Environmental Analysis of Automobile Industry - Desklib

This report provides a detailed analysis of the internal and external factors affecting Rolls-Royce motor car. It includes a SWOT analysis, PESTLE analysis, Porter's five forces model, and a value chain analysis. The report discusses the impact of political, economic, social, technological, legal, and environmental factors on the company's operations. It also highlights the strengths, weaknesses, opportunities, and threats faced by the company.

The global business
environment

INTRODUCTION
There are many factors which are present in the environment which impacts the business of the
organisation in different aspects such as positive and negative. It is the duty of the managers of
the organisation to analyse these factors and develops effective measures to deal with the issues
provided in future (Ogden, J. and Roy-Stanley, C., 2020). The organisation which is chosen here
to demonstrate this report is Rolls- Royce motor car. This report provided brief discussion
related to SWOT and PESTLE analyses of the respected organisation. It also provided a
description of porter five forces model on the company.
TASK
SWOT analysis-
SWOT analysis is a process of strategic planning used by management of rolls royce with
motive to identify its strengths, weaknesses, opportunities as well as threats. Determining swot
analysis in aspect of rolls royce is described as below-
Strengths-
Brand image- Cars of Rolls Royce are strongly associated with quality, luxury and performance
which builds a strong brand image for company in market. This well being brand image
helped company to charge premium costs for its cars as well as gain a good amount of
profit.
Backing from parent company- Rolls Royce have technical support from its parent company
which is continuously involved in activities of technologies research (Qomariyah, A., 2019).
This association with parent company helped Rolls Royce to make perfections in its cars.
Superior design- Rolls Royce cars are one of top designed luxury cars in world. It is build by
using superior engine and with a high quality design.
Weaknesses-
 Status Symbol- Rolls Royce is recognised as luxury brand and people
subordinate it with high status as well as dignity.
 Exorbitant pricing- Price of Rolls Royce cars are very high which makes it
unaffordable for most customers. This premium price makes company to target a
niche segment in market and having a small clientele.
Opportunities-

 Technology savvy cars- Technology in auto-mobile industry is increasing rapidly
resulting in creating a self driven cars in market. Rolls Royce is trying to combine
new age technologies such as machine learning, IOT and data connectivity in its
cars. This is a huge opportunity for Rolls Royce to innovate its luxury cars with
this new technologies and gain sustainability in market.
 Focus on energy saving- With increased interest of customers in green and
hybrid vehicles may result as a big opportunity for companies operating in auto-
mobile industries such as Rolls Royce (Sacret, J., 2018).
Threats-
 Focus on sustainability- Increasing concerns of peoples towards sustainability
can be a threat for Rolls Royce as company manufactures vehicles which are non
environmental savvy.
 Growing cost- Increasing cost of raw materials as well as fuel costs can affect
price of Rolls Royce cars as well as its profits share. Increase in raw materials will
result in increase in price of Rolls Royce cars which can impact in unwillingness
among people to buy such a high cost cars. Unwillingness can also arrise among
people due to increase of fuel cost which can make people to switch to green
hybrid vehicles.

PESTLE analyses of Rolls- Royce
It is related to those framework under which the organisation analyses different factors present in
environment. These factors impact the business of company and the brief discussion related to
the impact of external factors on the business of Rolls Royce are given below:
Political
This factor of pestle analyse is related to the impact of government policies and issues raise by
the act of government. Rolls- Royce is one of the most important and biggest auto mobile maker
and seller of the world which sells their cars in different countries of the world so the impact of
political factor is more in this company. One of the most important factor which impacts all the
business of United kingdom is the Brexit (Liyu, X., Wan, H. and Qian, Z., 2020). Under this
concept, the government withdraws all the trade agreements from European nations which
provides many difficulties for the organisation to conduct their business operations in the region.
Economical
This section of PESTLE analyses related to the impact of economic factor on the management of
organisation. At this time all the economies of the country are impacted by the negative growth
due to covid outbreak (Shi, X. and Wu, Y., 2017). The business of Rolls- Royce is badly
infected with this issue because the demand of the product and services becomes nill at the time
of covid outbreak. It is analyses that the wages of workers are increases due to the Brexit which
decreases the profit margins of the company. The strategic alliance of the organisation helps the
company to deal with these issues.
Social
This section is related to the social belief, tradition and custom followed by the customers of the
company. It is very important for the organisation to analyse the social needs of the employees
and then develop the product so the chances of failure becomes less. The brand Rolls- Royce is
one of the most reputed and royal brand which the company develop for high standards people.
Most of the people use this brand only for the status ans respect from the society. The
organisation only target those customers which are having strong background in term of finance.
Technological
Technology is one of the most important factor which the organisation has to consider in their
analyses because it helps the organisation to attract the customers towards the organisation and
also helps the employees to reduce their efforts in many process of the production. As the time

