InThinking IB Business Management

1.4 Stakeholders Exam practice question

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Rolls-Royce to cut 9,000 jobs as Covid-19 takes toll on airlines

In May 2020, Rolls Royce announced 9,000 jobs losses in the UK due to the airline industry
being hit hard by the global coronavirus pandemic. Rolls-Royce employs 23,700 staff in the
UK, with most of the aerospace employees working in Derby, England. Rolls-Royce – known
for its super luxury cars – is also a major jet engine manufacturer for the world’s largest
aircraft manufacturers (Airbus and Boeing) and services the engines of major airline carriers.
The company announced the job losses in order to save £1.3 billion ($1.7bn) in annual cost
savings due to the worldwide crisis.

The Covid-19 pandemic grounded most of the world’s airlines during the latter part of 2019
and most of 2020, with flights having plummeted by 90% in April 2020 (a month before the
job cuts were announced). This meant demand for Rolls-Royce to service and maintain
aircraft engines fell sharply. Rolls-Royce also makes engines for fighter jets and ships, as
well as reactors for nuclear submarines. The company employs around 52,000 staff in over
50 countries around the world.

Rolls-Royce’s chief executive officer, Warren East, said “Governments across the world
are doing what they can to assist businesses in the short term, but we must respond to
market conditions for the medium term until the world of aviation is flying again at scale.
Governments cannot replace sustainable customer demand that is simply not there.”

The Board of Directors suggested the news would reduce the return on investment for
shareholders of Rolls-Royce, at least in the short run.

Source: Adapted from The Guardian (https://www.theguardian.com/business/2020/may/20/rolls-royce-to-cut-

9000-jobs-worldwide-as-covid-19-takes-toll)

a. Identify two internal stakeholders of Rolls-Royce. [2 marks]

b. Identify two external stakeholders of Rolls-Royce. [2 marks]

c. Explain two conflicts following Rolls-Royce’s decision to reduce its workforce.

[4 marks]

© Paul Hoang, www.thinkib.net/businessmanagement