Rolls-Royce PLC is an aircraft manufacture organization based in Britain. It was noted in the 20th century as a leading maker of luxury automobiles but it nationalized and separated from its car-manufacturing operations following the bankruptcy in 1971 (Harrison, 2017). The organization has put in place several strategies for it performance evaluation. It measures and reports on the factors impacting its business activities and operations. The reporting is informed by its expectations of the external stakeholders and materiality assessment. The organization in 2017 introduced a suite of stretching operational target based on the performance that it had in 2016. The performance is meant to help in the management of risks that the organization experienced in the previous year.
The performance in 2016 showed that 99% of the suppliers who agree to the global supplier code of conduct adherence by the organization. The employee engagement index of the organization is greater to ensure the sustainability of the employees. The sustainability is greater to the global high performance norm in 2017 as compared to that in 2016 (Harrison, 2017). The financial performance of 2016 was overall in line with the expectations that were set in 2016. It was a year that the organization considered to be of change in the market, the management and the near-term outlook. There were however some constants between the years: the underlying growth of the long-term markets, the strength of the demands of the customers and the quality of the critical technology and services which are all shown in the growing order book of the organization.
Industry five porter’s forces analysis
Competitive rivalry
The aerospace industry is capital demanding and there is need for high capital investments in research and growth to advance technology. There is no single manufacture who dominates the business. Competition in the main market for aero-engines is increased through the connection that the organization have with the secondary market for the sales of services and engine parts. The access that the organizations have to the secondary market depends on the original sale of the engines. The other factor that has intensified the competition is the maturity of gas turbine engines.
Power of buyers
The decision of the consumers to purchase an engine or aircraft is long-term. This implies that failing to get an order by a manufacturer may avert trading with a given company in the airline sector for a long time. It implies that collection of an engine may lead to a domino cause hence the power of the buyers is high. Their power dictates the industry.
Power of suppliers
The supplier power to the aero-engine manufacture has partial power. There are several suppliers in the business who supply all types of machinery. The power of the small organizations that carried out most of the supplies has been abridged as most of the manufacturers have adopted dual sourcing strategy.
Threat of entry
Entry into the aero-engine industry is complex. Some of the barriers to entry into the industry include the extensive investment that is need in research and development and technology. The confidence of the customers is also another barrier as the consumers believe in the players who are currently in the organization.
Threat of substitutes
There are no substitutes for aero-engine. The threat is hence low. There are however speculations that the development of video conferencing and the current growth in high speed travel might affect the travel decisions of consumers and hence might affect the demand for aero-engines.
Market structure
In the aerospace manufacture market, there are a few sellers who control a significant market for the industry. The market is oligopoly. In the market, there are barriers to entry due to the intensive technology, research and development. There are also limited resources that could be used in the industry as they are controlled by a few organizations. In the industry, the operations are interdependent of the other and this implies that the operations of one influence the operation decisions of the other. In the industry, there is non-price competition. Each of the organizations in the industry is rigid to their prices. The changes in the price of an organization do not affect the price of the other player. This is a feature only in the oligopoly market structure. The oligopoly market structure makes the competition dependant on the instances of strategic interaction between the organizations in the industry. The decisions and actions of an organization consider the other.
In the market structure, there is no uniformity in terms of the size. There are small sized aerospace manufactures and large manufacturers. The demands of the products in the aerospace market are not affected by the change in price. An organization may decide to reduce the prices but this does not imply an increase in the demand of the goods or the services of the organization. Roll Royce in its operations considered these characteristics to retain its consumers.
Reference
Harrison, A., 2017. Design for Service: The Advanced Services Transformation Roadmap at Rolls-Royce The Advanced Services Transformation Roadmap ensures that service considerations are integrated into every step of the engine design process. Research-Technology Management, 60(4), pp.19-25.
