Based on various researches at Oak Spring University , Rolls Royce Holdings plc is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China,
increasing transportation and logistics costs, increasing commodity prices, etc
Introduction to SWOT Analysis of Rolls Royce Holdings plc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Rolls Royce Holdings plc can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Rolls Royce Holdings plc, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Rolls Royce Holdings plc 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 plc can be done for the following purposes –
1. Strategic planning of Rolls Royce Holdings plc
2. Improving business portfolio management of Rolls Royce Holdings plc
3. Assessing feasibility of the new initiative in United States
4. Making a Aerospace & Defense sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Rolls Royce Holdings plc
Strengths of Rolls Royce Holdings plc | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Rolls Royce Holdings plc are -
Innovation driven organization
– Rolls Royce Holdings plc is one of the most innovative firm in Aerospace & Defense sector.
Diverse revenue streams
– Rolls Royce Holdings plc is present in almost all the verticals within the Aerospace & Defense industry. This has provided Rolls Royce Holdings plc 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.
Operational resilience
– The operational resilience strategy of Rolls Royce Holdings plc 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.
Learning organization
- Rolls Royce Holdings plc 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 plc is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Rolls Royce Holdings plc emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Rolls Royce Holdings plc has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Aerospace & Defense industry. Secondly the value chain collaborators of Rolls Royce Holdings plc have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management in the Aerospace & Defense industry
– Rolls Royce Holdings plc is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Rolls Royce Holdings plc 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 States 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.
Superior customer experience
– The customer experience strategy of Rolls Royce Holdings plc in Aerospace & Defense industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Rolls Royce Holdings plc has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Rolls Royce Holdings plc 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.
Digital Transformation in Aerospace & Defense industry
- digital transformation varies from industry to industry. For Rolls Royce Holdings plc digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Rolls Royce Holdings plc 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.
Low bargaining power of suppliers
– Suppliers of Rolls Royce Holdings plc in the Capital Goods sector have low bargaining power. Rolls Royce Holdings plc has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Rolls Royce Holdings plc to manage not only supply disruptions but also source products at highly competitive prices.
Ability to lead change in Aerospace & Defense
– Rolls Royce Holdings plc is one of the leading players in the Aerospace & Defense industry in United States. Over the years it has not only transformed the business landscape in the Aerospace & Defense industry in United States but also across the existing markets. The ability to lead change has enabled Rolls Royce Holdings plc in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of Rolls Royce Holdings plc | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Rolls Royce Holdings plc are -
Interest costs
– Compare to the competition, Rolls Royce Holdings plc has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Low market penetration in new markets
– Outside its home market of United States, Rolls Royce Holdings plc needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High bargaining power of channel partners in Aerospace & Defense industry
– because of the regulatory requirements in United States, Rolls Royce Holdings plc 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Rolls Royce Holdings plc is slow explore the new channels of communication. These new channels of communication can help Rolls Royce Holdings plc to provide better information regarding Aerospace & Defense products and services. It can also build an online community to further reach out to potential customers.
High operating costs
– Compare to the competitors, Rolls Royce Holdings plc has high operating costs in the Aerospace & Defense industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Rolls Royce Holdings plc lucrative customers.
Skills based hiring in Aerospace & Defense industry
– The stress on hiring functional specialists at Rolls Royce Holdings plc 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.
Aligning sales with marketing
– From the outside it seems that Rolls Royce Holdings plc 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 plc can leverage the sales team experience to cultivate customer relationships as Rolls Royce Holdings plc is planning to shift buying processes online.
Increasing silos among functional specialists
– The organizational structure of Rolls Royce Holdings plc is dominated by functional specialists. It is not different from other players in the Aerospace & Defense industry, but Rolls Royce Holdings plc 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 plc 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 plc 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.
Capital Spending Reduction
– Even during the low interest decade, Rolls Royce Holdings plc 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.
Lack of clear differentiation of Rolls Royce Holdings plc products
– To increase the profitability and margins on the products, Rolls Royce Holdings plc needs to provide more differentiated products than what it is currently offering in the marketplace.
Rolls Royce Holdings plc Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Rolls Royce Holdings plc are -
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 plc in the Aerospace & Defense industry. Now Rolls Royce Holdings plc can target international markets with far fewer capital restrictions requirements than the existing system.
Building a culture of innovation
– managers at Rolls Royce Holdings plc can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Aerospace & Defense industry.
Leveraging digital technologies
– Rolls Royce Holdings plc 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Rolls Royce Holdings plc 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.
Manufacturing automation
– Rolls Royce Holdings plc 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.
Better consumer reach
– The expansion of the 5G network will help Rolls Royce Holdings plc to increase its market reach. Rolls Royce Holdings plc 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Rolls Royce Holdings plc can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Rolls Royce Holdings plc to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
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 plc 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 plc 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Rolls Royce Holdings plc 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 plc 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 plc 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 plc to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of Rolls Royce Holdings plc has opened avenues for new revenue streams for the organization in Aerospace & Defense industry. This can help Rolls Royce Holdings plc to build a more holistic ecosystem for Rolls Royce Holdings plc products in the Aerospace & Defense industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Rolls Royce Holdings plc has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Threats Rolls Royce Holdings plc External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Rolls Royce Holdings plc are -
Regulatory challenges
– Rolls Royce Holdings plc 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.
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 plc in the Aerospace & Defense sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Rolls Royce Holdings plc can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Aerospace & Defense industry.
Environmental challenges
– Rolls Royce Holdings plc 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 plc can take advantage of this fund but it will also bring new competitors in the Aerospace & Defense industry.
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 plc needs to understand the core reasons impacting the Aerospace & Defense industry. This will help it in building a better workplace.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Rolls Royce Holdings plc business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of Rolls Royce Holdings plc
– 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 plc.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Rolls Royce Holdings plc will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
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 plc can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Consumer confidence and its impact on Rolls Royce Holdings plc 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.
Technology acceleration in Forth Industrial Revolution
– Rolls Royce Holdings plc has witnessed rapid integration of technology during Covid-19 in the Aerospace & Defense industry. As one of the leading players in the industry, Rolls Royce Holdings plc needs to keep up with the evolution of technology in the Aerospace & Defense sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
High dependence on third party suppliers
– Rolls Royce Holdings plc 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.
Weighted SWOT Analysis of Rolls Royce Holdings plc 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 plc 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 plc 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 plc 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 plc 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 plc needs to make to build a sustainable competitive advantage.
