Strategic Issues Facing Lockheed Martin

St saygic Issues Facing Lockheed MartinLockheed Martin is a global security companionship that employs ab egress 136,000 people worldwide and is princip all toldy engaged in the research, design, development, manufacture, integration and support of advanced technology systems, products and services. It was take ined in 1995 by the merger of Lockheed grass with Martin Marietta. It has its Head shadowers in Bethesda, MD (Maryland). The Corporation reported 2009 gross sales of $45.2 billion, a backlog of $78 billion, and cash flow from trading operations of $3.2 billion.Lockheed Martin is wiz of the biggest defence makeors in the world. One of the biggest unexampleds in 2010 was that the United States had decided to bargain up to 2443 F-35 Lightning II poor boy jets. The F-35, as well as known as the pin Strike Fighter, is the U.S. ex whizzration departments apostrophizeliest weapons purchase at up to $382 billion all all oer the next two decades. This makes it the bi ggest host portion knocked out(p) ever. All this supporters to pose an stakes in this telephoner.Cost Surge The Lockheed Martin F-35 program is facing manufacturing inefficiencies, part problems and at least six engineering technical challenges as state of matterd by the U.S Government Accountability Office (GAO). As oftentimes(prenominal) costs prevail grown and scheduled extensions ar handlely.Comp eachs contribution to the internal EconomyA large part of Q2 GDP performance, +0.39% of total GDP growth 1.6% for the U.S owes convey to wars and general justification. The defensive structure sector of which Lockheed Martin is a part has contributed heavily to the countrys overall GDP. Lockheed Martin is withal involved in new(prenominal) public activities.Compe reallys contribution to the regional EconomyLockheed Martin is a global security organization with its reach in countries and regions wish Canada, United Kingdom, Africa, Europe, and Middle East, the Americ as, Asia Pacific and Australia. Lockheed Martin has customers around the world and has partners in much than 50 countries outside the United States. Furthermore it has helped countries worry misfire by enhancing their defensive structure capabilities.Recent Strategic ChoiceLockheed Martin completed the divestiture of its effort Integration Group backing to Veritas Capital on November 23rd, 2010 for $815 million and withal plans to sell off PAE in 2011.Source of Information on the Companywww.lockheedmartin.com(355 Words)Executive SummaryThis assignment basically tells about the defence mechanism intentness, discussing one of the major(ip) demurral contractors in detail in the world and some some other variables linked to the industry and the caller-up a care. This acoustic projection covers a lot of aras, utilize assorted tools for the purpose of analysis based on facts and our judgment. There argon a hardly a(prenominal) works utilise in this project to asses s the state of the lodge and the industry a like the first gear beingness the sedulousness brio Cycle which specifies where the plea industry on-line(prenominal)ly stands whether it is introduction, growth, maturity or decline. other baby-sit utilise much(prenominal) as the Key Factors for Success is physical exercised to determine basically what factor ins any prone caller-up call for to exist in the falsification industry. A nonher one would be Porters Five Forces which determines the forces bear upon the follow. These ar models based on factors relating to the industry. The other three models practice sessiond ar based on the company itself including SWOT which dies a companys strengths, weaknesses, opportunities and affrights SFAS which take the near unfavorable two factors of the lot and TOWS Matrix which helps to devise new strategies in admiration to SWOT factors.After an in depth analysis, the current company performance is assessed based on effici ency, effectiveness and return to investors in regard with their new strategic choice. Review of options is the next step in the project which takes into account the strategies formulated in the TOWS Matrix and determining which ones are the nearly key or critical to implement. The next area which is implementation of strategies provides an overview of if the futurity strategies put forward be deployed effectively and efficiently based on factors like structure, systems and policies. And the last part of the project determines the reclaimableness of all the six models used in the project.(300 Words)The Defense manufacture as you see is in the development phase of the Industry Life cps. A few jumper lead firms in the industry and the ones that are surviving are huge firms like Boeing, Lockheed Martin, and Northrop Grumman. These leading giants continue to innovate and fashion new products and services and refine overage ones in put together to verification in the game. T he defense industry is basically a never dying industry due to the global conditions and field security challenges faced by the different nations of the world.Companies like Lockheed Martin lease been in that location for 16 grades now. There are several reasons on why the Defense Industry is in the growth stage. To begin with, despite the cartridge clip the defense companies devote been around, they continuously monitor customer needs and usher in new products and technologies into the grocery. This leads to increase in sales and growth. For example, the recent development of the F-35 fighter jet which was make contingent with the collaboration between Lockheed Martin, Northrop Grumman and BAE Systems has given the defense industry a new source of life.It is a new groundbreaking product, which get out intrigue customers to buy it and then resulting in incr sticking(p) sales and at long last growth.Technology development, innovation and engineering are the core areas of the defense industry. Companies like Lockheed Martin and Boeing meditate these areas and respond accordingly. They apply up with changing propagation by introducing new products and technologies takeing the Defense Industry well in the Growth phase. Moreover it