Business Strategy Report

This report analyzes the business strategy of Rolls Royce, examining its capabilities, competitive landscape, and strategic direction using PESTLE, SWOT, Porter's Five Forces, and Bowman's Strategic Clock models.

Business Strategy
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Contents
TASK 1............................................................................................................................................3
P1 Capabilities of Rolls Royce and impact of macro factors on same...................................3
TAKS 2............................................................................................................................................5
P2 The internal environment and organisation capabilities...................................................5
TASK 3............................................................................................................................................8
P3 Competitiveness................................................................................................................8
TASK 4............................................................................................................................................9
P4 Understanding and interpreting strategic direction...........................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11
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INTRODUCTION
In the present business world, it is important that the administration work in a way that it can
compete with tough competition prevailing in the market. for same strategies need to be
formulated well in advance as it assists in carrying out business in a competitive manner.
business strategies are the plans that are made prior to commencement of any project so that the
desired goals and objectives can be achieved (Ackermann and Audretsch, 2013). An effective
approach minimises the gap between actual and desired results as these are prepared after
analysing all the factors that affect the function of business. Rolls Royce cars limited is a British
automobile organisation having its headquarters in UK. It was founded in 1998 after BMW was
licensed the rights to the Rolls – Royce brand name. As the referred brand belongs to a sector
having a range of competitors it is important for same that it formulates such strategies which
can help it in maintain the higher image in market. The following report will talk about how an
effective plan can be made using distinct tools for auditing like PESTLE and SWOT analysis
which helps in understanding the business surroundings.
TASK 1
P1 Capabilities of Rolls Royce and impact of macro factors on same
The external surroundings of business keeps on fluctuating and it is important that the
change taking place in the environment are dealt with care. Automobile industries fluctuate much
and has to operates within the legal obligations made against the same. There are different
factors that are present in the external surroundings and effects the day today function of the
business (Annabi and McGann, 2013). This is of great importance that these factors are
identified in advance so that corrective actions can be taken. For same PESTLE analysis is an
effective tool that shows how the elements that are present outside has their indirect impact on
business. The following discussion will show how these factor has their influence on the
business.
Political factors - These are the factors that are part of the political change or policies
prevailing in a particular nation. Whenever any business operates it has to first go through the
political conditions prevailing as they are different in distinct nations. As the referred company is
operating in different nations it is effected by the policies that are followed there. The tax rates
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are high for the referred firm and also strict laws are made for controlling the air pollution which
further affects the business as pressure on the manufacturing unit increases. The long term
profitability of the firm further gets effected as it uses the products that are supplied from the
different nations hence become more prone to global political changes. it is important for the
firm to first go through the political stability of an enterprise. It involves identification of the
military invasion as it has its indirect impact on the scope of business (Auzair, 2011). Apart from
this Rolls Royce also uses the intellectual properties in order to protect the important assets and
getting the same involves range of formalities which gain effects the growth of business. There
are different laws and regulation which are capable of restricting the growth of a business like
the safety regulations made for protecting the work force.
Economic factors – This is another factor which has its influence on the working of an
enterprise. the economic condition of different countries is distinct from one another and it is
important that it remain stable so that the predicted sales level can be achieved (Murano and et.
al., 2011). Before formulating the plans for a particular nation it is crucial that same are
examined against the present economic state of the country. Change in the interest rate, inflation
or any other monetary or equivalent value aspect has to be given maximum care so that the
financial factor of the business remains unaffected. The government intervention is high in this
sector in order to maintain stability in the automobile market. as the referred enterprise is
operating globally it further faces restrictions of trade that are made to maintain the economic
conditions and exchange rates. in the process of manufacturing of cars high labour is required
which add additional cost to the business. It is difficult to find cheap labour and therefore Rolls
Royce add that cost to its final product which is already out of reach to a middle class customer.
It takes loans too to carry out the daily operations for which interest is paid and hence the rate of
interest become another factor through which the business of referred institution gets effected
(Azar, 2011). In this sector it is important to have skilled labour so that effective and efficient
work is done which again become a challenge for the company to find in different countries.
Social factors – This is a part of external environment of Rolls Royce which effects the
operations in indirect way and most difficult to determine in advance. The culture and way of
living of different individuals is a part of this segment which has a major effect on how a
particular company receives demand in the market (Oestreicher-Singer and Zalmanson, 2012).
the designing and changes that are made in the company’s product are influenced by the society
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it is serving so that maximum satisfaction to the costumers can be given. As the product the
referred company is dealing in is of premium class education level also play an important role. It
is important that market in which the company is operating consist of people who has knowledge
of the brand and understands the worth of same. Apart from this the influence of society is also
high in a way that there are people who do not believe in promoting the foreign brands and avoid
using their products considering it as a move towards saving own economy. It is difficult to
influence the people of this belief and hence become a challenge to achieve the desired sales.
