Inventory turnover period (£m)
107.74 105.67 105.51 95.92 92.03
Gearing 1.10 0.80 1.11 1.28 1.82Gearing 2 0.52 0.45 0.53 0.56 0.64Table 1: Rolls-Royce financial analysis (25) (29) (33) (45) (46) (52) (58)
From the above analysis, we can see that the company performances drop a lot in 2014. The profit
of the company drop dramatically in 2014, and the recovery in 2015 is not high. This indicate the
company may need a few years to recover.
Return on Capital Employed (ROCE) aim to measure how efficiently a company can generate profits
from its capital employed by comparing operating profit to capital employed. Rolls-Royce most
efficient year is in 2012 (41.27%) and 2014 (1.72%) is the worst. The reason for the ROCE drop is
because the operating profit drop 89 million pound and the capital employed increased by 738.05
million. This indicate that in 2014 the company increase their capital employed but it didn’t help to
generate more profit which means the efficiency of the company is very low. And it didn’t recover
much in 2015.
The gearing ration measure the proportion of the company’s borrowed funds to its equity. Rolls-
Royce do have a relatively higher gearing ration compare to the industry average (gearing 1: 1.0 and
gearing 2: 0.48) this indicate that they may have a financial risk as the excessive debt can lead to
financial difficulties.
12
[Type text] [Type text] [Type text]
1.3 External, Internal and Competitive environment 1.3.1 External analysis - PESTEL (See appendix 3 for detailed PESTEL)
Political factor Strong political influence (14) UK government intervention to avoid
potential foreign takeover of Rolls-Royce Sanction may cost delays and
cancellation (57) Major receiver of funding from
government which puts them in a powerful position (5)
Benefit from a relative stable democratic government
Import and export policies and controls (57)
Decrease in government spending Subsidies by UK government US tax
breaks for Rolls-Royce (26) Carbon emission under the Kyoto
protocol is target for reduction by EU, creating pressures for reduced impact of air travel (35)
Economic Factor Worldwide recession (12) (21) Fierce competition, savvier customers
and economic headwinds are adding to pressure to cut cost (16)
Cost of production high (34) Currency risk (34)
Social factor Civil aerospace correlated with trends in
airline sector (17) Airline influence by demand of global
population; Increase number of passengers travelling by air (2) (3)
Outbound Travel Alert affect the number of people travelling
Growth of aviation (7)(9) Demand for aftermarket product +
services increase ie. long-term contract (28)
Technological factors Innovation of new materials and design Advanced technology help to shorten the
time for new inventions Many years of experience and R&D –
forefront for technology IT security Product performance Risk of technological obsolescence, with
long delivery cycles
Legal factor REACH (Registration, Evaluation and
Authorisation of Chemicals) Norms Articles interpretation Employment protection: Health and
Safety important in manufacturing and also in liability for air safety(17)
Environmental standards and legislation EU/US law and WTO ruling on
competition
Environmental Factor Geographical location limitation (19) Unstable weather conditions Supply chain performance (8) Capability of global resources Reduction in consumer demand due to
concerns regarding climate change (20)
Table 2: PESTEL
Political and legal factor will be the key affecting the aero engine industry, especially for Rolls-Royce.
There are many regulations for importing and exporting engines to foreign countries, since aero
13
Business Strategy Report – Rolls-Royce Holdings plcCandNo: 134492
engines companies do provide products and service to the military in different countries. Therefore,
governments will implement different policies in order to protect their own interest.
Economic and Social factors are also factors that the company need to be concerned about when
making a decision. There is evidence that when the demand of aeroplane increases, the demand of
aero engines will increase correspondingly. However, the industry is facing fierce competition and
the economy is going through recession, which coerces companies to reduce cost in order to survive
and brave the adversity.
1.3.2 External analysis - SWOTOpportunity
Government intervention prevent takeover from other company (32)
Government funding have sufficient funding for project (28)
Increased demand for commercial aero engines due to the demand of air travel increase
Sales of engine correlated/ dependent on sales of aircraft
Rolls-Royce is well positioned both geographically and technically to service the huge aircraft market in the future.
Increased demand for turbine helicopters
Threat Economic recession (60) Government policies compatibilities
(38)o Import and export controlso Sensation policy of other
countries High level of competition
Competitors start to dominate some of the aero engine model
Risk for supply chain
Table 3: SWOT - OT
1.3.3 Internal analysis - SWOT Strength
Good relationship with:o Suppliers & buyers (especially
Singapore airline)o European government
Investment in US to smoothen the political issue
Major player in aero-engines manufacturing
Business have reach to different parts of the world market
High capacity for R&D
Weakness Brand image decrease due to loss in
engine competition and failure to improve the engine AE3007 model
Working environment is getting worse Culture of the company causes an
associated negative impact, which may adversely affect the performance of R&D
New CEO could not handle the media (24)
Long decision-making process which may not have been accurate
The way that Rolls-Royce dealt with legal affairs is not mature enough, fines and other remedies hampered the image of the company as well as the business, position and operations
Table 4: SWOT - SW
14
[Type text] [Type text] [Type text]
1.3.4 Internal analysis – VRINCompetency Valuable Rare Inimitable &
Non-substantiate
Exploitable by the firm?
Competitive outcome
Relationship between customers
Yes Yes No Yes Yes
Company name and reputation
Yes No No Yes Yes
Design/ Product
Yes No No Yes Yes
Product expertise
Yes No Yes Yes Yes
Innovation Yes Yes No Yes YesSecurity of supply
Yes No No No Yes
Supplier network and relationship
Yes Yes No Yes Yes
Information system
Yes Yes No Yes Yes
Table 5: VRIN
VRIN shows the competitiveness of the company. ‘Inimitable and non-substantiate’ is evidently the
most significant problem that the company needs to face, as competitors can easily copy knowledge
and services. The regular press conference and participation in the exhibition will increase the
chances of information leakage. Also, during the news conference of launching a new engine, the
company will need to explain the new features or the new materials used in the design, which
provide competitors a chance to copy our product or ideas. Also, when the company fail to keep the
employees, the chance of information leakage increases.