goes Rolls- Royce also develops their technology and provides new and advanced technology in
their cars which attracts their customers. The main reason for the technological development of
cars is the huge investment of company in their research and develop department and also the
management of the company. In the year 2016, the management of organisation patent more than
500 which shows the technological advancement of the organisation.
Legal
This section of PESTLE analyses is related to the impact of government rules and
regulations on the business operation of the company. The management of Rolls- Royce has
perform their operations in many countries so the management of the company need to analyse
the rules made by the government of respected country. These rules and regulations are
developed by the organisation to protect the law&order and also their local organisation from the
competition made by international organisations in the local market. The management of Rolls-
Royce also deals with the impact of legal issues of United kingdom prepare for business
organisations.
Environmental
This section is related to impact of environmental issues on the management of the
organisation. It is important for the organisation to develop their strategies of business which
promotes natural environment not demote the concepts (Ebrahimi, A. and Banaeifard, H., 2018).
There are many rules which the management of the organisation has to perform in business
which is related to protection of environment from the mal practises of the organisation. It is the
duty of the managers of Rolls-Royce that it follows these rules and take part in the various
environmental programmes.
Porter's five forces:
It is a structure used for analyzing competition level within industry by examining
surplus potentiality of industry and hence its attractiveness. In Rolls Royce, competition level
depends on five forces detailed as under:
Competition in existing market: Rivalry among ventures selling identical products with
aim to earn as well as maximize revenue, market share and profit termed as market competition.
It determines competition level and number of competitive rivalries in current market. In Rolls
Royce, there are huge number of competitors such as Bombardier, MAN Energy Solutions, Pratt

and Whitney. Hence it is high threat for Rolls Royce as consumer can switch easily to another
competitor offering products at lower price than it.
Threat of new entrants: It refers to situation in which new industries enters into current
market with new capacity and willingness to obtain market share. UK government made barriers
as well as regulations in Airline industry for new entrants and requires licence to enter in
industry so there is a low threat of new entrant to Rolls Royce as huge amount is needed to enter
into airline industry with innovations and developed products.
Bargaining power of supplier: In this situation, suppliers exerts pressure on business
organisations in different ways by reducing quality or increasing prices to loot each others profits
and market share. In context with Rolls Royce, suppliers are huge in number in Manufacturing
industry so there is low bargaining power of suppliers as Rolls Royce can easily switch to
another supplier if a supplier increases price or reduces quality of raw materials.
Bargaining power of buyers: It is a situation in which buyer exerts pressure on business
organisations to seek discounts or offers to get better quality at lower rates. Buyers are huge in
number in case of Rolls Royce demanding modified products at low rates. Hence, there is a high
threat of bargaining power of buyers as they can switch to another business organisations which
is offering them products at lower price than Rolls Royce.
Threats of substitute products or services: Substitute products means when a product
used for same purpose by consumers against another product. When substitute products are
expensive than Rolls Royce, there is low threat of substitutes as consumer won't switch to any
other industry because Rolls Royce is offering products at lower rates than any other with same
benefits.
Value chain analysis:
Value: Capabilities or resources are considered as valuable if they permits the company
in exploring its opportunities or limiting its threats within the environment (Akimana, V., 2017).
If any of the resource is not helping the Rolls Royce in limiting the risks or expanding
opportunities within business, then it does not help the company in gaining competitive benefits.
Rare: Resources are said to be rare when they are not possessed by the rivalries within
the market-place. When Rolls Royce is using valuable resources and are not rare, the it is not in a
position to provide competitive benefits to the organisation. Rather, those valuable resources that

are generally held by the rivalries helps the company in permitting the business to be at par along
with the competitors.
Imitable: Valuable and rare resources help the Rolls Royce in engaging in the process of
designing the strategies that other organisations cannot pursue. The resources that are costly as
well as difficult to imitate or substitute are considered as more valuable resources.
Organisation: It helps in determining whether resources or capabilities are possessing
competitive advantages to the Rolls Royce or not. This criterion also helps the company in
identifying that mere control or possession is necessary but it is not enough to attain the
competitive benefits.
CONCLUSION
It is clearly concluded from this report that if the organisation wants to successes in international
market they have to analyse the external and internal factors impacts the organisation effectively
so that the chances of failure become less. The brief discussion related to the VRIO analyses are
concluded from this report. This report has concluded the Porter five forces model under which
all the five forces are describes in this report.

REFERENCES
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