With the increasing ramification of economic changes and consistent changing business environment, companies are coming up with different economic strategies to beat their rivals. There are several micro and macro factors which need to be evaluated by the organizationsbefore implementing any business strategies. In this report, Rolls-Royce Corp. has been taken into consideration for implementing micro and macro strategic plans. This company has been facing various ups and downs throughout the time due to the sluggish market conditions of the market. This company is providing design, manufacturing and distribute power system for aviation and other industries which is the top most company in automotive industry in Britain. This company is having headquartered in Derby United Kingdom. This report has put emphasis upon the business environment which is consisted of political, economical, social and technological forces that are largely outside the control and influence of a business and that can potentially have all positive and negative impact on the business functioning of organizations There are other several systematic parts of this study which reflects all the strategic tools such as SWOT analysis, PESTL analysis and other matrix for evaluating all the internal and external economic factors of design, manufacturing and distribute power system for aviation and other industries. In the end, conclusion has been made to evaluate all the strategic plans implemented by the organizations for analyzing and encountering all the hurdles and problems of Rolls-Royce Corp and General electric Limited (Henderson, 2008).
The main purpose of select this company is to identify all the key factors of economic factors of design, manufacturing and distribute power system for aviation and other industries. It plays an important role in determining the business strategies and economic conditions of Rolls-Royce Corp and General electric Limited. It is evaluated that each and every business is required to implement strategic plans accordingly in order to mitigate the negative impact of all the external factors of economy and grasping all the positive factors of economic. Rolls-Royce Corp and General electric have been considering all the managerial and business economics strategies in order to establish effective business rules and culture for the organizations (Rees and Smith, 2017).
It has been observed that economic factors of design, manufacturing and distribute power system for aviation and other industries has been showing positive upward image since last five years (Wirtz, Tuzovic, and Ehret, 2015). It is analyzed that due to the sluggish market conditions on international level of Automobile industry, Rolls-Royce Corp and General Electric have been reflecting negative downward slope in its total revenue earned during last five years. Rolls-Royce Corp has been facing various ups and downs throughout the time which has aroused due to the sluggish market conditions of the market. This is the Automotive industry where design, manufacturing and distribute power system for aviation and other industries are provided. This company has balanced portfolio with leading position in civil aerospace, defense, marine and energy market.The key operational activity of Rolls-Royce Corp is to make primarily focus on reducing the overall cost of fuel and other energy consumptions for jets and other high power machines. The key ideology followed by Rolls-Royce Corp is to improve integrated power solutions to aerospace and marine/industry power system market (Turner, 2009).However, company has used increased efficiency of its value chain activities (inbound and outbound activities) with a view to increase its business efficiency as compare to its business rivals such as General electric, Pratt & Whitney. These all organizations are running their business and following two key strategies namely product differentiation and cost leadership strategies in mitigating the negative impact of global recession throughout the time. After 2007-2008 after happening of global recession, Rolls-Royce Corp had to change its existing value chain activities with a view to compete with its rivals and other competitors. Financial managers and other team members of this company maintain effective capital structure. It followed .65 debts to equity structure which not only reduced its overall financial risk but also help company to keep its overall cost of capital. This assisted company to implement its cost leadership strategy in the market (Stone, 2016). For instance, Rolls-Royce Corp reduced its overall cost of capital by 10% and by using optimum utilization of its resources it increased its production capacity by 10% (Williams, 2017). Nonetheless, in global recession it has to penetrate the market with its cheap design, manufacturing and distribute power system for aviation and other industries and satisfy clients needs and demand in determined approach. In addition to this, General electric capital also followed the same strategy (Matelly and Lima, 2016). However, General electric after evaluating the global recession implemented business process outsourcing business to diversify its business. Rolls-Royce Corpimplementsthese re-capital structuring business strategiesand create core competency in maintaining capital structure to eliminate all the negative impact of global recession (Fioramonti, 2016).
