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Rolls Royce

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Emma Taylor Gallagher

on 9 February 2013

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Transcript of Rolls Royce

Overview Global Markets Civil Aerospace PESTEL Analysis
of the Aero-Engine Industry Political •Founders Charles Rolls & Henry Royce
•Renowned British car manufacturing company
•1914 produced first aircraft engine
• 1973 Automotive division seperated from aircraft engine division & acquired by Vickers plc
•1987 privatised Rolls-Royce plc "the spirit of the Rolls-Royce, namely, speed with silence, absence of vibration, the mysterious harnessing of great energy and a beautiful living organism of superb grace..."
"A graceful little goddess, the Spirit of Ecstasy, who has selected road travel as her supreme delight and alighted on the prow of a Rolls-Royce motor car to revel in the freshness of the air and the musical sound of her fluttering draperies." • Worlds second-largest aircraft engine manufacturer behind General Electric

•18th largest defense contractor

•Suppliers for Boeing's 787 and Airbus' A380

•May 2012 - Won contract worth +£400million to design & supply next generation of nuclear-armed submarines for the Ministry of Defense,UK. Marine Porters 5 Forces Defence Aerospace Energy History Today Environmental Social Technological Legal Economic Competitor Analysis Pratt & Whitney References • Gale 2006, "Investigation into the aerospace industry with specific reference to the aero-engine sector and its electronic advances" Accessed on: http://edissertations.nottingham.ac.uk/409/1/JamesGale-InternationalBusinessDissertation.pdf
• Rolls Royce Company Website
• The Times Newspaper 2000

