Rolls-Royce and the Stock Market Case Study Example | Topics and Well Written Essays - 2750 words

Rolls-Royce and the Stock Market - Case Study Example Factors that are apt to influence the market are inflation, exchange rates, government takeover and marketing needs. In this paper an effort will be made to determine why Rolls-Royce plc had such serious difficulties in the 1970s and how they either have, or should try to, offset any difficulties that might arise. Over the past 20 years, with successful deregulation and innovation in important areas of the economy, Britain has been doing well, and in keeping with that economy, Rolls-Royce has also been doing well. This was not always the case for the company. The 1970s were a time of instability for Rolls-Royce, so much so they almost went out of business completely, declaring bankruptcy in 1971. At the end of the decade, Rolls-Royce was in trouble again when their exchange rate predictions went awry. Could the company have foreseen the difficulties they would be facing in their engine production and was their financial crisis due to lack of foresight or a roll of the dice With empirical research, up-to-date news, government articles and papers on the business economy, an effort will be made to answer this question. Henry Royce built the first motor car in 1904 and joined with Charles Rolls to manufacture and sell a range of cars in Britain under the name Rolls-Royce. The company was formed in 1906 and within a year, the Silver Ghost, a six-cylinder car, was lauded as the best in the world. At the start of World War I, Royce designed his first aero engine, the Eagle, which provided half the horsepower used by the Allies in the air war. With the production of the "R" engine, business continued and Rolls-Royce gained the technological base to develop the Merlin, used in the Battle of Britain during World War II, and the gas turbine for the civil aviation market which led to the Comet, the first turbo jet to enter transatlantic service . In 1960 the Conway engine in the Boeing 707 became the first turbofan to enter the airline service ("History: Timeline, 2004; "The History of Rolls-Royce Motor Cars" [online]). Rolls-Royce was enjoying success as the only "British aircraft engine company that cou ld contemplate competing in global markets" (Lazonick and Prencipe, 2004, p.6). In 1966, Rolls-Royce and Bristol Siddley merged and continued production of the Rolls-Royce aero engines in both companies. However, with each company retaining old loyalties, integration was never complete, perhaps creating the first crack in the veneer of the heretofore financially solid, growing business. At the same time, American Airlines in the United States announced a contest for a new trans-Atlantic aircraft. Both Douglas and Lockheed responded with designs, the DC-10 and the Lockheed L-1011, respectively. The designs were