Rolls-Royce: Market Structure and Competition

This assignment explores the market structure adopted by Rolls-Royce, a leading manufacturer of aircraft engines. It categorizes Rolls-Royce as a monopoly due to its unique products and limited competition within the UK market. The analysis delves into characteristics defining this market structure, highlighting factors like its single supplier status, product distinctiveness, entry barriers, and information control. Additionally, Porter's Five Forces framework is applied to understand the competitive dynamics influencing Rolls-Royce's position in the industry.

Management Report

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK...............................................................................................................................................1
Performance details of Rolls-Royce.......................................................................................1
Potential performance and threats of Rolls-Royce.................................................................1
Market structure adopted by Rolls-Royce..............................................................................3
CONCLUSION ...............................................................................................................................3
REFERENCES................................................................................................................................5

INTRODUCTION
Rolls Royce has started their journey in UK over 80 years ago. It is famous as fourth
largest national aerospace industry in the whole globe (Hashmi and Biesebroeck, 2016). They
occupy third largest position in Europe having international market share of around 6.4 % in
2016. The present report is based on the Rolls-Royce Holdings plc whereby its marketing
structure is discussed in detail.
TASK
Performance details of Rolls-Royce
Rolls – Royce holdings plc is a famous British international public limited corporation
which was established in the year 1904 and was incorporated in February 2011 (Baldwin and
Scott, 2013). It is known as the world's second largest manufacturer of aircraft engines and also
perform major business in the marine propulsion and energy sectors. This was found by Charles
Rolls and Henry Royce. They are providing all the advanced technologies which are required for
aerospace systems.
Potential performance and threats of Rolls-Royce
Porter's five forces model is nothing but a tool which is used for analysing the
competition of a business. It consists of five undeniable forces that play an important role in
shaping every market as well as industry in all over the globe. Rolls-Royce can utilise this model
in order to respond to the changing role of business. The five areas are discussed as below: Threat of new entrants: New entrants not only bring innovation and but also new ways of
doing things. But competition rises and pressure on Rolls-Royce gets increased through
low pricing strategies, minimising costs and offering new value proposition to the users.
So, this company has to focus on managing all these challenges and create effectual
barriers for safeguarding its competitive edge. Enterprise can tackle with this threat by
manufacturing innovation based goods and services because new products make new
customers and also give reason to their old users to purchase its products. Bargaining power of suppliers: Suppliers existing in dominant position can reduce the
margins that can be earned by this firm. Powerful suppliers are using their negotiating
power for extracting higher prices from companies. Thus, it can be said that this
phenomena lowers the profitability of ventures in total. Rolls-Royce can tackle this act by
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creating efficient supply chain with multiple suppliers. They can also do experiment with
their goods designs by using several materials so that if costs rise up of one raw material
then venture can shift to another. Bargaining power of Buyers: Purchasers desire to buy the best offerings present in
minimum prices as possible. This pressurised Rolls-Royce as they have to made products
as per that. They can survive in this type of marketplace by generating a large base of
users. This minimises the bargaining power of customers. It also gives an opportunity to
streamline their sales and process of production. Threat of substitutes: This states that when any new product or service satisfies the same
needs of consumers in different ways then profitability of company suffers a lot. From
tacking this problem, they have to become not only product oriented but also service
oriented (Porter's Five Forces, 2017). Additionally, they have to understand the current
requirements and demands of consumers rather than what they are purchasing.
 Competitive rivalry: This says that if competition among existing challengers in this
industry is intense then this would drive down prices and also reduce the profitability of
organisation. They can tackle with these competitors by creating sustainable
differentiation by building scale in order to compete in a better way.
Illustration 1: Porter's Five Forces
(Source : Jurevicius, 2013)
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Market structure adopted by Rolls-Royce
Market structure can be simply defined as the organisational and other characteristics of a
market (Market Structure, 2017). Entrepreneur focus on those characteristics that can affect the
nature of competition and pricing. On the other hand, it is important not to place more
importance on the market share of the existing company in an industry. Rolls-Royce falls under
monopoly market structure as it is a single seller of aircraft engines. It faces less competition . It
enjoys power of setting the price of its products. Some of the characteristics of Rolls-Royce that
are fulfilling the criteria of monopoly are:
 It is a single supplier of air craft engines in the United Kingdom.
 It produces unique products that are not made by other corporations.
 It is proved as a good barrier to entry and exit.
 It consists of control over information or production that is available to others.
Illustration 2: Market Structure
(Source: Market Structure, 2017)
CONCLUSION
From the above report, it can be summarised that Rolls-Royce is the second largest
manufacturer of aircraft engines. Thus, they are having monopoly in this industry. They are
giving support for US department of defence with new marine corps contract. Porter's five forces
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has been explained here that which is describing about various things like bargaining power of
buyers and suppliers, competitive rivalry, etc.
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REFERENCES
Books and Journals
Baldwin, W. and Scott, J., 2013. Market structure and technological change (Vol. 18). Taylor &
Francis.
E. Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of industry
analysis templates. Competitiveness Review. 24(1). pp.32-45.
Hashmi, A. R. and Biesebroeck, J. V., 2016. The relationship between market structure and
innovation in industry equilibrium: a case study of the global automobile industry.
Review of Economics and Statistics. 98(1). pp.192-208.
Kumar, N. and Siddharthan, N. S., 2013. Technology, Market Structure and Internationalization:
Issues and Policies for Developing Countries. Routledge.
Vitasek, K. and Vitasek, K., 2016. Strategic sourcing business models. Strategic Outsourcing:
An International Journal. 9(2). pp.126-138.
Online
Market Structure.2017. [Online]. Available through: <https://businessjargons.com/market-
structure.html>.
Porter's Five Forces.2017. [Online]. Available through:
<https://www.strategicmanagementinsight.com/tools/porters-five-forces.html>.
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