This assessment will cover the following questions:
- Rolls Royce Motor Car Company is British luxury auto mobile company of UK. Examine the methods of internal and external development that helps businesses to grow and expand in the market.
- Evaluate key future directions by using Ansoff's Matrix/ Market Matrix that helps for strategic growth of the business of the Rolls Royce Motor Car Company.
- Analyse the core idea and how sustainable growth can help the company to diversify the business of the Rolls Royce Motor Car Company.
Strategic analysis refers to an activity which includes researching a business environment within the company operates their organisational activities. It is necessary for the preparing strategic planning related to the smooth working of business as well as making effective decision making (Bohm, 2016). This will help in bringing essential and important information regarding the analysis as well as development of internal and external environment of business and disclose some opportunities and threats which require to be considered in making strategic decisions. In this report Rolls Royce Motor car company is chosen to study the strategic analysis which is a British luxury auto-mobile manufacture. The company was established in 1998 in United Kingdom that headquartered in England that mainly deals in manufacturing and distribution sector across worldwide. Along with this, in order to get sustainable growth they should try to focus on diversification. Whereas, the core business idea is to brings innovation in the field of electric vehicles and diversify their products in new country which named paraguay. Under this report discuss about the company's offerings as well as portfolio analysis, on the basis of this find out the key future direction for their strategic growth by using Ansoff Matrix as well as study about the internal development and external growth by applying several methods which a strategic business unit can adopt in order to grow and success.
Company offerings and Portfolio analysis.
Company offerings: As the company Rolls Royce Motor Car is known as a luxurious manufacturer of British which deals in weelbase, two door coupe and so on. Company produce vehicles with excellent quality and durability, well functions, designs and styles The product line of company involves convertible version of phantom sedan, smaller ghost four door sedan, dawn convertible, wraith two door coupe, cullinan SUV as well. As the company Rolls Royce Motor car reported their annual sales of 4107 vehicles in 2018 which is most in ultra-luxury brands in a history of 115 years.
Portfolio analysis: It is defined as an examination of several components which includes the mix of product ranges for the purpose of taking appropriate decisions which are to be expected for increasing end results (Cameron, 2019). A portfolio analysis applies to the procedures which allow a manager in order to recognise many better and effective ways for the purpose of assigning resources along with an objective of improving profitability. Within the context of Roll Royce Motor Car, strategic portfolio analysis refers to the identification as well as evaluation of all goods and services that are offered by the organisation within the market. Also, formulate and implement several strategies for all product mix as per their market shares and actual growth of sales. In order to do strategic portfolio analysis a company Rolls Royce Motors can use BCG matrix for knowing about the strategic positions of their business unit.
BCG Matrix: It is a tool of strategic management which was developed by Boston Consulting Group for evaluating the strategic business units as well as potentiality towards their offerings in the market. This kind of matrix contains mainly 4 elements which are based on two dimensions only. As first dimension is based on the market growth and second one is relative market shares of SBU (Chandra, 2017). The entire business unit is placed in 4 categories in a strategic way which includes stars, ash cows, dogs, question marks. The BCG matrix within the context of Rolls Royce Motors will assist in deciding strategies which can be effectively implemented for their strategic business units.
SBU with the high market growth and shares are considered as a Star category as they should invest in stars and can adopt vertical integration, product development, penetration as well as horizontal integration strategies. Strategic business unit with high growth and less shares termed as a question mark category as the business units need close consideration whether firm should forward with same or divest. When both are at a low are called as a dogs category so business should divest their strategic business plan. At last, SBU with high shares and low market growth termed as a cash cows in which business should invest in order to maintain their market shares.
BCG Matrix for Rolls Royce Holding Plc
This analysis will begins with the identification where SBU of the company fall in a BCG matrix and it will assist in implementing business strategies for the strategic business units which results in sustainable growth (The BCG Matrix, Boston Matrix, 2018). These are as follows:
- Stars: Within the context of Rolls Royce Motors the financial services SBU is a star in BCG matrix of company as it operates in that market which shows future potentials. The company Rolls Royce makes significant income from their strategic business unit. The company should adopt vertically integration strategy by getting other companies in supply chain. This will assist in making more income and profits because of their potential SBU. In addition, product of the company also termed in start category which yields huge sales amongst their product portfolio. Company's potential in product market is also high because customer are demanding their products. Rolls Royce plc should consider a product development strategy for business units where it bring innovative features in their products like electric vehicles through the research & development. This will aid in attracting large number of customers as well as raise their sales also.
