Marketing SWOT Analysis of Rolls-Royce Motor Cars

Thesis

By

Huy Do Quang

Submitted in Partial Fulfillment

of the Requirements for the Degree of

Bachelor in Science

in

Business Administration

State University of New York

Empire State College

2017

Reader: Tanweer Ali

ACKNOWLEDGEMENT

I would like to express my gratitude to many great characters that I have had the honor and

luck to meet throughout my life that has led me to this moment. Firstly, I would like to

thank my family, especially my parents for the constant support and the sacrifices they have

made to provide me with a better chance at life. Secondly, I would like to express gratitude

to my master and mentor Ondřej Havlíček who has taught me so many valuable life lessons

and always stands ready to push me beyond my limits. Next, I would like to express my

appreciation to all my teachers that had the patience to teach me, especially professor

Tanweer Ali, who had never hesitated to lend me a helping hand while I was composing

this thesis. Finally, I would like to thank the entire team of Rolls-Royce Motor Cars

Prague, as they have shared their time and information with me, without which it wouldn’t

be possible to compile this thesis.

“Those who have fallen and got up are much stronger than the ones that never fell.”

- Ondřej ‘Sho’ Havlíček

Table of Contents
ACKNOWLEDGEMENT.................................................................................................... 2

ABSTRACT ........................................................................................................................... 5

INTRODUCTION ................................................................................................................ 6

1 THE HISTORY OF ECSTASY........................................................................................ 8

1.1 History ........................................................................................................................... 8

1.2 Battle for Ecstasy 1998 – VW vs. BMW ......................................................................... 9

1.3 Current Status ............................................................................................................. 10

2 PRODUCT ........................................................................................................................ 11

3 MARKETING MIX – EXTENDED 7P ......................................................................... 13

3.1 Product ........................................................................................................................ 14

3.2 Price ............................................................................................................................. 15

3.3 Place............................................................................................................................. 15

3.4 Promotion .................................................................................................................... 16

3.5 People........................................................................................................................... 18

3.6 Process ......................................................................................................................... 19

3.7 Physical Evidence ......................................................................................................... 20

3.8 Summary of Marketing Mix......................................................................................... 21

4 ANSOFF MATRIX ANALYSIS..................................................................................... 23

4.1 Market Penetration ...................................................................................................... 23

4.2 Market Development .................................................................................................... 24

4.3 Product Development ................................................................................................... 25

4.4 Diversification .............................................................................................................. 26

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 4.5 Summary of Ansoff Matrix Analysis ............................................................................ 27

5 PORTER’S FIVE FORCES ANALYSIS ...................................................................... 28

5.1 Bargaining Power of Suppliers ..................................................................................... 28

5.2 Bargaining Power of Buyer .......................................................................................... 29

5.3 Threat of New Entrants................................................................................................ 30

5.4 Threat of Substitutes .................................................................................................... 31

5.5 Competitive Rivalry ..................................................................................................... 32

5.6 Summary of Porter’s Five Forces Analysis ................................................................... 33

6 GLOBAL AND SECTOR-SPECIFIC ENVIRONMENT EVALUATON ................. 35

6.1 General Economic Environment in 2016 ...................................................................... 35

6.2 Automobile Segment .................................................................................................... 37

6.4 Summary of Global and Sector-specific Environment Evaluation ................................ 38

7 FINANCIAL AND NON-FINANCIAL PERFORMANCE ANALYSIS ................... 40

7.1 Performance of Rolls-Royce in 2016 ............................................................................. 40

7.2 Summary ..................................................................................................................... 41

8 CORPORATE AND MARKETING SWOT ANALYSIS ........................................... 43

8.1 Corporate SWOT ......................................................................................................... 43

8.3 Marketing SWOT ........................................................................................................ 47

8.3.1 Online Campaigns ......................................................................................................... 47

8.3.2 Offline Campaigns ......................................................................................................... 52

8.4 Summary of Corporate and Marketing SWOT Analysis .............................................. 54

CONCLUSION ................................................................................................................... 56

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ABSTRACT

Rolls-Royce has touched the skies but also hit the rock bottoms in past. Currently the

British automotive heritage is paradoxically owned by German carmaker BMW. This

research has focused on evaluation of the marketing activities of Rolls-Royce Motor Cars.

Via marketing theories, analysis of current global economy, and interviews of Rolls-Royce

personnel, the thesis has outlined the strengths and weaknesses of the company, plus the

research has revealed some of the incoming opportunities and threats. The attempts of

DNA modification of Rolls-Royce are more than apparent. With new, diverse products in

pipeline, the company is answering to the needs of the market. Moreover, the favoring

global economic situation is providing an opportunity to expand beyond the traditional

markets. The SWOT analysis have identified highly successful synergy with BMW Group

which has fruited record sales in the past years, however, the disunited marketing activities

might not communicate a unified message to the customer, which can ultimately lead to

losses. All in all, the token of the company, Emily - Spirit of Ecstasy is flying towards new

era of Rolls-Royce, hopefully for the sake of the company and automotive history a

successful one.

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INTRODUCTION

Rolls-Royce, the embodiment of British aristocracy and luxury has reported record sales in

the previous years. A 113-years-old luxurious carmaker is rising from the ashes as a

phoenix, after its paradoxical financial issues in the 1970s. Moreover, the British jewel -

acquired by German automotive mogul in 1998 in the so-called battle for Ecstasy - is

reprogramming its DNA and policy to target different clienteles. However, Roll-Royce is

still staying true to its tradition by placing the Spirit of Ecstasy on the top of the hood of

every produced vehicle.

The market of Rolls-Royce Motor Cars (Rolls-Royce) is due to its pricing policy and the

quality of the manufactory considered to be ultra-niche. The volume of cars sold is counted

in lower amounts of thousands. Which is a marginal difference compared to automotive

industry average. However, due to Rolls-Royce´s specific corporate strategy, we might

argue that the company is in an industry of its own. Due to company`s history, a Rolls-

Royce stands for much more than a transportation vehicle, this superficial task of driving

could be replaced by any other vehicle, but one does not buy Rolls-Royce for driving from

A to B. One buys it for the implicit values that a Rolls-Royce stands for, which is almost

impossible to replace.

This thesis sets as its target to analyze and evaluate the corporate and marketing strategy of

Rolls-Royce, mostly via marketing theories. However, we may also identify certain traits

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that do not correspond with the traditional marketing theories. Nonetheless, all of that is

intentional as Rolls-Royce is not aiming for average, classic clientele. Moreover, from the

latest information, we may assume that a new era of Rolls-Royce is coming as the company

is expanding into new segments and corners of the market.

Interviews with Filip Dudys, Marketing Specialist and Jan Suchánek, Sales Consultant of

Rolls-Royce Motors Cars Czech Republic provide deeper insights into the company.

Marketing-wise, Rolls-Royce is struggling to reimagine its own brand to match the current

market of young successful entrepreneurs. But sales-wise, the company is enjoying its best

performance in the 112-year-old history of the brand.

The marketing of Rolls-Royce is delicately designed, crafted and executed flawlessly just

like the end product, the car. Because of the ultra-niche market Rolls-Royce occupies,

every strategy must be calculated to the last step.

Therefore, one must ask, if there is a place and the market for, if bluntly stated, obsolete

values of the previous century and millennium. Considering the facts such as the hastened

pace of life, young impatient millionaires, price tag and the traditional approach to

production, that certainly lowers the potential of scalability. But it seems like there is

definitely enough of space, as Rolls-Royce is beating its own records year after year.

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1 THE HISTORY OF ECSTASY

1.1 History

Rolls-Royce company was established in 1906 by Charles Stewart Rolls and sir Frederick

Henry Royce. The company quickly expanded as its engineering qualities had attained the

reputation of superior quality. Later on, in the 1940s the company has participated in the

development of a jet engine. This development was successful and the company has again

secured for itself a dominant position in the market of engines for defence and civil

aircrafts. (Dudys & Suchánek, 2017)

However, in the 1970s the company, due to mismanagement, ran into financial issues. The

production of the RB211 jet engine was riddled with cost over-runs. Moreover, due to the

fact that the company was securing employment for 80, 000 people, the British government

has decided to save the company and provide it with funding. (Dudys & Suchánek, 2017)

Soon after, the management of the company has decided to split the two main divisions into

two subsidiaries, separating the main income stream of aero engines and the insignificant

car division. Afterwards in the 1980s the British government has sold the holding to the

Vickers group. (Dudys & Suchánek, 2017)

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1.2 Battle for Ecstasy 1998 – VW vs. BMW

In 1998, the Vickers group has decided to sell the car division of Rolls-Royce Motors. Two

major car companies decided to duel for it; Volkswagen and BMW. The logical buyer in

this case seemed to be BMW as it was supplying engines and other parts for the

manufacturing of the cars and was generally tied to the Rolls-Royce to a higher degree.

