Rolls-Royce is an example of a case based on new strategic opportunities and an organization’s desire to capitalize on market and technological developments. As one of the premier manufacturers of jet engines of the commercial and military markets, Rolls-Royce is facing an opportunity to “piggy back” off Airbus’s newest airframe design, the A-380, an enormous airplane capable of flying up to 750 people. The case also demonstrates the manner in which Rolls-Royce must identify and manage their key stakeholder group for maximum effectiveness.
1) Who are Rolls’ principal project management stakeholders? How would you design stakeholder management strategies to address their concerns?
Among the company’s biggest stakeholders are its direct customer’s, the commercial airframe manufacturers (Boeing and Airbus), as well as those supplying aircraft for military uses. Rolls-Royce also must work closely with national governments who subsidize their airlines by resorting to creative financing, long-term contracts, or asset-based trading deals. Among Rolls-Royce’s other key stakeholders are its labor force, which must be highly trained, its competitors (technical advances by a competitors must be immediately matched by Rolls-Royce), suppliers of parts and equipment, and so forth. Students discussing this case can create a large and very diverse stakeholder list. It is useful to illustrate how the desires of some stakeholders may be in direct opposition to the needs or expectations of others, making the point that stakeholder management is often a creative juggling act.
2) Given the financial risks inherent in developing a jet engine, make an argument, either pro or con, for Rolls to develop strategic partnerships with other jet engine manufacturers in a manner similar to Airbus’s consortium arrangement. What are the benefits and drawbacks from such an arrangement?
In answering this question, it is helpful to first identify the tremendous barriers to entry and risk factors associated with manufacturing jet engines. What would Rolls-Royce gain from a consortium arrangement? What could they potentially lose? The arguments can add up on both sides of the ledger so the instructor can steer this discussion to include issues of stakeholder management, corporate strategy, and even culture, by highlighting the problems with blending conflicting cultures under a consortium arrangement.
Case Study 3.1: Keflavik Paper Company
Keflavik Paper is an organization that has lately been facing serious problems with the results of its projects. Specifically, the company’s project development record has been spotty: While some projects have been delivered on time, others have been late. Budgets are routinely overrun, and product performance has been inconsistent, with the results of some projects yielding good returns and others losing money. They have hired a consultant to investigate some of the principle causes that are underlying these problems and he believes that the primary problem is not how project are run but how they are selected in the first place. Specifically, there is little attention paid to the need to consider strategic fit and portfolio management in selecting new projects. This case is intended to get students thinking of alternative screening measures that could potentially be used when deciding whether or not to invest in a new project.
1. Keflavik Paper presents a good example of the dangers of excessive reliance on one screening technique (discounted cash flows). How might excessive or exclusive reliance on other screening methods discussed in this chapter lead to similar problems?
Some measures that allow us to screen projects may lead to the wrong conclusions; for example, suppose that we selected projects in construction settings for their aesthetic appeal and ability to promote our name across the industry....