Rolls Royce’s Technology Leadership and Total Care Business Model Makes the Company a More Preferred Choice for Partnerships

Speaking of high-tech companies, maybe there is nothing in the planet that can compare with Rolls Royce. When this motor company makes its products, they require years of extensive development where the science of materials and engine performance are pushed to the maximum limit in order to produce only the top quality products.

How does Rolls Royce make profits out of this kind of business strategy? The engines Rolls Royce produce are sold to users at competitive prices. However, since the engines are of top quality, the margins are realized ten years later out of the sales from the spare parts business. Rolls Royce calls the strategy The Total Care business model. This model shifts company’s relationship with its clients from the product to long term contract to keep their aircrafts flying.

The contracts yield profits from Rolls Royce’s “power by the hour” service. The company offers its clients, within the terms of the contract, engine servicing, monitoring and spare parts check, which guarantee the engines’ top performance. This way, Rolls Royce manages the risks involved with its products while earning revenues through the available opportunities.

To keep the company in the forefront, Rolls Royce executives have prioritized R&D. In 2011 for instance, Rolls Royce has spent £460 million on R&D efforts that were focused on projects that aim to produce engines that improve environmental performance and reduce emission of toxic gases.

A good portion of the amount spent for R&D went to strengthen Rolls Royce internally. The company anticipates more long term partnerships in the future and Rolls Royce want to be on the cutting edge even as technological advances are too fast. Rolls Royce created University Technology Centers, a global network designed to help the company in its decentralized research and technology approaches.

Rolls Royce is now dealing with forward orders worth £60 billion. In the aviation sector alone, there is an order of 137,000 units of new engines. These orders are just part of the estimated $1 trillion worth of aerospace engines in the next decade, where Rolls Royce is expected to take a good share.