A Rolls-Royce case study
The name ‘Rolls-Royce’ has always been associated with high quality products. Most people probably link the company with high quality aero-engines and motor cars. Rolls-Royce still makes aero-engines, but no longer manufactures cars. Instead, the company has transferred its core strengths and expertise into other markets in which it has the greatest competitive strengths. These are the civil aerospace, defence aerospace, marine and energy markets. Strategies are the means by which organisations achieve their objectives. Strategies are long-term plans. Strategic implementation is the process of putting these plans into action. Rolls-Royce’s strategy is to secure and retain the leading position in its key markets. The company recognises that an increasing number of customers want to deal with as few suppliers as possible in order to reduce purchasing and search costs. Therefore, customers look for suppliers who are able to meet the full range of their needs with the highest level of service.
Rolls-Royce has already built a strong, mature business in defence aerospace and is well placed in future programmes. Over the past three years the company has won an average of 30% of the civil aerospace market by value. However, aerospace is a maturing market, so it makes sense for Rolls-Royce to look for new opportunities for expansion. This case study focuses on how Rolls-Royce has built a strong presence in marine markets. It has done this through a process of take-over, consolidation and by focusing on developing competitive advantage in this sector. Competitive advantage has resulted from the company making leading edge improvements, including a strong focus on meeting the green challenge. In 1999, Rolls-Royce acquired Vickers Plc. Vickers was already a key player in the marine market, providing leading edge marine equipment. The take-over demonstrated Rolls-Royce’s strategic intent to become the dominant player in the marine market. This acquisition gave the company a range of leading edge businesses. Rolls-Royce carried out extensive market research and conducted detailed financial analyses into the marine market. This research identified a clear opportunity; an opportunity that Rolls-Royce has backed-up through significant investment in this growth area. The strategy of expanding in the marine sector should be seen as part of an overall strategy of seeking to grow the business of Rolls-Royce by searching out the most suitable opportunities for global expansion and market leadership. Expanding through acquisition
The main way of achieving marine market expansion has been that of acquisition: taking over other leading players in the field in order to gain competitive advantage. A competitive strategy is one that enables an organisation to stay ahead of rivals. In the modern world, large organisations compete in global markets. To be successful they have to be the best at what they do and they need to be seen to be the best on a global scale. A company’s strategists need to identify the key characteristics that will make it ‘the best’ in the markets in which it operates. The faster the growth of a particular market, the greater is the amount of expenditure required in order to maintain position in that market. In a dynamic market, considerable expenditure is required on investment in product lines. Intelligent organisations identify those areas of a market that are experiencing the highest levels of growth and then seek to increase their share of the market in these sectors.
This case study shows how Rolls-Royce has identified key areas of the marine markets on which to focus. Today, marine activity accounts for about 15% of the Rolls-Royce group’s turnover. It has the potential to move to about 30% of the group’s turnover over the next 10 years.
Identifying the new opportunity
Given the high levels of...