Aircraft Engine Industry: Ge Aviation and Rolls Royce

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  • Topic: Pratt & Whitney, GE Aviation, Rolls-Royce plc
  • Pages : 9 (2858 words )
  • Download(s) : 273
  • Published : May 13, 2013
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Synopsis
Three companies; GE Aviation, Rolls Royce and Pratt & Whitney have long dominated the aircraft engine Industry. This essay discusses the need to manage the global business environment in order to establish and maintain a competitive advantage, and subsequently ensuring the businesses success. Through examining the strategies of Rolls Royce and GE Aviation we can determine the different methods of globalizing manufacturing and production. This examination if executed through the theoretical framework of Dunning’s OLI model, the new trade theory, the international product cycles and managing global value chains. Synopsis

Three companies; GE Aviation, Rolls Royce and Pratt & Whitney have long dominated the aircraft engine Industry. This essay discusses the need to manage the global business environment in order to establish and maintain a competitive advantage, and subsequently ensuring the businesses success. Through examining the strategies of Rolls Royce and GE Aviation we can determine the different methods of globalizing manufacturing and production. This examination if executed through the theoretical framework of Dunning’s OLI model, the new trade theory, the international product cycles and managing global value chains. Aircraft Engine Industry: GE Aviation & Rolls Royce

Aircraft Engine Industry: GE Aviation & Rolls Royce

Introduction
It’s been nearly 104 years since an American company manufactured the first airplane. Since then many firms have developed innovative products to enhance the aircraft engine industry. In an industry with a promising future, with a sales growth rate of 8.96% it begs the question as to why more firms aren’t invested in the future of aircraft. The answer could be that existing power firms such as GE Aviation, Rolls Royce and Pratt & Whitney have established firm entry barriers to potential competitors, or their prevailing competitive advantages withstand. Firms such as GE Aviation and Rolls Royce specifically strive to establish and maintain competitive advantages in a volatile global environment. This essay will argue that a firm’s entry strategy can be determined through examining Dunning’s OLI model, the new trade theory, the international product life cycle and the global value chains; and subsequently result in establishing and maintaining a competitive advantage that is equivalent to produce greater value to consumers under the changing patterns of competition in the global market.

Dunning’s OLI Model
A company’s competitive advantage is detrimental to succeeding in both existing and new markets. A competitive advantage can be translated in the form of many different elements. Specifically the application of the OLI model can help understand both Rolls Royce and GE’s process of internalization. Majority of both company’s production and manufacturing is undertaken overseas. Both GE Aviation and Rolls Royce have conducted several joint ventures as an entry mode into foreign markets. The OLI model can service an understanding in determining the factors of this mode of entry and the influences the decision entails. Ownership advantages, Location –specific advantages and internalization are the three elements of Dunning’s Eclectic theory (Dunning, 1998).

In a technological industry that advances rapidly companies technological superiority is difficult to maintain. The aircraft engine industry has empirically shown that a firm’s competitive advantage from an incremental advance is hard to sustain with no firm keeping advantage for more than a decade. Firms can acquire a competitive advantage through product differentiate; Rolls Royce did this successfully through its design of new fan blades for the engine. Although this produced high research and development costs for the firm it constructed a strong competitive advantage in the industry. This product differentiation created unique products, and simultaneously formed an ownership advantage...
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