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Competitive Analysis of Defence Contractors 

  • March 2016
  • -
  • Frost & Sullivan
  • -
  • 132 pages

Competitive Analysis of Defence Contractors : Deepening Core Markets Before Broadening them Is Likely to Increase Future Success

This study is an update of the 2014 report on defence contractors. There are slight changes in the top 15 companies selected to reflect their performance in 2014; the quantitative analysis has been done from 2005-2014. The study focuses on defence businesses and contractors, while also considering the non-defence activities of these companies. Globalisation and the blurring of boundaries between commercial and defence companies coupled with recent budget constraints in Western countries are likely to significantly impact the long-term strategy of defence contractors. As a result, contractors will continue to increasingly face several challenges that they will need to overcome for market success.

Key Findings

Deepening core markets is the foundation for diversification.

- Defence companies must not just implement a strategy to lessen their position in defence, but must also implement a strategy to deepen core markets as a platform for increased diversification. Going after adjacent markets without a solid foundation will be risky and may lead to drawbacks, such as in the case of General Dynamics, which acquired Fidelis in 2012 and then disposed of it in 2015.

- This also provides a platform for broadening market penetration, reaching new geographic and commercial markets, and concurrently optimising performance at all stages.

Future success will rely on innovation.

- In the highly technological defence industry, investment in Research and Development (R&D) is expected to remain crucial—although investments vary greatly across companies. In fact, some companies have been spending less than % of their revenue on R&D, while others spend approximately %; however, the average expenditure is %. With innovation increasingly coming from commercial technology companies and defence customers that want more high-tech solutions (including exploitation of wearable technology, social media, and cloud services), the acquisition of technology companies and partnerships between defence and technology companies are expected to grow.

Operational efficiency and short-term profitability goals should not be the only answer.

- The average operating margin across the companies that have been profiled reached % in 2014. Achieving a % operating margin is the strategic objective of many top companies. Improving margins, without harming innovation or jeopardising the sustainability of future growth or weakening the company's strategic position, remains a major challenge.



Table Of Contents

Competitive Analysis of Defence Contractors 
1 EXECUTIVE SUMMARY

Executive Summary
1. Key Findings
2. Methodology and Selection Process

2 STRATEGIC OVERVIEW AND OPTIONS FOR DEFENCE CONTRACTORS

Strategic Overview and Options for Defence Contractors
1. Introduction—Strategic Context and Industry Environment
2. Strategic Options for Defence Industry Participants
3. Deeper Market Penetration
4. Deeper Market Penetration—Introduction
5. Deeper Market Penetration—Cumulative Data of Selected Contractors
6. Deeper Market Penetration—Cumulative Data of Selected Contractors Chart Analysis
7. Deeper Market Penetration—Strategic Mapping (2005)
8. Deeper Market Penetration—Strategic Mapping (2009)
9. Deeper Market Penetration—Strategic Mapping (2014)
10. Deeper Market Penetration—Strategic Mapping Analysis
11. Deeper Market Penetration—Conclusion
12. New Product Development
13. New Product Development—Introduction
14. New Product Development—Strategic Mapping (2005)
15. New Product Development—Strategic Mapping (2009)
16. New Product Development—Strategic Mapping (2014)
17. New Product Development—Strategic Mapping Analysis
18. New Product Development—Conclusion
19. Broader Market Penetration
20. Broader Market Penetration—Geographic Expansion
21. Broader Market Penetration—Geographic Expansion: Revenue from Home Market
22. Broader Market Penetration—Geographic Expansion: Revenue from Home Market (2014)
23. Broader Market Penetration—Geographic Expansion: Revenue from Home Market Analysis
24. Broader Market Penetration—Geographic Expansion: Conclusion
25. Broader Market Penetration—Commercial Expansion
26. Broader Market Penetration—Strategic Mapping (2005)
27. Broader Market Penetration—Strategic Mapping (2009)
28. Broader Market Penetration—Strategic Mapping (2014)
29. Broader Market Penetration—Strategic MappingAnalysis
30. Broader Market Penetration—Commercial Expansion: Cumulative Total and Defence Revenue
31. Broader Market Penetration—Commercial Expansion: Cumulative Total and Defence Revenue Analysis
32. Broader Market Penetration—Commercial Expansion: Conclusion
33. Diversification
34. Diversification—The Virtuous Cycle
35. Diversification—The Virtuous Cycle: Strategic Option for Defence Companies
36. Diversification—Analysis of the Virtuous Cycle
37. Conclusion

3 APPENDIX—COMPANY PROFILES

Appendix—Company Profiles
1. Market Presence
2. Market Presence
3. Market Presence—Category Definitions

4 LOCKHEED MARTIN

Lockheed Martin
1. Lockheed Martin
2. Lockheed Martin
3. Lockheed Martin
4. Lockheed Martin

5 BOEING

Boeing
1. Boeing
2. Boeing
3. Boeing
4. Boeing

6 BAE SYSTEMS

BAE Systems
1. BAE Systems
2. BAE Systems
3. BAE Systems
4. BAE Systems

7 RAYTHEON

Raytheon
1. Raytheon
2. Raytheon
3. Raytheon
4. Raytheon

8 NORTHROP GRUMMAN

Northrop Grumman
1. Northrop Grumman
2. Northrop Grumman
3. Northrop Grumman
4. Northrop Grumman

9 GENERAL DYNAMICS

General Dynamics
1. General Dynamics
2. General Dynamics
3. General Dynamics
4. General Dynamics

10 AIRBUS GROUP

Airbus Group
1. Airbus Group
2. Airbus Group
3. Airbus Group
4. Airbus Group

11 UNITED TECHNOLOGIES CORPORATION (UTC)

United Technologies Corporation (UTC)
1. UTC
2. UTC
3. UTC
4. UTC

12 THALES GROUP

Thales Group
1. Thales Group
2. Thales Group
3. Thales Group
4. Thales Group

13 FINMECCANICA

Finmeccanica
1. Finmeccanica
2. Finmeccanica
3. Finmeccanica
4. Finmeccanica

14 L-3 COMMUNICATIONS HOLDINGS

L-3 Communications Holdings
1. L-3 Communications Holdings
2. L-3 Communications Holdings
3. L-3 Communications Holdings
4. L-3 Communications Holdings

15 ROLLS-ROYCE

Rolls-Royce
1. Rolls-Royce
2. Rolls-Royce
3. Rolls-Royce
4. Rolls-Royce

16 HONEYWELL INTERNATIONAL

Honeywell International
1. Honeywell International
2. Honeywell International
3. Honeywell International
4. Honeywell International

17 TEXTRON

Textron
1. Textron
2. Textron
3. Textron
4. Textron

18 SAFRAN

Safran
1. Safran
2. Safran
3. Safran
4. Safran
5. Legal Disclaimer

19 THE FROST and SULLIVAN STORY

The Frost and Sullivan Story
1. The Frost and Sullivan Story
2. Value Proposition
3. Global Perspective
4. Industry Convergence
5. 360º Research Perspective
6. Implementation Excellence
7. Our Blue Ocean Strategy

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