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Rolls-Royce Moves Operations to High-Wage Paying Countries

Business

"If you want to do complicated, high-value engineering, you've got to have a good supply of skilled people and support from governments."

Here is a different business strategy for major manufacturing companies: pursue operations expansions in high-wage paying countries. Sound like an idea that defies convention? Maybe. But it’s the strategy that British manufacturing giant Rolls-Royce had adopted.

Setting itself apart from almost all of its competition (specifically General Electric), Rolls-Royce has decided against shifting production to low-wage areas in Asia and Latin America, reports the Wall Street Journal.

Instead, the Rolls-Royce strategy involves expanding into countries with healthy economies such as Germany, Norway, and Singapore ("where salaries dwarf those around the region").

"If you want to do complicated, high-value engineering, you've got to have a good supply of skilled people and support from governments," Rolls-Royce CEO John Rishton said in a recent Journal report.

But even with generous pay, Rolls faces a shrinking pool of engineering talent that's being lured into finance and computers, writes Newser. Balancing skills and cost "is walking a tightrope," Rishton says. "We wrestle with those issues all the time."

In order to attract these “skilled people,” Rolls is training hundreds of apprentices annually and has collaborated with 28 universities worldwide. It is also opening far-flung facilities, such as a new factory in Singapore, where Rolls for years has maintained jet engines, writes the Journal.

The point of this new strategy?

Rolls-Royce wants to aggressively compete in the market by matching their brains against the brawn of the lower-cost competition, writes the Journal.

So far, the gamble is paying off. Rolls-Royce saw revenue spike 55 percent over the last 5 years and gained a net profit of $1.3 billion over the first half of 2011, reports Newser.

Read the full Wall Street Journal report

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