Final report on Rolls Royce

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Executive Summary Rolls-Royce is one of the most famous brands in the world. It is also one of our most valuable assets. It opens doors; attracts talented people; reassures customers and gives us the credibility to move into new markets. Our reputation has been built on our engineering credentials. Today, it is also about the way we behave, the services we provide and how we deliver on our promises. We have a strong culture that is benefiting from new people joining us all over the world. As we grow, it‟s important to recognise what unifies us culturally and what differentiates us from our competition; in essence, brand. Trusted to deliver excellence is our brand promise and represents the values we have as a business. Everyone at Rolls-Royce must be trusted to deliver excellence, to take confidence from our brand promise, be inspired by it and, always strive to achieve it. Trust: can only be earned by the way we behave with customers, shareholders, partners and colleagues Deliver: we develop long-term relationships with customers and we must deliver consistently on their behalf Excellence: a standard, our way of life, few companies can aim higher.

History Charles Stewart Rolls 27 August 1877 to 12 October 1910 - 33 years.

Charles Rolls was born at 35 Hill Street, Berkeley Square, London into a wealthy landed family with much property. In London these properties derived rents of £46,000 per annum and in addition there were large estates in Monmouthshire, South Wales. His father, John Allan Rolls, was a Justice of the Peace and High Sheriff of the County and later became Baron Llangattoch of the Hendre in August l892. The Hendre is Welsh for Winter Dwelling or main house. At the time Rolls was born F. H. Royce was resident in the Old Kent Road, London and may well have been a tenant of the Rolls' Estates and as he was a Post Office messenger until September 1877 when he was apprenticed to the Great Northern Railway, quite possibly delivered congratulatory telegrams to Mrs. Rolls on the birth of Charles. The Rolls family soon acquired a permanent London address - South Lodge, Rutland Gate, South Kensington. Rolls attended Mortimer Vicarage Preparatory School in Berkshire and then Eton until March 1894. He installed a dynamo at The Hendre and wired part of the house. He crammed to gain

entrance to Cambridge University at Trinity College where he was a keen cyclist and gained a half Blue in 1896 and made Captain 1897.

In October 1896 he went to Paris and purchased with his father‟s assistance a 3 3/4 hp Peugeot Phaeton - the first ever car based at Cambridge. He became known as "Dirty Rolls" and "Petrolls" because of his „hands on‟ approach. Rolls graduated in January 1898 with Class II Ordinary Bachelor of Arts degree by Special Examination in Mechanism and Applied Science, and gained a Master of Arts in 1902. He was accepted as student member of the Institution of Civil Engineers in February 1898. Rolls spent time in the workshops of London and North Western Railway at Crewe. He had a reputation for being very careful with money, economical with food and a very modest intake of alcohol. CSR made his first balloon flight on 8 September 1898. This is shown above. In 1900 Rolls won the 1,000 miles reliability trial promoted by Lord Northcliffe and organised by his partner, Claude Johnson, also a founder member and Secretary of the Automobile Club. A picture of a similar Panhard motor car is shown below. Above, Claude Johnson. In 1903 Rolls established a world land speed record of 93 mph in Dublin driving a 30 hp Mors. This was a French car models of which he imported and distributed. In 1904, via a mutual friend and another founder member of the Automobile Club, a Mr. Henry Edmunds introduced Rolls to Royce about 4 May at the Midland Hotel, Manchester. Edmunds, pictured below, is known as the Godfather of Rolls-Royce and Claude Johnson The Hyphen in Rolls-Royce.

Rolls-Royce came into being at Christmas 1904 and from then on the 10 hp cars were so named as they were previously called Royce cars. Rolls went to the New York Motor Show to exhibit Rolls-Royce cars in 1906 and also attended an exhibition organised by the Aero Club of America and was introduced to the Wright Brothers. This meeting gradually directed Rolls' interest from balloons to powered flight.

