Rolls Royce Global Business Strategy: Performance and Strategic Audit

This report provides a comprehensive analysis of Rolls Royce's global business strategy, including a strategic audit of the company's financial and business performance over the past three years. It examines strategic actions such as PESTLE analysis, Porter's Five Forces, customer analysis, and environmental factors, justifying their importance in managing day-to-day operations and enhancing the company's market position. The report details the company's profitability, liquidity, and efficiency ratios from 2019 to 2021, highlighting the impact of the COVID-19 pandemic and the subsequent recovery. It concludes with recommendations aimed at improving the company's profitability and strategic effectiveness in the global market, emphasizing the need for innovation, customer focus, and adaptation to environmental and technological changes. Desklib is a platform where students can find similar solved assignments and study resources.

Global Business Strategy

TABLE OF CONTENT
EXECUTIVE SUMMARY ............................................................................................................3
Strategic audit of company's financial and business performance over the past 3 years ............3
Explaining and justifying strategic actions .................................................................................6
Reflection on completing management report...........................................................................11
CONCLUSION AND RECOMMENDATIONS ........................................................................12
Conclusion.................................................................................................................................12
Recommendations .....................................................................................................................12
REFERENCES..............................................................................................................................14
APPENDIX....................................................................................................................................16

EXECUTIVE SUMMARY
The global business strategy refers to the strategy which helps the organization in the
development and expands its business in the global market. By having and developing the global
business strategies helps the company to improve its profitability and productivity in the global
market. By having the good strategy, it helps the organization to know about its competitors,
customers, production sites and other factors that helps the company to ensure its success in the
global market. The objective of having the global strategy by the business is to increase its sales
across the globe. The below report is based on the Roll Royce which is the British Luxury
automobile manufacturer. The organization is working in the market since 2003 and having the
good market share and market size. As the company is having the big market share it must
follow some strategic actions which helps the company to know about the external market. The
strategic actions are the tools that helps the company to have the good action plan in order to
grow in the competitive market.
Strategic actions are the projects or it can be the models that helps the company to know
about the outside environment which increases the day-to-day activities of business. By using the
strategic actions, it makes the organization to know about the operational and strategic position
in the market. The cited organization has many strategic actions which helps them to know about
the external environment and manages the day-to fay operations of the company. The various
strategic action recommended to the company are PESTLE analysis, porter's five forces,
customer analysis, environment basics, degree of turbulence, competitor analysis, four links,
industry life cycle and key success factors. By using these action it will help the company to
know about the market and improves the profitability of the company. Further, in this report has
also explained about the strategic audit of the cited company by showing its financial and

business performance of the past 3 years. This report has also explained about the different
stearic model that has identified above.
Strategic audit of company's financial and business performance over the past 3 years
Strategic audit refers to the audit or the system which used to identify the extent of
implementing the strategies of the organization, its objective and helps the organization to reach
its goals (Choi, Choi and Kim, 2018). This type of audit is the in depth review of the company
which makes the organization to meet its goal and objective. The cited organization must have
the strategic audit which helps the company to use its resources effectively and gain the good
profit.
FINANCIAL RATIOS
Profitability ratio :
Profitability ratio analysis 2019 2020 2021
Gross Profit GP 942 -210 814
Net Profit NP -1311 -3169 114
Sales Revenue Sales 16587 11824 5159
Earnings before interest and tax
or operating profit
Capital employed
Net Income
Average total assets
GP Ratio Gross profit / sales * 100 6% -2% 16%
NP Ratio Net profit / sales * 100 -8% -27% 2%
Profitability ratio is the assessment of the company's ability to earn profit from its sales
for the operations, balance sheet assets or shareholders equity. From this analysation it has been
understood that the business is affected due to the covid-19 pandemic. This shows significant
growth in the profit it has made in 2021 as the business has been in loss in the last 2 years

(ROLLS-ROYCE HOLDINGS PLC - 2021 Full Year Results, 2022) . This company needs to
increase its sales in order to mitigate the loss from the operating and non operating expenses.
Liquidity ratio :
Liquidity ratio analysis 2019 2020 2021
Current assets 16054 14331 13287
Current liabilities 14976 13700 11159
Inventory 4320 3690 3666
Prepaid expenses 11734 10641 9621
Current ratio
Current assets /
current liabilities 1.17 1.04 1.19
Quick ratio
(Current assets –
Inventory)/Curre
nt Liabilities 0.85 0.77 0.86
Liquidity ratios are the ones which are used for understanding the efficiency of the
organization and help in the determination of how the debtors are able to pay off the current debt
obligations without raising the external capital (Izzalqurny, Subroto and Ghofar, 2019). These
ratios are able to explain that the liquidity of this organization is still very effective even after
suffering so much loss. This indicates proper balance in the assets and liability for the company.
This business will be able to pay of the short term obligations.
Efficiency ratio :
Particulars Formula 2019 2020 2021
EBIT -891 -2779 -294
Interest 430 874 1092
Interest coverage
ratios EBIT/ interest -2.072 -3.180 -0.269
Particulars Formula 2019 2020 2021

