Rolls-Royce: A Manufacturer at Your Service

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Case Details:

Case Code : MKTG208
Case Length : 21 Pages
Period : 1970-2009
Pub Date : 2009
Teaching Note :Not Available
Organization : Rolls-Royce plc.
Industry : Aerospace
Countries : UK, Global

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts

Background Note

In 1884, Henry Royce (Royce) started an electrical and mechanical business, manufacturing products like domestic electrical fittings, dynamos, and electric cranes. In 1899, Royce registered the business as Royce Limited. In 1904, Royce built a motor car called the Royce 10, which impressed Charles Rolls (Rolls), the owner of C.S.Rolls & Co., one of Britain's first car dealerships...

The Bankruptcy and The Turnaround

In the late 1960s, Rolls-Royce became the sole engine supplier for the US-based aerospace company Lockheed's passenger jet, the L-1011 TriStar. Rolls-Royce was required to design, manufacture, and deliver about 150 new aero engines, called the RB211-22.

The RB211-22 was to be the latest engine to be developed by the company in its highly successful RB211 series turbofan aero engine line. The company planned to develop and use two innovative new technologies in the RB211-22, to make it lighter and more fuel-efficient...

A New Direction

In 1996, Rose became the CEO of Rolls-Royce. One of his most significant decisions was to continue and increase the company's investment in developing its turbofan engine line - the Trent engine series. The Trent engine series, developed from the Rolls-Royce RB211 series, went on to become highly successful. A Rolls-Royce employee later said, "The irony of the huge success of the Trent engine is that it grew out of the RB211, the engine which led to the 1971 bankruptcy.

The Strategy For The Future - Turn Service Into A Growth Engine

In the 1990s, competition between GE, P&W, and Rolls-Royce - the three main aero engine manufacturing firms in the world - led to a drop in Rolls-Royce's margins. To counteract this, beginning from the late 1990s, the company decided to focus on increasing revenues from after-sales service...

The Services

In addition to engine repair and overhaul, Rolls-Royce provided engines on lease and also undertook repair of accessory units...

After-Sales Service: The Business Opportunity

Analysts believed that the many unique services that Rolls-Royce provided helped the airline operators, while at the same time, enabling the company to improve operations and increase market share.

Challenges

The main challenge Rolls-Royce faced was in maintaining a technological lead over its rivals. Analysts observed that any technological innovation by one company was matched by its rivals, sometimes, within a period of two years.

Outlook

In spite of the many challenges it faced, the most important reason for the success of Rolls-Royce was its after-sales service. As of 2008, Rolls-Royce's revenue from aftermarket services was about 63% of its total civil aerospace revenues.

Exhibits

Exhibit I: Rolls-Royce: Income Statements (2003-07)
Exhibit II: Various Products of Rolls-Royce
Exhibit III: Global Repair and Overhaul Network
Exhibit IV: Growth of After-Sales Services
Exhibit V: Rolls-Royce: Share Prices
Exhibit VI: Rolls-Royce: Share of After-Sales Revenues in Group Revenues
Exhibit VII: Growth of Market Share and Installed Base
Exhibit VIII: Breakup of Total Sales in 2007


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