Business insight into Rolls Royce

'Royces' is a big employer in the Derby area (http://www.rolls-royce.com/) with over 12,000 people having jobs at its Sinfin site.  
So I was interested to read an article by Alan Tovey in the Business News section of the Daily Telegraph (nb not Derby Telegraph, our local paper) on Friday 14 November this year.  .

When it comes to its products, Rolls-Royce's jet engine's really are the er, Rolls-Royce of the industry, delivering power and reliability through cutting-edge technology.  However, when it comes to relations with investors, things are a little more basic.
In the recently management statement there were a mere 121 words to tell shareholders that things are pretty much the same as they were before, when Rolls needed just 378 worlds to say it was cutting 2,600 jobs in a restructuring that would cost £120m.  On the same day, the loss of its 27-year veteran finance director merited 307 words.
Maybe after decades of stripping out weight from its aero engines, the principle has crossed though into investor relations.  Perhaps the FTSE 100 group is of the 'if you don't have anything nice to say, don't say anything' school of thought.
Certainly, Rolls is facing a difficult period.  It's blaming defence spending cuts, deteriorating economic conditions and sanctions on Russia for this year's warnings - three, if you count the restructuring as one in all but name.

Despite this, Rolls remains a company with fantastic intellectual property and the research base to keep adding to that.  Many it does need to shrink staff numbers and lower expectations - but its communications need work.  Brevity is the soul of wit, not a well-informed shareholder base.



The article goes on to give the Strengths/ Threats/ Weaknesses/ Opportunities (often called SWOT Analysis, which is often used to determine later steps in planning).

Strengths

• Strong intellectual property and reputation for cutting-edge innovation
• Stable, established and long-term aftermarket business as customers service aircraft engines.
• Long horizon of work with an order book totalling more than £70bn.

Weaknesses

• Defence spending is on a long-term downward trend, putting one of its largest divisions under pressure
• Long development times mean it can be slow to react to rapid changes in the market place.
• Expense of producing new technologies.

Opportunities

• Financial fire power and large order book creates ability to take a very long-term outlook.
• Merger with rival to create industry super power.
• Reputation for engineering excellence could be leveraged into other areas.

Threats

• Highly exposed to global economics and polities, as profit warnings have shown.
• Danger of severe and public reputational damage from failure of one of its aircraft engines.
• Price pressures from operating in competitive market against large rivals.

See also: 
http://www.telegraph.co.uk/finance/newsbysector/transport/9848463/Boeing-facing-payouts-battle-over-Dreamliner.html
and
http://www.derbytelegraph.co.uk/Rolls-Royce-board-determined-resist-Government/story-22711723-detail/story.html