Account receivable 5065 5455 5383
Sales revenue 11824 16587 11218
Account receivable
turnover
Account receivable /
sales *365 156.354 120.038 175.147
Particulars Formula 2019 2020 2021
Account receivable
turnover
Account receivable /
sales *365 156.3536028417
120.038282
9927
175.146639
3296
Average collection
period
365/account receivable
turnover ratio 2.334 3.041 2.084
Particulars Formula 2019 2020 2021
COGS 15645 11678 9082
inventory 4320 3690 3666
Inventory
Turnover Ratio COGS/Inventory 3.622 3.165 2.477
Efficiency ratio is considered to be the ratio which explain how effectively is the
organization using it assets. From the above analysation of the different ratios it can be said that
the business has been trying to improve on its efficiency in comparison to the last two years.
However, its is still facing major issues of performances which needs to be improved.
Explaining and justifying strategic actions
Strategic actions are defined as the projects and program that are external to the
organization and helps the organization to manage the day to day operations (Sathasivam,
Hashim and Bakar, 2021). The strategic actions that are available to the organization are as
described below:

PESTLE analysis: This tool helps the organization to now about the macro- factors and
helps the company to grow in the competitive market which are described below:
Political factors: In many countries, there are lots of intervention of the government
related to the production of the automobile parts in order to ensure the safety. The automobile
industry must have to check the market before entering into it. The organization must use and
keep the emission under the specific range which help the organization to continue its business in
the competitive market. These sectors are more dependent on the decisions of the government in
order to import and export the products in different countries.
Economic factors: The market of automobile industry may also affect the earnings of the
people as due to COVID the savings of the people has finished (TRAN, HOANG and NGUYEN,
2020). Many countries used to impose the high taxes on the luxury items which increases the
cost of the product. As the organization also used to produce the luxury cars so the prices may
vary in the different country. By increase in the prices it makes the customers to switch from this
company to its competitors in the market. As there is increase in the parts of the automotive, it
increases the price of the cars as well. This is the big reason in decrease in demands of cars in the
automobile industry.
Social factors: As cars are not only the vehicles for the people, as these are the fashion
statements for them (Kumar, 2019). The company has to consider the choices of the customers
before manufacturing the new cars in the market. As if the cars go out of market trend and from
fashion it will not be sold in the markets.
Technological factors:The company is basically dependent on the innovative technology
in order to endure the safety and productivity in the organization (PESTLE ANALYSIS, 2022).
The cited company must focus on the changing technologies and market trends which used to
maintain the profits in the market.
Legal factors: There are some legal issues which the company may faces in the countries
are having the strict laws in order to decrease the vehicles on the roads. As having many vehicles
used to pollute the environment of the country. By doing this it helps the country to lower the air
and noise pollution.
Environmental factors: The automobile companies can greatly have the great impact by
the ecological issues. The government of the different countries are willing to have the
environmental policies in order to decrease the pollution level (Gholampour, Abdul RAHIM and

Gholampour, 2018). The company must follow the laws and regulations related to environment
in order to manufacture the best product in the competitive market.
Porter's five forces model: Porter's five forces is the tool that identifies and defines the
five competitive forces that used to shape the industry and helps the company or industry to
determine its strengths and weaknesses (Automative Industry Five Forces Analysis, 2022). Five
forces are described as below:
Threat of new entrants: The company used to get affect he this force and have a great
impact on their business. By this the company may decrease its profitability with the entrance of
new company in the market. As this industry has strong entry barriers it will reduce the
competitiveness for the firm. The organization can charge the higher prices for their products as
having the fewer substitutes in the market.
Threat of Substitutes: This is the another main factor of this five forces model which
used to know about the substitutes in the market (Christodoulou and Cullinane, 2019). As the
automobile industry has variety of products but having the different models of each product. The
organization must focus on the quality of their products as there is availability of the close
substitutes. As by having the close substitutes it will make the customers to switch on the another
brand.
Bargaining power of customers: The strong and powerful client has the high bargaining
power which used to have affect o the profitability of the business. As the customers requires no
cost in order to switch from on brand to another, so they switch it they are getting the substitutes
at the lower prices.
Bargaining power of Suppliers: The bargaining power of the suppliers is little weak for
the small players in the market. The suppliers have to work in the very good and effective
manner. As the bargaining power of the suppliers is very weak it has to work according to the
market (Nandonde, 2019). As the organization is having many suppliers, so they cannot bargain
with the company as company can switch to the other suppliers.
Competitive rivalry: The large number of competitors, having the same type of products
and services, decreases the power of the company. If the competitive rivalry is low, the company
gets the chance to charge the high prices and have the deals with the people in order achieve high
profits by selling more.