In April 1910 Rolls purchased the French Wright with a Wright Bariquand engine. It was not Rolls-Royce powered because Royce, having collapsed at work in 1902, was yet to design a Rolls-Royce aero engine. This was a tail-less wheel-less model aircraft really of 1909 specification. Rolls was relieved Rolls-Royce Limited of some duties in January 1910 to pursue aircraft

interests. Rolls

completed

the

first

double

crossing

of

the

Channel

-

England/France/England on 2 June 1910 in total flying time 95 1/2 minutes and is pictured below. A French built moving tail plane was fitted 10 July 1910 to his Wright plane. On 12 July in a 20 - 25 mph wind he crashed when tail plane broke at the Bournemouth International Aviation Meeting in celebration of the town‟s centenary. Rolls was the first Briton to die in an aviation accident. At this time Rolls' exploits had built up such a following in Great Britain that Lord Montague of Beaulieu interrupted his speech in the House of Lords to announce the death. Rolls was buried at St. Cadoc‟s Church 16 July 1910. Rolls' grave is shown in the following picture: Fredrick Henry Royce 1863 to 1933. In contrast to Rolls Royce, pictured below, described himself simply as mechanic. came Sir Henry was knighted in 1930 for his part in success in the Schneider Trophy races with his R engine giving 2,300 HP at 3200rpm.

James Royce, Royce‟s father came from a family of millers and he married Mary King at Woodham Ferrers, Essex, on 30 March 1852. She was a farmer's daughter and the family lived at nearby Edwin's Hall. The family later moved to Alwalton in Huntingdonshire where James Royce ran a steam and water powered mill but was he was not noted for his reliability or application and died in 1872 in a poorhouse. Royce‟s early life was hard and left lasting unpleasant memories ever since his birth the family was in money troubles and before he was four years of age he was earning money bird scaring near Alwalton. At 10 years old he was selling newspapers at Clapham Junction in London. He spent a year at school and when he was 14 was delivering telegrams in Mayfair, London. In September 1877 an aunt living on the outskirts of Peterborough paid £20 per year for him to be apprenticed at the local Great Northern

Railway works. At this time he lodged with a Mr. Yarrow from whom he learned machining and fitting and became dexterous with all hand tools. In his limited spare time he went to evening classes in English and Mathematics and sold more newspapers. After 3 years at Peterborough the aunt was unable to provide further support but Royce quickly found work with Greenwood and Batley in Leeds as a tool maker. He earned 55 pence for a 54 hour week. Evening studies rendered him knowledgeable with electricity and he obtained work with The Electric Light and Power Co. in London. Evening classes again helped his electrical knowledge and his work impressed Hiram Maxim whose electric light bulb patents the company acquired. Just before Royce's 21st birthday he was sent as first electrician to do theatre and street lighting in Liverpool for which he had full technical responsibility. The work was accepted by the Corporation in March 1884. There was more trouble for Royce when in May the company failed but Royce had saved £20 and his friend, A. E. Claremont pictured below, also with electrical training, had £50 and together they formed F. H. Royce & Co. electrical engineers and traded from rented premises in Cooke Street, Manchester.

The company produced small electrical items such as electric bell sets powered by Leclanche cells, bulb holders with bayonet fitting, switches, fuses, filaments, probably complete bulbs, and electrical registering instruments. Profits enabled complete installations, dynamos, motors with sparkless commutators winches and cranes to be made and they earned a reputation for quality and reliability. Royce was the technical partner and Claremont dealt with the sales and business side. In 1893 the partners married the Punt sisters. In 1894 F.H. Royce and Co. became a limited company and by 1899 the share capital was increased to £30,000 to allow extra works to be built at Trafford Park, Cooke Street being too small, gantry cranes were built at Trafford Park and one is still in use at the Derby works. Opposite Royce‟s factory was that of W. T. Glover, a cable making firm, of which Henry Edmunds, referred to above, was a director. Royce and Minnie Grace, his wife, lived at Brae Cottage shown below, Knutsford a house designed by the same architect, Waterhouse, as designed Manchester Town Hall and many other public buildings.