On the other hand, the company does have the ability to exploit the resources, which can increase
their competiveness.
1.3.5 Competitive environment - Porter’s 5 forcesBargaining power of Buyers
Middle - High: long term commitment to purchase an aircraft engine. Customers prefer a trusted brand (11)
Limited numbers of buyers and increasing level of global carriers within airline industry Globalisation of the many airlines in recent years has enhanced their purchasing power to
great extent (4) Long-term decision to buy a specific aircraft or any combination of aircraft engines
therefore they will compare different models and choose carefully (15) Easy for them to get new information from other parties and the customers can easily
change aero engine suppliers
15
Business Strategy Report – Rolls-Royce Holdings plcCandNo: 134492
Increased referral once a sale has been madeBargaining power of supplier
Depends Aero engines manufacturer are involved in many different source supply applying double
supplier strategies. Supplier of high end technology like complicated electronic control component have the most bargaining power where the suppliers of the smaller components are decreasing in the recent years (42).
Threat of new entrants Low This is a reputed market and high cost of R&D and need approval from the authorities Also, it is hard to win the buyers’ confidence for new entrants (29) Aero engines market dominated by GE, RR & P&W The name of the company also plays a vital role in this industry due to the sensitive nature
of this marketThreat of substitute
Low There is most likely no substitute for air travel because of time constraints, and although
options like high speed trains are available, they are not utilised (13) Due to nature of sector, “substitute products” difficult But still these emerging technological developments taking place along with increasing
opportunity of air travelRivalry within industry
High This is an oligopolistic global industry is dominated by 3 main players (General electric GE,
Rolls-Royce and Pratt & Whitney) fuelling a balance, resulting in intensified rivalry (19) Civil aerospace engine industry is highly budget oriented as it requires massive capital
investment for advanced technology and R&D. Single manufacturers find it difficult to dominate the market, which leads to the increased
competition among the opponents. (20) In recent years, each producer tried to enhance their volume share, which brought a
healthy competition to the existing market (20) Wide range of labour, industry is well developed
Infrastructure available in UK + sources of capital and nature resourcesTable 6: Porter's 5 forces
Overall aero engine is a highly competitive industry as there are only a few players in this sector and
there are a few buyers. The barriers of entrant is high and the threat of substitute is low, thus
companies can focus on the existing competitors and fight for their market share. However, the
barging power of buyers and suppliers are relatively high. Therefore, companies should impose
strategies in order to retain their customers and ensure their supply.
16
[Type text] [Type text] [Type text]
1.4 Basic of competition & Key Success FactorsThere are four main key success factors for the civil aero engine industry.
Partnerships with Government agencies
Becoming a partner with government agencies will be a key for the company to success. As the
company will have funding and support for the university infrastructure, complementary basic
research, which seek to attract key researchers. Besides, it is easier for the company to reach
customers worldwide, as it will be hassle-free to get through the legal process.
Customisation of approach for different countries and cultures
This can help customers contact the company more easily. In the long term, with increased
ease of contact, it can attract customers. Ostensibly, the approaches employed by the
companies will be a key factor taken into the consideration of customers when they make
decisions.
High quality control standard
This can ensure that the company will provide products of high quality, and can prevent any
accident caused by mistakes.
Well-developed aftermarket services
These services can help to keep the customers as they can maintain the life expectancy of
an engine. This will also be a key element when customers make their decisions.
Advance IT system
The process of creating engine involves a lot of calculation and design. It will require a good
IT system and software to work on and to record all the processes. Clearly, an advanced IT
system is essential. Beside, easily accessible information will enhance the operation
mechanics and lead the company to eventual success.
17
Business Strategy Report – Rolls-Royce Holdings plcCandNo: 134492
2. Strategic Development 2.1 Existing Strategy(s)Their existing strategy is to focus on differentiated, mission-critical power systems, which create
tough barriers to entry in our chosen markets. Leverage world-leading engineering can drive growing
market shares. This will capture long-term aftermarket value and deliver profitable growth.
Engineering excellence (44)
o Investing in and developing the excellence of our engineering to produce high-
performance power systems.
Operational excellence (44)
o Transforming our manufacturing and supply chain to embed a lean approach across
our facilities and process
Capturing aftermarket value (44)
o Leveraging our installed base, product knowledge and capabilities to provide
outstanding services to customers
Currently, Rolls-Royce is facing a financial disadvantage (figure 3) due to the economic recession,
and their decision to exit IAE and not join PW in developing the geared turbofan for single market.
Their income and support from the third party has since dropped and this made them suffer. After a
number of profit warnings from 2014 to 2015 (41), the company’s emergent strategy was to cut cost
and to boost its brand image. In 2014, the company had cut 5% of its work force due to the drip in
demand and it mainly occurred in its aerospace division (41). In 2015, there was a major
management restructure in the company in order to cut cost once more (49). However the company
need more strategies to tackle the problems and to recover from the failure. Rolls-Royce will be
implementing strategies to aim market advantage (figure 3).
18
[Type text] [Type text] [Type text]
Figure 3: Generic routes to competitive advantage creation (29)
19
Business Strategy Report – Rolls-Royce Holdings plcCandNo: 134492
2.1.1 Business stream level
2.1.1.1 Porter’s generic strategies
Figure 4: Porter's generic strategies I (29)
Currently the company is on a differentiation side where they hire talented employees to help them
differentiate their products from the competitors.