However, in the bidding, Volkswagen has managed to outbid the BMW, thus acquired, the

majority of the assets of Rolls-Royce, such as production facilities in Crew, vehicle

designs, or the Spirit of Ecstasy. However, due to a clause that stated that in a case of sale

of Rolls-Royce Motors, the parent holding Rolls-Royce PLC would still retain essential

trademarks, such as logo and name. (Beurkle, 1998)

This offered BMW a chance to retaliate and has managed to license the remaining

trademarks from Vickers owners of Rolls-Royce PLC. With such combination, BMW was

crippling the VW from producing new cars, moreover, BMW has decided to cancel its

contract with Roll-Royce Motors, thus leaving Rolls-Royce with no engine supplier. As the

BMW was the main engine supplier of Rolls-Royce for many years, the cars were

specifically designed for its engines, thus replacement would be extremely difficult and

costly as the customer expectations were higher than flawless. Thus, Volkswagen has

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agreed on selling the all of the Rolls-Royce trademarks to BMW, including Spirit of

Ecstasy and the front mask design.

1.3 Current Status

Currently, Rolls-Royce Motor Cars, as a part of BMW Group, offers four lines of cars that

target different segments of the market – Dawn, Wraith, Ghost, Phantom. The lowest line

Ghost starts at 300, 000 USD and the highest line Phantom starts at 420,000 USD.

Moreover, with various vehicle types – Extended wheelbase, Convertible (Drophead),

Coupé – we are reaching ten possible vehicles types. Despite the price tag, Rolls-Royce is

reporting record sales in the latest years.

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2 PRODUCT

Rolls-Royce has its clientele only in the highest spheres of the society, therefore, implicitly,

about 99.5% of the population is disregarded in its strategies. Rolls-Royce cars have been

using engines of BMW prior to the acquisition by BMW. However, after adding Roll-

Royce into the portfolio of BMW, the cooperation reached new levels. A car manufacturer

that has record sales in thousands of units wouldn’t be profitable should it develop all the

cars itself, therefore a cooperation with a bigger car manufacturer that has higher volumes

of sales was necessary. BMW delivered the know-how and the latest technology while

Rolls-Royce provided the partnership with its brand and marketing experiences. The result

is the state-of-the-art vehicle that has no match.

The technology of BMW is generally considered to be the top tier. Therefore, all new

generations of Rolls-Royces are equipped with V12 engines of 6.6 litre by BMW to always

ensure enough of torque and horsepower. Also, the models are using modified platform

developed for the highest BMW 7 series to lower cost per unit. Transmissions are supplied

by ZF a historically strong partner of BMW, again, to lower the cost per unit during

development and implementation.

The brand of Rolls-Royce contains certain historical perception, therefore implementation

of new technologies such as infotainment systems demands higher stress on the setting, so

the overall ambiance of the vehicle wouldn’t be disrupted.

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As stated before, Rolls-Royce offers four main product lines, and with the extensions the

product number reaches ten. Each product is targeted at a different type of customer,

however there is a certain overlap in the categories.

The oldest line being the this-year-discontinued Phantom line. The crown jewel of the line.

Phantom targeted mostly the older demographics as it exuded authority and power. The

smaller Ghost just like Phantom exudes authority and power, however the smaller size

decreases the inflexibility of Phantom, thus targets younger managers. The new lines of

Wraith and Dawn are aimed at younger audience. Moreover, with stylish paintjobs, such

cars can also be viewed as a more viable option for a lady, compared to the authoritarian

Phantom. In addition, the rumors of a new ultra-luxurious SUV Rolls-Royce Cullinan have

been confirmed and the vehicle is supposed to hit the market in 2018, imaginatively the

vehicle will be marketed as a family car.

Moreover, the absolute advantage of Rolls-Royce lies in their unmatchable knowledge of

customization. Rolls-Royce’s Bespoke program offers customization of any kind. The

Bespoke department specializes mostly in paint-jobs, claiming to be able to mix colors of

44,000 hues, exactly the number of hues a human eye can distinguish. Additionally, other

departments do not linger behind and can also fulfill any wish of a customer, from hand-

painted tree ornaments on razor-straight coach line to decorating the dashboard with

wooden ornaments of any choosing.

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3 MARKETING MIX – EXTENDED 7P

The marketing mix theory was propagated by Harvard Business School professor Neil H.

Borden in 1940s. But it wasn’t until the Borden’s publication of “The Concept of

Marketing Mix” in 1964, that the idea spread into a wider academic population. Borden`s

criteria evaluated were: product planning, pricing, branding, advertising, promotions,

personal selling, distribution, handling, packaging, display, servicing, and fact finding and

analysis. Based on Borden’s work, E. Jerome McCarthy, in the 1960s, had developed the

idea of the four P’s by grouping up Borden’s criteria and renaming them to: product, price,

place, and promotion. From its initial conception until now, the marketing mix of four P’s

has been expanded into eight P’s, adding people, as trained employees, process, that refers

to business model, place as the place of business being conducted, and finally physical

evidence as a tangible asset that results from company-customer interaction, for example

packaging. (Gilsten, 2016)

Rolls-Royce’s marketing mix is slightly different from the ordinary as the area of

operations is in an ultra-niche market that doesn’t allow for any mistakes or imperfections.

The current marketing efforts of Rolls-Royce are focused at a minor rebranding of the

company to reach other demographics such as female and young entrepreneurs, needless to

say, they still maintain the high level of customer perception of the brand that is built on

success.

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3.1 Product

The product is an essential part of any company. It must solve a need for the customer, it

must offer a viable value proposition. Even with the best marketing team, a company`s

success is still restrained to the value of its product.

To look at Rolls-Royce’s products as a tangible asset of four wheels that transports its

passengers from point A to point B would simply be wrong. Due to the level of disposable

income of its clients, the products can be tailored to the smallest, tiniest details to ensure

the uniqueness of the products and to give the customer a mean to express their artistic

tendencies. Rolls-Royce offers three types of colours: Standard, Special Order, and

Bespoke.

Also, it is important to mention that the products of Rolls-Royce are supposed to be a

synonym to perfection, therefore certain latest technologies are not implemented as they are

only reliable in 99% of the cases and not in all 100% cases. Therefore, we cannot find

Adaptive Cruise Control or Head-Up Display as they are not perfected enough for the

standards of Rolls-Royce.

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3.2 Price

The price measured in money, which is ultimately a derivation of value for a product, is

one of the first specifications of the target market. However, with the higher price tags, the

quality must be corresponding, thus, pricing strategy must be a careful process.

Rolls-Royce is a product designed for people at the highest levels of the society. With the

lowest price starting at roughly 250,000 USD, the products are not targeted at your average

car buyer. However, due to the amount of possible customization, the prices can skyrocket

and many times the price for customization is higher that the base price for the vehicle.

(CarandDriver, 2016)

3.3 Place

The place of business can provide a lot of indications to a potential customer, for instance

merely mentioning 5th Avenue in New York or Oxford Street in London, one automatically

assumes that the business is selling luxury consumer goods.

However, when it comes to Rolls-Royce, there is a certain disparity between its market

position and its location of showrooms. One would assume that such brand would position

its showrooms accordingly with the price strategy, at notoriously luxurious streets, but the

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majority of showrooms in Europe are located outside the city centers in suburbs, usually

within an already established BMW dealership. When we look at the Warsaw showroom,

which is located on the street Ostrobramska, on the periphery of Warsaw next to

McDonald’s, a certain loss of luxury can be felt. (Rolls-Royce Motor Cars)

One of the few exceptions to this can be Prague showroom, located directly on Pařížská

street, which according to Filip Dudys is the most important aspect of the showroom, as it

directly links the address to luxury.

3.4 Promotion

Promotion in the marketing mix can refer to channels that are used to generate enough of

interest to purchase a company’s product. Nowadays, one of the main channels to promote

a product is the online channels, such as social media and websites. However, when

formulating a promotion strategy, the essential reagent is the knowledge of firstly the

customer demographics and secondly its needs and desires.