- Cash Cows: With respect of Rolls Royce the supplier management services of their strategic business units are termed as a cash cows in BCG matrix. This has been in company's operation from last decades and it has earned significant revenue. The market shares of Rolls Royce Plc is high but the entire market is decreasing because the company manage their suppliers itself instead of outsourcing it. So the company should recommended a strategy is that they stops further investment in their business and maintain operating strategic business units as wide as their profitable (Clarkson, 2019).
- Question Mark: It is associated with those products that do not show a same level of prospective future which is indicated by stars and cash cows. As these kind of products have a high level of uncertainty that termed as a question mark. In a success rate, these units may facilitate company with a financial leverage while they are unable to get a market share which can make these items a financial burden for the company. The firm requires to analyse the proportion of failure and success in order to decide whether future investment is likely to accomplish financial as well as strategic objectives. For Rolls Royce question mark is their profitable venture however, the potential of revenue generation has declined which shows result in loss of market share in luxury car segments (Dawes, 2018). As the company has huge potential to further grow so it should be suggested at the future promotion of strategic business value into a global leading position in automotive industry.
- Dogs: In the BCG Matrix dog category involves all business units which don't yield any kind of financial gains for the business organisation and shows poor sales, revenue and future prospects. In the context of Roll Royce Motors, plastic bags SBU is considered as a dog in BCG matrix which has been in the loss for last 5 years. The company operates in a market at a better position but it is also declining due to the huge concern of environment. So the company Rolls Royce should recommend a strategy to take strategic business unit and reduce the losses (Jenkins, 2015).
Key future direction for strategic growth.
On the basis of above portfolio analysis of the company Rolls Royce Motors the strategic business unit identified in BCG matrix have full potential of changing from their existing classifications (Kevin, 2015). For instance, a dog changing into cash cows. So the company should recommended that apply some appropriate strategies in order to ensure such kind of change that has been made. For this purpose a company Rolls Royce Motors can apply Ansoff Matrix effectively.
Ansoff Matrix: It was developed by the Russian-American H. lgor Ansoff in 1957 that is based on the product marketing such known as diversification strategies (What is the Ansoff Matrix?, 2020). This matrix is used in order to identified strategic aim of company which maps new as well as existing markets and match them along with the existing product lines. The results are categorised into mainly four categories that are listed from the riskiest to less risk such includes diversification, market development, product development and market penetration. All these are discussed as follows:
- Market penetration: It is only viable when the company possess product and market for their product line which is already developed. It includes the utilisation of existing channels in order to increase sales that ultimately results in high income. This kind of strategy can be accomplished by organising advertisement campaigns as well as sales representatives. It is termed as a less expensive and risky among all and it may take more time to yield outcomes as compared to other strategies (Kuznetsov, 2015). As there are not an evidence that Rolls Royce is presently emphasising on penetration strategy as the company seeks to penetrate their market and attract large number of customers however it does not seem to be their priority.
- Product development: It is related to the delivery of new products into an existing market for the purpose of grow. It is well known strategy in automotive industry as several companies are try to filling gap between product lines which may satisfy many customers at a same time. While adopting this strategy it can require acquisition of right product instead of research and development activities. Rolls Royce is developing a new product in order to enter an huge competitive and well established market of SUVs. As the company can seems to brings electric vehicles as these are highly demanded to satisfy the customers requirements.
- Market development: When a company diversify their market with existing product range in a new geographical location then the company moves towards the market development. As this kind of strategy would need huge capital in order to enter into new market and on the basis of demographical expansion it includes high marketing cost along with the risk of losing existing brand perception. A primary focus of Rolls Royce dealership is to operate in that country which is highly depend on the economical level of country. With the wealth rising more regions seems as a viable option to enter like Hanoi, Vietnam in 2014, Prague, The Czech Republic in 2015 and Phuket, Thailand in 2017. The company is expanding their current network of showrooms for providing more satisfaction to their customers. As a evidence of application of this strategy the 6th in Japan and expanded showroom in Poland. Presently the marketing department of company emphasised on female and young demographics.
- Diversification: It is related to the cutting risk in several markets along with the increase in yield at a same time. As it is riskiest option among all strategies as it often needs to develop an entire new market with new range of products otherwise it will not be implemented in a successful manner (Mohajan, 2017). Several kind of diversification strategies are available as differentiating on a synergy level between acquirer and acquisition. Within the context of Rolls Royce, brand of company itself can be termed as a diversification by their parent company BMW. Since BMW was already offering the engines of Rolls Royce, preceding the acquisition various synergy among group was anticipated.