2.1.1.2 Ansoff matrix
Figure 5: Ansoff Matrix I (29)
20
[Type text] [Type text] [Type text]
Rolls-Royce current strategy is product development, in the past years the company develop new
engines, nuclear energy and power system in the past years. Also they planned to develop and move
into new markets too. However, they have not take any action for market development yet.
2.1.2 Corporate level2.1.2.1 BCG
Figure 6: BCG (29) (31)
According to the market share and the growth rate data, there is still a question mark when it comes
to the power system and the nuclear business, as there is still a long way for the business to grow
before entering the mature level (see appendix 4 for industry life cycle). In addition, we are still
unsure of the popularity level of these product and services. However, there will be a great chance
for these two businesses to become the star product of the company as the demand of energy is
growing and many industries will need an easy access and safe power system operate in their
products.
The civil and defence aero engine are still the cash cow of Rolls-Royce. Although the business is
dropping, these 2 businesses have generated over 50% of the company’s total revenue (48). With
the appropriate strategy implemented, civil can again become the star product of the company.
21
Business Strategy Report – Rolls-Royce Holdings plcCandNo: 134492
Marine business will be a question mark product too, but it will be more close to the middle point, as
the business rate is medium and their relative market share is not very high (51). More investment
will be required in order to stand out and attract more customers in this business.
2.1.2.2 ADL
Figure 7: ADL (29) (31)
The ADL matrix used the dimension of environment assessment and business strength assessment to
identify the general strategy. Rolls-Royce’s nuclear and power system business is in the growth stage
where the demand is increasing and more companies wish to enter this industry (61). There are a
few of larger player in this industry but not a dominating one. Therefore, it will be located on the
GrowthXFavourable, where the company can attempt to improve the business by investing more
these two areas and try to develop a safer and easier way for people to access the energy and the
system.
Civil and defence aero engines will be located on the MatureXFavourable. Although the engine
sector is more mature, the growth rate has been slowing down and the competition is intense. The
company provide quality engines to their customers. However, the company has failed to regularly
provide new inventions or the enhancement of old engines (1). Along with the economic recession
and wrong decisions made, especially the civil aero engine business stream, the damage inflicted is
22
[Type text] [Type text] [Type text]
significant. Rolls-Royce should find ways to boost their research and development to create a more
competitive advantage when pitched against others in the industry.
Last but not least, the Marine business is located on GrowthXTenable. There are only a few
competitors in this particular industry as the cost of setting up this business is very high, and it also
takes a long regulation process before the business can be started (51). As a result, this business
performance in Rolls-Royce is not performing well. Hence, the company will need to differentiate
their marine products from other competitors in order to protect their business.
2.2 Generation of strategic options From the financial analysis, the ROCE indicate that the company did increase the capital employed in
2014 trying to generate more profit for the company. But these actions fail. Tolls will be used in the
following to analysis and generate the strategy that Rolls-Royce should follow in order to improve
their financial performance and be more competitive.
2.2.1 External strategies
2.2.1.1 Porter’s generic strategy
Figure 8: Porter's generic strategy II (29) (31)
Rolls-Royce is moving towards a differentiation, the resources from the power system and marine
business that can be used in the aero engine business. However, their biggest competitor GE is a
diverse company, they have 12 different business stream operating and a multinational parent
company supporting them. This shows that Rolls-Royce will need to put extensive effort in order to
become a differentiate company and to compete with its competitors. Becoming a differentiate
company may be difficult to the company Vertical integration could be another choice for Rolls-
Royce to choose. The R&D department of Rolls-Royce is well-developed and they have sufficient
amount of resources and talented people working in the company. Backward vertical integration
23
Business Strategy Report – Rolls-Royce Holdings plcCandNo: 134492
means Rolls-Royce can invent and manufacturer new materials for the engines. Inventing new
materials for the engines can inspire engine designers to improve their old model and to design new
and more effective model in the future. Moreover, the company can benefit from it, the company
will have more control over the supply and they may enjoy a lower production cost. Besides, the
company can also create data collection and information system for aeroplane, as it is vital to collect
all information during the flight.
2.2.1.2 Ansoff
Figure 9: Ansoff Matrix II (29) (31)
Market penetration allows the company to maintain or increase their market share of their current
products. It also allows the customer to secure dominance of growth markets and to increase the
usage by existing customers. The company can introduce loyalty schemes to attract and keep their
customers. For example, the company can implement an Engine Replacement Scheme. When the
company creates a better engine to replace the old one, the customers can enjoy discounts to
change their engine and they do not have to repurchase the whole aeroplane. Most importantly,
the companies can seek to improve the quality of products and services. High quality products and
professional services are the most important in this industry, as tiny mistakes would not be
permitted in this market. Company can increase the quality standard to maintain the high quality
product they provide.
Market development allows the company to explore New Geographical Markets. From the previous
analysis, the political issue will be the key that Rolls-Royce need to overcome. There are many
markets that Rolls-Royce can enter and provide aftermarket services for the local airline. Knowing
and understanding the regulations will be the first step that the company needs to take. Then, they
24
[Type text] [Type text] [Type text]
will need to communicate and invest in developing the new market, and try to smoothen the
political issue, provide maintenance and other services to the airlines. Like companies, they want to
enter the Chinese market, and they will first start up the business in Hong Kong as a stepping stone
to enter the Chinese market.
Product development will be one of the growth strategies of the company, where Rolls-Royce will be
aiming to introduce new products in existing markets. This strategy will be suitable to the company
as the aero engines market need to be differentiated in order to remain competitive. The company
can emphasize on R&D and innovation; secondly, they need to understand what the customers
need. An aeroplane will need many systems implemented in order to work, especially the system to
record the flight and the power system. Rolls-Royce can invest in creating a Flight Record System to
attract more customers.