As can be seen above the term cottage was typical of Royce the mechanic‟s understatement. The property was electrically lit including the gardens because his work interfered with his hobby! It should be remembered that in 1902 Royce collapsed through overwork and irregular meals. The extra work of dealing with the erection of the Trafford Park works and commercial competition from cheap imports had caused Royce to work too hard and long. Royce was persuaded to buy a car, after spending some months in South Africa with his wife‟s relatives to recover. A French 10 HP two cylinder Decauville was duly acquired. Royce was dissatisfied with its quality and reliability and in 1903 obtained, somewhat reluctant, Board permission to build in Cooke Street three cars of his own design. Royce Ltd. now added Royce petrol motor cars to its list of products on the firm‟s headed notepaper. The new products were to compensate for business lost as a result of German and American competition in the electrical field. By September 1903 the twin cylinder 10 HP engine ran for six hours. It was installed in a chassis somewhat similar to the Decauville except that the engine and gearbox units were isolated from chassis distortion, the engine had positively opened inlet valves, a single lever quadrant change for the 3 speed gearbox, steel on bronze bearings replaced steel on steel and a more efficient radiator was fitted. On 1 April 1904 Royce drove the first model home for its test without any troubles, largely reflecting his electrical skills. Henry Edmunds borrowed the car to demonstrate his company‟s Parsons chains in the “Side Slip Trials” driving it on the first day some 145 miles at average 16.5 mph. Rolls was to meet Royce in May 1904. Rolls was, with his manager Claude Johnson, then selling Minerva and Panhard cars, but wanted a good British car with at least 3 cylinders. Royce and Rolls were mutually impressed and Rolls agreed to sell all the cars that Royce could make. By December 1904 Royce was to produce for the Paris Salon 2,3 and 4 cylinder cars and a 6 cylinder engine. It took until February 1905 for a complete 6 cylinder car to be at the Olympia Show. For publicity purposes Claude Johnson entered Rolls and Northey in two 20 HP cars for the 1905 Isle of Man T.T. Roll‟s gearbox failed on first lap but Percy Northey came second in the

race. In 1906 CSR won the Isle of Man T.T. at an average of 39 mph touching 70 mph on some stretches. Also at that 1904 meeting the shape of the radiator top tank was changed. The hot water from the top of the cylinders was fed to the middle of the top tank and had to be spread across the top of the radiator block to travel down it. As there would be a decreasing amount of water to be accommodated as it moved towards the sides of the radiator, it was logical progressively to reduce the cross section of the tank. This maintained a constant water velocity and reduced the amount of material used in the radiator's construction. Thus technical correctness and fitness for purpose were the real reasons for the world famous Grecian Radiator. For similar logic and mechanical perfection the 2 cylinder engine crankshaft had a centre bearing. The 4 and 6 cylinder engines had groups of the original twin cylinder block. The 4 cylinder crank form was the well established two 180 degrees twins back to back balancing out primary forces and couples. The 6 cylinder being probably three twins in a row was very rough running and early attempts with a light flywheel at the front showed Royce the principle of the Lanchester crankshaft torsional damper. Royce did not immediately make use of this discovery but solved the problem by using two 3 cylinder cranks in mirror image form about the middle of the engine. This principle was adopted for the 40/50 HP engine producing 48 BHP from 7,036 cc at 1,200 rpm. This the configuration of the engine in the Silver Ghost AX201 of 1907, pictured later. The crankshaft was a fully machined heat treated nickel-steel forging, drilled for full pressure lubrication (about 10 lbs/psi) running in 7 bearings. Grossly oversimplified, Royce‟s obsession with smooth quiet operation using first class materials to obtain long life, was exemplified in this model that far surpassed its contemporaries. A dual ignition system was employed a coil for starting and slow running, the magneto being the main ignition, separate switches permitted this to be done. Remember Royce was an electrical expert in his day. The gearbox gave 4 forward speeds with „overdrive‟ 4th (47 mph per 1,000 rpm). The steering lock was very good and the car‟s weight was taken on fully enclosed oil retaining thrust ball races.

Rolls-Royce did not produce coach work for their chassis at this time. In 1904 the 10 HP with a tonneau body cost £395. The entrance to the passenger compartment was at rear like a dog cart. The Silver Ghost chassis cost £895 in 1907. In 1906 Rolls-Royce Limited had been formed absorbing C.S.Rolls & Company that traded in Conduit Street, London, selling cars and carriage and upholstery work. An appeal for £200,000 capital was made successful at the last minute by £10,000 from A. H. Briggs, pictured below, who joined the new Rolls-Royce Limited Board. Claude Johnson set up the 15,000 mile trial in 1907 - “We will run our 40/50 Silver Ghost for 15,000 miles and the RAC shall see to it that we do no tinkering by the way”. There was just one involuntary stop of 36 seconds to rectify a petrol tap that had shut off. Complete restoration of the car after the test cost £2.14. The drivers were C. S. Rolls, Claude Johnson, Eric Platford and Macready. Production Numbers and Dates Post 1946 Dates