After evaluating the market conditions and economic external factors, it is analyzed that the UK and Britain economy have observed consistent growth and characterized by unemployment, contained inflation and stable economic condition. Economic growth is the one of the fundamental factors which could be determine on the basis of production of goods and services in Australian market. It is conventionally gauged as the % rate of increase in GDP of country (Mayor and Tol, 2007). Nonetheless, Rolls-Royce Corp needs to gauge all the economic factors such as employment growth, inflation rate, economic conditions, capital expenditure per person and political environment. Rolls-Royce Corp and General electric could use GDP rate of country to determine the average standard of living of its clients (He, and Balmer, 2017). This GDP rate and collected data will help Rolls-Royce Corp has been considering the private consumption, private investment, export and import of goods and services in economic environment in UK economy. Rolls-Royce Corp has analyzedthat since 1991 UK’s real economy has increased by an average of 3.3 percent in a year. In brief, GDP per capital of UK economy is 43,734.00 USD (2015) which is reflecting that consumption of goods and services in design, manufacturing and distribute power system for aviation and other industries has been increased by tremendous rate. Moreover, as per the annual report of Rolls-Royce Corp it is observed that due to its ramified changing domestic and international economic environment Rolls-Royce Corp has shown upward slope in its total turnover since last 5 years (Castles and Henderson, 2014). However, at the time of global recession it had to face high amount of loss in its overall total turnover. Ideally economist uses GDP rate as broad gauge of the overall economic health. After analyzing it is evaluated that structure and policies of UK is very flexible that providesRolls-Royce Corp has to make changes in its strategic and marketing plan with a view to increase its overall production and market turnover. However, Rolls-Royce Corp has already faced many challenges to establish new business chain in Australian market which could be identified by implementing PESTL analysis as below (Borio and Lowe, 2002).
Political factors
These are the factors which are set by the government and parties to the economic and influenced the organization business functioning. It is evaluated that Australian government has reduced tariff and tax rate on all the imports of raw material which has resulted to the low level of price charged on its assets. Rolls-Royce Corp has taken full advantage of these political factors to reduce its overall tax payment to government. General electric has also used double taxation avoidance agreement to reduce its overall tax payment (Campiglio, 2016).
Social factors
These are consisted of all the value, belief, perceptions and other personal factors of the clients. Morrison Plc could use these factors to customize its supermarket supply chain. Company has used these strategies to grab the low level of demands of market by providing its customized supermarket supply chain to its customers. It is evaluated that Rolls-Royce Corp has been following strategies to provide customized services with a view to provide better satisfaction to its domestic and international clients (Forecasting, 2006). On the other hand, General capital followed standardised services which are provided to attract more clients on the basis of its international brand image and quality of services.
Economical factors
These are the factors which are not in the control of Rolls-Royce Corp and General electric capital. In the time of global recession, Rolls-Royce Corp used these factors to determine economical impact on its business. After evaluating purchasing power of clients, interest rate, Inflation rate and return available on gilt securities, Rolls-Royce Corp increased its overall production, design, and manufacturing and distributes power system for aviation and other industries. On the other hand, after getting affected by global recession General electric had reduced its production level due to high interest rate and less purchasing power of clients in domestic and international market. General electric followed diversified business strategies to cope up with the global recession (Yang, et al. 2011). It entered into other business organizations such as factoring, mutual funds, cash flow matching business and other diversified business with a view to increase its overall profit. Both companies followed different strategies to compete in the market and came up with their different economic strategies to encounter negative impact of global recession. As per the behavior of finance, there were several stock bubbles which has impacted share price of company on domestic and international level. The share price of Rolls-Royce Corp has also increased by 200% since last 10 years. The market capitalization of Rolls-Royce Corp was £22.22 billion in 2013 which increased to 32.33 billion in 2017. This reflects that company has created value in its capital through its automotive business.On the other hand, General electric capital has also increased its market capitalization by 22% since last 10 years due to its diversified business and effective business functioning (Suomalainen, et al. 2014).
Legal factors
Morriso1n Plc has followed all the legal compliance in systematic manner in order to increase its overall corporate governance. It is evaluated that due to the changing international treaty between countries, Rolls-Royce Corp has followed all the internal policies and establish an effective corporate governance in its business functioning. On the other hand, General electric capital had faced various penalties and fees due to its less legal compliance in its business functioning. It had faced high penalties due to its legal department failure to make compliance of FEMA provision and international standards in its reporting frameworks. In addition to this, General electric had also faced legal issues in following international financial reporting frameworks. Nonetheless, Rolls-Royce Corp has followed international financial reporting standard in order to establish harmonization in its domestic and international reporting frameworks (Rudd, 2009).
These all factors are very important to gauge by both the organizations before implementing strategic plans. Rolls-Royce Corp has used cost leadership and product differentiation strategies with a view to overall all the negative impact of global recession. On the other hand, global recession has been managed by General electric capital by implementing diversified business strategies (Schmitz et al. 2014).