2.2.2 Internal strategies
2.2.2.1 Value chain
Figure 10: Value Chain (29) (31)
Primary activities
Inbound logistics
Rolls-Royce handle the materials with extra, they have details highlighting the process of handling materials/ product and stock control that the employees will need to follow.
Operations Aero engines need a lot of different components to make the final product. Engineers will need to do lots of measurements and to find pieces of materials to fit in the product to become an engine. A team of workers will need to plan and create the engine together
25
Business Strategy Report – Rolls-Royce Holdings plcCandNo: 134492
Outbound logistics
Engine is a big piece of machine which is not convenient to store in a warehouse. Rolls-Royce will start to make the product when there is an order and they will need to communicate with airplane manufacturer ahead to make sure that they can transport the engine safely to the right place. They will then communicate with the plane manufacturer and help to install the engine of the plane
Marketing and sales
Company provide details of the engine on their website except those for military usage. Companies tend to use personal selling where they will contact their customers individually to promote their new design. However they do expose details to the media when they launch any new technology or design.
Service Installation, repair, training and spares are the main aftermarket services the company provide. This is the area where Rolls-Royce can improve and provide more sophisticated aftermarket services to the customers.
Support activities
Procurement Acquiring resources is essential to the company. The company will examine the supplier and its products before ordering, also they will regularly look for new technology and for production. However, the working pace of the company is very slow and the company will thus need to improve this problem. Technology has been flourishing in recent times and the company will need to move faster in order to more competitive.
Technology development
Rolls-Royce do have a well developed R&D department, where they have sufficiently talented people and materials. However, the company culture is not ideal and the development of the company is thus slowing down. The company should implement schemes to encourage people be more innovative and create new models.
Human resources management
The people are the key to the company, and Retaining Talented People is thus vital. The company can attract many talented people, but the culture of its company is the main factor responsible for the failure to retain these people. The payment and working hours is fair to all the employees, but the working environment cannot fulfil their need and they find it unattractive to work in the company and they will tend to leave the company. To attract more talented people to join their company, they can create a sponsor scheme, which mainly sponsors masters and PhD students for their research projects. These people will need to do relevant projects for the sponsor scheme and the result of the findings can benefit the company. Beside they can set up Reward and Punishment Scheme to encourage people to work more effectively.
Infrastructure It is believed that the company followed all the industry standards to produce all their engines. There were no accidents that occurred as a result of their engines. However, the information management of the company has room for improvement, where there is a new computer system introduced, the company will take a long time to implement to all the computers, which significantly affect the daily operations.
Table 7: Rolls-Royce Value Chain analysis
26
[Type text] [Type text] [Type text]
2.2.2.2.Resources competencies
Table 8: Marketing Assets (29) (31) (50)
Overall the marketing assets of the company is not bad. Companies do have sufficient amount of
assets to maintain its company’s viability. However, if the company can create their own materials
for their engine and manufacture them by themselves, the company can enjoy a lower cost of
production and encourage innovation and new engine designs.
Marketing Assets
Supply chain assetsThe security of supply is medium as there are risks that the natural resources are not enough for the industry. Besides, suppliers may not provide them with materials in the future. To increase the security of the materials supplied, the company can find and make their own materials for the engine. Not only can these materials be applied to the aero engines, it can also be applied to other business streams such as marine and the power system.
Alliance-based assetsIn recent years, the sharing of new technology and information in the aero engine industry had been changed and it is easier for the company to access new information. Sharing of technology has become more popular in these days, and companies will tend to work together, such as join venture for a particular project.
Internal support assetsRolls-Royce has high technical skills and expertise in production. However, they do not enjoy cost advantages. Also, the information system is not perfect. It can be one of the areas that the company can improve on.
Customer-based AssetsCustomer relationship is fair, Rolls-Royce needs to work on the aftermarket services to retain more of their customers.The reputation has dropped after they exited the IAE and lost in the engine competition for the very first time. Rolls-Royce is one of the three main dominator of the engine industry, with the right strategy implemented, market share will stop decreasing.
27
Business Strategy Report – Rolls-Royce Holdings plcCandNo: 134492
Figure 11: Dynamic marketing capabilities (29) (31)
Marketing sensing capability
Understanding the external environment is essential to the company, especially for a mature company like Rolls-Royce. They need to regularly update the information under the fast changing and rapidly progressing trends of the industry (36). The R&D department of the company is strong and they have a relatively high marketing sensing. However, they lack creative people to design and develop better engines to compete with their major competitors. Therefore, the company should use the resources to hire or cultivate more talented graduates to join the company, and invented more advanced engines.
Learning capability The company refused to work with P&W and chose to exit the IAE, which shows the company is not willing to learn from other companies, nor share the information and research with other companies. The company should learn new know-how tactics from other companies from the same industry and apply in their own designs to gain a long-term competitive advantage.
Targeting and positioning capability
The current target market of Rolls-Royce civil engines is quite small, they can increase the number of target airline to gain more revenue and increase their market share.
Customer relationship management
According to the market assets analysis, the current customer loyalty of Rolls-Royce is weakening, as the company have lost in the xxx competition and they have failed to design an advanced engine to replace the xxx model.
Innovative CapabilityNew product and service development capability
Adaptive CapabilityTargeting and positioning
capabilityCustomer relationship
management
Absorptive CapabilityMarket sensing capability
Learning capability
28
[Type text] [Type text] [Type text]
New product and services development capability
Product and service development are important elements to the company. Rolls-Royce have advanced technology and sufficient capital to carry out research and development. Hence, they should focus on designing advance engines with lighter but strong materials.
