Strategic Management analysis in the Aero-Engine Manufacturer

Introduction
In the beginning, I decided to write on the Aero-Engine industry,
there are lot of manufacturers that produce Aero-Engine, but the Aircraft
engine market is already dominated by some individual manufacturers. In
the first section, I will be using the Porters Five Forces model to evaluate
and analysis their position. In the second section, I will choose a key
organization in the Aero-Engine industry and I will also apply the Porters
Value Chain in to it. In the analysis, I will look for some areas of strengths
in the organization that I selected and areas that could be developed. In
the last section, I will analysis the organization using VRIO Framework
and to identify the core competencies and capability.
Porters Five Force Model analysis
I picked the Aero-engine manufacturer that I intend to write on the
essay. As I mention before, there are lot of organization that are
producing or related to the Aero-engine manufacturer. However, the AeroEngine market is already ruled by some several joint ventures and
individual manufacturers. The key successful organizations include GE
Aviation, Pratt & Whiney, MTU Aero Engine, SNECMA, Rolls Royce etc. The
three main major manufacturers in the world which are GE Aviation, Pratt
& Whitney, Rolls-Royce, these three manufacturers are actually producing
the same products, e.g. Turbofan, turboprop, turboshaft engines for
military aircraft and civil aircraft. The three companies listed above, GE
Aviation and Pratt & Whitney are both U.S. manufacturers of Aero-Engine.
The Rolls Royce is the largest non-U.S. producer and these three
organization are all competitors.
The Porters Five Forces Model include Bargaining Power of Suppliers,
Bargaining Power of Buyers, Threat of New Entrants, Substitutes and
Rivalry.
This theory is designed to help analysis the attractiveness of the
industry for some potential entrants and existing competitors when they
are developing their strategy. Each force looks at the fundamental area
affecting how competitive business are within that industry.
I think the suppliers have a quite strong Bargaining Power. Rolls
Royce, GE Aviation are highly standard manufacturer, they aim to produce

highly standard product, so they want some highly standard raw material,
parts to provide their product. The Aero-Engine Manufacturers are looking
for long-term strategic partnership with the suppliers which can benefits
both firm and the suppliers. Also there are not much supplier that can
choose, so the suppliers can use this point to bargain more benefit from
the frim. The switching cost are too high. Uniqueness of services, after
sales service, technician support etc.
The buyers have lower bargaining power in here, as I mention before
there is not much highly standard Aero-Engine Manufacturer in the world,
the buyers dont have so many choices, and some of them may already
build a friendly relationship toward the frim and buyers. In the AeroEngine manufacturers industry, it is not really possible that the buyers can
make the product by themselves, because this industry requires very high
technique workers and technology that a normal company that is not
require and also the Aero-Engine cant be replace by other things.
There is not much pressure in the threat of New Entrants, it is very
difficult to start an Aero-Manufacturer company from zero. The barriers
include the scale of economies, product differentiation, capital
requirement, switching cost, channel distribution developing, government
actions and policies, natural resources, geographic environment etc. There
are lot of problem need to handle if a company want to start in the AeroEngine Manufacturer industry. On the other hand, there might have some
revenge action done by the other organization that dont like you or dont
want you to come here to share the market
Now Aero-Engine Manufacturer is feeling a little bit pressure in
Substitutes. As I mention before, there are a few company are also
producing the Aero-Engine. At this time, the company need to enhance
their quality or lower the price to keep their profit. However, in the AeroEngine Manufacture industry is hard to lower the price of the product, so
they need to enhance their quality or enhance their service to gain more
customers. In short, who have the lower price, higher quality product and
lower user switching cost is the winner in the market.
Currently, the main competitor is GE Aviation, Pratt & Whiney and
Rolls Royce which also have the same kind of product. There are not much
brand or company that could fight with these kind of organization. In a

word, these three company are already dominated the Aero-Engine

Manufacturer market.
Porters Value Chain analysis
In the Aero-Engine Manufacturer industry, I decide to choose Rolls
Royce as the key organization that I will apply the Porters Value Chain to
it.
The definition of value chain is a series of processes or activities
which aim at adding and creating value to a product at every step while
the production process.
The business activities are divided in two activities, primary and
secondary activities. The primary are directly related to the creation of a
service or good. In the meantime, the support activities is help to enhance
efficiency and work for obtain a competitive advantages among peers.
The primary activities include, Inbound Logistics, Operations,
Marketing and Sales, Services. Support Activities include Infrastructure,
Human Resource Management, Technology Development and
Procurement.
Inbound Logistics
Knowing that Rolls Royce already get its own activities and operation
in the manufacturing process of their Aero-Engine, most of the activities
involved or related in inbound logistics heavily. The key of the
implementation to the strategy is to synchronize Rolls Royces current
inventory scheduling controls with the Authen Tecs, in order to
continuously create much more value and prevent slowing down the
process of manufacturing. Because of the Aero-Engine is very large, Rolls
Royce need lot of space to store their product or the raw materials.
Operation
Operation will become the most important keys to change the value
chain framework. Rolls Royce manufacturing operation has mostly
localized in England, because of that, Rolls Royce would not have lot of
delay in its production process. Although the logistics part have less
pressure, but they still need to ensure inventory and scheduling control
are matched.
Outbound Logistics
The Current Outbound logistics are quite solid on Rolls Royce. Because

