St.

Paul University Surigao

St. Paul University System
Cor. San Nicolas & Rizal Street
Surigao City

GINO, Ma. Carmela D. International Business and Trade

BSAIS – 201 Long Quiz #2
This case scenario relates to Rolls-Royce, the engine manufacturer. Although known perhaps by the public
at large for its aeroplane engines (aerospace), the company also focuses on the defence, marine and energy
markets. Each of the four markets is very competitive, with the aerospace one being particularly so. This
scenario focuses, in the main, upon aero-engines. Rolls-Royce has two main segments in that product
division: new engines to airplane manufacturers, and parts to companies maintaining and servicing aircraft.
The external environment is constantly changing. There are pressures for ‘greener’ engines, and, of course,
(even) greater reliability, and, of course, low cost in the context of perceived value for money by customers.
It makes sense for Rolls-Royce to undertake PESTLE analyses on a continuing basis. Additionally, as the
environment of both the aero-engine segments are highly competitive, it would also make sense to
undertake an analysis based on Porter’s forces.

(1) LoNGPESTLE Analysis

Political Economic Social Technological Legal Environmental

Efficient and Health

Doubtfulness
Health environment and
Local caused by Growth rate Environmental Policies
consciousness friendly safety
Brexit
innovation law

Efficient and Health

Foreign
Lobbying Ethical environment and
National exchange Environmental Policies
Activities concerns friendly safety
rate
innovation law

Efficient and Health

Foreign Globalization
Lobbying environment and Support for renewable
Global exchange and emerging
Activities friendly safety energy
rate economies
innovation law

Political
Rolls Royce is a company that operates all over the world, with that factor there is a political that may affect
its sales. With the uncertainty caused by Brexit, the company faced some issues with in terms of increased
costing and lower sales. Also a special interest's lobbying activity may go up or down over time, depending
on how much attention the federal government is giving their issues. Particularly active clients often retain
multiple lobbying firms, each with a team of lobbyists, to press their case for them.
Economic
The section is prime in which it operates is and its customers are those people who can afford their service.
Since the customers are already in prime, the exchange rates may not so much affect. But the currency
fluctuations affect the profit margins for the company. With a weak euro and a strong dollar, currency
fluctuations can take away more than 300 million pounds from its revenue. Another factor is the sterling
lump caused by Brexit. They lost it as the statutory pre-tax loss.

Social
The goal is to enhance the personal health and wellbeing of the people to help them reach their full potential.
The Rolls-Royce LiveWell accreditation programme will help to create a culture where healthy choices are
encouraged and rewarded, including; smoke-free site policies, healthy food choices and exercise facilities.
Sites are also required to establish local employee wellbeing committees with annual objectives. Global
Code of Conduct sets out the ethical principles that underpin the values and the way the business works. It
also provides guidance on how to apply these principles in everything they do.

Technological
Reduce total solid and liquid waste in our operations and facilities by 25%, normalized by revenue, by
2020. They recognized that improving the environmental performance of their operations contributes to
profitable growth. The four principal waste streams that contribute to their waste production are: recyclable
solid wastes; liquid wastes sent for disposal; recyclable metals; and solid wastes sent for landfill. They have
seen a modest reduction in the amount of waste that they dispose of from our sites. Their total solid and
liquid waste, normalized by revenue, was 4.31 t/£m in 2015. This represents a 3% reduction compared to
2014. New programmes launched in 2015 and continuing into 2016 are expected to accelerate waste
reduction across their global operations.

Legal
Rolls Royce should consider the Health and safety law. They are expected to help fulfill the health, safety
and environment goals. They should focus on the minimizing of the impact on the environmens and take
accountability to help protect and enhance health, well-being and environmental performance.

Environmental
Its environment strategy focuses on three areas: supporting our customers by further reducing the
environmental impact of our products and services; developing new technology for future low emissions
products; and maintaining our drive to reduce the environmental impact of our business activities. They
worked with their customers to ensure optimal performance from our products throughout their operational
life. Delivered a broad range of learning solutions, ranging from product operations and maintenance to
simulation activities. Had an extensive range of field service personnel and service operations centers that
ensure to have the expertise and equipment available to service our products with minimal disruption. The
products and services are designed to the highest standards of product safety, and we consistently pursue
proactive opportunities for improvement. Product safety and environmental requirements are an integral
part of each stage of the product lifecycle. Understanding the energy use to help identify inefficiency and
opportunities for improvement across global operations and activities. Upgrading existing facilities and
investing in energy efficient technology helps to reduce energy consumption and cost.

(2) SWOT Analysis

Strengths Weaknesses
 Research and Development Budget  Risk management issues
 Business Structure  High Debt-Equity Ration

Opportunities
Threats
 Partnership and Alliances
 Product to service shift
 Digital and electrification
Strengths
Invested in R&D and skilled people Developing and protecting leading-edge technology and deploying it
across its businesses allows the company to compete on a global basis and creates high barriers to entry.
The latest Product Development System, introduced in 2015, provides an even more rigorous and structured
method for developing game-changing capabilities and embedding these across the Group. It allows to
substantially improve the company’s performance.

Weaknesses
If the operation experience a major product failure in service, then this could result in loss of life and critical
damage to our reputation. If an external event or severe economic downturn significantly reduces air travel,
then the financial performance may be impacted. If the airframer customers significantly delay their
production rates, then the financial performance may be impacted. If they fail to achieve cost reductions at
the necessary pace, then the ability to invest in future programmes and technology may be reduced. If the
operation experience significant pricing pressure from increased competitor challenge in the key markets,
then the financial performance may also be impacted.

Opportunities
Rolls Royce are market leaders in the large business jet fleet market powering aircraft from most of the
main airframers. They have a strong market position on widebody aircraft produced by the world’s two
major airframers: Boeing and Airbus, who are broadly consistent in forecasting traffic growth (Revenue
Passenger Kilometres) of approximately 5% CAGR over the next 20 years. In the engine market for
narrowbody aircraft, they continue to supply some parts and services for the IAE V2500 engine family.
They also has a joint venture with the large companies like Allison Engine Company, Vickers Plc, Daimler
Ag and many more. Their position and long-term prospects in the widebody sector are strong across our
Trent family. The Trent XWB has successfully completed its first year in service and the new Trent XWB-
97 engine made its first test flight in November 2015 and is on schedule to enter into service in 2017.
Business jet market share is likely to fall in the medium term with the success of new entrants into the
large/very large sector, but the market remains attractive and will continue to invest to improve the position
and retain leadership.

Threats
The significant changes to the regulatory environment has a great impact for the airline industry especially
during this pandemic.

(3) Porter’s Five Forces

Bargaining
power of
buyers
LOW

Threats of
Threats of Competitive
new
subtitutes Rivalry
entrants
HIGH HIGH
LOW

Bargaining
power of
suppliers
HIGH
Threats of New Entrants
Rolls Royce will face low threats of new entrants because it will be difficult for the new firms to enter
to the market for the reason of the existing regulatory framework imposes certain challenges.

Threats of Substitutes
There will be a high threats of substitutes of products or services of Rolls Royce if there is an existing
firm or new firm with substitute product who offer the same or much higher quality.

Competitive Rivalry
There is a high competitive rivalry that the company will face because if the new or existing firms will
adopt or target the same market.

Bargaining Power of Suppliers

The bargaining power of suppliers are high it’s because suppliers have higher concentration than the
buyers.

Bargaining Power of Buyers

The bargaining power of buyers are low it’s because there is a lower customer concentration.