Industrial environment

Abstract

The industrial environment is fast-paced, and competition became very heavy among companies and in such environment, innovation becomes an important strategy which must be adopted by ambitious companies to survive and success. Organizations today must innovate to survive, and ssuccessful organisations are those who can innovate while controlling cost and risk. It is more important for an organization to change their environment culture by encouraging creativity, and new ideas, and according to (Jolly, 2002) Innovation is "the end result of creativity and a synthesis of knowledge, combined with novel and relevant new products or services".

Rolls-Royce Group plc is one of the most famous names in the field of engineering technology through the world, and it is a "global power systems company providing power for land, sea and air, with leading positions in civil aerospace, defence, marine and energy markets" (Rolls-Royce annual report, 2008).

This leading company has been selected for this report due to its innovative superior technological capabilities products in the mechanical engineering industry.

Introduction

This report begins by giving a brief description about Rolls-Royce Group Plc Company, which includes the company's history, and which industry does it compete in? And the company main competitive strategy, and the challenges it currently facing or will face in the near future. In the second part of this report, we shall review the literature in the concept of innovation and identify the organisational characteristics that facilitate, and encourage innovation, and then we will discuss whether this company possesses these characteristics. The third part of this report will identify the most innovate product of this company, and define the type of innovation, which it falls under, and then discuss the main reasons that motivated this company to develop this product, and then we will discuss the product life cycle, and the factors which make this product an innovative product, which may enable the company to be competitive. Finally; this report will outline what could be contributed to the success of the company in the future. The report will end with a brief discussion and conclusion.

About Rolls-Royce

Rolls-Royce history

Rolls-Royce Group plc is an innovative organisation that resides within the electrical and mechanical engineering industry, and it is a "global power systems company providing power for land, sea and air, with leading positions in civil aerospace, defence, marine and energy markets" (Rolls-Royce annual report, 2008). Rolls-Royce has been originated in 1884 by Henry Royce. The first motor car built by Royce was in1904, and then in the same year he met and agreed with Charles Rolls who had a company selling quality cars, that Royce Company will manufacture cars to be exclusively sold by CS Rolls & Co, and from that time the company named Rolls-Royce. In the following years the company developed a wide range of motors, and at present Rolls-Royce is "the world's second largest civil aero engine company, and the world's second largest defence aero engine company, a global leader in marine propulsion and a leading supplier of energy solutions" (Rolls-Royce annual report, 2008). The Group have more than 160 customers in 103 countries around the world, and they have 18,000 engines in service, and they are looking ahead to attract more customers by investing more in new innovative technologies which will increase the company market share in the global market.

The Group has 9,600 engineer worldwide, which operate in the UK, USA, Canada, Germany, Scandinavia, India and Singapore, and also the Group leverages resources through its global network of 29 University Technology Centers (UTC) in seven countries, which involve in advanced researching technologies to develop innovative products for tomorrow's Rolls-Royce (Rolls-Royce annual report, 2008).

Rolls-Royce strategy

Rolls-Royce competitive strategy is based on improving the performance of their products, by developing new innovative technologies, and this strategy consist of five elements (Rolls-Royce annual report, 2008):

  • Operating in four global markets which include: Defense aerospace, civil aerospace, marine and energy markets.
  • Investing in the research of new advanced technologies.
  • Developing innovative products, which enable the Group to stand competitive in the global market.
  • Installing a product base that can generate attractive returns in the growing market share.
  • Enhancing the performance of their products to meet their customer needs.
Rolls-Royce main challenges

Rolls-Royce is facing some challenges such as: environmental issues, balancing between original equipment delivery and aftermarket services, and competitive market.

Rolls-Royce is trying to respond, and overcome these challenges:

* In responding to the environment issues, and climate change; the Group is "investing more than 800million every year of which at least two thirds is directed at reducing the environmental impact of their products and operations" (Rolls-Royce annual report, 2008). The Group also investing in alternate renewable energy such as tidal power, which can help reduction in green house gas emissions. The Group, and in partner with the Government are in the process of developing a new Environmentally Friendly Engine (EFE) that aim to improve the environmental performance of an aero engine. (Rolls-Royce annual report, 2008)

  • Rolls-Royce also trying to balance between original equipment delivery and aftermarket services, by enhancing their services to meet customers' needs
  • Rolls-Royce considers the market they operate within is high competitive, which requires more investing in the research of developing more innovative technologies that can increase the company market share, and attract more customers around the world, and also the company is tightens strong relationship with their customers by developing a long term contracts with them in order for the company to respond to the global competitive market.

Literature review on innovation

The concept of innovation has been evolved over the last 30 years, and has not been finalised yet, however innovation can be defined as a mean of creating something new, bring it into use, and get a profit from it. Innovation is about "offering new solutions that add better value to customers; it brings new products and services to market more quickly" (Simon, 2002).

The innovative product; acording to Everett Rogers (2003) must have five characteristics in order to be succeed. The first element is relative advantage which means, that the innovative product must offer more, and better advantages than the comparable existing product, and the second element is the compatibility of the product with the buyer needs, and the third element is the complexity of the product which means; the innovative product must be easy to use, and not complicated; the forth element is observability which means the ability of the people to see an innovative product being used, that make them willing to buy it, and the last element is trial ability, which allow the buyer to try the innovative product before buying it.

