expanding foreign sales of u.s. military equipment ... · pdf filea&d companies –...

PRIVATE & CONFIDENTIAL July 19, 2013

Prepared for:

Expanding Foreign Sales of U.S. Military Equipment: Industry Perspectives By Jon Barney Partner, Avascent

PRIVATE & CONFIDENTIAL | AVASCENT | 2

A&D companies – expand globally

“We put on a real push to grow internationally. It’s easier for US companies to hunker down and stay home. But the other side of the

coin is that there is a huge market out there that’s available to us.”

“Our strategy focuses on the growing importance of winning international business, where growth markets remain.”

“An important element of our growth strategy is our focus on increasing our international business from about 17% [of

total revenues] today to 20% over the next several years.”

Q: Will foreign markets be of greater importance to your company in the coming years? (March 2013 Avascent and Fleishman Hillard survey of senior A&D leaders on international markets) YES! (93%)


Rest of World

Flat/Declining Budgets Growing Economic Power

$-

$100

$200

$300

$400

$500

$600

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Countries included: Australia, India, Japan, Malaysia, Pakistan, Singapore, South Korea, Taiwan, Indonesia, Thailand, Saudi Arabia, Egypt, Iraq, UAE, Qatar, Kuwait, Jordan, Turkey, Algeria, Morocco, South Africa, Oman, Mexico, Colombia, Chile, Brazil

+ All figures in Billions of USD

DoD Budget

Growth will be in the Rest of the World

*Source: Avascent Analytics International Database


-5% 15% Projected Defense Spending Growth 2013 – 2017*

$0B

$60B

Topl

ine

Defe

nse

Budg

et 2

013

Segments 1. Legacy: High GDPs and high

levels of defense spending face declines/flat budgets

2. Major: Sizable markets and growth offer significant opportunities for companies looking to gain traction globally

3. Minor: Numerous smaller markets will continue to show moderate growth in defense spending – niche strategies

Italy

Canada Australia

Spain

2013 GDP

> $1T

$400B - $1T

$0B - $400B

Sweden

Netherlands

Norway

Poland

Israel

Finland

Greece

Egypt

Algeria

Japan

Germany

France

Brazil

UK

*Source: Avascent Analytics International Database

India

ROK

Saudi Arabia

Mexico

Indonesia Turkey

South Africa

Columbia

UAE

Chile Pakistan

Qatar

Kuwait

Iraq

Oman

Jordan

Taiwan

Thailand Morocco Malaysia

Singapore

Major Legacy

Minor

Countries: Uneven growth picture… but with opportunity


35%

18%

38% 45%

18%

21%

45%

Q: Which of these countries do you consider most important to your company in terms of growth potential?

Readiness Checklist – 6 Steps Survey: BUSI not BRICS

*Source: Avascent and Fleishman Hillard Survey of A&D Leaders on International Markets and Offsets


Readiness Checklist – 6 Steps Offsets - The Growing Half Trillion Dollar Challenge

*Source: Avascent and Fleishman Hillard Survey report on offsets “Half Trillion Dollar Challenge”


Latin America Obligations

$-

$5

$10

$15

$20

$25

Mill

ions

9.6%

Europe & Canada Obligations

$-

$5

$10

$15

$20

$25

Mill

ions

4.6%

Asia/Pacific Obligations

$-

$5

$10

$15

$20

$25

Mill

ions

6.5%

MENA Obligations

9.0%

$-

$5

$10

$15

$20

$25

Mill

ions

Offset Growth in All Regions Increasing

*Source: Avascent and Fleishman Hillard Survey report on offsets “Half Trillion Dollar Challenge”


Effectiveness of Offset Regime

Size

of F

Y13

Defe

nse

Inve

stm

ent (

Proc

urem

ent)

Canada

KSA

UAE South Korea

Turkey

Taiwan

Colombia

2

3 Greece

1 The Reality: Vital Markets with Challenging Offset Environments

2 The Ideal: High Spenders and Offsets Leaders

3 The Second Tier: Smaller Addressable Markets with Complex Offsets

4 Mature Markets: Smaller but Strongly Structured Offset Environments

$15B

$0B

1

4

Low High

India

Finland

Netherlands Brazil

Readiness Checklist – 6 Steps Largest markets = largest challenges

+ All figures in Billions of USD *Source: Avascent Analytics International Database


Fly-in/fly-out approach to global expansion Product centric approach Offsets rapidly increasing in $$$ and importance Offset authorities economic dev results Building a global organization

“Boots on the ground” and effective JV partnering Solution centric approach Raise visibility and view as opportunity not risk Campaign to educate and train offset authorities Integrate strategy, policy, reps, compliance, brand

Readiness Checklist – 6 Steps

Challenge Recommendation

Global Expansion Challenges and Recommendations

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