This continues act as a barrier to entry for aerospace manufacturers located throughout Asia, specifically China, who are looking to capitalize on increased government spending on defense. The costs associated with hiring, retaining employees and funding security clearances for employees in this industry makes recruitment and retention critical. As a result of all these factors combined the barriers to entry are exceptionally high in the global military aerospace products manufacturing industry.
Contrary to the significant power aerospace manufacturers have over suppliers, buyers in this industry dominate accounting and costing standards, procedures and systems; prototype development, product validation and testing; product quality levels and pricing. The competitive strength of Lockheed is exemplified in their ability to keep the F-22 Program moving forward despite many delays attributable to design changes and cost reductions as defined by Congress over the life of the program (Browning, Heath, 2009). Buyers also can define audit procedures and initiate inspections and audits at any time during the project, which leads manufacturers in this industry to invest heavily in enterprise compliance and quality management (ECQM) systems, software and processes.
In addition to all of these factors, buyers can redefine the production processes used to actually produce each version of the system, subassembly or vehicle they are acquiring (Johansen, Comstock, Winroth, 2005). Adherence to military standard (MIL-STD) specifications across all components, subassemblies and modules of any project are increasingly being audited for ethical oversight as well. When all of these factors are taken together, it is apparent how much influence buyers have in this industry and will continue to over time.
Assessing Competitive Rivalry
Lockheed Martin is the market share leader of the global military aerospace products manufacturing industry with 17.8% market share. Their closest competitor, EADS N.V. with 13.8% market share and Boeing with 10.8% both compete in the three core markets of defense and intelligence, homeland security, and systems and information technology. Figure 1 provides a graphical representation of market shares globally for 2008.
Figure 1: 2008 Global Military Aerospace Products Mfg. Market Shares
Lockheed Martin Corporation
European Aeronautic Defence and Space Company EADS N.V.
The Boeing Company
BAE SYSTEMS plc
Source: Lockheed Martin, Investor Relations (2009)
Lockheed Martin has been able to consistently gain market share in a relatively flat growth global market, projected to grow at 1.5% to 2% per year, by concentrating on its core strengths. These include its focus on portfolio-based management of its businesses (Gurgur, Morley, 2008) the ability to manage supply chains (Myers, Cheung, 2008) and managing order backlogs well including the F-22 Program (Browning, Heath, 2009). As a result of these strengths at managing internal processes and programs, Lockheed Martin has attained global market leadership.
Opportunities for Lockheed Martin include the integration of recent acquisitions that have been targeted to increase the company's integration capabilities in electronic systems. These companies include Aculight Tenix/RLM. In total Lockheed Martin has made 22 acquisitions since 2003, spending just over $3B to support its four core businesses. Additional opportunities including global spending on space business initiatives and defense spending in the U.S. also show significant potential over the long-term. The threats of higher environmental costs and adherence to government contracts and regulation including spending on ECQM-based audit requirements and ethics oversight are threats to the company's profitability today as well.
EADS N.V. is the second leading manufacturer globally and also has significant strength in their product portfolio and management processes and systems. This strength has been attributed with the company having strong inorganic growth from existing systems and projects and for also having global operations that provide for a diversified revenue base. As with Lockheed Martin, this company has significant upside potential to the growth in global aerospace and defense spending, and also has strong growth potential throughout...
As with all competitors in this industry, they are facing liquidity challenges as the recession is draining cash from many manufacturers. Being squeezed by the continual increases in compliance and quality management and audits from their many global clients who are governments is a threat to profitability over the long-term. There is also the threat of intense market competition and market access in the U.S., which dictates companies must have American-based technologies that cannot be exported to ensure nationals security. In conclusion, competitive rivalry is very high in this industry as manufacturers face rising costs due to inflationary pressures on the one hand, and the need to continually invest in new approaches to compliance and ethics-based transaction reporting on the other. The costs of competing for global projects continue to increase as each country has specific compliance and quality management requirements as well. All of these factors combine lead an oligopolistic market structure being maintained globally with intensive investments in R&D, supplier development, compliance, quality management and project management being critical to growth.
Appendix a: Lockheed Martin Segmentation Analysis
Lockheed Martin Business Segment Analysis
Information Systems & Global Services
Integrated Systems & Solutions
Information Systems & Global Services
Integrated Systems & Solutions
Appendix B: Lockheed Martin Financial Ratio Analysis
Lockheed Martin Corp. Financial Ratio Analysis
ROA % (Net)
ROE % (Net)
ROI % (Operating)
EBITDA Margin %
Calculated Tax Rate %
Revenue per Employee
Net Current Assets % TA
LT Debt to Equity
Total Debt to Equity
Total Asset Turnover
Accounts Payable Turnover
Accrued Expenses Turnover
Property Plant & Equip Turnover
Cash & Equivalents Turnover
Cash Flow per Share
Book Value per Share
Browning, T., & Heath, R.. (2009). Reconceptualizing the effects of lean on production costs with evidence from the…
The company's efforts to sell globally make this aspect of their ethics and online initiative programs noteworthy according to Saywell (2002, May). The use of online initiatives to protect intellectual property rights online, in addition to the protection of line data is well documented in the analysis completed by Sears (2006, July) and Pollach (2003) as well. Lockheed-Martin uses a series of proxy servers to protect online data, and
It also develops and integrates spacecraft systems and subsystems, electronic and communications payloads, intercontinental ballistic missile systems, and high energy laser systems and subsystems in the areas of space, defense, and electronics technology (Northrop Grumman Corporation (NOC), 2009). The Raytheon Company designs, develops, manufactures, integrates, and supports technological products, services, and solutions for governmental and commercial customers in the United States as a well as internationally. It does business in
Corporate Analysis Company Studied Lockheed Martin Articles you read about each company (online or print) http://www.lockheedmartin.com/us/news/press-releases/2012/february/isgs-jieddo-ops-0207.html http://www.google.com/finance?client=ob&q=NYSE:LMT http://finance.yahoo.com/q/pr?s=LMT+Profile http://www.marketwatch.com/investing/stock/lmt Lockheed Martin Corporation-2010 Annual Report Notice of 2011 Annual Meeting of Stockholders Number of countries the company does business in (75 Internationally, in addition to U.S.) Headquarters location 6801 Rockledge Dr., Bethesda, MD 20817, USA Number of employees Gross Revenue in most recent year available $46.5 billion Names of the Chairman of the Board, CEO, President, CFO Board Chairman and CEO: Robert J. Stevens, President and COO: Christopher E.
Strategic Alliance There are a number of reasons why companies engage in strategic alliances. Typically, these are rooted in the idea of comparative advantage, where the two companies bring their respective strengths to the project, theoretically these strengths complementing each other. There are some industries where the practice is quite common, in particular pharmaceuticals and defense. Indeed, in some of these industries, companies can have multiple strategic alliances at any given
Aviation / Aerospace Course # Management 311 Marketing The business of aircraft for defense requirements is quite different from the requirements of aircraft for civilian requirements. The sale of the material is also to different groups and all defense equipment has to be sold to governments whereas the civilian purpose aircraft have to be sold to airline transport companies. The objective of the government for military aircraft is simple -- the protection
The international scope of operations Lockheed, Boeing, and Airbus are all in the aviation manufacturing industry. While Boeing and Airbus have popular for the manufacturer of commercial airplanes, Lockheed Martin is popular for manufacturing security and defense products. For all these companies, their operations have an international reach from suppliers to consumers. For Lockheed Martin, from the F-35 Lighting II and the C-130J aircraft to the integrated air and missile defense,