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INTRODUCTION
Strategy Analysis refers to allocating information from internal and external environment of business in order to set long-term tactic in the organisation. The present assignment will be based on Rolls Royce; the company deals in manufacturing of aero engines for regional jet, aircraft and business aviation (Rolls Royce, 2022). The report is going to undertake external and internal environmental analysis of organization in order to evaluate current strategic position of company and accordingly comparison between year 2016/2017 and 2022/2023 will be done. Furthermore, suggestions would be given.
ASSESSING EXTERNAL ENVIRONMENT
Porter’s five forces
Existing thereat in the industry
There are different players within the industry such as- Audi, Mercedez and etc. The rivalry is extremely high and therefore, it is important for Rolls’ Royce to implement specific focus in this. It helps in undertaking appropriate strategies through which competitive advantage could be gained.
Bargaining power of suppliers
The main suppliers of organisation are internal engineers who are working towards research and development. Apart from this, company relies on external suppliers as well. This means organisation does not depend on on few suppliers (Henry, 202). Hence, there is no threat from suppliers as business has approached numerous suppliers.
Bargaining power of customers
The bargaining power of consumers is less and the major reason behind this is that, organization recognized as a global player as well as market leader that focuses on customer and market trends (Competitive analysis of Rolls Royce, 2023). Along with this, company approaches customer from higher income group who can afford higher prices. The additional services such as quality control and maintenance provide opportunities to company to keep their prices at forefront.
Threat of substitutes
There are only few options related to substitute products and services available in the market (da Cunha Bezerra et al, 2020). The major reason behind this is that, there are only few competitors of Rolls Royce and therefore, there is no threat from substitute products.
Threat from new entrants
In this context there is no threat to Rolls Royce; in order to enter in Automative manufacturing industry, higher investment is needed (Competitive analysis of Rolls Royce, 2023).
Conclusively, it could be said that, company needs to undertake specific research and development so; appropriate decision could be taken. The threat from the competitors is high however, organization has effective supplier network that could be used as a strength for enhancing operational practices within allocating high-quality inputs.
PESTLE Analysis
Political factors
The organization is operating in different countries and therefore, it is essential to implement significant focus on rules and regulations followed in each nation. For instance- Rolls Royce is bound to follow tax policies as per the guidance of countries where business is operating (PESTLE Analysis of Rolls Royce, 2023). In case, company does not adhere to this then, this results in imposing heavy penalties on business.
Economic factors
Findings have shown that in 2016, profit of organization was reduced to the greater extent. The company has underperformed for an extended period due to increase in the cost of production (Fuertes et al, 2020). Increasing labour cost is one of the topmost economic factors that lead to increase in operational cost of business that result into higher price and reduces profitability of the business. Another component is, supply chain disruption due to which organisation was not able to enhance their profitability.
Social factors
In year 2016-2017 due to unsatisfactory services of company many consumers got demotivated and they shifted towards competitor products (PESTLE Analysis of Rolls Royce, 2023). Social factors comprised with the taste and preferences of customers; in case it gets changed then. This lead to develop threat for organization and same has been witnessed in the case of Rolls Royce.
Technological factors
The company has always focused out in this area and accordingly they have undertaken the technological advancement. Due to this organisation got benefit, however, its competitors are using far better technologies and Rolls Royce is mainly sticked with electron beam melting technology (Chen et al, 2020). Organisation needs to undertake more technological advancement as per the requirement of customers.
Legal factors
In this area, company proves to be highly effectual as appropriate focus has been made on this context and all the mandatory laws comprised with employment law followed by company.
Environmental factors
Rolls Royce believes in promoting sustainability and organisation is using net zero technique in order to promote environment (PESTLE Analysis of Rolls Royce, 2023). This shows that company is effectually assuring focus towards saving environment and appropriate steps taken in consideration by organisation.
From PESTLE Analysis, it has been evaluated that, there is significant impact developed on industry in which Rolls Royce operates. The opportunities identified from analysis are that, organization can undertake technological advancement for enhancing the satisfaction of customers. Furthermore, threats concerned with changing preferences of consumers and therefore, Rolls Royce needs to analyse demand of consumers so that action can be taken accordingly.
Comparing Roll’s Royce situation in terms of external environment
While undertaking comparison of Rollc Royce between year 2016/2017 and 2022/2023 there are certain insights developed related to external environment of business. It has assessed from the evaluation that political, legal and environmental factors have not caused any significant impact throughout these years (Profit earned by Rolls Royce in 2023, 2023). Whereas, in year 2016, profit margin of Rolls Royce got decreased, organisation underperformed for extended period that led to increase in cost and this led to impact consumer’s demand (Hunger, 2020). Also, in year 2017 the organisation was only relying on some of the technologies. While in year 2022\2023, organisation made significant profit and this was due to the achievement of set targets by company. After 2017, organisation focused on undertaking technological advancement and setting realistic budget so cost of operations could be managed.