Table 9: Rolls-Royce Dynamic marketing capabilities
2.3 Evaluation and ranking of options2.3.1 Ranking of StrategiesStrategic options
Fit technical competences
Fit with sector know-how
Builds on our known reputation
Reached our ‘contact ceiling’
Build on client need
Higher income
Increased competition
Ranking
Vertical integration
2 2 2 0 2 2 2 12 A
Engine replacement scheme
2 2 2 0 2 2 2 12 A
New geographical markets
0 0 1 2 2 1 2 8 P
Flight record system
2 2 1 0 0 1 2 8 P
Retain talented people strategy
0 0 2 0 1 1 2 6 p
Reward and punishment scheme
0 0 2 0 1 2 2 7 P
2 = favourable; 0 = unfavourable; 1 = uncertain/ irrelevant A = most suitable; P = possible; U = unsuitable
Table 10: Strategies Ranking (29)
From the above ranking, it shows that vertical integration and engine replacement scheme are the
two most suitable strategies that the company should consider and take action.
29
Business Strategy Report – Rolls-Royce Holdings plcCandNo: 134492
2.3.2 Evaluation - SAFe Criteria On scale of 1-5, 1 being the lowest and 5 being the highest
Vertical integration
Engine replacement scheme
New geographical markets
Flight record system
Retain talented people strategy
Reward and punishment scheme
SuitabilityDoes the proposed strategy address the key opportunities and threats the organisation?
5 4 3 2 3 3
AcceptabilityDoes the proposed strategy meet the expectations of the stakeholders?
4 5 3 2 4 4
Is the level of risk acceptable?
4 5 2 4 4 5
Is the likely return acceptable?
4 3 3 4 4 4
Will the stakeholder reactions be positive?
5 4 4 3 4 3
FeasibilityWould the proposal strategy work in practice?
4 4 3 3 3 4
Can the strategy be financed?
3 5 2 4 5 5
Do people and their skills exist or can be obtained?
4 5 4 5 3 5
Total of 45 33 35 24 27 30 33Table 11: SAFe Criteria (29) (31)
30
[Type text] [Type text] [Type text]
2.4 Choice of strategy Four strategies are chosen after the ranking.
Vertical integration
Backward vertical integration will be highly recommended, this strategy can help the company to
enjoy a lower production cost and differentiate its product by using newly created materials. Rolls-
Royce can firstly search for small component and electronic control component manufacturer that
have incentive to merge with them. Then Rolls-Royce can do some research the manufacturers
understand more on their overall performances. Then to write up the documents and reach the
sellers. Arranging meetings for negotiation, discussion of the heads of terms and complete the deals.
While signing the contract Rolls-Royce researchers can start to create new materials for the new
engine design. After developing the new materials and the new engine, the company will need to do
a range of testing and amendments before finalising the design and sent the product to
manufacturer.
Engine replacement scheme
The company will need to count up the number of plane that need to change engine. Then predict
the cost of production, selling price and the expected revenue. Meanwhile, the company can
promote their new scheme and to contact customers and arrange the engine replacement. Lastly
the company can take actions and change the engine for their customers. This strategy aims to
retain their customers.
Reward and Punishment scheme
The HR development and the senior should come together and discuss the details for the scheme.
Then the company should implement the strategy for 5 months for testing and evaluate the results
and see if there is any amendments that they nee to make. After all the amendments, the company
can officially implement this strategy and try to encourage the employees to work in a faster pace.
Retain Talented People scheme
Talented people are not willing to stay in the company as they found the job is not challenging nor
attractive. The HR department should understand the employees needs and to come up with
strategy to encourage innovative ideas. Also to offer the non-monetary rewards to fulfil the
employees needs. This strategy aims to retain the talented people.
31
Business Strategy Report – Rolls-Royce Holdings plcCandNo: 134492
3. Implementation 3.1 Gantt Chart
Figure 12: Gantt Chart (see appendix 5 for the enlarged Gantt chart)
The strategy will be divided into three levels, short terms, mid terms and long terms. For the vertical
integration and the reward and punishment scheme will be a long term plan. As these two plan will
need a longer period time to implement. Engine replacement scheme is a mid term plan as it will
depends on the number of flight that need to change the engine, the duration of time will vary from
1.5 years to 2.5 years. Last but not least is the retained talented people scheme. As it believed that it
will be a short term strategy to back up the reward and punishment scheme. This strategy can help
to improve the working culture and to identify the needs of employees. Which the strategy can be
stop once the reward and punishment scheme can maintain a positive working culture in Rolls-
Royce.
32
[Type text] [Type text] [Type text]
33
Business Strategy Report – Rolls-Royce Holdings plcCandNo: 134492
Reference 1. Aboulafia R. Rolls-Royce: Bad decisions, tough luck and A Long Road ahead. Forbes. 2015 Nov 13 [cited 2016 May 5]. Available from: http://www.forbes.com/sites/richardaboulafia/2015/11/13/rolls-royces-long-road-to-a-difficult-week/#5b67f05307a2.
2. Airbus. airbus. Orders & deliveries | Airbus, a leading aircraft manufacturer; 2016 Mar 31 [cited 2016 May 5]. Available from: http://www.airbus.com/company/market/orders-deliveries/.
3. Airbus. airbus. Airbus for suppliers | Airbus, a leading aircraft manufacturer [cited 2016 May 5]. Available from: http://www.airbus.com/tools/airbusfor/suppliers/.
4. AirInsight.: FliegerFaust. Commercial jet engine share 2000-2014; 2015 May 6 [cited 2016 May 5]. Available from: http://www.airinsight.com/commercial-jet-engine-market-share-2000-2014-1129456823.html.
5. army-technology.com. Army Technology. The top 10 aerospace and defence companies in 2014; 2014 Sep 29 [cited 2016 May 5]. Available from: http://www.army-technology.com/features/featurethe-top-10-aerospace-and-defence-companies-in-2014-4386382/.
6. Boeing. Boeing: Boeing UK - Boeing’s centenary; 1995 [cited 2016 May 5]. Available from: http://www.boeing.co.uk/boeing-100.page.