Organizations must have dynamic capabilities that can influence the innovation process and competitive advantage, and Teece et al. (1997) has defined "dynamic capabilities as the firm's ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments".

In a study by William and Andrea (2005); they stated that Rolls-royce dynamic relation between 'strategic control' and 'financial commitment' were the main reasons for the company success, and they "both strategy and finance are of critical importance for how firms 'integrate, build, and reconfigure internal and external competences to address rapidly changing environments William and Andrea" (2005).

In this study William and Andrea (2005), have analyzed the role of both 'strategic control' and 'financial commitment', and they mentioned that the strategic control that drove innovation at Rolls-Royce was 'engineer' control. William and Andrea (2005) mentioned that Rolls-Royce was an engineering company run by engineers, and through the history of the company; the engineer were behind all the company's decisions, and most of these managers were engineers who had spent their entire careers at Rolls-Royce, and therefore understood the technological, market and competitive challenges. The role of financial commitment was that Rolls- Royce had always allocated funds, and finance resources through the innovation process until these processes are completed, and generates financial returns.

Generally; the organizations that choose to become innovative must need to establish a set of characteristics or factors, and according to a study by Boston Consulting Group (2006); these factors can be:

  1. Innovative Culture
  2. Deep Customer Understanding and Focus
  3. Market Focused

Rolls-Royce Group plc is an innovative organisation because it follows these three characteristics.

Firstly; It creates the type of changes that simultaneously allows the group to respond to the internal and external environment around it, and trying to implement more innovative procedures to accommodate these changing's. The Rolls Royce investment in research and development was 403 m, in 2008, and the cost of training and development of their employee was 30 m in the same year (Rolls-Royce annual report, 2008). The Group has created inclusive working environments that encourage their employee's creativity, and enhances their flexibility, and raising their motivation. The Group has a program to engage their employees into a two-year rolling global engagement program. Which will improve the Group ability to test, identify necessary actions and better understand employees' level of engagement across the organization, and also the Group is rewarding their employees and pay them high salary and bonuses.

Secondly; Rolls-Royce Group plc has created a closely relationships with their customers, and adopted long-term service agreements with them in all market sectors they operate in, and also the Group has developed an innovative services through a global network service to meet their customers' needs. This strategy helped the Group create more competitive advantage by attracting and retaining the best customers, and building successful working relationships with them.

Thirdly; Rolls-Royce Group plc is currently operating in four long-term global markets - civil and defense aerospace, marine and energy. These markets create a total opportunity worth some two trillion US dollars over the next 20 years (Rolls-Royce annual report, 2008)., and because the Group has a strong systems integration capability based on its knowledge of technology; this will help them to expand in the global market, i.e. in 2008, the Group established a new civil nuclear to meet the need for nuclear power in the rapidly expanding global market. They estimated generation could be worth around 50 billion per year within 15 years (Rolls-Royce annual report, 2008).

Discussion on Rolls-Royce most innovative product

Rolls-Royce is aiming to develop innovative and reliable products that meet the public health, and safety, by investing in research technologies which will promote the Group, and keep the business moving forward.

One of the most innovative products that have been developed by Rolls-Royce is 'Innovative Offshore vessel'. This product has been designed by Rolls-Royce for Olympic Shipping Octopus, and it has the UT 712 L solid workhorse design (Rolls-Royce).

Olympic Octopus is 78.3m long, and has a beam of 17.2m, and a working deck area of 510m2, and it is provided with a tank space for 1,000m3 of recovered oil, and the vessel can have 280-person (Rolls-Royce).

The vessel is powered by two Bergen B32: 40V12P main engines turning CP propellers in nozzles and it meets IMO DP2 requirements for dynamic positioning, and is the first to have the full Rolls-Royce DP2 system, working in conjunction with the latest advances in automation and control (Rolls-Royce).

The product meets the standard features of safety, because the vessel has been provided with a set of developed equipments, which can insure more safety for the crew, and improve living conditions, by reducing noise and vibration. The product also can be considered environment friendly, because it reduces fuel consumption.

The life cycle of this product has gone through a set of developments, and currently this product has enormous advances compared with early vessels, and the Group is quite sure that this product is the world's most innovative offshore vessels, and due to its huge advantages; this will make it a competitive product in the global market.

Conclusion

Rolls-Royce current competitive strategy is well planned, and the company still ahead in the field they reside within and the Group now is operating at the highest level to ensure supplying their customers with high efficiency products. The company can develop this strategy and try to grow more by extending the business and operating in new countries, which will enable the company to gain more customers, and more profits.

Rolls-Royce is already see that innovation as a way of life, but in the current global crisis, and the econimc count down, and the heavy competitions among companies; Rolls-Royce must keep working on developing the business, and look ahead to invest in alternate renewable energy, and developing more environmental innovative products, because this type of products can be the best competitive product in the market, which will enable the company to increase their market share, and also attract more customers, and thus it can makes huge contribution to the future of the company.

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