SWOT Analysis / TOWS Matrix for Rolls-Royce Holdings (United Kingdom)
Based on various researches at Oak Spring University , Rolls-Royce Holdings is operating in a macro-environment that has been destablized by – increasing commodity prices, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, increasing household debt because of falling income levels,
talent flight as more people leaving formal jobs, digital marketing is dominated by two big players Facebook and Google, etc
Introduction to SWOT Analysis of Rolls-Royce Holdings
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Rolls-Royce Holdings can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Rolls-Royce Holdings, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Rolls-Royce Holdings operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Rolls-Royce Holdings can be done for the following purposes –
1. Strategic planning of Rolls-Royce Holdings
2. Improving business portfolio management of Rolls-Royce Holdings
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Aerospace & Defense sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Rolls-Royce Holdings
Strengths of Rolls-Royce Holdings | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Rolls-Royce Holdings are -
Strong track record of project management in the Aerospace & Defense industry
– Rolls-Royce Holdings is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Rolls-Royce Holdings are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Innovation driven organization
– Rolls-Royce Holdings is one of the most innovative firm in Aerospace & Defense sector.
Digital Transformation in Aerospace & Defense industry
- digital transformation varies from industry to industry. For Rolls-Royce Holdings digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Rolls-Royce Holdings has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Learning organization
- Rolls-Royce Holdings is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Rolls-Royce Holdings is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Rolls-Royce Holdings emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Rolls-Royce Holdings in Aerospace & Defense industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– Rolls-Royce Holdings is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Aerospace & Defense industry. The technology infrastructure of United Kingdom is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Operational resilience
– The operational resilience strategy of Rolls-Royce Holdings comprises – understanding the underlying the factors in the Aerospace & Defense industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Successful track record of launching new products
– Rolls-Royce Holdings has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Rolls-Royce Holdings has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Training and development
– Rolls-Royce Holdings has one of the best training and development program in Capital Goods industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Diverse revenue streams
– Rolls-Royce Holdings is present in almost all the verticals within the Aerospace & Defense industry. This has provided Rolls-Royce Holdings a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
High switching costs
– The high switching costs that Rolls-Royce Holdings has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Weaknesses of Rolls-Royce Holdings | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Rolls-Royce Holdings are -
Increasing silos among functional specialists
– The organizational structure of Rolls-Royce Holdings is dominated by functional specialists. It is not different from other players in the Aerospace & Defense industry, but Rolls-Royce Holdings needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Rolls-Royce Holdings to focus more on services in the Aerospace & Defense industry rather than just following the product oriented approach.
Slow to strategic competitive environment developments
– As Rolls-Royce Holdings is one of the leading players in the Aerospace & Defense industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Aerospace & Defense industry in last five years.
High cash cycle compare to competitors
Rolls-Royce Holdings has a high cash cycle compare to other players in the Aerospace & Defense industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Capital Spending Reduction
– Even during the low interest decade, Rolls-Royce Holdings has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Aerospace & Defense industry using digital technology.
High bargaining power of channel partners in Aerospace & Defense industry
– because of the regulatory requirements in United Kingdom, Rolls-Royce Holdings is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Aerospace & Defense industry.
Employees’ less understanding of Rolls-Royce Holdings strategy
– From the outside it seems that the employees of Rolls-Royce Holdings don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Rolls-Royce Holdings is slow explore the new channels of communication. These new channels of communication can help Rolls-Royce Holdings to provide better information regarding Aerospace & Defense products and services. It can also build an online community to further reach out to potential customers.
Products dominated business model
– Even though Rolls-Royce Holdings has some of the most successful models in the Aerospace & Defense industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Rolls-Royce Holdings should strive to include more intangible value offerings along with its core products and services.
Skills based hiring in Aerospace & Defense industry
– The stress on hiring functional specialists at Rolls-Royce Holdings has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Low market penetration in new markets
– Outside its home market of United Kingdom, Rolls-Royce Holdings needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Aligning sales with marketing
– From the outside it seems that Rolls-Royce Holdings needs to have more collaboration between its sales team and marketing team. Sales professionals in the Aerospace & Defense industry have deep experience in developing customer relationships. Marketing department at Rolls-Royce Holdings can leverage the sales team experience to cultivate customer relationships as Rolls-Royce Holdings is planning to shift buying processes online.
Rolls-Royce Holdings Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Rolls-Royce Holdings are -
Better consumer reach
– The expansion of the 5G network will help Rolls-Royce Holdings to increase its market reach. Rolls-Royce Holdings will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Creating value in data economy
– The success of analytics program of Rolls-Royce Holdings has opened avenues for new revenue streams for the organization in Aerospace & Defense industry. This can help Rolls-Royce Holdings to build a more holistic ecosystem for Rolls-Royce Holdings products in the Aerospace & Defense industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Rolls-Royce Holdings can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Rolls-Royce Holdings can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– Rolls-Royce Holdings can use the latest technology developments to improve its manufacturing and designing process in Aerospace & Defense sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Rolls-Royce Holdings to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Rolls-Royce Holdings to hire the very best people irrespective of their geographical location.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Rolls-Royce Holdings can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Rolls-Royce Holdings to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Use of Bitcoin and other crypto currencies for transactions in Aerospace & Defense industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Rolls-Royce Holdings in the Aerospace & Defense industry. Now Rolls-Royce Holdings can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Rolls-Royce Holdings can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Learning at scale
– Online learning technologies has now opened space for Rolls-Royce Holdings to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Aerospace & Defense industry, but it has also influenced the consumer preferences. Rolls-Royce Holdings can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Aerospace & Defense industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Rolls-Royce Holdings can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Rolls-Royce Holdings can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Developing new processes and practices
– Rolls-Royce Holdings can develop new processes and procedures in Aerospace & Defense industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Threats Rolls-Royce Holdings External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Rolls-Royce Holdings are -
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Rolls-Royce Holdings.
Regulatory challenges
– Rolls-Royce Holdings needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Aerospace & Defense industry regulations.
Easy access to finance
– Easy access to finance in Aerospace & Defense industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Rolls-Royce Holdings can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Rolls-Royce Holdings may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Aerospace & Defense sector.
Increasing wage structure of Rolls-Royce Holdings
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Rolls-Royce Holdings.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Rolls-Royce Holdings can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Rolls-Royce Holdings prominent markets.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Rolls-Royce Holdings needs to understand the core reasons impacting the Aerospace & Defense industry. This will help it in building a better workplace.
Environmental challenges
– Rolls-Royce Holdings needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Rolls-Royce Holdings can take advantage of this fund but it will also bring new competitors in the Aerospace & Defense industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Rolls-Royce Holdings in Aerospace & Defense industry. The Aerospace & Defense industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Rolls-Royce Holdings in the Aerospace & Defense sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Rolls-Royce Holdings high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Consumer confidence and its impact on Rolls-Royce Holdings demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Aerospace & Defense industry and other sectors.
Shortening product life cycle
– it is one of the major threat that Rolls-Royce Holdings is facing in Aerospace & Defense sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Rolls-Royce Holdings Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Rolls-Royce Holdings needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Rolls-Royce Holdings is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Rolls-Royce Holdings is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Rolls-Royce Holdings to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Rolls-Royce Holdings needs to make to build a sustainable competitive advantage.