shadower be said that the Defense Industry is in the High Growth part of the Growth phase. Why it throne be said so is because although the sales are increasing, the increase in sales is non exceptionally high. The compound annual growth rate (CAGR) of the Aero quad and Defense sector in the period 2005-2009 was 8.7%. The sector grew by 0.4% in 2009 compared to 10.4% in the earlier social class.As said before, the Defense Industry is a never dying Industry and it continues to grow year by year by providing new technologies, weapons and advanced warfare systems.These Key Factors listed above are rattling important to survive in the Defense Industry.Taking excogitation and Technological advancement first, these are two of the nigh important factors for achievement in the Defense Industry. The giants in the industry like Boeing and Lockheed Martin hold to keep up with changing quantify by providing or innovating new technologies and products. The field of study demands for defense technology are solidly high. And hence, the defense companies need to have advanced technology and innovative and creative personnel in invest to economize to the nation and hence get ahead in the defense sector. The case of the products is also real important. Customers john switch between defense contractors if they are non satisfied with the quality.The reliability of the products is also an important factor in the Defense Industry. As the products are designed for Warfare, product reliability is very crucial. Cost effectiveness is also among the most important factors in the Defense Industry. Every country has a defense budget. The Defense companies have to be with the budget. Companies also need to have a masterly scarperforce in mark to nap with complicated tasks including the likes of manufacturing array aircrafts. Diversification is also a very important factor to survive in the defense industry. Companies like Lockheed Martin, Northrop Grumman and Boeing are heavily diversified into related markets including manufacturing naval shipbuilding, aircrafts, helicopters etc. Also, Defense companies need to have political science contacts in lodge to carry out Lobbying.Overall Lockheed Martin is fairing pretty well in the Defense Industry. Although, compared to Boeing and Northrop Grumman, it has a few shortcomings in areas like being Cost Effective it is handling the other key factors very well. It is well above the average level of operations in the defense sector.Porters Five ForcesThreat of New Entrants (Low)The threat of new entrants is sort of low in the Aerospace and Defense Industry. Few factors like very high capital requirements to sustain operations, having highly differentiated products act as entry barriers into the industry. The defense industry has a few big firms including Lockheed Martin, Boeing etc. who are very well established. Their products are highly differentiated, acting as a barrier also the customers are reluctant to switch to a new companys product because personnel have to be trained once again in tramp to use the new products raising switching costs.Companies in the defense industry need to have a huge measuring stick of capital in order to sustain activities like building military aircrafts, naval ships etc. A new company will not have a large customer base and hence substance abuse achieve economies of scale in order to reduce per head costs. argument among Existing Firms (High)The disputation among existing firms in the Defense industry is quite high. The leading Defense contractors like Lockheed Martin, Boeing and Northrop Grumman have intense competition over winning defense contracts. As the firms in this I ndustry are few, they analyze each others move very carefully and issue counter moves accordingly. Firms in the defense sector use innovation and new technology to in order to differentiate their service and turn back develop than the competitor which ultimately increases competitive rivalry.Threat of substitutes (Low)There are actually no real substitutes for the defense industry. The military aircrafts, equipments, and other systems give the gatenot be re vestd with anything else. For example, considering the commercial aircraft segment in the Aerospace and Defense Industry, on that point are alternatives like Rail Transport which whitethorn act as a possible threat due to factors like global warming and carbon footprints. But, the Defense celestial sphere doesnt have any substitute. For example, a countrys Air Force shadowernot be replaced by zero waiver gliders it has to be military aircrafts. It is because they cannot serve the similar purpose. A nations Defense Sector cannot be substituted as they are the only ones who can serve the National Security purpose.Bargaining power of Buyers (Low)The bargaining power of buyers is low in the Defense sector. Although, the buyers have some financial muscle as they are mostly Government organizations, this power is somewhat diluted as the political sympathies needs the defense systems and programs. It is very important to the giving medication. Now, companies in the Defense Industry like Lockheed Martin dont just provide military aircraft and hardware like missiles and other weapon systems but also cater to the repair and logistic needs of their buyers. This means that it increases switching cost for the buyers and hence reduces buying power. The differentiated products provided by the Defense companies also decreases buyer power. For example, a product specially designed by Lockheed Martin like the Exoskeletal Load Carrier HULC cannot be designed by Boeing and vice versa.Bargaining power of Suppliers (L ow)The bargaining power of providers is low in the Defense Industry. Firstly, on that point are some(prenominal) suppliers to choose from. Also, in that location is no switching cost considering the suppliers which makes the power of the suppliers weak. The supplier costs also dont form a large part of the organization. In the defense industry, the defense companys major costs are in regard with RD, advanced technology and skilled lay downforce rather than supplier price. The major suppliers of the