However, one can tumble in the pitfalls, due to its excessive focus on its target group and

therefore miss an entire segment of the market. Rolls-Royce is experiencing such situation

now as it placed itself for many years as a partner of successful CEOs and lawyers, but due

to that, they have unintentionally positioned themselves as a vehicle for the older

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generation. But with the era of dotcom millionaires and tech entrepreneurs, the average age

of a highly-successful person with a very high disposable income, therefore potential

customers of Rolls-Royce, have fallen. Also, the society has changed, as there are more and

more self-made millionaire females, who do not desire robust vehicles that exude the

authority of an old, veteran lawyer. Moreover, since the targeted audience of Rolls-Royce is

ultra-niche, the general approaches to promotion would be highly ineffective and

inefficient, hence Rolls-Royce must come up with more elaborate promotions.

Such case is explained by Palm Beach Dealership General Manager Ralph Avila in an

interview for Diana T. Kurylko in 2016. Avila explains the intriguing ways to attain new

customers. Usually, through various events, Rolls-Royce invite current owners and

encourage them to bring their friends. One of such cases is a small posh dinner, where ten

couples that already own a Rolls-Royce are invited and each couple is asked to bring

another couple that doesn’t own a Rolls-Royce to the dinner. (Kurylko, 2016)

Here in the Czech Republic, Rolls-Royce has set its eyes on several high-profile events

such as Karlovy Vary Film Festival as it is a perfect opportunity to introduce their vehicles

to wealthy clients. Certainly, they are sending invitations to visit their booth to all the

celebrities and influencers that are notorious for coming to the events.

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3.5 People

People are an essential part of any company. When communicating with a customer, they

are the representatives of the company and at that moment, for a customer, their statements

may have equal weight as of the statement of a CEO. If a company is to be successful, it

needs to firstly pick only the individuals that fulfils the technical criteria such as expertise

and experience, secondly, they need to have the same cultural mentality as the company.

Nowadays, part of the differentiation strategy is the culture of the company, therefore, an

individual that is not a good fit, cannot be a beneficial asset to a company. Also, the

onboarding process and the training provided to a perspective employee needs to be in line

with the quality of work expected from the employee.

Rolls-Royce is aware of the problems that a bad sales representative can get them into.

Therefore, the training process of Rolls-Royce includes various fields that need to be

addressed to produce a viable sales person and a good representative of the company.

According to Filip Dudys one of the most important aspects of training is sending

candidates to Goodwood, the factory of Rolls-Royce, where the candidates undergo

rigorous training involving topics about the history of the company or manufacturing

processes. One of the necessities is also to create a network that will be personal, effective

and efficient. Therefore, all the trainees are introduced to heads of shops, e.g. paint shop,

wood shop, etc..

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Above all this, the Rolls-Royce teams also need to be aware of social and business affairs.

Mostly because the clients of Rolls-Royce, firstly know each other and secondly, may have

had done business with each other before and may hold grudges to each other, therefore

when planning a meeting or an event, it is essential that two hostile parties wouldn’t meet,

and if issue would arise, an experienced Rolls-Royce employee needs to know how to

resolve it diplomatically.

3.6 Process

Process in marketing mix refers to the entire process that a customer needs to undergo in

order to buy a product. On an e-shop, it might refer to a number of clicks and the overall

user experience. For instance, when you are selling consumer goods, the general rule is to

design a simple process that is effective and time efficient for a customer. However, at rare

occasions, such as suit tailoring, we may implement more “unnecessary” steps for the sake

of making the experience memorable.

With sales in mid thousands globally, we may consider the purchase of Rolls-Royce to be a

special occasion, therefore, we may include more steps in the process in order to make the

experience more memorable. According to Jan Suchánek, the average process from the first

contact to a finished vehicle may take well over a year. With multiple meetings involved

where the customer decides on which model to pick and what specs to buy, the process

indeed is long. Moreover, in some cases, a visit to Goodwood for the client is required as

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they might need an inspiration or to witness the process first-hand so that they can dedicate

their capital to the cause.

When it comes to the automotive segment, the process doesn’t end with the handover of the

keys but continues with the aftersales process. Therefore one needs to keep in mind the

burdens its client is experiencing while having his car serviced or if his car is indisposed.

However, as stated by Jan, the customers of Rolls-Royce are successful people that know

perfection requires time, thus are willing to go through a more tedious process in exchange

for the perfect result at the end. Furthermore, the after sales process of Rolls-Royce is

brought up to a whole new dimension as it monitors various data via an implemented SIM

card in the car, with the consent of the client, in order to prevent any mishaps that may

occur to its clients. For example, the company constantly monitors the battery level, and if

it falls beyond the feasible level, an operator contacts the customer and consults with him

the possible steps to solve the issue, one of which involves an in-house visit with a portable

charger.

3.7 Physical Evidence

This trait usually refers to the services as they are intangible and need a physical proof of

their existence. When it comes to Rolls-Royce, the physical evidence is the vehicle itself.

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Rolls-Royce represents the incarnation of your imagination. Therefore, whatever you can

imagine, the company can deliver. There is a case of a customer, that demanded a hand

spun, embroidered silk with hand painted motives of sakura, unsurprisingly, the company

delivered. In another case, a customer demanded a special diamond painted Ghost sedan,

Rolls-Royce also delivered. Undeniably, the vehicles are used to attract attention and but

they also serve as a testament to the skills of craftsmen in the company.

3.8 Summary of Marketing Mix

As described above, the marketing of Rolls-Royce is a meticulous matter in which a slight

misstep can cause great damages. However, the marketing team of Rolls-Royce has been

more than aware of the threats and is proceeding with high caution. With the company,

whose one of the value propositions offered is the tradition, the new era of digitalization

and electricity may pose a great challenge as it may disrupt the ambiance of the grand old

majestic vehicle.

Moreover, the changes in dynamics of the society are putting more challenges that Rolls-

Royce marketing department needs to confront. The fact that Rolls-Royce is no longer

purchased to be chauffeured in, but rather is considered a daily vehicle for the 0.01% of the

population, also needs to be reflected in the marketing of the company. Moreover, the

current customers, consisting more of females and young entrepreneurs, aren’t as

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conservative as the previous customers, therefore they demand a vehicle that firstly suits

their fashion choices and secondly is a flashier testament of their success. This will put

higher stress on the delivery of the products as the new era of customization will need to

adapt to the changes in the market.

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4 ANSOFF MATRIX ANALYSIS

The Ansoff Matrix was developed by Russian-American H. Igor Ansoff. Ansoff introduced

the concept in 1957 in his paper on product marketing called Strategies for Diversification.

The matrix is used to determine the strategic aim of the company as it maps out the new

and current markets and matches them with the current product lines of the company. The

outcomes are categorized by four categories, here listed from the least risky to the riskiest:

market penetration, product development, market development and diversification (Dziak,

2016).

4.1 Market Penetration

The market penetration strategy is only viable when we possess a product and market for

the product is already developed. This strategy involves utilizing the current channels to

generate higher sales, which ultimately refer to higher income. This strategy can be

achieved by more aggressive advertisement campaigns and sales representatives. It is also

the least risky and costly, however, it may take longer to yield the result compared to other

strategies.

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There are not many pieces of evidence that Rolls-Royce is currently focusing on this

strategy. It is undeniable that the company strives to penetrate the market and attract as

many customers as possible, however currently it doesn’t seem to be its priority.

4.2 Market Development

Market development suggests a strategy when an established company with an established

product is aiming to enter a new market, usually geographically. However, an approach to

target different demographic segments of the market is also plausible. This strategy would

require more capital to enter a new market or to partner up with one of the companies that

are currently in the targeted market and outsource the process to them. Moreover,

demographically-wise, the strategy involves higher marketing costs and the risk of losing

the previous brand perception and be replaced with less valuable brand perception.

A prerequisite for a Rolls-Royce dealership to operate in a country depends heavily on the

economical level of the country. With the general level of wealth rising, more and more

regions seem as a viable option to enter – Hanoi, Vietnam in 2014, Prague, the Czech

Republic in 2015, Phuket, Thailand in 2017. (Tuoi Tre News, 2013) (iDnes.cz, 2016)

(Baker, 2017) Moreover, Rolls-Royce is expanding its current network of showrooms to

better satisfy the needs of its customers. The sixth showroom in Japan and expanded

showroom in Poland are the evidence of such strategy.

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Moreover, the efforts of the marketing department are currently focused on targeting the

younger and female demographics. With the new generation of young self-made millionaire

millennials and women, the potential yield of the customers is so high that the company

cannot afford to ignore the trend and the demographic groups. This aim has been confirmed

by Filip Dudys who also commented that the turquoise painted Rolls-Royce in Prague

showroom firstly demonstrates the eye-catching abilities of the vehicle and secondly shows

the gentler feature of the car thus can be viable for a woman.