Rolls Royce most of its operations are also localized in the England, all the
activities related to the storing, gathering or distribution of the finished
Aero-Engine or other product are dont effectively.
Marketing and Sales
As we all know, the marketing and sales are one of the most
important part in the value chain framework. The Rolls Royce invests in
world class quality product and superior customer services than
aggressive marketing. Because of the world class quality product, Roll
Royce dont need to have an aggressive marketing, their customers will
find Rolls Royce actively.
Service
Rolls Royce aims to build customer loyalty through the superior
customers service and after sales service. They promise the provide a
assured manner, delivering service in repeatable to meet and exceed the
customers expectations. Also, the provide tailor made, deliver the correct
combination service lines which can meet each Roll Royce customers
unique business and operational requirements Total Care is a Flagship
brand for Service in Rolls Royce from the Aero-Engine or Civil Aerospace.
This service offering maintenance and integrated set of services covering
the key aspects of the engine management.
Human source management
Rolls Royce play an essential role to ensure that the employees in
Rolls Royce and the whole organization are working together and aim to
create a better future. This would be involves developing, researching and
implementing the best human resource solution and some new idea to the
company. On the more personal level, Human Resource aim to act as a
trusted resource for all the employees looking guidance on everyday
matters. The Rolls Royces Human Resources team is trying to attract the
high caliber Leadership Graduates.
Technology Development
Rolls Royce is very well known for use the technology to invent new
Aero-Engine or to improve their product. There are over 15,000 engineer
working everyday in researching and development. In the research
facilities around the world, all the engineer collaborate on strategic
technology to the future and original technology design to forge new

market trend and set new standard for excellence.

Strength and Weakness
As I mention before, Rolls Royce is a world class brand, they provide
not only the superior product and also unbeatable customer service that
always exceed the customer looking for. Rolls Royce should keep this as
their Strength, However, I think Rolls Royce can try to investigate more
country and develop their market to different country.
Competitive advantage
The Roll Royce is the world leadership in the Aero-Engine industry, the
Roll Royce are leading the industry, other companies need to learn from
them, not even how to make the engine, is the way how to manage the
company. Why the Roll Royce is so successful in the industry. In service,
they provide unique service that other company cant provide, e.g. Total
Care, after sales services etc. In product, they have the best engineer,
doing research and development erveyday, to improve their product to
invest new product. One thing that Rolls Royce do it very well, is they
know the way how to build up a solid relationship with their customers, so
they the customers will come back again and again.
VRIO analysis
The definition of VRIO framework is a part of a larger strategic
scheme of a firm. The strategic process any firm go through begin with a
vision statement, and continue on through internal and external analysis,
objectives, strategic implementation and strategic choices. The firm also
hope that this will results in competitive advantage in marketplace who
operate in. VRIO is stand for Value, Rarity, Imitability and Organization.
Value
Rolls Royce has a leading market position in the civil aerospace
industry. The company provide more than 30types of commercial aero
engines. Including helicopter engines for corporate, reginal aircrafts and
aircraft engines. The company also is the worlds second-largest supplier
of the defence aero engines and one of the most important defence
contractors with 140 customers in more than 100 countries. On the other
hand, Rolls Royce has maintained a consistent strategy to developing
research and development capabilities. Rolls Royce also continually invest
advanced technology to fit the current requirement of customers and

needs in the future. Rolls Royce cooperate with 28 top universities and
technical centers enables that the company can access to world class
research.
Rarity
Rolls Royce has the world best engineer team, providing unique
services and product to the customers. Rolls Royce already invested to
develop the low carbon aircraft engines technology. Also the Roll Royce
Flagship brand, Total Care, is the other superior service provide from Roll
Royce.
Inimitability
The Roll Royce service and product is very hard to imitate or obtain.
Rolls Royce have very high competitive advantage, they can provide
unique that other company or organization that cannot be provide
Recommendation
It is recommended that Rolls-Royce avoid dependence on the civil
aerospace business. Roll Royce should think about offers diversified
products or services for various potential market and keep invest in other
profitable business especially the civil nuclear power market.
Also, it is important that for Rolls Royce to pay attention to external
changes and try to get out in front of developing trends. This be results a
limited gap for new entrants who desire to gain market share and weaken
competitive pressures in another way.

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