Model

Number Produced

1947 1959

Silver Wraith

1,783

1949 1955

Silver Dawn

785

1950 1956

Phantom IV

18

1955 1959

Silver Cloud

2,359

1959 1962

Silver Cloud II

2,716

1962 1966

Silver Cloud III

2,376

1959 1968

Phantom V

832

1965 1976

Silver Shadow

19,493

1965 1976

2 door/drophead

1968 -

Phantom VI

1977 1981

Silver Shadow II

1,111

10,560

Literature Review SWOT analysis: SWOT analysis is an analytical method which is used to identify and categorise significant internal (Strengths and Weaknesses) and external (Opportunities and Threats) factors faced either in a particular arena, such as an organisation, or a territory, such as a region, nation, or city. It provides information that is helpful in matching the firms' resources and capabilities to the competitive environment in which it operates and is therefore an important contribution to the strategic planning process. It should not be viewed as a static method with emphasis solely on its output, but should be used as a dynamic part of the management and business development process.

Strengths 

What are your advantages?



What do you do well?



What relevant resources do you have access to?



What do other people see as your strengths?

Consider this from your own point of view and from the point of view of the people you deal with. Don't be modest. Be realistic. If you are having any difficulty with this, try writing down a list of your organization‟s characteristics. Some of these will hopefully be strengths! In looking at your strengths, think about them in relation to your competitors - for example, if all your competitors provide high quality products, then a high quality production process is not a strength in the market, it is a necessity.

Weaknesses 

What could you improve?



What do you do badly?



What should you avoid?

Again, consider this from an internal and external viewpoint: Do other people seem to perceive weaknesses that you do not see? Are your competitors doing any better than you? It is best to be realistic now, and face any unpleasant truths as soon as possible.

Opportunities 

Where are the good opportunities in front of you?



What are the interesting trends you are aware of?

Useful opportunities can come from such things as: 

Changes in technology and markets on both a broad and narrow scale



Changes in government policy related to your field



Changes in social patterns, population profiles, lifestyles, etc.



Local Events

A useful approach to looking at opportunities is to look at your strengths and ask yourself whether these open up any opportunities. Alternatively, look at your weaknesses and ask yourself whether you could open up opportunities by eliminating them.

Threats 

What obstacles do you face?



What is your competition doing?



Are the required specifications for your job, products or services changing?



Is changing technology threatening your position?



Do you have bad debt or cash-flow problems?



Could any of your weaknesses seriously threaten your business?

Carrying out this analysis will often be illuminating - both in terms of pointing out what needs to be done, and in putting problems into perspective.

SWOT analysis of Rolls Royce SWOT Analysis 1. Technological support from the parent company 2. Strong brand image globally existing since inception 3. Strong aspirational value in minds of people 4. Superior build quality not only for interiors but also the exterior, engine & chassis 5. It has elegant and supreme brands like Phantom, Phantom Drophead Coupé (convertible), Phantom Coupé (coupe) and Ghost 6. The brand is owned by the elite of the world, and is one of the most significant status symbols of the super rich Strength

7. Rolls-Royce has customers in over 150 countries and operates in

more than 50 countries worldwide 1. The design of its models is evolutionary in nature thus they look similar 2. Many potential customers move to other brands due to the Weakness

profiling requirements 1. Currently there is a rising trend for environmental friendly cars, there lies an opportunity for luxury brands as well 2. Also keeping the price premium they should try & relax the

Opportunity

customer profiling procedure 1. The protectionists trade policies of various countries

Threats

2. Unwillingness of people to buy a vehicle of such high price Competition 1. Maybach 2. Limousine

Competitors

3. Mercedes

BCG Growth Matrix Back in 1968 a clever chap from Boston Consulting Group, Bruce Henderson, created this chart to help organizations with the task of analyzing their product line or portfolio. The matrix assess products on two dimensions. The first dimension looks at the products general level of growth within its market. The second dimension then measures the product‟s market share relative to the largest competitor in the industry. Analyzing products in this way provides a useful insight into the likely opportunities and problems with a particular product.

