Rolls-Royce: A Manufacturer at Your Service
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
In 1884, Henry Royce (Royce) started an electrical and mechanical business, manufacturing products like domestic electrical fittings, dynamos, and electric cranes. In 1899, Royce registered the business as Royce Limited. In 1904, Royce built a motor car called the Royce 10, which impressed Charles Rolls (Rolls), the owner of C.S.Rolls & Co., one of Britain's first car dealerships...
A New Direction
In 1996, Rose became the CEO of Rolls-Royce. One of his most significant decisions was to continue and increase the company's investment in developing its turbofan engine line - the Trent engine series. The Trent engine series, developed from the Rolls-Royce RB211 series, went on to become highly successful. A Rolls-Royce employee later said, "The irony of the huge success of the Trent engine is that it grew out of the RB211, the engine which led to the 1971 bankruptcy.
The Strategy For The Future - Turn Service Into A Growth Engine
In the 1990s, competition between GE, P&W, and Rolls-Royce - the three main aero engine manufacturing firms in the world - led to a drop in Rolls-Royce's margins. To counteract this, beginning from the late 1990s, the company decided to focus on increasing revenues from after-sales service...
The main challenge Rolls-Royce faced was in maintaining a technological lead over its rivals. Analysts observed that any technological innovation by one company was matched by its rivals, sometimes, within a period of two years.
In spite of the many challenges it faced, the most important reason for the success of Rolls-Royce was its after-sales service. As of 2008, Rolls-Royce's revenue from aftermarket services was about 63% of its total civil aerospace revenues.
Exhibit I: Rolls-Royce: Income Statements (2003-07)