4.3 Product Development

The product development strategy consists of delivering a new product onto an existing

market in order to grow. This strategy is well-known in the automotive industry as many

companies are filling out the gaps between their product lines so that they may satisfy as

many customers as possible. Moreover, this strategy does not necessarily involve research

and development of a new product but rather can involve the acquisition of rights to a

product or acquisition of a product and rebrand it.

Rolls-Royce at the moment is developing a new product to enter an already highly

competitive and established market of SUVs. The upcoming of a Cullinan is expected in

2019 according to Filip Dudys, the vehicles are currently undergoing rigorous testing in

extreme conditions in order to satisfy the standards of the clients of Rolls-Royce.

Moreover, the production of Phantom has been discontinued in late 2016 in order to focus

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on the development of a new face-lifted super-luxurious sedan, which according to many

sources is expected to come in 2018. (Brodie, 2017)

Rolls-Royce has established a market of its own in the market of luxurious sedans with the

models of Ghost and Phantom. However, we have witnessed many successful entries to a

new market by Rolls-Royce. The discontinued line of Phantom included the Drophead

model, which marked the re-entry to the convertible market. Moreover, the entry was later

reinforced with the roll-out of a new model Dawn. Plus, the Fastback model of Wraith has

successfully claimed its position on the coupé market.

4.4 Diversification

The strategy of diversification lies in diluting the risk in multiple markets and at the same

time increasing the yield. Conversely it is the riskiest as it often requires the development

of an entirely new market and product, otherwise, the strategy will not be successfully

implemented. There are multiple types of diversification, differentiating on the level of

synergy between the acquisition and acquirer.

In the case of Rolls-Royce, the brand itself can be considered as a diversification strategy

by its parent company BMW. Since BMW was already supplying the engines to Rolls-

Royce, prior the acquisition, certain synergy within the group was expected. Therefore,

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corporate diversification is not expected, but rather focus on the synergy will be the aim for

future by BMW.

4.5 Summary of Ansoff Matrix Analysis

The current strategy of Rolls-Royce can be considered a hybrid between product

development and market development. Rolls-Royce has confirmed that it is developing two

new vehicles to be released by the end of 2018. Plus, the entry to new markets has been

witnessed in previous years, more specifically the Czech Republic, Thailand, and Vietnam.

Therefore, the strategy of the company for the upcoming years can be expected to focus on

the development of new products and seeking new markets globally to enter in order to

generate higher profits.

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5 PORTER’S FIVE FORCES ANALYSIS

Developed by Henry E. Porter of Harvard University, Porter’s Five Forces Analysis assists

during the formation of corporate strategy of a company as it helps the company to map out

the magnitude of the forces that are pressing the evaluated industry based on five variables.

This evaluation can be complementary to the well-known SWOT analysis and the

Competitive Profile Matrix.

Three of the variables refer to horizontal competition: Threat of New Entrants, Industry

Rivalry and Threat of a Substitute. Two of them refer to vertical forces: Bargaining power

of Suppliers and Bargaining Power of Buyers. All the forces described are affecting the

business industry and therefore may decrease or increase the potential profit deriving from

the industry. Moreover, the attractiveness of the market is therefore determined by the

magnitude of these forces, where lower the number, indicates more attractive industry.

(Harper, 2013)

5.1 Bargaining Power of Suppliers

This variable discusses the threats incoming from the supply chain. The suppliers of

components, labour and services can be ones’ competitive advantage but also a great threat

if not properly managed. Due to reliance on the product of other companies, the suppliers

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may hold relatively high power over the company. To avoid or decrease this risk, dilution

of reliance on a sole supplier is necessary, therefore securing multiple channels of supply is

essential. The risk lowering tactics may involve higher and intensive staff training or secure

materials from multiple suppliers.

The bargaining power of suppliers in the case of Rolls-Royce may be lower than expected

as it is part of a larger holding of BMW Group, however, certain elements in the production

of Rolls-Royce are in core competence of the company and not shared across the holding.

This includes the specialist that hand draws the coach stripes or wood trim planner – a

single person in Goodwood factory that fulfils the task. Generally, the employees that are

highly specialized and are focusing on tasks in Rolls-Royce only can pose a high threat to

the company should they leave, as replacing such skilled workforce tends to be difficult.

Moreover, the suppliers of exotic and expensive materials, such as high-premium leather

suppliers for interior or exotic woods for dashboards may hold higher leverage on the

company.

5.2 Bargaining Power of Buyer

The Bargaining Power of Buyer indicates to which degree a buyer can affect your prices to

his advantage. Simply put, it is the changes in products sold in comparison to changes in

price. This variable can be linked to the direct competition (a more perfect competition) on

the market, this places a higher leverage in the hands of the buyer and therefore puts more

29
pressure on the seller. To lower the threat, one should either acquire the possible

substitution or differentiate itself so significantly, that there wouldn’t be any close

alternative to its product.

However, this power can be considered insignificant in case of Rolls-Royce as it firstly

stands almost alone in the market of ultra-luxurious vehicles and has no direct competition

in its price range to compete with. Nonetheless, there exist the alternative of not buying a

Rolls-Royce at all, as it is deemed an unnecessary spending and to be honest, one does not

necessarily need a Rolls-Royce, ever. However, if a buyer decides to invest in a vehicle in

this price range, there aren’t truly many alternatives that can influence the customer's

power. Plus, with the purchasing power of Rolls-Royce’s potential customers, the price is

usually not a significant issue. But, demands of customers on the specifications of the

vehicle might be a bigger challenge to the company, however, Rolls-Royce’s comparative

advantage lies in this field, therefore the severity of the threat is lower.

5.3 Threat of New Entrants

The threat of new entrants suggests the possibility of a new company entering the market.

Industries that yield high return will usually attract new firms. This will create a more

competitive environment and thus will lower the amount profited due to higher cost to keep

and gain market share. There are many specifications that lower the possibility of entering

the market by new competitors, it may include the capital requirements, technological

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requirements – such as patents and rights, or simply the difficult legislation required to

operate. However, that is predetermined by the characteristics of the market itself. But the

strategy to improve company’s position on the market further from the new entrants would

be to acquire the potential entrant itself. In that case, we can hold their patents and know-

hows and control the competitor to be.

Rolls-Royce is a strong brand that is globally recognizable, therefore shall a new player

enter the market, the difficulties he would need to face to steal market share from Rolls-

Royce are tremendous. Also, worth mentioning is the fact that there was a competitor in

past that has already surrendered. Maybach owned by Daimler has left the market after an

unsuccessful attempt to enter the market of the super-luxurious vehicle. (Taylor,

2011)Therefore, Rolls-Royce does not necessarily need to fear a new entrant at the

moment.

5.4 Threat of Substitutes

The variable hints the possible alternatives to products outside the realms of the direct

competitive market itself, usually a substitute providing essentially the same outcome that

can increase the likelihood of the customers not spending money on company’s product but

rather on the alternative. In the banking sector, the substitute to a mortgage can be a loan

from a relative, in the night-life market it can be a bar or a restaurant, or any venue that can

provide entertainment for an evening, even including Netflix for instance. The factors that

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need to be considered are in fact the availability and the level of satisfaction one can get

from the substitute compared to the company’s product.

Rolls-Royce is a vehicle, a beautiful, luxurious, but still a vehicle. Hence, a substitute is the

first impression the entire automotive market. However, the essential part of Rolls-Royce is

firstly the brand and secondly the artistic approach to the product. Moreover, as many of

the cars are heavily customized, the uniqueness prevails and therefore the vehicles can even

appreciate, compared to the accustomed concept of depreciation in the automotive industry.

Thus, a purchase of a Rolls-Royce can also be considered as an investment. Due to that,

there are quite many alternatives, ranging from coin collections, to fund investments, to real

estates or to art pieces.

5.5 Competitive Rivalry

The factor signifies the circumstances dominating the market. The higher the number of

competitors the lower the profit and the lower the leverages the company has over the

market. The best strategy to avoid the costs dedicated to combatting the competition is

again to differentiate significantly enough for the customer to recognize the separation.

Rolls-Royce considers itself to be alone in the market, however, Bentley owned by

Volkswagen can be considered as a slightly indirect competitor or a competitor to be in

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certain segments. With their models ranging from coupés to limousine to high-end

limousines, Rolls-Royce needs to be alert in case Bentley would decide to gain on them.