Thus, on the basis of comparison, this can be said that external factors keep fluctuating and that results in influencing organisation on negative note; same witnessed in the case of Rolls- Royce. However, an effectual understanding in this area can lead to manage the situation and therefore, significant focus should be made in this area. Thus, it could be said that, organisation managed to assess their external environment and accordingly progress achieved.
In 2020 company suffered loss of £2bn, in 2021 their profit accounted for £414m. On the other side, in 2022 it reached on £652m, whereas during 2023 it was between £1.2bn-£1.4bn. This clearly shows that company has made effectual growth (Profit earned by Rolls Royce in 2023, 2023).
EVALUATING INTERNAL ENVIRONMENT
VRIN analysis
It stands for value, rare, inimitable and non-substitutable elements. This analysis helps in determining the resources of business that lead to assure competitive advantage. Below mentioned VRIN Analysis of Rolls Royce has been performed to evaluate internal environmental aspects of the business-
| Resource | Value | Rare | Imitation | Non-substitutable | Competitive advantage |
|---|---|---|---|---|---|
| Financial resource | Yes | No | The information is available to all the competitors. | The company has sound financial position. | Due to effective financial position the organisation is able to bear the loss. |
| Supply chain network | Yes | Yes | The competitors have also similar supply chain procedure. | The organisation is effectually using their supply chain network and accordingly inputs gathered in the business. | The competitive advantage organisation is getting from this is that, business is running on consistent note. |
| Global presence | Yes | Yes | This might be imitated by competitors. | The organisation is one of the diversified companies in whole industry. | Strong competitive advantage. |
| Intellectual property rights | Yes | Yes | Cannot be imitated. | It is non-substitutable. | Provides competitive advantage. |
| Pricing strategies | Yes, company has effectual pricing strategies. | No | These are imitated on daily basis. | The company has its own pricing analytics software. | It can lead to provide temporary competitive advantage. |
| Marketing expertise | Yes | Yes | The organisation has effectual marketing expertise team and this cannot be imitated by their rivalry firms (Grant, 2021). | It is non- substitutable. | It supports in assuring competitive advantage to firm. |
| Brand awareness | Yes, it is very high. | Leading in brand industry. | No | The organisation has utilised their brand position in effective manner (Internal environment analysis of Rolls Royce, 2023). | It is providing sustainable competitive advantage to firm. |
| Customer network | Yes, company has approached larger customer segment from all over world | Yes | Might be possible. | The changing demand of customers can lead to create issues for company. | Within focusing on needs of consumers, company can gain competitive advantage. |
From VRIO Analysis it has been identified that, company has effective internal resources such as- financial, human and technological which could be used for managing extreme competition.
Value chain analysis
It refers to the evaluation of each activity within organisation value chain so that opportunities could be approached. Below mentioned is the value chain analysis of the organisation-
Primary activities
The primary activities of organisation involve production process under which company manufactures cars and other parts of motor vehicles. Here is the explanation of primary activities of Rolls Royce-
Inbound logistics-
The company has implemented effective relation with suppliers so, they receive necessary resources which are essential for producing products ((Internal environment analysis of Rolls Royce, 2023).
Operations-
In this, raw material converted into finish goods, this is time-consuming process and company monitors each step while undertaking operational practices (Tikhonov and Novikov, 2020).
Outbound logistics-
This concerned with activities of delivering products to consumers. Rolls Royce has different intermediaries through which they provide products to customers.
Marketing and sales-
In this stage, company focuses on undertaking marketing practices so they can gain competitive advantage. The business uses different approaches in order to shape their marketing activities.
Service-
Pre- and post-sale services of organisation plays essential role in the development of customer loyalty (Internal environment analysis of Rolls Royce, 2023). Thus, by offering quality services Rolls Royce can build and maintain customer loyalty.
Support activities
These are considered as the secondary activities which mainly involves-
Procurement-
Procurement management assures deliver of raw materials on time so that operations can take place and accordingly products can be delivered to customers.
Technological development-
In current era, technological advancement is essential to gain effectual image in the market (Dzhengiz and Niesten, 2020). Rolls Royce integrates technology in their production, distribution, marketing and HRM practices.
Human resource-
This area of company focuses on allocation of specific manpower which is important to gain competitive advantage.
Infrastructure-
The infrastructure of the company plays vital role in managing quality, legal matters, accounting, finance and etc elements (Internal environment analysis of Rolls Royce, 2023). Organisation’s infrastructure management is up to the mark which assures varied benefits to business.
Thus, the key strengths that has been emerged from internal analysis is that, organization has effective internal resources however, the weakness is that, company has not utilised it in past due to which profitability got reduced. However, in last few years organization has used their internal resources in significant manner that led to enhance profitability.