• Political: Article: Reach for skies, AGP,July 2012 , http://www.bis.gov.uk/assets/biscore/business-sectors/docs/r/12-954-reach-skies-strategic-vision-uk-aerospace.
• Environmental : Company Website, Reports 2008, http://www.rolls-royce.com/reports/2008/br-pru-strategic-risks.html
• Social: Company Website,Reports,2011 , http://www.rolls-royce.com/reports/2011/business/sustainability.html
•Technological: Long Term Planning in Aerospace technology, DR MIKE HOWSE OBE FREng, http://www.ingenia.org.uk/ingenia/issues/issue15/howse.pdf
• Economic: Article: Wall Street Journal Oct 20,2011, http://online.wsj.com/article/SB10001424052970203791904576608272097346238.html
• Legal: Article: Impact of REACH on Aerospace sector, November/December,2007,Rolls Royce plc, http://www.hse.gov.uk/reach/events/nigelmarsh.pdf * Porter’s Five Forces: The Times 100 Edition6 , http://www.rolls-royce.com/Images/competition_tcm92-11184.pdf Strategy & Values Structure Bargaining Power of Customers Threat of New Entrants Bargaining Power of Suppliers Threat of Substitute Products Competitive Rivalry within Industry • The Board is responsible for performance of the company and day to day running
• Primary goal of the Board is to ensure that the company's strategy creates value for the long term investor within acceptable risk
The Board comprises:
• Non Executive Chairman
• Chief Executive
• Four other Executive Directors
• Nine Non-Executive Directors – Independant
• Five CEO's are the approval body • Address four global markets
• Invest in technology and capability
• Develop a competitive portfolio of products & services
• Grow market share and installed product base
• Add value through the provision of product-related services & delivering economic value
• Reliability- our customers trust us implicitly
• Integrity- at the heart of the way we operate and behave and also in the quality of the products and services
• Innovation- our forward thinking culture create a well- managed and contemporary organisation • Total revenue: £62.2bn (2011)
• Civil Aerospace: £5,572m = 49%
• Defence Aerospace: £2,235m = 20%
• Marine: £2,271m = 20%
• Energy: £1,199m = 11%
•Underlying profits increased by 21%, £1,157m then year earlier (2011) Key Financial Indicators • GE total revenue = $1.47bn (2011)
• GE Net Income = $4.5bn i.e. +51%
• GE earnings rose 31% to $3.9bn
• Earnings per share rose to 36% per share
(CNN Money, Apr,2011) • world leader in design, manufacturing & service of aircraft engines & industrial gas turbines
• Operating profit of $ 2.0bn (2011)
• Revenues of $13.4bn
• 36,000 employees
• +11,000 customers around the world
• New joint venture formed between Rolls Royce and Pratt & Whitney in Oct, 2011 • Strong political influence due to government involvement
• Largest manufacturer in aerospace industry in Europe and second only to US
• Military aerospace dependent on defense budgets & procurement policies
• Society of British Aerospace Companies
• Aerospace Innovation & Growth Team
• National Defense & Aerospace Systems Panel
• Main aim to secure agreement between government & industry & prepare for future challenges
• Major receiver of funding from government which puts them in a powerful position
• Benefits from a stable democratic government
• Have invested heavily in US & Germany reducing political risk • Reduced no.of passengers traveling by air
• Less use/need of spare parts
• Sales of engines correlated/dependent on sales of aircraft – dependent on demand for air travel
• Products and its operations to be nature friendly
• Issues with emissions & waste
• Massive eco foot prints to reduce • Civil aerospace correlated with trends in airline sector
• Airlines & air cargo orgs major customers for Rolls Royce
• Airlines influenced by demand of global population
• Cyclical/seasonal trends
• Widespread disease outbreaks eg: SARS
• Conflict across Middle East/terrorist attacks
• Global travel: increasing growth faster than ever & predicted to continue rising.
• Demand driven by emerging economies; China, India, other southern-east Asian countries
• Desire to travel widespread • Many years of experience & R&D - forefront of technology
• Three phase plan for technological enhancement : Vision 5,Vision 10 & Vision 20.
• Collaborations with over 19 educational institutions worldwide for R&D including Purdue, MIT, Georgia Tech etc
• Technologies developed; SBAC Competitiveness Challenge, National Research Support, Aeronautics Research Programme, Defense Science & Technology Laboratory, Engineering & Physical Scienes Research council, Defense Aerospace & Research Partnerships, QinetiQ
• Strong political backing encourage technological innovation • World wide recession
• High Cost of Production
• Increasing oil prices
• Department for Trade & Industry (government) core financial funding
• Interest in increasing nations overall global competitiveness
• Vital to keep track of UK & global inflation, taxes, interest rates • REACH (Registration, Evaluation and Authorisation of Chemicals) Norms
• Articles Interpretation • High : Long term commitment to purchase an aircraft engine. Customers prefer a trusted brand
• Increasing military demand (WW2)
• Current vast airline & military sector
• Limited number of buyers & increasing level of global carriers within airline industry
• Increased referral once a sale has been made • Low : As it is a Reputed market and high cost of R & D.Approval from the authorities
• Aero-engine market dominated by GE, RR & P&W
• Market governed by advance technology & demands high investment & R&D - rare to achieve
• Reputation
• Early demand conditions & long term experience & reliability
• Strong network over time
• Experience in automobile sector has also increased strength against rivals • Electronic control Equipment suppliers : High
• Smaller & Basic Components suppliers : Low
• Often limited - aero-engines developed from many components which range in price & individually have their own strong competition
• Aero-engine manufacturers in control, individual supplies lose pricing power
• Specialised core equipment developers who are more rare have more bargaining power • Low : as no substitute to air travel because of time constraints . Although ,options like high speed trains is available e.g.: “Eurostar”
• Due to nature of sector, 'substitute products' difficult
• Experience in automobile sector has also increased strength against rivals • High: Since only few players in the market fuelling a balance resulting in intensified rivalry
It also brings forth the sales to the market of Spares.
• Wide range of labour & well developed infrastructure available in UK + sources of capital & natural resources Conclusion MBA Group 2
Anish Makoday
Emma Taylor
Priyank Singh
Sher Afgan
Stanislava Encheva General Electric HQ: Westminster, London, UK In response to the rapidly changing environment of the business Rolls Royce has developed it's orientation to become much more proactive, dealing with new ideas to create more services and customer focus. Rolls Royce is deeply involved in programmes aimed at making significant reductions in engine noise and emissions without compromising the performance. In the Recessional environment Rolls Royce has managed profits despite the high costs of manufacturing. Rolls Royce has defined the identity that needs to encourage, building on its reputation and achievements for continuing success. "Trusted to deliver Excellence"
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