Plus, with the new SUV model Bentayga, Bentley is, in fact, leading the ultra-luxurious

SUV market compared to Rolls-Royce, however, Rolls-Royce’s Bespoke program and

marketing activities are superior to Bentley’s marketing efforts and their in-house

customization studio Mulliner. Therefore, we may observe certain overlap but, Rolls-Royce

is keeping its distance by focusing their attention on the ambiance of aristocracy and fine

art.

5.6 Summary of Porter’s Five Forces Analysis

Rolls-Royce in certain areas of the supply chain is grasping the longer end of the stick as

they are a part of a larger BMW Group Holding, however, such occurrence is not

necessarily unique as Bentley, the closest competitor to Rolls-Royce is part of Volkswagen

conglomerate. But as Rolls-Royce is to certain degree a stand-alone on the market and

within BMW Group, several parts of the production processes can be a high threat to the

company, such as the suppliers of exotic, unique materials and the high-skilled labor

workers in Goodwood, therefore a prevention of crisis scenarios related to these aspects is

necessary. Moreover, the bargaining power of customers is very low, as firstly, there are no

direct competitors, and secondly, the price is usually not an issue with the customers of

Rolls-Royce. Only the demands of customers on the customization may be a challenge

obstructing the commitment of the customer to the investment in the product. But since

Rolls-Royce is focusing its activities on this sector, the severity of the threat is rather low.

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Similarly, the threat of new entrants remains low, as there are no signs of a new carmaker

to enter the market. Additionally, with the unpleasant experience that Daimler had with

Maybach, we can safely assume that current carmakers will be discouraged from entering

the market. The threat of substitutes can be considered low and high at the same moment.

The components of the final result of Rolls-Royce offers can be substituted to a certain

degree, however not in its entirety. If we break down the elements of Rolls-Royce value

proposition, we may find substitutes to each element, such as funds or real estates to

appreciation factor or chauffeur services and public transport to the transportation feature,

however, put together, there is no substitute available. Finally, the competitive rivalry is

high only with Bentley, but considering the size of the market, we should consider this

competition to be significant. Moreover, with Bentley leading the ultra-luxurious SUV

market with its Bentayga model and the expected Rolls-Royce Cullinan is not coming

before 2018, Rolls-Royce is lacking the edge to compete and will have to retreat to the role

of a challenger in the future. However, Rolls-Royce is superior in other aspects such as

brand strength, marketing activities or customization experience. Therefore, we may

consider Rolls-Royce to be a fairly strong market leader at the moment.

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6 GLOBAL AND SECTOR-SPECIFIC ENVIRONMENT

EVALUATON

The primal predisposition to purchase a Rolls-Royce is the ability to pay for the vehicle,

therefore the outlook for the economy is an essential factor in strategy planning. Shall the

economy raise, the population that can afford a Rolls-Royce would logically rise, therefore

a positive economic output is in the best interest of Rolls-Royce.

6.1 General Economic Environment in 2016

The year 2016 was rather a turbulent year, with all the surprising results from referendums

and elections, the global situation has changed significantly. However, economically the

global growth has reached the rate of 3.1% (BMW Group, 2016, pg. 34). That includes the

lower growth rate in China and the contraction of GDP in Russia and Brazil. In contrast,

USA has recorded a slight growth and Eurozone is experiencing a moderate growth which

can be accounted to the favorable conditions on the job market.

GDP of the Eurozone grew by 1.7%, which is slightly lower compared to the GDP growth

of the entire EU. Additionally, Germany is experiencing the fastest rate in the last half-

decade at 1.8%. Also, France and Italy are experiencing positive economic growth of 1.2%

and 0.9% respectively. (BMW Group, 2016, pg. 34) This can be accounted to the structural

35
reforms that are designed to stimulate the economy from previous years, however, the

strategy is still in the implementation phase.

The events on the British Isles in 2016 were significant due to the Brexit decision. The

expected economic impact is to be felt in late 2017 and onwards. GDP of UK for the

reported year has increased by 2%. Despite the political uncertainty, the household

spending has not shrunk. Worth mentioning is the significantly lower increase in

investments by companies compared to previous year. Moreover, despite the substantial

devaluation of British Sterling Pound, the exports of UK have not reached the level

recorded in previous years by far. (BMW Group, 2016, pg. 34)

On the other hand, China has experienced a weaker year, compared to its previous periods.

Due to the stock market slump, the government has forced measures which were supposed

to stimulate the economy. The GDP level of 6.7% is slightly lower than of previous years,

however, it still falls within the pursued target range of Chinese government. (BMW

Group, 2016, pg. 35)

However, the economy of USA has continued to show a solid performance, growing by

1.6% year-on-year. Noteworthy is the unemployment rate, which fell to 4.9%; lower by

0.4% from previous year. Nonetheless, the domestic spending showed a lower increase

compared to a preceding year. In addition, the exports grew only slightly, which can be

accountable to the strong USD. Due to these developments and in anticipation of a rising

36
inflation, the US Federal Reserve has decided to raise its benchmark on the interest rates in

December 2016. (BMW Group, 2016, pg. 35)

Moreover, the domestic economy of Japan has experienced a slight hiatus as the GDP

raised only by 0.9%, mostly attributed to Japanese government economic stimulus. Also,

the strong Japanese Yen and high debt levels were strangling the export, which can also be

counted as a contributing factor. Nonetheless, the household spending has increased after a

two-year decline; although still at a moderate rate. (BMW Group, 2016, pg. 36)

Furthermore, thanks to its economic reforms, India has reported the growth of 7.0%. Which

marks the third consecutive year, that India has reached the meta of seven percent growth.

Conversely, the economy of Russia and Brazil have failed yet again to extricate themselves

from the economic recession. Although, in the case of Russia the industrial production have

increased, however, the more careful budgeting of Russian households have held down the

economic output at the level of -0.6%. Nevertheless, Brazil economy is struggling in

greater depression as the GDP has fallen by 3.4%. (BMW Group, 2016, pg. 36)

6.2 Automobile Segment

We have witnessed the positive trend in the latest years towards the automotive industry.

Worldwide registration of passenger cars grew by 5.9%, reaching 87.4 million newly

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registered cars. A significant rise was experienced in China, where the registration of new

vehicles has reached the level of 24.1 million, equaling in 17.4% growth compared to 2015.

Moreover, the European population did not idle, as they have registered 15.2 million of

new vehicles, signifying the increase of 6.6%. The high increase can Europe-wide can be

attributed to strong performing Spain and Italy, which experienced a double-digit increase

of 16.2% and 10.9% respectively. (BMW Group, 2016, pg. 37)

Conversely, United States have experienced only a slight increase of 0.4%. On the other

hand, Japan was unable to turn around the negative trend experienced in a previous year, as

the market has contracted by another 1.6% which equals to 4.8 million vehicles. Moreover,

Russia has faced a drop of 4.7% (1.2 million units) and registration in Brazil fell down by

staggering 32.2% (1.7 million vehicles). (BMW Group, 2016, pg. 37)

6.4 Summary of Global and Sector-specific Environment Evaluation

The global economy seems to have calmed down after the crisis of 2008 and is increasing

its rate of growth. The western economies, namely the United States and Europe are

experiencing positive growths, although the rate is rather moderate of around one to two

percent. The biggest uncertainty in Europe in form of Brexit has not cleared up by the end

of 2016 as the GDP has raised by 2%. But conversely, the exports of UK in 2016 have

failed to match the level of export from the previous year by far, despite the depreciation of

UK Sterling Pound. The Chinese economy is slowing down, ending the year with the

38
growth of 6.7% which is slightly lower than preceding years. Similarly, India has

experienced the third consecutive year with the GDP growth of 7% or higher. On the

contrary, the Japanese economy is in an almost standstill. Besides, Brazil and Russian

economy continue to fall, however, at a slower rate.

The automobile segment is increasing as the statistics show the increased registration of

vehicles by 5.9% globally. This result is mostly driven by China (17.4% increase) and

Europe (6.6% increase), in which Italy and Spain are experiencing double-digit increase.