Customer analysis: The organization must take of the customers as customers are the
main source of profit. There are various customer analytical tools which helps the organization to
get profit in the competitive market (Appiah and Charnigo, 2021). The best customer analysis
tool is google analytics which will help the Rolls Royce in order to find out the key customer's
data by having the website and the app. By having customer analysis it will help the organization
to have higher customer satisfaction, increase in sale and revenue, better brand awareness and
increase in the customer engagement.
Environment basic: The environment analytical tool is the best tool which will help the
organization to know about the environment. The automobile companies can greatly have the
great impact by the ecological issues. The government of the different countries are willing to
have the environment policies to lower down the pollution in the market. This environment
basics will identify the external and internal factors that may affect the company performance.
Degree of turbulence: There is basically the five levels of the environmental turbulence
which are repetitive, expanding, changing, discontinuous and the surprising level. The turbulence
can be defined as the unpredictable uncertainty for the purpose of strategic planning (Li, Kong,
Dong and Jiao, 2021). This will help the cited organization to know about the uncertainty in
order to have the strategic planning. In order to cope up with the major changes it will help the
cited organization to be confident in the market.
Industry life cycle: There is consisted of four phases which are Introduction, growth,
maturity and decline.
Phases Description
Introduction In this phase the organization used to create the
new business in order to enter the market. The
profitability in this phase is very low as it is the
new business (Alpenidze, Pauceanu and
Sanyal, 2019). As it is the new market the
organization is not known about the customers
in the market.
Growth The customers in the new automobile industry
have come in order to understand about the

new offering and by this demand grows
rapidly. The organization has to demonstrate
its products at the large scale which will help
them to grow in the market.
Maturity In the maturity phase the growth of the
organization may slower down. The
organization may also achieve the economies
ODF scale which helps them to have good
competition with the competitors. In the phase
the cash flow, market share, and the
profitability are the main goals in order to
grow in the market.
Decline This is basically the last stage of the industry
life cycle. The company may face competition
by having the several factors which are high
entry barriers, speed of declining and the level
of fixed cost. In order to cope up with the
declining factors the company can sell those
products and cars which are more profitable
for them.
Four link analysis: The four link analysis tool which used to look at the opportunity in
order to have collaboration in the industry. It will help the cited organization to have the critical
analysing of the market rival which includes independently and collectively assessing its drivers
and the future goals. The four elements of this model are government, Formal links, Informal
links and the Complementers. If the company used to consider the government links then they
have toe examine the government agencies that will help the organization. The formal links are
legally binding which includes the joint ventures, strategic alliances, sharing board memberships,
etc. The informal links includes the associations dan the Chambers of Commerce.

Complementers are basically the other business with whom the organization can have the joining
to have product offerings in the market.
The best link is the complementors which will help the organization to have joining with
the other business by having co- brand in order to have the product offerings. This will helps the
cited company to increase in the profitability by skincare in the slate in the market.
Competitors analysis: The competitor analysis includes the competitors features, their
market share, pricing policy, their strengths, geography, culture and the customer review. As it is
the big automobile industry it has various competitors in the market (Priatna and et.al., 2020). In
order to compete with their competitors the organization has to do some innovation and must
bring something new in te market. The competitors of the Roll Royce are Mercedes- Benz,
BMW, Bentley, Aston Martin, Ferrari, Jaguar, Porsche, etc. These all automobile industry also
has the high market share and earn profits in the competitive market.
Key success factors: There are various key success factors which will help the
organization to grow in the market. The five major key success factors are as follows:
Factors Description
Strategic focus This relates with the organization leadership
and strategy which will help the Rolls Royce to
have the good leadership structure to attain the
corporate goals.
People It includes the human resource in the
organization. The cited organization must have
the good employees which will help them to
attain their objectives.
Operations The operations includes the functioning and
day to day activities of the organization. There
must be availability of the raw material which
help them to have smooth functioning.
Marketing In this factor the organization used to promote
its business which helps them to have increase
in their sales and profitability (Wang, Tan and

Li, 2018).
Finances This is the major factor which help the
organization to have good position in the
market. By monitoring the financial activities
helps the organization to remain profitable in
the market.
Reflection on completing management report
From the completing of this management report it increases the learning style of the person. In
the week 1 tutorial I have learned about the global business strategy which helps me to know
about the different types of strategies that the company uses in order to have good market across
the globe. By learning from this it has gained my knowledge in the global market and the
different tools that are used in order to check the external environment. By making this project I
have also learned about the strategic management that helps the company to have the proper
management at the global level. The strategic management deals with the issues that used to
affect the future of the company. This helps the organization to achieve their objectives and
makes the profitable in the market. By making this report I have gained my research and
analytical skills.
In the week 2 I have learned about the various analytical tools that helps the company to
have the strategic actions. By analysing of these tools it helps me to gain the knowledge about
the macro- environment. As I have used PESTLE analysis, porter's five forces, customer
analysis, environment basics, degree of turbulence, competitor analysis, four links, industry life
cycle and key success factors in order to make the company aware about the market. In this
tutorial I have learned and understand about the organization purpose which helps the
organization to get success in the market. The success of the organization is always depending
upon the power of the stakeholders by making the proper vision and mission of the company
(Mihailova, 2020). By making this report I have learned that the company must make the vision
that helps and benefits them to have the stairs of success. This also helps them to explore the new
opportunities in the market. The last week is based on the purpose of emerging from innovation,
new resources and technologies in the company. By having the new and innovative technology it
will help the company to get good profit in the market. By learning from this it makes to learn