Products are classified into four distinct groups, Stars, Cash Cows, Problem Child and Dog. Lets have a look at what each one means for the product and the decision making process.

Stars (high share and high growth) Star products all have rapid growth and dominant market share. This means that star products can be seen as market leading products. These products will need a lot of investment to retain their position, to support further growth as well as to maintain its lead over competing products. This being said, star products will also be generating a lot of income due to the strength they have in the market. The main problem for product portfolio managers it to judge whether the market is going to continue to grow or whether it will go down. Star product can become Cash Cows as the market growth starts to decline if they keep their high market share. Cash Cows (high share, low growth)

Cash cows don‟t need the same level of support as before. This is due to less competitive pressures with a low growth market and they usually enjoy a dominant position that has been generated from economies of scale. Cash cows are still generating a significant level of income but is not costing the organization much to maintain. These products can be “milked” to fund Star products. Dogs (low share, low growth) Product classified as dogs always have a weak market share in a low growth market. These products are very likely making a loss or a very low profit at best. These products can be a big drain on management time and resources. The question for managers are whether the investment currently being spent on keeping these products alive, could be spent on making something that would be more profitable. The answer to this question is usually yes. Problem Child (low share, high growth) Also sometime referred to as Question Marks, these products prove to be tricky ones for product managers. These products are in a high growth market but does not seem to have a high share of the market. The could be reason for this such as a very new product to the market. If this is not the case, then some questions need to be asked. What is the organization doing wrong? What is competitors doing right? It could be that these products just need more investment behind them to become Stars. A completed matrix can be used to assess the strength of your organization and its product portfolio. Organizations would ideally like to have a good mix of cash cows and stars. There are four assumptions that underpin the Boston Consulting Group Matrix: 1. If you want to gain market share you will need to invest in a competitive package, especially through the investment in marketing 2. Market share gains have the potential to generate a cash surplus due to the effect of economies of scale. 3. The maturity stage of the product life cycle is were any cash surplus is most likely to be generated

4. The best opportunities to build a strong market position usually occur during a market‟s growth period.

BCG Analysis of Rolls Royce Market Share High

Low

STARS:

QUESTION MARKS:

Phantom Phantom Extended MS= 45% GR= 14% Growth Rate

Low

MS= 40% GR= 10%

CASH COWS:

DOGS:

Ghost

Wraith

MS= 80% GR= 20%

MS= 15% GR= 4%

 Star: These are branches with a high market share in a fast-growing industry. They are graduated question marks with a market or niche leading trajectory, amongst market share front-runners in a high-growth sector. Rolls Royce Phantom is acquired 45% market share and the growth rate for phantom is 14%.  Question Mark: They are also known as „problem child‟ they refer to business operating in a high market growth, but having a low market share. They are a starting point for most businesses. Question marks have a potential to gain market share and become stars, and eventually cash cows when market growth slows. Phantom Extended has 40% market share and 10% growth rate.  Cash Cow: This is where the branch has high market share in a slow-growing industry. These branches typically generate cash in excess of the amount of cash needed to maintain the business. They are to be "milked" continuously with as little investment as possible; since such investment would be wasted in an industry with low growth. Ghost has the most potential and largest market share 80% and 20% growth rate. 

Dog: These are units with low market share in a mature, slow-growing industry. These branches typically "break even” and are generating barely enough cash to maintain the business's market share. Though owning a break-even branch provides the social benefit of providing jobs and possible synergies that assist other business units, from an accounting point of view such a branch is worthless, not generating cash for the company. Wraith model of Rolls Royce has the lowest percent of share and growth rate which are 15% and 4%.

Porter’s competitive five forces model

Threat of new entrants. This force determines how easy (or not) it is to enter a particular industry. If an industry is profitable and there are few barriers to enter, rivalry soon intensifies. When more organizations compete for the same market share, profits start to fall. It is essential for existing organizations to create high barriers to enter to deter new entrants. Threat of new entrants is high when: 

Low amount of capital is required to enter a market;



Existing companies can do little to retaliate;



Existing firms do not possess patents, trademarks or do not have established brand reputation;



There is no government regulation;



Customer switching costs are low (it doesn‟t cost a lot of money for a firm to switch to other industries);



There is low customer loyalty;



Products are nearly identical;



Economies of scale can be easily achieved.