Conversely, Russia, Japan, and Brazil are experiencing a contraction of the market. In case

of Russia and Japan, it is 1.6% and 4.7% respectively, however in case of Brazil by 32.2.%

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7 FINANCIAL AND NON-FINANCIAL PERFORMANCE

ANALYSIS

The strong year of 2016 has yielded high performance in every aspect of the parent

carmaker BMW. The centenary year of BMW was marked with historic successes of the

brands. Rolls-Royce has enjoyed the second-best performing year in the history of the

brand. Moreover, the carbon dioxide (CO2) emissions of the entire fleet offered by BMW

Group has decreased slightly compared to the previous year, finishing at 124 grams

CO2/km which means a decrease of 2.4% compared to 2015. (BMW Group, 2016, pg. 39)

Moreover, the production facilities in Goodwood have high-faith of the management board

as the BMW Group is planning to invest additional funds to expand the manufacturing

plant. Furthermore, another facility dedicated to technology and logistics was opened in

Bognor Regis, near Goodwood, was opened in January 2016. (BMW Group, 2016, pg. 47)

7.1 Performance of Rolls-Royce in 2016

The production of Rolls-Royce vehicles has stopped at 4,179 vehicles, an increase of 8.6%.

The similar growth was also expected in the sales department of Rolls-Royce as it has

40
managed to reach the growth of 6.0%, equaling at 4,011 vehicles sold totally in 2016.

(BMW Group, 2016, pg. 42)

The strong performance of Rolls-Royce was mostly driven by the newly introduced vehicle

Dawn in mid-2016. The company-wide sales volume has increased by 6.0%. Despite the

decrease in the sales of Phantom-line (-20.3%; 389 vehicles sold; all body-types included)

and Ghost-line (-27%; 1,175 vehicles sold). However, the sporty lines of Wraith and Dawn

have galloped up by 45% stopping at 2,447 sold vehicles, out of which 1,164 can be

attributed to hardtop Rolls-Royce Wraith and 1,283 to its convertible sibling line Rolls-

Royce Dawn. (BMW Group, 2016, pg. 44)

7.2 Summary

The year of 2016 was a strategic year for BMW Group due to its centenary year and for

Rolls-Royce as it experienced a drop between the years and 2014 and 2015 and therefore

needed a new effective propeller, which was introduced in the form of Rolls-Royce Dawn.

Moreover, the second-best year in the history of Rolls-Royce has brought new changes,

included a new facility in the vicinity of Goodwood, focused on technology and logistics.

Sales and production-wise Rolls-Royce is experiencing somewhat divided performance as

sales of its limousine models Phantom and Ghost have dropped over 20%, however the

sports Wraith and Dawns even out the difference, which leads to the overall increase of 6%.

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Noteworthy is the successful decrease of carbon dioxide (CO2) fleet-wide. This may be

attributed to the new electric engines offered in 7, 5 and 3 series and in i3 and i8.

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8 CORPORATE AND MARKETING SWOT ANALYSIS

Rolls-Royce as the leader in custom-tailored vehicles has perfected its signatures through

many decades is entering a new challenging era, as it needs to attract new customers

outside the classic realms of old conservative lawyers and CEOs. However, as Mercedes

strives to set a benchmark for cars, Rolls-Royce makes every effort to be the figurative

ceiling of the automotive market, which in today’s world of possibilities is not an easy

mission to uphold. Therefore, the marketing efforts must address this issue.

SWOT analysis introduced here will be two-fold. The first part will be addressing the issue

related to corporate governance, the synergy within BMW Group and comparing it to the

closest competitor Bentley. The latter part will put higher stress on the analysis of the

marketing efforts of Rolls-Royce online and offline. Attempting to identify strengths and

weaknesses and propose a comprehensive strategy to fix or strengthen the position of Rolls-

Royce.

8.1 Corporate SWOT

The BMW Group is comprised of its core brand BMW, and its acquisitions of MINI and

Rolls-Royce. Each of the brands has a different set of ideal or potential customers,

43
however, certain inter-brand cannibalization is expected and unfortunately cannot be

avoided altogether.

The Rolls-Royce acquisition on the beginning of the previous decade was rather a formal

step as Rolls-Royce and Bentley were already using the crown engines of the Bavarian

carmaker. However, with the inclusion of the traditional English brand into the German

household, the true potential of synergy has exploded.

While BMW has firstly, a wide fleet of lines, ranging from small city cars to big SUVs and

long limousines with powerful engines, and secondly high volume of sales counting in

millions. Rolls-Royce focuses only on the highest end of the market, and conversely MINI

only on the segment of city cars. For these smaller boutique manufacturers, it would be

highly costly to research, design and produce a vehicle on their own, therefore a partnership

with bigger concerns is necessary to generate satisfying profit. Such joint ventures are not

an unusual sighting in the world of automotive, examples are witnessed in PSA, Chrysler-

Fiat or Volkswagen.

The general approach to synergy in the automotive sector is to develop as many parts for as

many vehicles possible, in other words, to spread the cost per unit. This can be observed for

instance in the infotainment system of a vehicle.

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As it is highly costly to develop and maintain the software for navigation and on-board

entertainment, the car manufacturers often use the same infotainment system through many

of lines and even brands. Therefore, if we look at Volkswagen concern brands, we may

identify the identical software in Škoda, Volkswagen, Audi, and Bentley, although with

different control panels or graphics to match the quality and ambiance expected from the

brand, however, the core of the system is identical. BMW Group is utilizing the same

approach as the infotainment system of BMW, MINI, and Rolls-Royce vehicles are in fact

the same. A similar approach is applied in the case of driver’s assistance system or the

concierge online service.

Moreover, the platforms, skeletons of the vehicles are built as solely as a modular platform.

This increases the flexibility of the platform and offers the potential to utilize the platform

across brands with similar car dimensions. The current Rolls-Royces share the platform

with 7-series BMWs. Technical aspects of the upcoming Cullinan have not been revealed,

but one may assume that the platform and engines will be closely related to the ones of

either X5 or the rumored X7.

On the other hand, Rolls-Royce brought into the wedlock with BMW a highly sophisticated

know-how of custom tailoring the vehicles to customer’s wishes and most importantly

monetizing on the customizations. It is not uncommon that carmakers are charging

incredible amounts for the smallest customizations possible. For instance, Porsche charges

45
approximately 2,500 USD for painting the ventilation covers to match the exterior color of

the vehicle. (Miller, 2016)

However, Rolls-Royce can beat any carmaker with the menu of customizations. It is not

uncommon to have a family crest embraided on the headrest, tree specific wood paneling or

mixing the exact color of customer`s choosing, plus if it is a unique color, Rolls-Royce

often names it after the customer. Such case is the story behind the color Fux Candy Red,

which is dedicated to philanthropist Michael Fux only. (Rolls-Royce Motor Cars, 2017)

Moreover, another recent case occurred as a customer demanded a highly exotic paint job

on a Rolls-Royce Ghost, which was priced more than the car itself, as it was made of

grounded diamonds, mixed in with the paint; the exact figure or the owner were not

disclosed. The trend in car customization is clearly observed with the highest lines of the

mainstream carmakers. (Ewing, 2017) For instance, in the case of BMW, the new 7-series

does not hesitate to charge over 500 USD for ceramic detailing of controls of the

infotainment system. (BMW)

In addition, the partnership with BMW has helped the Rolls-Royce to pass the limits of

fleet-wide CO2. If Rolls-Royce would be a standalone carmaker, with the high-volume

engines in all of its vehicles, the company would be bound to fail environmental regulations

of EU or pay high fines for CO2 emission of its fleet in the offering. However, the low-

volume and hybrid engines in BMW brand counterweigh and lowers the threats of fines

from failing to comply with EU regulations.

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To summarize, the brands within BMW Group are at the moment highly synergized as

BMW and Rolls-Royce share technology, CO2 emission levels, research and development

facilities and the manufacturing plants of BMW, whereas Rolls-Royce and MINI offer

strong brands that are built around lifestyle and fashion statements. Moreover, Rolls-Royce

has brought in the know-how of monetizing on the customizations and thus extracting as

much money as possible from one vehicle. Therefore, there are not many scenarios in

which this course of actions would fail. However, one should never dwell on the past and

has to strive forward, which BMW Group is constantly accomplishing.

8.3 Marketing SWOT

Marketing of luxurious goods has its specifics that in some cases might be counter-intuitive

to the classic theories. As the luxurious goods are very heavily based on the brand

reputation and image, the protection and proper communication of brand values is essential.

Rolls-Royce has been in the territory of ultra-niche since its birth, therefore the company

has great experience with such marketing.

8.3.1 Online Campaigns

The traditional companies are usually struggling with presenting their message and mission

in the world of online and social media. It is not uncommon that companies in pursuit of

47
making a viral video create a disparity between the original mission and the online

contents. Moreover, in the world of social media one should be highly alert as any flaws

have much higher potential to become viral and ultimately a PR and marketing nightmare.