7. Boeing. Boeing. World economy continues acceleration; 1995 [cited 2016 May 5]. Available from: http://www.boeing.com/commercial/market/long-term-market/business-and-market-environment/.
8. Brief L. Global Commercial Aero Turbofan Engine Market, Supply Chain and Opportunities: 2011 - 2017. ; 2012 Jul. Available from: http://www.lucintel.com/commercial_aero_engine_supply_chain_2017.aspx
9. Business Jet Market Market Outlook and Dassault Aviation Market Positioning. [place unknown]: Aviation, Aerospace & Defense ✈. Aviation, aerospace & defense ✈; 2015 [cited 2016 May 5]. Available from: https://globalaviationaerospace.com/.
10. CFM. About CFM [cited 2016 May 5]. Available from: http://www.cfmaeroengines.com/about.
11. Chairman ID. BOARD OF DIRECTORS directors’ report / board of directors.; 2016.Available at: http://www.rolls-royce.com/country-sites/northamerica/news/yr-2015.aspx?page=4
12. Clark N. Rolls-Royce to restructure management in cost-cutting drive. International Business. 2015 Dec 17 [cited 2016 May 5]. Available from: http://www.nytimes.com/2015/12/17/business/international/rolls-royce-to-restructure-management-in-cost-cutting-drive.html.
13. Corporate K. KBS Corporate. Competitiveness of companies; 2014 [cited 2016 May 4]. Available from: http://www.kbscorporate.com/competitiveness-of-companies/.
34
[Type text] [Type text] [Type text]
14. DEMIR R.. Commercial engines 2013 special report by flight global; 2015 Jan 31 [cited 2016 May 5]. Available from: http://www.turbofan.net/reyyandemir/2013-commercial-engines-juneflight-globalreyyandemir.
15. DUBLIN. PR Newswire. PRNewswire. Global Commercial Aircraft Gas Turbine Engine Market 2015-2019 - Growth in Airline Fleets and New Models of Aircraft is a Key Market Driver; 2016 May 5 [cited 2016 May 5]. Available from: http://www.prnewswire.com/news-releases/global-commercial-aircraft-gas-turbine-engine-market-2015-2019---growth-in-airline-fleets-and-new-models-of-aircraft-is-a-key-market-driver-300123392.html.
16. Durugbo C, Ahmet Erkoyuneu J. Mitigating uncertainty for industries services operations: a multi case study. International Journal of Operations & Production Management: [publisher unknown]; 2016. p532–71 p. (vol. 36).
17. Durugbo C, Erkoyuncu JA. Mitigating uncertainty for industrial service operations: A multi case study. International Journal of Operations & Production Management. 2016 May 3;36(5):532–71.
18. Electric G. GE Aviation. William S. Clapper awarded french legion of honor; 2015 [cited 2016 May 5]. Available from: http://www.geaviation.com/press/cfm56/cfm56-x/cfm56-x_20050613.html.
19. Eriksson S, Steenhuis H-J, editors. The global commercial aviation industry. United Kingdom: Routledge; 2015 Jul 16. ISBN: 9781136672392.
20. Flightglobal. Commercial engines turbofan focus 2015; 2016 Jan. Available from: http://www.turbofanfocus.net/reyyandemir/commercial-aircraft-engines-2015-new-datadriven-aftermarket-strategy.
21. flightglobal. flightglobal aviation connected. Flightglobal.com. low oil prices likely to boost demand for MRO market; 2015 [cited 2016 May 5]. Available from: https://www.flightglobal.com/asset/2527.
22. General Electric. GE Aviation. William S. Clapper awarded french legion of honor; 2015 [cited 2016 May 5]. Available from: http://www.geaviation.com/press/cfm56/cfm56-x/cfm56-x_20050613.html.
23. General Electric. General Electric. GE9X commercial aircraft engine; 2015 [cited 2016 May 5]. Available from: http://www.geaviation.com/commercial/engines/ge9x/.
24. Glassdoor. Rolls-Royce reviews; 2016 Apr 26 [cited 2016 May 5]. Available from: https://www.glassdoor.co.uk/Reviews/Rolls-Royce-Reviews-E3505.htm.
25. GlobalData. globaldata. Aerospace & defense in the United Kingdom; 2015 Jul [cited 2016 May 5]. Available from: http://store.globaldata.com/market-reports/aerospace-and-defense/aerospace-defense-in-the-united-kingdom.
26. gov.uk. Large civil aircraft engines. Trade.gov: ; 2011.Available from: http://www.trade.gov/static/aero_rpt_flight_plan_2011_engines.pdf
27. Grant RM. Contemporary strategy analysis: Text only. 8th ed. United States: Wiley, John & Sons; 2012 Dec 18. ISBN: 9781119941880.
28. Hollinger peggy. Fiancial Times. airlines complains to Brussels over parts and maintance contracts; 2016 Mar 26 [cited 2016 May 5]. Available from:
35
Business Strategy Report – Rolls-Royce Holdings plcCandNo: 134492
http://search.proquest.com/abiglobal/docview/1783602884/BBA01E374F8C4BECPQ/37?accountid=14182.
29. Hooley GJ, Piercy NF, Nicoulaud B. Marketing strategy and competitive positioning. 5th ed. New York, NY: Pearson Financial Times/Prentice Hall; 2011 Aug 3. ISBN: 9780273740933.
30. Ingvarsson E, Prasad S. History of solid performance and well positioned for growth, hold.; 2013. Available from: http://analystreports.som.yale.edu/reports/Rolls-Royce.pdf
31. Johnson G, Scholes K. Exploring corporate strategy: Texts and cases. 4th ed. New York: Prentice Hall; 1997 Feb 14. ISBN: 9780135256350.