Thereafter another way how the referred enterprise remain effected by this element of macro
environment is that there is a very little part of whole society who like to spend on luxury
(Bharadwaj and et. al., 2013). As the prices of this brand are high it is less demanded by the
customers.
Technological factors – These are the other factors which involves the impact on business
due to change in the applications used in the business surroundings. It is important for the
businesses that such software’s are used which are recently used in the business. the impact of
this factor are as follows:
 Technology has its high impact on the pricing of distinct product
 The rate of installation of new applications is high
 Competitors influence is high on the code of conduct of own business
Legal factors – In order to make the business lawful and free from different unethical
activities diverse legal obligations are made which needs to be followed while performing the
function (Schaltegger and Wagner, 2011). The different factors that need to be followed by
rolls Royce are as follows:
 Consumer protection laws
 Safety act
 Use of good application
 Maintenance of pollution act
TAKS 2
P2 The internal environment and organisation capabilities
Rolls Royce has very unique internal environment which in turn helps out in identifying the
skills and abilities of the employees and also helps out in performing the tasks and objectives in
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better and effectual manner. There are various kind of factors which are highly essential for
analysing the external kind of factors as they have high level of impact upon the success of the
company (Scholes, 2015). Certain kind of factors which are involved within the internal
elements and they are like weaknesses, strengths, relations of employee, productivity along with
final resources and many more. Concept of strategic abilities mainly refers to the business
abilities and potential for formulating with the competitive strategy with the motive of surviving
within the world full of competition and this will mainly improve the value with time. Rolls
Royce company which is multinational company and thus it is highly essential for mainly
devising the effectual kind of plans along with strategies which in turn can help out in
maintaining the brand value across the globe. Along with this, it will help out in bringing
improvisation within the level of profits along with its revenues at the same tenure. It is highly
essential for the managers of Rolls Royce to acknowledge about the mission and vision of the
company which in turn can provide support within developing the strategies for the company.
This mainly needs the skills, talents, knowledge, abilities and expertise for the management so
that they can effectively formulate the plans and strategies for maintaining the lead and thus it
can help in making the company to enter within new kind of markets and countries (Slack,
2015). Rolls Royce can mainly apply the VRIN\VRIO Framework for mainly identifying that the
resources which can in turn help out in availing competitive advantages. In order to serve at the
best and get sustainable benefits, resources should be:
Valuable (V) – In an organisation if it is found that the resources of the organisation are
giving the desirable returns to the business than same can be considered as of having worth for
business. Rolls Royce uses a range of resources in its day to day operations and is doing good
business which shows that the enterprise is having effective resources. Proper evaluation should
be done on time so that good quality of same are maintained in the long run and profitability is
raised (Bucolo and Matthews, 2011). Whenever any change takes place in the external
surroundings of the referred enterprise it directly effects the worth of present resource with the
organisation.
Rare (R) – It includes those resources which are only possessed by Rolls Royce and are not
shared by any other brand. These resources assist in achieving the competitive advantage to the
referred enterprise. By using the capacity of rare resources the referred enterprise can experience
growth in the long run.
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Imitable – It consists of those features of an organisation which cannot be imitated by any
other party and Rolls Royce has a good design which is difficult to copy by other with the same
efficiency of cost and quality.
Non substitutable – In order to achieve higher scale of efficiency the referred enterprise
should ensure that it use such resources which cannot be copied by any other enterprise so that it
can achieve the competitive advantage.
The SWOT analysis of Rolls Royce is as follows:
Strength - The referred enterprise has established a good brand image in the market which
helps it in experiencing higher volume of sales in the long run. As the brand value of Rolls
Royce has achieved success it now does not have to invest much on the marketing activities
which further assist in saving much of the operational cost. Another strength with this unit is that
it belongs to a premium product line which becomes a factor for attracting people who likes to
show off in the society and like to have premium goods (Grover and Kohli, 2013). the quality of
services which are delivered to the customers is high which helps in raising the customer
satisfaction level.
Weaknesses – Rolls Royce belongs to the automobile industry where competition is high
and also it is difficult to adopt the change at the same moment they take place. Due to the
existing rivalry pressure on every individual increases which further effects the day to day
operations of the business to a great extent. Getting skilled labour becomes a challenge for the
referred enterprise which is of great importance to maintain innovation in the product delivered
in the market.
Opportunity – The demand for automobiles is continuously increasing in the market. It
shows that the referred institution has the chance to grow which is possible through adding more
features to its existing products which are capable of defeating the other products existing in the
same field. Apart from these the sales can also be raised through adopting to new code of
conduct which has the capacity of raising the present scale of operations.