It is evaluated that total revenue of the Rolls-Royce Corp has been increased to USD 14,955 million from USD 12161 million. This shows that company has increased its total revenue by 16% since last 6 years. However, due to the global recession company had to face high stock bubbles in its business functioning and ups and downs in its total revenue throughout the time. Nonetheless, Rolls-Royce Corp has increased its overall turnover throughout the time irrespective of its capital value and share price in the market (Whitelegg, 2000).
|
Year |
2012 |
2013 |
2014 |
2015 |
2016 |
|
Total revenue($ millions) |
12161 |
15513 |
13736 |
13725 |
14955 |
It is observed that revenue of the General electric capital has been decreased to USD 123,693 million from USD 172,488 million. This reflects that company has decreased its total revenue by 40% since last 6 years. These reflect that company has been reflecting that due to the ramified economic changes and technical development, General electric company has been facing 40% decline in its overall total turnover.
These above comparisons reflect that Rolls-Royce Corp has been performing better in comparison to General electric company. It is evaluated that Rolls-Royce Corp has used cost leadership and product differentiation strategy to overcome all the negative impact of the global economic recession.
|
Year |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
|
Total revenue($ millions) |
172,488 |
181,581 |
155,278 |
149,567 |
146,542 |
146,684 |
113,245 |
117,184 |
117,386 |
123,693 |
This decreasing graph of total revenue of General electric reflects that company is having negative business functioning which is diminishing its business value. It is analyzed that due to the sluggish market conditions on international level of Automobile industry, Rolls-Royce Corp and General Electric have been reflecting negative downward slope in its total revenue earned during last five years. However, despite of all the sluggish market conditions Rolls-Royce Corp has been facing various ups and downs throughout the time but has also maintained effective growth in its business functioning (Shahiduzzaman and Alam, 2014).
It is evaluated that Global recession has provided various negative impact on the business functions of both organizations. Rolls-Royce Corp had made changes in its design, manufacturing and distribute power system for aviation and other industries. It is observed that Rolls-Royce Corp has developed core competency in selling, manufacturing and distribute power system for aviation and other industries (Forecasting, 2006). However, due to high market bubbles and other environmental factors, Rolls-Royce Corp makes effective changes in its capital structure. For instance in 2010 when company wanted to increase its overall capital then it increased it by issue of shares in market. It used this capital raising strategy with a view to reduce its overall cost of capital and financial leverage at the same time. On the other hand, General electric had to face high loss from its business functioning due to its less effective capital structure and low level of productivity functioning.
As per the economic factors of UK it is evaluated that after global recession and sluggish market conditions, demand for design, manufacturing and distribute power system for aviation and other industries have been decreased by 17% as compare to the data shown in the statistics of company in 2007 with the its 2016 data.
In energy consumption and power drilling products and services, Rolls-Royce Corp penetrates the UK and international market with its products at very low cost with better quality. On the other hand, General Electric did not reduce the price of its products and services which resulted to 40% reduction in its overall turnover in its domestic and international market (Gössling andUpham, 2009).
Rolls-Royce Corp has indulged in towards implementing effective tax planning with a view to reduce its overall tax payment to the UK government. It had made investment in various public funds charity and other provision for availing tax deductions on it net tax payable amount. On the other hand, General electric has failed to maintain effective taxation polices and had various cases for eliminating the cascading effects on its tax payment. In addition to this, company had also faced various problems in the payment of tax done under the double taxation avoidance agreement by the UK with other countries (Capoccitti, Khare and Mildenberger, 2010).
It is accompanied by all the present and potential clients of the organization. It is evaluated that Rolls-Royce Corp has been indulged in grasping business to business segment market. In this market it has captured 20% of domestic market and 10 % international market for providing design, manufacturing and distribute power system for aviation and other industries. On the other hand, General electric has been indulged in grasping business to business and business to clients market for increasing its overall turnover. It has been evaluated that due to the sluggish market conditions and low level of business conditions which aroused due to the negative impact of global recession, it adopted business strategies to enter into diversified business. These diversified business plans assist General electric corporation to create shield against all the negative impact of global recession on its all its business units (Barker, Ekins and Foxon, 2007).
Conclusion
After evaluating all the economic factors of design, manufacturing and distribute power system for aviation and other industries in which Rolls-Royce Corp and General electric corporation has been running their business, It is observed that both organizations have made their best efforts with their unique strategic plans to encounter all the negative impact of global recession. Rolls-Royce Corp has increased its profits and increased its domestic and international market share. On the other hand, due to the sluggish market conditions, General electric has faced various losses and downward slope in its overall total turnover. Now in the end it would be concluded that both organizations have made their best possible course of actions to compete with all the negative impact of recession and sluggish market condition. Nonetheless, Rolls-Royce Corp adopted the best suitable strategic plan of cost differentiation and product differentiation strategies with a view to grasp business to business clients from domestic and international market.
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