Comparing Rolls Royce situation related to their internal environment
The internal environmental development of Rolls Royce from year 2016/2017 to 2022/2023 has been proven positive. The major reason behind this is that, company has wide number of resources and Rolls Royce used it in appropriate manner. After the loss incurred in 2016, company assured focus on undertaking technological advancement.
It can be said that, business has used their internal resources such as- employees and finance in effective manner so that organisation can get benefit from this (Jelonek et al, 2022). From the analysation of VRIN and value chain, it is being found that, company’s resources ensuring support to business in terms of gaining advantage. Hence, organisation has shown growth in the context of internal environment development. As a result, company managed to earn profit in 2023. Thus, it has been reviewed that, it is important to use internal resources in significant manner as these are in the control of organisation and using it in proper manner led to create effective support for business.
CONCLUSION AND RECOMMENDATIONS
Conclusively; this could be said that effectual understanding in relation to external and internal environment enables business to gain success. The report reflected on Rolls Royce external and internal environment. It has been reviewed that from year 2016-2020 company was in loss whereas after 2020, organisation made significant growth within understanding their environmental trends. Below mentioned are the major recommendations to company in terms of gaining strategic advantage.
Research and development
The company should more invest in their R&D as this helps in analysing latest trends in the market so accordingly future planning can be made (Goni et al, 2021).
Consumer feedback mechanism
By adopting effective consumer feedback system supports in witnessing the issues of customers and also assures higher satisfaction to the customers. Therefore, this should be adopted by business.
Strong supply chain network
Rolls Royce must strengthen their supply chain procedure so, business becomes able to enhance their logistic process.
Talent management
This supports in developing employees in the organisation and further contributes in enhancing the resource within business (Hameed et al, 2021). As a result, higher productivity can be approached by company along with gaining sustainable competitive advantage.
REFERENCES
Books and Journals
Chen, L.H., Hung, P. and Ma, H.W., 2020. Integrating circular business models and development tools in the circular economy transition process: A firm‐level framework. Business Strategy and the Environment. 29(5). pp.1887-1898.
da Cunha Bezerra, M.C., Gohr, C.F. and Morioka, S.N., 2020. Organizational capabilities towards corporate sustainability benefits: A systematic literature review and an integrative framework proposal. Journal of Cleaner Production,.247. p.119114.
Dzhengiz, T. and Niesten, E., 2020. Competences for environmental sustainability: A systematic review on the impact of absorptive capacity and capabilities. Journal of business ethics. 162(4).pp.881-906.
Fuertes, G., Alfaro, M., Vargas, M., Gutierrez, S., Ternero, R. and Sabattin, J., 2020. Conceptual framework for the strategic management: a literature review—descriptive. Journal of Engineering.2020. pp.1-21.
Goni, F.A., Gholamzadeh Chofreh, A., Estaki Orakani, Z., Klemeš, J.J., Davoudi, M. and Mardani, A., 2021. Sustainable business model: A review and framework development. Clean Technologies and Environmental Policy. 23. pp.889-897.
Grant, R.M., 2021. Contemporary strategy analysis. John Wiley & Sons.
Hameed, W.U., Nisar, Q.A. and Wu, H.C., 2021. Relationships between external knowledge, internal innovation, firms’ open innovation performance, service innovation and business performance in the Pakistani hotel industry. International Journal of Hospitality Management. 92. p.102745.
Henry, A., 2021. Understanding strategic management. Oxford University Press.
Hunger, J.D., 2020. Essentials of strategic management.
Jelonek, D., Tien, N.H., Dao, M.T.H. and Minh, D.T., 2022. Comparative analysis of business strategy of Vietnamese real estate developers: the use of Hoffer matrix. International journal of multidisciplinary research and growth evaluation. 3(1).pp.197-204.
Tikhonov, A. and Novikov, S., 2020. Modern Organization Effective Functioning Evaluation. Quality-Access to Success.21(178).
Online
Competitive analysis of Rolls Royce, 2023. Online. Available through: < https://www.portersfiveforces.org/rolls-royce-porters-five-forces/ >
Internal environment analysis of Rolls Royce, 2023. Online. Available through: < https://www.rolls-royce.com/media/press-releases/2023/03-08-2023-rr-holdings-plc-2023-half-year-results.aspx>
PESTLE Analysis of Rolls Royce, 2023. Online. Available through: < https://www.mbaskool.com/pestle-analysis/companies/18009-rolls-royce.html >
Profit earned by Rolls Royce in 2023, 2023. Online. Available through: < https://www.rolls-royce.com/media/press-releases/2023/03-08-2023-rr-holdings-plc-2023-half-year-results.aspx>
Rolls Royce, 2022. Online. Available through: < https://www.rolls-roycemotorcars.com/en_GB/home.html>
5 Years | PhD
