question 5 exam Essay

5.
HOW CAN PORTERS 5 FORCES BE USED IN THE DEVELOPMENT OF A COMMON STRATEGY.

Strategy in a business is all about how people decide to organise major resources to enhance the performance of the business. It is about business survival.
The main goal of strategic management is to secure a sustainable competitive advantage.
Teece 2009 holds the view that competitive advantage can only be developed and sustained through the creation of new business knowledge from continuous organisational learning and deployment of the organisations dynamic capabilities
BUT Rolls Royce will also need to look at the micro environment such as its competitors, supplies and customers.
To do this Rolls Royce will need to analyse the competitive environment and each industry and market will have its own distinctive structure.
Kay 1993 stated that the businesses distinctive capability will only become a competitive advantage when applied to its markets but before they can do this clear analyses will need to be carried forward to identify threats from existing and potential competitors, understand markets from which resources are obtained and understand the customers’ needs and wants
Industry analysis aims to establish the nature of the competition as the business creates its strategy and should be ongoing due to the rapid growth and changes in the industry.
Porter 1985 developed a framework for analysing the extent of competition.
This was called Porters five forces. This is some of the Analysis for Rolls Royce aerospace.
THE EXTENT OF RIVALRY BETWEEN BUSINESSES IN THE INDUSTRY
There are three dominant players in the same industry as Rolls Royce.
No single manufacturer dominates the industry so balance fuels the rivalry.
Competition in the primary market for aero-engines is intensified by the link to secondary market for engines parts and services.
The access to the secondary market is dependant on achieving the original sale of new engines.
Intensity of competition has increased as each manufacture has tried to improve its volumes and market share.
Gas turbine engines are now a mature product so potential for technological differential advantage has been reduced.

THE THREAT OF SUBSTITUTE PRODUCTS
There are no substitutes for aero engines and the threat of substitutes for air transport is minor.
Video conferencing will reduce business travel and growth of high speed travel will affect travel decisions.
However this all happening when demand for air travel is increasing.

THE POWER OF BUYERS IN CONSUMERS
Potential buyers of new aircrafts are low.
Market price for new engines being set by buyer
Power of buyers has increased in recent years due to many airlines becoming 'global carriers'
It is a long-term purchase so to fail to secure order can mean no more trading with airline for a particular decade.
Can lead to domino effect,with other competing buyers following

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