Threats – Every business operate in a dynamic surroundings and it is important that same
are identified in advance so that corrective actions are taken in advance. Change in the present
political conditions can affect the functioning of business as it is not necessary that every
government supports the automobile industry and an unfavourable change can affect the profit
margins or scale at which business is operating.
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TASK 3
P3 Competitiveness
In the automobile industry the degree of competition prevailing is high and it is important
for Rolls Royce that it formulates such strategies through which competitive advantage can be
achieved. This has to be given care that the planning is done in a way that more results are
achieved using the different models. For same the porters five force model can be used as
through same the analysis’s of industry can be done which will further assist in knowing the
factors that restricts the growth of business (Jocovic and et. al., 2014).
Porter five forces on Rolls Royce
Threats of New Entrants: The threats of new entrants are weak due to adoption of advanced
technologies which requires huge amount of funds due to which new entrants may show less
interest in entering into such industry. It will more difficult for new entrants to bring customers
into confidence due to which the chances of achieving sustainability will be very less. Therefore,
Roll-Royce finds no difficulties or threats for new entrants as the company already attained
strong brand image in competitive market.
Power of suppliers: The suppliers to the aero-engine manufacture have limited power due to
having limited number of suppliers to the aero-engine industry. They supply different nature of
components, from nuts and bolts to state-of-the-art electronic control systems which are so
expensive that can be afforded by large suppliers. Due to this, the power of small supplier has
been reduced. Therefore, the power of suppliers which deals in providing high specification
electronic control equipment’s are high. Thus, Roll-Royce may find difficulties in controlling
prices incremented by their suppliers due to which the prices of products may also goes high.
Power of Buyers: The number of potential buyers are low. As due to implementing costly
aircraft engines the company cannot able to lowering the prices of their products and services
due to which the buyers play no role in setting up the price of products. As Roll-Royce
manufactured expensive vehicles which can afforded by higher level income group. Therefore,
the company has attained loyal customers which cannot be shifted to their rival companies.
Competitive rivalry: The rivalry among the Roll-Royce company is very intense which
forces existing companies to reduce the prices and decrease the overall profitability of the
industry (Kalyani and Sahoo, 2011). A there is huge requirement of investment so as to
implement advanced technology and research development due to which no single manufacturers
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can dominate the industry thus balances fuels the rivalry. Therefore, Roll-Royce should require
to collaborate with their rivals in order to increase market size instead of competing for small
market.
Threats of substitutes: There is no substituents for an aero-engine due to which the threat of
substitutes are very low. However, it assumes that the development of video conferencing
capability may minimises the growth but due to low threat of substitutes the existing companies
such as Rolls Royce will successfully continue to capture large market share and achieve success
for longer period of time. However, a slowdown in industry growth and the increasing maturity
of products will intensify the degree of rivalry between the engine manufactures.
TASK 4
P4 Understanding and interpreting strategic direction
In an organisation strategic decision are those which helps the management in reaching to
the next level. By having the strategic based working atmosphere, the goals and objectives are
achieved in a way that full capacity utilisation of the recourse are made. In order to identify the
important areas in business that require proper planning use of Bowman’s clock can be made
which is as follows:
Bowman’s Strategic clock model - In order to formulate the competitive strategies the
referred enterprise can use this model as through same an organisation can examine its own
position in market in comparison to other in the same filed. Explanation of same is given below:
Low price and low value added – This strategy can be adopted in case when the product in
which company is dealing in not much different from other. in this phase sales can be raised
using more effective marketing strategies so that other who are dealing in same business are
provided with equal level of competition.
Low price position 2 – This is another concept which can be used to have more sales
keeping the price of commodity low. Under this profit margins are kept less in per unit and
overall revenue is generated through mass sale (Klettner, Clarke and Boersma, 2014).
Hybrid (position 3) – In this competitive profit margins are maintained using the policy of
rivalry pricing strategy. In this the value of own product is kept low in comparison to other so
that it is preferred over the others. Through this customer’s satisfaction level can also be raised
through which long term connection with them can be maintained.
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Differentiation (Position 4) – On reaching to this position sales can be maximised by
offering differentiated products to the customers. It helps in creating a distinct image in the
market through which the competitive advantage can be achieved.
Increased price and standard product – This is another strategy in which the value of a
particular product is raised on the basis of expected demand hike in the market. Entrepreneurs do
not need to add any new feature to the commodity and can hence experience growth in the long
run (Köseoglu and et. al., 2013).
CONCLUSION
From the above report this has been summaries that in order to compete in the market it is
important effective business strategies are formatted. This way it becomes easy to face the
challenge and achieve higher returns in the long run. There are distinct tools like PESTLE and
SWOT which assisted in understanding the surroundings of Rolls Royce as how it gets effected.
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REFERENCES
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Köseoglu, M.A. and et. al., 2013. Linkages among business strategy, uncertainty and
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