Abstract
When British Aerospace acquired Royal Ordnance in 1987 it was midway through the first phase of a fixed-price contract to supply rifles to the Ministry of Defence (MOD), its single biggest customer, and had a firm option on the second phase. However, there was a significant problem in that each new British Army rifle was incurring a 30 per cent loss and deliveries were 18 months behind programme. The new management team had two months to decide whether to accept the option or pull out. After that the MOD would go to competitive tender.
The decision was a fundamental one for Royal Ordnance. To pull out of the contract would mean in effect surrendering the rifle business to competitors, but if the contract was accepted it was clear that radical changes would be required to cut costs and reverse the losses. The management team chose to stay in the market and fight. The events that followed, which are described in this paper, illustrate the step function in change that successful companies are having to make to stay ahead of the competition.