Case | HBS Case Collection | March 2014

Babcock International Plc

by John R. Wells and Galen Danskin

Abstract

In 2013, Babcock International Plc (Babcock) was the largest engineering services provider in the UK with sales of over £3 billion. Under the leadership of CEO Peter Rogers, Babcock had grown revenues and profits nearly tenfold over the previous decade as it benefited from increased public sector outsourcing. In 2012, for the UK's Ministry of Defense (MOD), Babcock trained over 50,000 troops, maintained the nuclear submarine fleet, provided engineering support for military vehicles, and managed numerous facilities at military bases. On the civil side, the company decommissioned aging nuclear plants, maintained the Metropolitan Police auto fleet and other emergency services fleets, and was the UK's leading trainer of engineering apprentices.
Babcock's leadership team believed that continued pressure on public spending would provide opportunities for double digit growth in the UK for at least five years. However, this might not come from Babcock's primary customer, the Ministry of Defense. What other national and local government agencies might the firm target? On the civil side, the resurgence of the salience of nuclear power generation in the mid 2000s had appeared to be good news for Babcock with its long-standing nuclear expertise, but the April 2011 Fukushima nuclear leak in Japan had shed doubt on future construction, while the fracking of shale deposits to extract natural gas promised a much lower cost supply of abundant energy. Nevertheless, decommissioning nuclear power stations promised steady and growing work. What other opportunities might Babcock pursue in the UK? Meanwhile, analysts were pushing for more international expansion but efforts at building business in South Africa, Canada, and Australia had been slow, with only 16% of revenues coming from outside the UK in 2013, a figure little changed since 2005. What would drive Babcock's long term future growth?
Growth itself also posed challenges. Babcock relied heavily on informal processes to extract synergies across its portfolio. Would this continue to be effective as the scope of operations continued to expand? Meanwhile, analysts were concerned about succession. Rogers and many of the leadership team were approaching retirement. Where would the next generation of Babcock leaders come from?

Keywords: strategic change; strategy and leadership; diversification; United Kingdom; military; nuclear power; nuclear; Engineering and construction; conglomerates; Strategic Planning; Competitive Strategy; Global Strategy; Corporate Strategy; Construction Industry; Energy Industry; United Kingdom;

Citation:

Wells, John R., and Galen Danskin. "Babcock International Plc." Harvard Business School Case 714-496, March 2014.