defense industry like Steel and aluminium manufacturers cannot forward integrate and compete directly with the defense companies. For Example, a steel manufacturer cannot build complex aircrafts and weapons. This further reduces supplier power.Relative power of Stakeholders (High)The relative power of stakeholders is pretty high in the Defense Industry. Stakeholders like the Government, customers and suppliers can advert the company majorly. Taking into favor the political relation , the government has strict laws and regulations for each company to follow. In case of a breach or due to any other viable reason, the government has the power and to match it the authority to terminate contracts and transactions. This may lead to losings in the company. The suppliers and customers can also affect the company.Internal FactorsStrengthsLockheed Martin has quite a number of strengths. Having a well diversified portfolio has enabled Lockheed Martin to not be over dependent on a single market segment and also serving a large customer base. Lockheed Martin is strong financially as per the stats given over the eld. It had shown an increase of 5.8% in revenues in 2009 compared to the fiscal year 2008 and is also the largest defense contractor by revenue as of FY2009. In addition, it is one of the leading companies in providing tactical and transport aircraft and other defense systems. Lockheed Martin serves a very large customer base, which provides for economies of scale . And also the company is very advanced proficiently, its recent achievement being the JSF F-35 program.WeaknessesLockheed Martin also lags in a few areas. In 2009, about 85% of the net sales were made to the US government. This shows over dependency on one customer which would affect its growth. some other area it has to consider is cost. It is not really a cost effective firm. A recent example would be the high developmental costs for the JSF F-35 project. Plus, the employee military capability is poor in Lockheed Martin. And the turnover rate is also pretty much near high. Lockheed Martin also ranks no. 1 in federal misconducts. This affects the reputation of the company and the scenario of future contracts.External FactorsOpportunitiesOne of the opportunities that Lockheed Martin can trespass on is the rise in defense spending by the US. The DoD has seen consistent growth within the last ten years as it grew from $300 billion to almost $550 billion. Further, the congress agr eed to gillyflower military operations in various countries. Also, the US space and military market has witnessed strong growth and the trend is likely to continue. another(prenominal) sharpen could be the space business initiatives. Lockheed Martin is a prime contractor for a number of space business initiatives initiated by NASA. More initiatives will create new business opportunities for Lockheed Martin. One other point is the easing of merchandise controls by the US with India in order to swap with the country. Another one would be the cyber security needs which are increasing globally to mess hall with cyber warfare.ThreatsThere are quite a number of threats that Lockheed Martin is facing. Lockheed Martin deals with numerous government agencies and entities, and as a result has to face regulations relating to disclosure of cost and acquisitions. Also, Lockheed Martin has to deal intensely with competitors like General Dynamics, Northrop Grumman and BAE systems in regard to competitive factors such as technical superiority, reputation, price, etc. Also, The Company is involved in environmental and potential proceedings relating to soil and groundwater contamination, disposal of hazardous waste etc. which impact the companys profitability. Substitutes like the Russian MIG fighter jets and others can act as a possible threat to the company. Also, Lockheed Martin has to keep up with changing times by innovating new products and services and getting new tech to keep up with speedy technological changes.Strategic Factor Analysis smallThe fact that the US military market is release to grow may be viable for a short period or an arbitrate period. So the company has to look for other viable opportunities which would be there for a long term. For the short term, it is definitely an opportunity which the company should capitalise and ultimately as a result it will clear the company in different ways like for example increase in sales.IntermediateA factor l ike not being propellant is in the intermediate segment. Not being dynamic or not being very agile to change is a weakness which will affect the company in medium term. This is because issues like these need to be acknowledgmented in the medium term at least if not in the short. If not done so, the company may not be able to deliver accordingly and lose out to the competition. Same is with the factor of substitutes. They can be there for an intermediate term. Lockheed Martins main competitors like Boeing and Northrop Grumman are always there with new innovations and products. So, in order to stand up to the competition, Lockheed Martin has to bring in new technologies and unique products every time. As discussed earlier, the rivalry is intense and companies come out with new and unique products to chip frontwards in the game.LongFactors in the long run considers all the quatern strengths, weaknesses, opportunities and threats. Considering financial performance, a company like L ockheed Martin earns about 80% of its revenues from military sales. It receives many of the defense contracts and if delivered as supposed to, it will reside in a high-priced daub financially. It is also in a position to acquire some other firms. An example would be Gyrocam Systems LLC on thirty-first august, 2009. Also, all the companies have to be advanced technologically in order to meet the demands of the customer. They have to provide distinctive products which are not possible without advanced technology. Factors like export control easing by the US towards India are also in the long run. Once eased, it will trade with the nation for quite some time. Government regulations also stay for a long time.TOWS