32. Kreindler LS. admissibility and effect of government approval and certification of aircraft. Coston college law review; 2016. Available from: http://lawdigitalcommons.bc.edu/cgi/viewcontent.cgi?article=2659&context=bclr
33. London Stock Exchange plc. ROLLS-ROYCE HLG share fundamentals (RR.); 2015 Jun 25 [cited 2016 May 5]. Available from: http://www.londonstockexchange.com/exchange/prices/stocks/summary/fundamentals.html?fourWayKey=GB00B63H8491GBGBXSET1.
34. ltd M. research and markets. Global commercial aircraft gas turbine engine market 2015-2019; 2015 Jul 8 [cited 2016 May 5]. Available from: http://www.researchandmarkets.com/research/x7zkl2/global_commercial.
35. M. Ong, X. Ren, G. Allan, HA Thompson, PJ Fleming. Aviation industry analysis University of sheffield. 2014 Oct 11 [cited 2016 May 5]. Available from: https://www.researchgate.net/publication/4071664_Future_trends_in_aircraft_engine_monitoring.
36. Market Research. Commercial aircraft market - global industry analysis, size, share, growth, trends and forecast; 2014 Jun 13 [cited 2016 May 5]. Available from: http://www.transparencymarketresearch.com/commercial-aircraft-market.html.
37. Meller P. Europe pushes for renewable energy. Business. 2002 Oct 16 [cited 2016 May 5]. Available from: http://www.nytimes.com/2002/10/16/business/europe-pushes-for-renewable-energy.html.
38. Mobility Matters : Dana. The global trend toward engine Downspeeding; 2014 Oct 27 [cited 2016 May 5]. Available from: http://www.danamobilitymatters.com/blog/2014/10/27/the-global-trend-toward-engine-downspeeding.
39. Pratt & Whitney. Pratt & Whitney. TIMELINE; 2016 [cited 2016 May 5]. Available from: http://www.pw.utc.com/Where_Weve_Been.
40. Pratt & Whitney. Pratt & Whitney. COMPANY PROFILE; 2016 [cited 2016 May 5]. Available from: http://www.pw.utc.com/Company_Profile.
41. Reed S. Jet engine maker Rolls-Royce to cut 5% of work force as demand dips. International Business. 2014 Nov 5 [cited 2016 May 5]. Available from: http://www.nytimes.com/2014/11/05/business/international/Jet-Engine-Maker-Rolls-Royce-to-Cut-5-Percent-of-Work-Force.html.
42. Robert W. Wall Street Journal. business news: plane makers, suppliers pare jobs; 2010 [cited 2016 May 5]. Available from:
36
[Type text] [Type text] [Type text]
http://search.proquest.com/docview/1782069789/fulltext/DF802D925D724A32PQ/1?accountid=14182.
43. Robinson M. Rolls-Royce’s submarine business could be nationalised. Daily Mail. 2015 Dec 14 [cited 2016 May 5]. Available from: http://www.dailymail.co.uk/news/article-3359066/Rolls-Royce-s-submarine-business-nationalised-Britain-s-Trident-nuclear-deterrent-contract-foreign-hands.html.
44. Rolls-Royce Group plc. Rolls-Royce. Our Strategy; 2008 [cited 2016 May 5]. Available from: http://ar.rolls-royce.com/2008/br-our-strategy.html.
45. Rolls-Royce holdings PLC, RR.:LSE financials - FT.com. Financial Times. 2016 [cited 2016 May 5]. Available from: http://markets.ft.com/research/Markets/Tearsheets/Financials?s=RR.:LSE.
46. Rolls-Royce Holiding plc. Rolls-Royce holdings plc annual report 2015. Available from: http://www.rolls-royce.com/~/media/Files/R/Rolls-Royce/documents/investors/annual-reports/2015-annual-report-v1.pdf
47. Rolls-Royce. Overview; 2016 Apr 29 [cited 2016 May 5]. Available from: http://www.rolls-royce.com/products-and-services/defence-aerospace.aspx.
48. Rolls-Royce. . rolls royce - about; 2016 Apr 29 [cited 2016 May 5]. Available from: http://www.rolls-royce.com/about/strategy.aspx.
49. Rolls-Royce. Rolls-Royce announces new senior management structure; 2015 Dec 16 [cited 2016 May 5]. Available from: http://www.rolls-royce.com/media/press-releases/yr-2015/pr-16-12-2015-rr-announces-new-senior-management-structure.aspx.
50. Rolls-Royce. Sustainability; 2016 Apr 29 [cited 2016 May 5]. Available from: http://www.rolls-royce.com/sustainability/performance/case-studies/improving-fuel-efficiency.aspx.
51. Rolls-Royce. Rolls-Royce Holding plc. Marine; 2016 Apr 29 [cited 2016 May 5]. Available from: http://www.rolls-royce.com/investors/results-centre/marine.aspx#marine.
52. Rolls-Royce. Rolls-Royce plc annual report 2014. Available from: http://www.rolls-royce.com/~/media/Files/R/Rolls-Royce/documents/investors/annual-reports/2014-annual-report-v2.pdf
53. Royce R. The jet engine. United States: John Wiley & Sons; 2015 Aug 14. ISBN: 9781119065999.
54. Storbeck O. Turnaround at Rolls-Royce could be imperiled. DealBook. 2016 Mar 3 [cited 2016 May 5]. Available from: http://www.nytimes.com/2016/03/03/business/dealbook/turnaround-at-rolls-royce-could-be-imperiled.html?_r=0.
55. The Economist.: The Economist. gearing up for a fight - pratt & whitney; 2016 [cited 2016 May 5]. Available from: http://www.economist.com/news/business/21594987-pratt-whitney-hopes-high-tech-engine-will-restore-its-.
56. Thisdell D. Flightglobal. : Flightglobal.com. Should Rolls-Royce stick to aero engines?; 2014 Dec 4 [cited 2016 May 5]. Available from: https://www.flightglobal.com/news/articles/analysis-should-rolls-royce-stick-to-aero-engines-406714/.
