Strategy Analysis: Rolls-Royce Motor Car Limited Uk

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2.1.2 Economic aspect

The economic state of a nation affects the profitability and the strategies of a company both in the short run and the long run. Economic aspects include inflation, exchange rates and taxes. According to BBC (2015) there are a lot of positive sighs in the UK economy. Price water house coopers predict the UK economy will be a 2 trillion economy by 2017 and the fifth largest in the world (PwC, 2015). With positive economic growth Rolls-Royce Motor Car Limited is in a position to increase its profitability in the UK as well as increase its revenues according to The Telegraph Rolls Royce sold 260 models during first half of 2014 compared with 196 models during the same period in year 2013 as economic recovery continue to stimulate the growth of business in the UK, (Collins, 2015[g])[h]

2.1.3 Social Cultural aspect

According to Yuskel (2012) every[i] single culture that a business operates in can be of importance to social cultural future of the organization. Culture affects consumer’s preferences and taste

Social aspects that affect Rolls-Royce include population in UK within the economically active age being between 35 and 65 with a lot of disposable income. [j]According to World Bank (2014), this age group form 34 % of UK’s 63 million people, and it is also perceived to be the most active population, thus leading to the increased purchasing power. The people of British has a renowned culture of appreciation of[k] luxury goods, they are trend setters when it comes to luxury items, this cultural aspects creates a good environment for luxury products like Rolls-Royce motor cars which are the ultimate symbol of success, (Mansfield, 2015)[l]

2.1.4 Technological aspect

An organization should understand the effects of technology in all business activities which includes information and communications, products and services, transport and distribution and production processes. New technologies provide better functionality and quality,[m] (Yuskel, 2012[n]). Rolls-Royce cars are fitted with sensors that actively monitors important parts and systems, the information is transmitted to the customers dealership so that servicing is scheduled to meet customers specific needs, also the cars technicians have access to the most innovative diagnostic equipment’s (Rolls-Royce motorcars, 2015). Information technology enables the customers of Rolls- Royce to gain information about the cars they need by touch of a button[o].

2.1.5 Environmental aspect

Environment factors include weather, climate change and energy utilization. Climate change affects many industries and is mostly affected by global warming, many organization are becoming aware of this environmental factors and are therefore aligning their business practices with an aim of protecting the environment, (Griskevicius, Tybur and Van den Bergh, 2010). [p]In UK[q] green energy is a key selling point for cars, Rolls Royce has invested in new technologies with an aim of reducing emissions and conserving energy, (Rolls-Royce motorcars, 2015[r]) The Rolls Royce long term strategy is innovations for fuel economy and non-harmful emissions Rolls-Royce Motor Car Limited has had to recheck their cars and engines in order to adhere to UK laws on carbon emissions[s].

2.1.5 Legal factors

Firstly, [t]the consumer law in the UK is meant to safeguard the rights of the buyers against unfair treatment or exploitation (Yüksel, 2012). Such rules and regulations comprise the Consumer credit act, Sales of goods act, Distance selling regulations act, as well as the Supply of goods and services acts, among others (Ferdow & Lewis, 2003). Further on, different laws exist to protect the firms operating in UK against biased competition and exploitation. Additionally patents are safe guarded by laws Examples of these laws include copyright laws and intellectual property laws which heavily penalize companies and individual that violates consumer rights (PR, 2014).The legal factors also have influence on employment, contracts, trading, taxes, health and safety at work[u][v]

2.2 Porter’s five forces

Porter’s five forces analyses evaluates the five factors [w]that determines industry competition

[pic 1]

Figure 1: Five forces framework[x]

2.2.1 Bargaining power of customers

U.K consumers have a high bargaining power (Truong, Simmons and Kitchen, 2008), there is a high demand for luxury cars. In Rolls-Royce motor car limited cars have to be highly customized to meet customers’ demands, the customers are actively involved in the production process especially in area of color and interior design of the car.[y]

2.2.2 Bargaining power of supplier

Suppliers have a low bargaining power because they are many and medium while Rolls Royce is a big company. Many suppliers are dependent on a single car manufacturer whereas the cars manufactures have a large pool of suppliers to choose from this have arisen as a result of globalization, (Porter, 2008). Rolls Royce motor car limited thus have a lot of power in negotiations except where it requires exclusive materials manufactured by only a small segment of suppliers.

2.2.3 Threat of substitute

Rolls Royce is a luxury commodity; it fulfills the need of affirming the owner’s status and often competes for disposable income devoted to this (Mansfield, 2015)

, and it can be substituted with other luxury commodities that can also be used as status symbols.[z]

2.2.4 Threat of new entrant

Rolls Royce is protected by significant barriers to entry, this [aa]include brand equity that it enjoys. The reputation of the brand is important to customers in UK, Rolls Royce have enjoyed decades of reputation as a symbol of exclusivity and superior quality and performance. New entrants are faced with huge investments required especially to set up manufacturing facilities and in research and development, (Kallstrom, 2015).

2.2.5 Competition between established firms[ab]

Rolls Royce face intense competition from other luxury car manufactures in UK, these include Mercedes Benz, BMW, Ferrari and Bentry, (Hoover 2015). All these companies’ compete for market leadership and technological