After discussing the above strategies it has been viewed that for the Rolls Royce diversification strategy is more suitable to adopt in order to take sustainable growth and development. In order to diversify the operations of company they can seem to be bring innovation in electric vehicles and choose paraguay as a new market. This will help in increasing the sales, revenue, presence, profits as well as customer base which will give sustainable growth and development.
Methods which SBU can adopt to grow.
As there are several methods that a company's strategic business unit can adopts for the purpose of grow and success in the marketplace. This will include internal development as well as external growth. Within the context of Rolls Royce, it can be classified as follows:
Internal development: Internal growth and development of a business organisation is related to the expansion in their own operations through bringing development in internal resources as well as capabilities (Whitehead, 2015). This can be done in Rolls Royce by assessing the core competencies of businesses as well as ascertained and exploiting their strengths of existing resources with the help of VRIO, SWOT and so on. Rolls Royce can plan to grow their business operations by diversifying existing one and starts new business. The important point is here to note that all inside business growth is done without the help of outside resources or parties. The company can done internal growth in such factors or areas that are discussed as follows:
- Expansion: The company can perform expansion in their product range and market area that is considered as a development of their operations without the involvement of external parties and resources (Williams, 2017). So Rolls Royce can do expansion as a internal development of their businesses.
- Hiring right people: In order to increase the growth of Rolls Royce at internal level a manager of company may adopt effective recruitment process in order to select appropriate candidate for vacant job positions.
- Better marketing: The company can adopts better tool and techniques for the marketing activities like advertisement, marketing mix and so on after analysing the internal environment of business. This will help in gaining high profitability and growth in the market.
Ways of internal growth have several advantages and disadvantages such as these ways helps in gaining the new knowledge sets, spreads investment, provide strategic independence as well as effective cultural management (Rothaermel, 2017). Whereas, internal growth strategies have few disadvantage such as it can results in expensive and time consuming as well as sometimes it works slowly and if not managed effectively and well manner then it termed as risky.
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External growth: External growth totally depends on the external factors of the marketplace. There are various factors of external growth such as merger and acquisition, strategic alliance and so on that are used to reduce the market competition and consider as a great way to grow the business with best experiences (Petrova, 2015). As it is also the fastest way to achieve growth and diversification of business. There are some methods by which external growth can be measured which are as follows:
- Joint venture: This is method by which the different venture will be merged to experience the profit or to expand the businesses. It is a strategic alliance of two or more than two parties where they share their profit, risk and returns etc. but with that all the different parties have there own separated entity. As the company Rolls Royce can adopts this way as a strategic methods for the development and growth of business externally.
- Mergers and acquisition: In this, two companies came together to save their image and to gain the profit. In merger there is an exchange of ownership the one who has maximum share will be the owner of this merger. Whereas, in acquisition there is an equal ownership of both the parties and both will combine to gain the profit and they have equal shares (Papke-Shields, 2017). By adopting merger and acquisition as a strategic tool the company Rolls Royce can shares their assets, employees, shares, liability, profit, loss, etc. with that they shares the best of all which will help them to gain high profit and also shows adequate growth.
- Strategic alliance: Strategic alliance doesn't exchange the complete ownership to gain the profit for a particular period of time. There are two type of strategic alliance one is equity alliance and other is non-equity alliance. Equity alliance is happened when there is an alliance of two different independent company to made a new company. Whereas, non-equity made by contracts where one party provide their product and services to another company (Schawel, 2018). As the company Rolls Royce can adopts strategic alliance for the purpose of effective external development of their brand and increase profitability and chances of sustainability.
There are many advantages of external growth as it facilitates innovative management along with the huge growth in the market. It also helps in utilising available resources in an effective way and produce valuable outcomes and provide long term sustainability (Morden, 2016). Whereas, it has some disadvantage also such as it reduces the range of initiatives and ineffective performance also which will creates some kind of risk.
It has been concluded from the above report that every business want to grow and expand their operations for increasing sales as well as revenue. In this report, discussed that how a company analyse and plan in a strategic manner after analysing the business environment appropriately. As it is essential to make a strategic plan which helps in smooth and flexible working of business operations and formulate effective decisions in order to get sustainable results for a long period of time. Several tools and techniques are available in the market that are required to analyse the product line, market position and so on factors. Whereas, portfolio analysis assist in recognising appropriate ways in order to assign resources with the specific sets of objectives in order to improve profits. BCG matrix helps in analysing the strategic business units and potentials of their offerings within the market that will help in adopting effective strategies for SBUs and gain a sustainable growth as well as development that can be done through the implementation of Ansoff Matrix. At last, discussed some ways or methods in order to grow internally as well as externally.
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