57. UK Trade & Investment. : GOV.UK. Aerospace sector: Export help; 2015 Feb 4 [cited 2016 May 5]. Available from: https://www.gov.uk/government/collections/aerospace-sector-export-help.
37
Business Strategy Report – Rolls-Royce Holdings plcCandNo: 134492
58. Wagner A, Alamy CP /, Vision D, HIGH-G Productions. 2015 global aerospace and defense sector financial performance study Growth slowing, profits improving; 2015. Available from: http://www2.deloitte.com/content/dam/Deloitte/global/Documents/Manufacturing/gx-mnfg-a-and-d-financial-perf-study-2015.pdf
59. Weng P. new york times. ndonesian airline garuda signs 4 bn pound deal with airbus, rolls Royce; 2016 Apr 19 [cited 2016 May 5]. Available from: http://www.nytimes.com/reuters/2016/04/19/business/19reuters-airbus-group-contract-garuda.html.
60. Whitelegg J. AVIATION: The social, economic and environmental impact of flying. [place unknown: publisher unknown]; 2000.
61. World NuclearAssociation. nuclear org. [place unknown: publisher unknown]. Nuclear energy - world nuclear association; 2016 Jan [cited 2016 May 5]. Available from: http://www.world-nuclear.org/information-library/current-and-future-generation/nuclear-power-in-the-world-today.aspx.
62. Yusuf Y, Gunasekaran A, Abthorpe MS. Enterprise information systems project implementation: International Journal of Production Economics. 2004 Feb 1 [cited 2016 May 5];87(3):251–66. Available from: http://www.sciencedirect.com/science/article/pii/S0925527303002974 doi: 10.1016/j.ijpe.2003.10.004.
63. President SV. The Statistics Portal. [place unknown]: Statista. World commercial aircraft engine manufacturer market share in 2013; 2016 [cited 2016 May 5]. Available from: http://www.statista.com/statistics/261934/world-commercial-aircraft-engine-manufacturer-market-share/.
38
[Type text] [Type text] [Type text]
Appendix
Appendix 1: Share price for the past 5 years
The share price of the company drop dramatically from the early 2014 till early this year.
Appendix 2:
The biggest problem is that the company is adopting a slow pace, which will take the company a long time to solve a problem
a. For example, IT Equipment is outdated even if the equipment has just been installed
eg PCs running XP. Until the upgrade to vista in 2014, software access is still poor as
the IT department has a command control attitude that makes innovation in IT or
engineering almost impossible. Senior managers are apparently aware but choose to
ignore the issue and sweep it under the rug.
Appendix 3: PESTEL
Political factor Strong political influence UK government intervention to avoid
potential foreign takeover of Rolls-Royce
Sanction may cost delays and cancellation , for example Russia where they require lots of information
Major receiver of funding from government which puts them in a powerful position
Benefit from a relative stable democratic government
Economic Factor Worldwide recession
o Oil price decreaseo Interest rate fluctuationo Inflation rate
Fierce competition, savvier customers and economic headwinds are adding to pressure to cut cost
Cost of production high Currency risk will affect the import and
export of engines
39
Business Strategy Report – Rolls-Royce Holdings plcCandNo: 134492
Import and export policies and controlso Open Skies liberalisation
package 2008 allowing any US or EU-based airline to launch scheduled services between the US and EU
Decrease in government spending will lead to less research and developing spending
Subsidies by UK government US tax breaks for Rolls-Royce
Carbon emission under the Kyoto protocol is target for reduction by EU, creating pressures for reduced impact of air travel
Social factor Civil aerospace correlated with trends
in airline sector Airline influence by demand of global
population; Increase number of passengers travelling by air (www.airbus.com: Global Market Forecast)
o Leads to pressure on airports and air traffic management, creating demand for larger aircraft (opportunity)
o Boeing plane order for the coming year has increased by 30% which indicate the aero engine demand will be increasing
Accidents happen eg Malaysia Airlines incident
Outbound Travel Alert affect the number of people travelling eg terrorism
Growth of aviation Demand for aftermarket product +
services increase ie. long-term contract
Technological factors Innovation of new materials and design Advanced technology help to shorten
the time for new inventions Many years of experience and R&D –
forefront for technology IT security Product performance Risk of technological obsolescence,
with long delivery cycles
Legal factor REACH (Registration, Evaluation and
Authorisation of Chemicals) Norms Articles interpretation Employment protection: Health and
Safety important in manufacturing and also in liability for air safety
Environmental standards and legislation eg. Pollution control, emissions reductions and noise abatement
Environmental Factor Geographical location limitation Unstable weather conditions
o Testing delayo Affect operationo Affect he transportation of
materials/ finished products Supply chain performance supply of
raw materials decrease Capability of global resources
40
[Type text] [Type text] [Type text]
EU/US law and WTO ruling on competition
Reduction in consumer demand due to concerns regarding climate change
Appendix 4:
Both Civil and Defense aero engine industry are mature and moving on to the decline section. There is a slow growth in this industry, the innovation has not kept pace with competing product. Aero engines are similar, is it hard for company to have new innovate ideas, as inventing new materials for engines is a difficult project which will take lots of time.
Marine is moving towards the mature side, but there are still rooms for the business to improve and gain more market share.
Where Nucluar and power system is in a growing stage, there is a increasing number of competitor. It is important for the company to differenicate it product and services offering from other competitors. The demand for energy is increasing as there are insufficient amount of oil, there is a need to find replacement which can offer stable amount of energy to people.
Industry Life Cycle
Time
Industry Sales
41
Business Strategy Report – Rolls-Royce Holdings plcCandNo: 134492
Appendix 5: Gantt Chart
42