E-business at Rolls-Royce aeroengines
This assignment is aimed to critically evaluate a business model and e-business strategy at Rolls-Royce aeroengines, to ascertain a range of reasons for either success or failure of the e-strategy and to propose further improvements for the company’s e-business. The annual Rolls-Royce report and the corporate website was a primary source of business data. It was found that the firm’s business strategy and e-business management are shaped to fulfil the current trends in the world class operations, i.e. customised quality of products and 24/7 services to customers, greener business and zero emissions concept (no paper use via online helper), flexibility of e-business operations, etc.; however, certain risks and global challenges such as IT security and cost-effective matching, virtualisation of customers etc. may affect a success of e-business in terms of losing online subscribers and subsequently a market share.
1. Introduction 1.1. Rolls-Royce in Contemporary E-Business Environment Rolls-Royce (RR) is a world-class manufacturer of power product, judging on a basis of customer’s demand and the market niches, for land, sea and air (Rolls-Royce, 2006) with the focus on services of the power systems based on a gas turbine engine (GTE). There are 55,000 GTE in-service, with annual sales o 6billion of which over 40% currently comes from aftermarket services. A forward order stands at nearly 18billion. These operations result in a value of the company’s business.
RR’s mission is described as “Rolls-Royce offers the best customers’ business solutions from superior power systems and services” (Rolls-Royce, 2006) with the focus on customers and finding new approaches to the business fundamentals. In response to rapid IT development and increased orders due to A380/B787 production, the firm implements a customised e-business strategy. Despite some other companies RR cannot simply absorb e-business technology and use it but have to restructure it for the way they work and do business with customers.
Michael Roberts, Rolls-Royce world-wide director of business process improvement, defines e-business as “the use of web technologies to strengthen manufacturing and business relationships” (Rolls-Royce, 2006). As such one of the RR’s ambitious and yet timely e-business objective is to provide the technology and consulting expertise in e-business and supply chain management (SPM) for the best value for money and service delivery.
Following with the global strategy a state of the arts in e-business is continuously supported at Rolls-Royce with investments to be at around 2.5% of sales. The firm has implemented the web, front-ending SAP R/3 ERP systems with 18,000 users (via Business Intelligence Warehouse) – providing Rolls Trading Net.com with global access to electronic catalogues and into SAP while managing its legacy of other systems across the businesses, which allowed them to consolidate commodity management and increase US dollar based proportion of a purchase bill. However, Ian Farquhar, business improvement and IT director at Rolls-Royce Combustion Systems noted that the programme does present challenges on the ground. Further to the e-strategy Rolls-Royce works with EDS (a global provider of e-business solutions) to improve e-business solutions (Rolls-Royce, 2001).
Objective of the Assignment Getting serious e-business working for a company the size and diversity of Rolls-Royce is forcing a complete re-examination of e-business strategy. This coursework is aimed to evaluate the e-business strategy and challenges at Rolls-Royce, considering the cost-benefits factors framework. In my opinion, the organization is continuously since 1906 doing the most operations with the best outputs. In a rapidly changing e-world the company could struggle to make it better with e-strategy as it could be trying to do too much.
Analysis and Evaluation Evaluating the success, quality, usability and benefit of Rolls-Royce’s e-business system can be carried out by various methods, focusing on the features, functions or usability of e-service (DeLone ; McLean, 2004; Wade ; Nevo, 2005). Typical evaluation approaches of customers’ satisfaction for e-services are testing, inspection and inquiry through a web search or a desk survey (Hahn & Kauffman, 2002) or by questionnaire-based survey (Lin, 2003). E-service evaluation framework has been proposed by (Zhang and von Dran, 2000) and further improved by (Lu, J. et al., 2008). Fig. 1 shows 16 benefit factors and 8 cost factors of e-business system developments and applications. This framework will be employed to evaluate RR’s e-business aeromanager strategy.
E-business has brought significant changes to the RR’s operations. Firstly, the introduction of e-business-online has changed the nature of customer support, products update and after-sales marketing compared to traditional on-site services (Beynon-Davies P., 2004). Secondly, online tools provide a more convenient way to communicate with the customers. As the Internet provides global access, the business can have a worldwide support through its websites. The interactivity of these new manager-online enables Rolls-Royce to get ever closer to its customers anytime – to really understand their needs and their behavior.
Thirdly, the electronic tools can help the business reduce the cost for servicing, advertisement and thus generate more profits. Fourthly, e-commerce enables businesses to be price competitive and increase the sales. Because providing e-access offers a cheaper way to disperse information for host organization compared with using paper publications or recorded messages. However, e-commerce also has brought costs to the businesses as it caused significant security issue.
Increased globalisation of the business and advances in technology has resulted in more data being transmitted across global communication links, posing an increased security risk. In a result the company has a corporate IT department and the latest security technology responsible for data management at the company as well as communication specialists at each department. Cost and complexity of IT is another factor to be considered as a problem. Features of the next generation e-business architecture offers more personalised customer service but it also adds extra costs to be justified. The company depends upon external e-business technology providers to enable rapid deployment of e-business models. Adapting of so-called “programmed logic” (redefining capacity of business value propositions) of the enterprise is a crucial for the long-term success of e-business strategy (Malhorta, Y, 2001).
Improving operational efficiency is still very important – eliminating waste, streamlining processes and getting lean manufacturing in e-business is as important as in the engine production. Rolls-Royce has extended its IT systems to engineering/technical and latterly SAP, with the emphasis on getting better ‘customer value’ and more efficient manufacturing ‘value streams’. Among cost and benefit factors of the e-business evaluation, certain cost factors are more important than others in achieving the benefits comparing with other cost items:
1. Increased investments in e-business facilities (such as Internet connection, hardware and software) and training staff to better work in e-service at Rolls-Royce have significantly helped in the establishment of customer profiles, improved the company’s global presence and enhance a business’ image via e-business strategy, resulting to 50% after-sale service revenue. 2. High security and legal issue related investments in e-service systems would bring high benefits to Rolls-Royce in both building trust customer relationships and cooperation with other companies.
It can be recommended that if Rolls-Royce plans to further improve customer relationships through the development of e-services, an appropriate way is to increase investments in system security, legal issues and staff training rather than other items. The company image of reliably supplier can be improved by investments in maintaining e-service systems and updating related information technologies.
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