Cases of Tesla malfunctions or United Airlines are the only tip of the iceberg.

There is no denying that Rolls-Royce is attempting to modify its DNA in order to match the

demands of today’s market. Firstly, Filip Dudys has already confirmed this theory and

secondly, it is clear with the visuals that Rolls-Royce is promoting its latest vehicles. For

instance, in 1986 a paper advertisement for Rolls-Royce Corniche shows a couple

presumably husband and wife in their fifties. The old advertisement depicts family

orientated visual. (Sean, 2014)

However, in today’s advertisements for the Dawn or Wraith, the essence of the message has

shifted, we may observe much younger couples, in their thirties at most with no apparent

marital ties to each other. There is also the general ambiance of sex, seduction, and

eroticism presented in the short clips as well as authority, success and power.

In addition, one of the movie clips for Ghost shows a high-manager being chauffeured in a

conservative black Ghost. Subsequently, there follows a sequence of a short race with a red

Roll-Royce Ghost, which is then revealed that it is driven by a woman. Such

advertisements were not presented before and it truly matches the course of actions that

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Rolls-Royce is attempting to expand the audience to attract young and female customers.

(Rolls-Royce Motor Cars, 2014)

Rolls-Royce has direct control over subsidiaries in the United States, Russia, and China,

however the rest of its 140 dealerships are authorized dealerships operated by independent

car dealers. In the Czech Republic, Rolls-Royce brand is operated by CarTec Praha, the

biggest authorized BMW dealer. Therefore, the dealers are usually handling the marketing

activities themselves, however, are closely monitored by the brand to avoid any damages

inflicted by the dealer to Rolls-Royce brand. (Dudys & Suchánek, 2017)

When assessing the online presence of Rolls-Royce, the brand is on all major social media

channels, such as Facebook, Twitter or Instagram. The respective countries own a city

dedicated Facebook page, such as Rolls-Royce Motor Cars Prague or Rolls-Royce Motor

Cars Warsaw.

The strength of the brand online is undisputable, the number of likes and follows across

social media platforms are counted in tens of millions of the main Rolls-Royce page, while

the performance of the pages dedicated to cities varies. The distribution of online marketing

into the cities may be a great strength and opportunity for Rolls-Royce to approach the

customer firstly in their native tongue and secondly localized campaigns. However, such

distribution may pose a great threat to the quality of the marketing departments may vary.

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For instance, the marketing department of Prague dealership owns pages on Facebook and

Instagram, but their colleagues from Warsaw only own a page on Facebook. However,

none of them own a Twitter account. Considering the amount of the population on these

social media channels, one should not disregard the presence on any of them. Also since the

possibility to post to all controlled channels with one click does exist in the software, such

as is the case of Instagram, which allows posting the same photo to Twitter, Facebook, and

Instagram with one click, there is no reason to not establish an extra channel.

However, when we consider the quality of the posts, one would be surprised by the great

disparity of the quality. The main page of Rolls-Royce is creating contents of its own, with

professionally produced videos and photos. The city dedicated pages usually share or repost

the main page`s posts, but should also create original posts of their own to create a

character of localization, not only translating the original posts. The dealerships in Prague

or Geneva are engaging the audience via reposted professionally produced videos of main

Rolls-Royce page, but also through quick snapshots and authentic posts of their own.

Conversely, Warsaw dealership has majorly translated posts of the main page and Munich

dealership creates all of its posts in English, the non-native language of Germany.

Moreover, when we analyze the hashtags, Rolls-Royce does not leverage its strong

trademarks online. Hashtags should serve as a brief but accurate phrase that depicts the

photo and the user can discover more posts though the hashtag, thus implicitly discovering

similar posts. While many of the dealers do not fail to mention #Rolls-Royce or #Rolls-

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Royce[City]. However, Rolls-Royce possesses many trademarks that could be easily turned

into a hashtag, for example, the Spirit of Ecstasy or their Bespoke program are suitable

candidates, because when one types in Spirit of Ecstasy, the top performing posts are not

from any of the Rolls-Royce official pages but rather of individuals.

The utilization of hashtags would create a better interconnected network across countries

and dealerships on social networks. But such network is difficult to build since Warsaw or

Hanoi, do not use hashtags at all. However, Prague dealership attempts to create the

network via utilization of large number and a variety of hashtags, including the ones that

aren’t necessarily directly connected to the brand but has the potential to draw attention of

further audience, such as #Luxury or #Supercars.

The discrepancy in the quality of the posts or the style of the posts may point towards a

divided and schizophrenic company for an outside customer. Plus, the lack of the hashtags

lowers the possibility and potential of the posts to be detected by the user, thus lowers the

overall presence on the social media.

All of the above mentioned flaws and disparities may be effectively removed if Rolls-

Royce would develop a comprehensive guide on how to handle and operate the social

media marketing channels. While the trainees do have to undergo a rigorous training in

Goodwood, about the product, one more lecture on handling the trademarks of the brand on

social media channels can be easily implemented.

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8.3.2 Offline Campaigns

Rolls-Royce’s offline campaigns are very limited, as it would be highly cost ineffective to

do massive campaigns throughout cities or countries as the number of perspective

customers is very low. Thus, Rolls-Royce prefers small highly-targeted events, where the

company can approach a customer directly.

More importantly, Rolls-Royce focuses on building their brand awareness, usually through

various exceptional accomplishments of the company. For example, the diamond lacquered

Rolls-Royce Ghost gained a lot of media attention mostly due to price and its extraordinary

paint job. Through that, Rolls-Royce started pushing the campaign and providing to every

media outlet an interview and description of the process to demonstrate the extraordinary

that the carmakers reaches for. (Ewing, 2017)

Or another case that had high media coverage was the record-breaking order of 31 Bespoke

customized Rolls-Royce Phantoms by Hong-Kong entrepreneur Stephen Hung. Out of

which 30 were for his hotel made in red and the last one for his wife, painted in pink.

However, as the hotel Louis XIII is attempting to be the most extravagant and luxurious

hotel on the planet, therefore the fleet of Phantoms would complement such aim rather

perfectly. As the stakes of Rolls-Royce brand name was higher than at the usual order,

Rolls-Royce has decided to firstly, design the garages for the fleet and secondly to provide

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training for the drivers in order to eliminate any flaws of the vehicle that reckless driving

might pose. (Zhang, 2014)

Rolls-Royce due to its brand and history tends to attract people. Therefore, such leverage

can be utilized in forms of partnerships for multiple events. Given the target demographics

of Rolls-Royce, an opportunity in form of posh sport events presents itself, perhaps a

partner for golf tournament or create an event in similar style of Mercedes Prague Fashion

Week.

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8.4 Summary of Corporate and Marketing SWOT Analysis

Rolls-Royce with the partnership of BMW is creating a strong syndicate that offers high-

end premium vehicles for all purposes. With the technology supplied by BMW, Rolls-

Royce does not have to focus on the technology of driving but can solely dedicates its

resources on design and development of their range of customization. However, the

weakness of Rolls-Royce might lie in the old, un-facelifted models as the sales of Phantom

and Ghost have dropped by more than 20%. The opportunity of Rolls-Royce may lie if

BMW Group would acquire another luxury carmaker with different type of fleet offered,

but with a strong brand. Perhaps Aston Martin might be a good potential target for

acquisition, as the company has been unprofitable in the past several years. (Pitas, 2016)

Moreover, Rolls-Royce may develop a new opportunity in targeting new segments of the

luxury market such as yachts or clothing. However, that is still slightly stretched.

Nonetheless, the biggest threat might be in form of VW conglomerate. Their subsidiary

Bentley has already made the first move into the segment of luxury SUV with their

Bentayga, therefore Rolls-Royce must enter the market from the position of a challenger,

which is always a difficult position to start with.

Marketing-wise, Rolls-Royce is struggling to communicate and match the corporate values

of tradition to the hectic world of today. With the online campaigns, Rolls-Royce is

fragmented and does not present a unified front that approaches a customer. The

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discrepancy among the dealerships social media channels creates disruption into the

attempted perfection of the brand. Moreover, why to create localized versions of the

channels if one does not posts localized contents or posts in non-native language of the

country? Furthermore, the legal battle for the brand at the brink of millennium by BMW

and VW was for mostly the trademarks of the company, yet the said trademarks aren’t

currently leveraged effectively in the online environment, lowering the potential for brand

presence on social medias. However, such matters can be swiftly solved with an instructive

manual or with providing trainings for the dealerships. However, the change of pace from

the family styled Rolls-Royce Corniche advertisement to advertisements charged with sex-

appeal cannot go unnoticed. Moreover, the offline campaigns are led in forms of car

expositions, such as in Geneva or via viral incidents such as Stephen Hung’s record

breaking order or the extraordinary diamond paint job. However, also the events are heavily

leveraged as they provide better platform to approach the customer directly, therefore

should be greatly utilized in future too.