Bargaining power of suppliers. Strong bargaining power allows suppliers to sell higher priced or low quality raw materials to their buyers. This directly affects the buying firms‟ profits because it has to pay more for materials. Suppliers have strong bargaining power when: 

There are few suppliers but many buyers;



Suppliers are large and threaten to forward integrate;



Few substitute raw materials exist;



Suppliers hold scarce resources;



Cost of switching raw materials is especially high.

Bargaining power of buyers. Buyers have the power to demand lower price or higher product quality from industry producers when their bargaining power is strong. Lower price means lower revenues for the producer, while higher quality products usually raise production costs. Both scenarios result in lower profits for producers. Buyers exert strong bargaining power when: 

Buying in large quantities or control many access points to the final customer;



Only few buyers exist;



Switching costs to other supplier are low;



They threaten to backward integrate;



There are many substitutes;



Buyers are price sensitive.

Threat of substitutes. This force is especially threatening when buyers can easily find substitute products with attractive prices or better quality and when buyers can switch from one product or service to another with little cost. For example, to switch from coffee to tea doesn‟t cost anything, unlike switching from car to bicycle.

Rivalry among existing competitors. This force is the major determinant on how competitive and profitable an industry is. In competitive industry, firms have to compete aggressively for a market share, which results in low profits. Rivalry among competitors is intense when: 

There are many competitors;



Exit barriers are high;



Industry of growth is slow or negative;



Products are not differentiated and can be easily substituted;



Competitors are of equal size;



Low customer loyalty.

Analysis of Rolls Royce according to Porter’s Five Forces Porter’s Five Forces Supplier Selection: Rolls Royce‟s selection policies identify the most globally capable suppliers in a fair, open and transparent way. They seek to foster both competitive and collaborative relationships throughout our global supply chain. These: 

Deliver mutual business benefit;



Minimize the environmental impact of business operations;



Encourage the highest standards of ethical behavior and



Promote sustainability and transparency.

Though Rolls Royce has been involved with Supplier maintenance code but still suppliers have the ability to force them. Recent events of 2012 has shown Rolls-Royce finance chief Mark Morris said the blue-chip company was increasingly being forced to lend money to its own suppliers to help them make ends meet – a situation described as 'lunacy' by campaigners.

Bargaining Power of Buyers: Most of the purchasers of the products of Rolls Royce are big agency or government functions. Therefore, the company can be affected by the purchasing power of buyers. Though, some of their business sectors are specially designed for the high accommodating people like business man, actors or royal family persons. But the company‟s most profitable sector is not affected by the purchasing power of buyers. For example Rolls Royce Cars are for the luxury and thus high expenditure is related with this.

Degree of Rivalry: The degree of rivalry for Rolls Royce is less in the sector of luxury cars. But in Rolls Royce Holdings has a high competitive situation. On the other sectors as Civil and Defense Aerospace has a proportionate rivalry according to the market share.

Threats of Substitute: The threats of substitute are less for Rolls Royce due to the type of their business. Once they are in a business with a company, agency or government the customers are not going to switch easily. Rolls Royce is in a business position where the products decoration are named with quality. As long as the quality and services are same the company has no threat of substitute.

Threats of New Entrants : Threats of new entrants are possible but in a ratio of possibility and improbability the ratio for possibility is very less. Because for the luxury cars Rolls Royce has already got few awards from Britain. And the new entrants would need a huge amount of investment here. Thus, new entrants is possible but probability is very less.

Recommendation Rolls-Royce is rightly proud of what it has achieved. The company has entered into the luxury car selling market in 2003 and already achieved a sense of growing demand. The company could save more of its money if proper investment planning were undertaken. The company has a strong performance with subsiding strategies but yet wasting money on other loss sectors as in the Rolls Royce Holdings business. The business is running under the support of the other profitable businesses. Thus the company needs more finance or need to close the Rolls Royce Holdings.

Conclusion In response to changes within its business environment Rolls-Royce has developed its orientation from that of engineering to become more business and service focused. The organization has had to become much more proactive, dealing with new ideas to create more services and customer focus. In the past, change was rare and slow, the company tended to follow the market trend. The structure of the organization has been realigned to meet the needs of the new way of operating. organizational structures define important relationships within the business, and create a mechanism for meeting business objectives.