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CONCLUSION

Rolls-Royce throughout its 113-year-old history has touched the skies but also

unfortunately, hit the rock bottom. However, despite all its letdowns, the brand has never

lost its gloss and the perception of an ultra-luxurious vehicle.

The British jewel of automobile industry is currently being owned by a German carmaker

originating from Munich. BMW has acquired Rolls-Royce early in 2000 in a rather

complicated manner. Despite its ties to the company prior to the bidding war, BMW has

lost to VW. However, due to legal loopholes BMW was able to cripple production of Rolls-

Royces and force VW to renegotiate sales of the company into the hands of BMW.

Ever since BMW has acquired the company, it has broken multiple sales records and is

collecting awards for technical and design efforts worldwide. Moreover, under the wings of

BMW, Rolls-Royce is focusing its efforts on modifying its own DNA in order to match the

current automotive market.

Marketing mix of Rolls-Royce indicates great combination of separate components that

ultimately provide a unified message to a customer.

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The product Rolls-Royce offers is rather intangible and could be also classified as a service.

The underlying engine technology in the vehicle is not rather ordinary. Despite its high-

volumes and horsepower outage, the engine can be easily replaced or replicated by

competition, for instance W12 of VW concern. However, the true comparative advantage

that Rolls-Royce possesses lies in the know-how of customer care and the customizing

services provided to the customers. The Bespoke program of Rolls-Royce has no match and

even the Mulliner program of Bentley or Special Operations of McLaren can do so little

compared to Bespoke program.

Price-wise, Rolls-Royce has never pretended to hide their aspiration to become one of the

most prestigious carmakers, in fact their whole marketing activities are built around that

aim. Therefore, the price tag must reflect such aim. As price-tag usually reflect prestige and

uniqueness. The prices for Bespoke customized Rolls-Royces vary greatly based on the

materials used and the customizations ordered. However, lowest base-line Rolls-Royce

already starts at staggering 250, 000 USD.

As it is an accustomed tradition in automotive industry, the place of business still prevails

in physical world. However, BMW has been making efforts in digitalizing the sales

processes, but given the price-tag of the vehicles, online purchase of a car will be rather a

rare occasion. Nonetheless, Rolls-Royce is usually utilizing an already established network

of BMW dealers in order to enter the market. However, such approach might be a danger as

that may lead to less appealing locations for showrooms, e.g. Warsaw dealership.

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Promotion-wise, Rolls-Royce utilizes direct approaches in order to increase the effectivity

of the activities. Therefore, it is not unusual for the dealership to organize or cooperate on

production of an event to attract new customers. Palm Beach dealership admits to inviting

customers to posh dinners, while Prague dealership is planning to utilize the famous movie

festival in Karlovy Vary.

The training process of Rolls-Royce is rigorous, as it contains a week-long training in

Goodwood, that include lectures on history and diplomatic methods. Moreover, the

employees do need to pay attention in social affairs in order to eliminate any discomfort of

their customers. Furthermore, during the training in Goodwood, candidates are establishing

a network for future cooperation within the company, ultimate to better accommodate the

customer.

Process of ordering and delivery of a vehicle is rather mundane and tedious. However,

Rolls-Royce has successfully managed to convert that rather ordinary process into a

celebration. As sales consultants guide the customer through color pallets or seat stitching

possibilities, the memory of a fond process of creating a vehicle is built and thus customers

have deeper ties to the vehicle, that bought out of stock.

The physical evidence of the British carmaker is clearly the vehicle itself. However, the

company does point out the details of the vehicle in order to increase the magnitude of such

details. The perfect leather seats that are crafted from young bulls, the impeccable stitching

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or hand drawn coach line straight as a razor edge. Such details once pointed out gain

noteworthy amount of recognition of the crafts.

Moreover, the Ansoff analysis points out to a dual strategy for the upcoming years.

Considering all the indications surrounding Rolls-Royce, it seems that the company is

undergoing the strategy of Market and Product Development. As the market is rather small,

and the already established awareness that brand possesses, market penetration strategy

wouldn’t be the most effective strategy. Similarly, diversification would pose a risk of loss

of brand identity and values. Therefore, the most valid strategy is in form of market and

product development. Due to the global rise of wealth, demographic changes in the richest

spheres and the shift of preferences on the market, Rolls-Royce has reacted by entering

multiple new markets in previous years, such as Prague or Hanoi and is focusing on

developing and delivering a new vehicle high-sided type of vehicle on the market to

challenge Bentayga of Bentley.

Moreover, the Porter’s Five Forces analysis has confirmed the generally known

assumptions. Rolls-Royce is utilizing the size of BMW Group to negotiate more favorable

conditions from the suppliers, however as a sole buyer of exotic materials within the group,

Rolls-Royce must be aware of the threats by suppliers. Moreover, the customer bargaining

power pose rather little to no threat to the company as mainly, customers of Rolls-Royce do

not bargain about a price. Similarly, the emergence of a new ultra-luxurious carmakers is

rather improbable as the market is rather small and secondly, one must possess great brand

59
in order to compete on such market, Mercedes has learned its lesson with its Maybach

experiment.

However, the threats of substitution and current competition shouldn’t be taken lightly.

Mostly, as Rolls-Royce is an unnecessary spending fueled by desire, therefore a simple

option that could lose the potential customer is to invest more rationally or to not invest

money at all. However, values of unique Bespoke Rolls-Royces, such as Zenith Collection

are expected to appreciate. Moreover, the competition is scarce however powerful. Bentley

has already launched its ultra-luxurious SUV Bentayga and are currently monopolizing the

market. Thus, Rolls-Royce will have to develop a challenger strategy in order to

successfully introduce and sell Cullinan.

Moreover, the predispositions for a Rolls-Royce to succeed is the general level of wealth of

the population. With the rising levels throughout the world, the potential market for the

company is constantly expanding. Furthermore, the general trend suggests the rise in

automobile registration worldwide, however, Russia and Brazil are exceptions as their

economies are shrinking and thus the number of registered cars year-to-year falls

accordingly.

Furthermore, the centenary year of BMW was one of the most successful if not the most

successful year in the history of the group. The group has managed to lower fleet-wide

CO2 emission levels by 2.4%. Moreover, the latest excellent performance of Rolls-Royce

60
has not gone unnoticed and therefore a new technology and logistic center was opened in

Bognor Regis, near Goodwood.

With 4,179 vehicles produced and 4,011 vehicles sold, the year 2016 was the second most

successful year in the history of the brand, inferior only to the year of 2014. Moreover, the

performance was heavily driven by the new lines Wraith and Dawn as they accounted for

more than 60% of the production.

Furthermore, the synergy between the brands under the house of BMW Group seems to be

going flawlessly. The technology and knowledge sharing such as platform development

and customization know-hows is substantially lowering the costs per unit. However, the

synergy cannot reach the levels of competitive VW concern as it owns more brands with

overlapping lines. Plus, the low volume segment of BMW is helping Rolls-Royce to pass

the regulatory restrictions on CO2 emissions placed by the EU.

Online marketing-wise, the Rolls-Royce is struggling to transfer a unified message to

customers in the online environment. Moreover, with major changes that Rolls-Royce is

undergoing, one cannot blame them for lacking the capacity to unify their marketing

activities. The new marketing campaigns are targeting different groups compared to

previous years. Due to rather fragmented corporate structure, the brand does not have full

control of dealerships, beside USA, China and Russia, where Rolls-Royce has direct

subsidiaries. Due to the lack of control, the online marketing activities vary to rather great

61
extent. As some dealerships are creating localized contents of their own and others only

translate from the original page of Rolls-Royce. The unification of marketing activities can

be achieved via providing a unified marketing training. Moreover, the brand owns multiple

strong trademarks but does not leverages them in the online environment, e.g. lack of

#BespokeProgram #SpiritofEcstasy. Conversely, the offline marketing activities must vary

greatly as they need to be tailored and localized to the region. However, common trait of

the campaigns consists of highly-targeted activities. Moreover, the company itself is

proficient in leveraging and controlling viral incidents, such as diamond dust paint-job or

the Stephen Hung’s order.

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