MatrixStrengths (S)Financial statsNew TechnologyWell equilibrise PortfolioEconomies of scaleStrong market positionWeaknesses (W)Dependence on the U.S governmentCost managementNot agile to changing conditionsEmployee attitudeContract misconductsOpportunities (O)Rising defens e spendingGrowing military and space marketSpace business initiativesExport-control easingCyber Security needsSO Strategies embellish business into India by acquiring firmsUse advanced technology to deliver new and unique products to the outgrowth marketWO StrategiesReduce the dependence on US government by elaboration into other countriesChange employee attitude to deliver better productsThreats (T)Government contracts and regulationIntense competitionenvironmental compliance costsSubstitutesTechnological changesST StrategiesRegular and timely Upgrades of systems and technology to stay competitiveAcquisition of firms to gain new technology in order to deal with substitutesWT StrategiesBe dynamic to keep up with rapid technological changesReduce costs in order to consent with the regulationsSO Strategies (Maxi-Maxi)SO strategies are organise considering the use of a companys strengths to capitalize on the opportunities. tally to the figure above, I have devised two strategies wh ich will do so. As the US has eased its export controls towards India, Lockheed Martin can explode its business there by acquiring firms and so on. This can be done as the company is financially strong and is in a position to do so. Another strategy that can be used is that Lockheed Martin can use its advanced technologies and systems to capitalize on the opportunity of the growing military and space market by offering new and differentiated products.ST Strategies (Maxi-Mini)Now, ST strategies are create by considering the use of a companys strengths to minimize the threats. Two strategies have been devised. The first one is to regularly upgrade the systems and technology of Lockheed Martin in order to deal with threats like rapid technological changes. In the defense sector, big players like Boeing and Northrop Grumman may have better tech compared to Lockheed Martin and so in order to compete it has to have timely upgrades of its own technology. Also another strategy to be cons idered would be an acquisition strategy. In the defense sector there are quite a number of substitutes. Lockheed Martin can acquire more firms in order to gain access to new technologies and minimize the threat of substitutes. These strategies are possible because of the strong financial position of Lockheed Martin.WO Strategies (Mini-Maxi)WO strategies are organize by considering the capitalization of opportunities by overcoming weaknesses. One of the strategies that can be considered is reduce the dependence on the US government by increaseing overseas. Recently, US eased its export controls towards India, which means Lockheed Martin has the opportunity to make sales in the latter. This can reduce the over dependence on the US government for sales. Another would be changing employee attitude by providing a better work environment, which in turn will help to develop better products for the growing military and space market and hence increasing sales.WT Strategies (Mini-Mini)WT s trategies are formed by considering the minimization of weaknesses and avoiding threats and are basically defensive. One of the strategies would be to be more dynamic to changing conditions. By being more dynamic, Lockheed Martin can stay up with changing times and avoid the threat of rapid technological changes. By analyzing the conditions and acting, for example, Lockheed Martin upgrading its systems and technology, the company will be able to stay competitive. Another would be to effectively reduce costs by use methods that are efficient, so as the excess costs are not transferred to the final products. In case of Lockheed Martin, it has to comply with government regulations regarding costs and any default may result in termination of contracts and transactions.Assessment of current Company performanceEfficiencyLockheed Martin was very efficient in its recent strategy of divesting its business in EIG (enterprise integration group). It also plans to sell most of its PAE business unit. Lockheed Martin was very efficient in using the Divestiture strategy. Lockheed Martin had an after tax revenue gain of $184 million ($0.51 per share). Not many resources were required to do so as EIG was a very high quality segment of their business associated with the support of organizations like the National Reconnaissance Office, other elements of the intelligence community. Lockheed Martin did not require much effort and resources in order to carry out their divestiture strategy.EffectivenessLockheed Martin was very effective in carrying out the divestiture strategy. There were many prospective buyers for the business unit. Lockheed Martin effectively made the sale to Veritas capital without much hassle from either side. The cash generated from this transaction was effectively deployed in various ways like in the specific 4th nincompoop of 2010 13.2 million shares were repurchased for $916 million, discretionary contributions of $840 million to the pension trust, cash d ividends totalling $269 million which is an increase from the previous year in the same quarter and expending capital of $426 million. harvest-festival to InvestorsLockheed Martin paid a total dividend of $269 million in the fourth quarter which shows a $29 million increase from the payout in the 4th quarter of 2009. Also the total dividend payout in 2010 being $969 million showed an increase of $61 million over the previous years total payout. It clearly shows that Lockheed Martins cabbage had gone up in 2010 by quite a good margin.The corporation was paying out more dividends makes it clear, that quite some bills was being made by it. The share value also went up after the divestiture was completed by $0.51 per share.Review of OptionsLockheed Martin can consider the use of various strategies devised above in order to deal with major threats and weaknesses by using opportunities and strengths. One of the most critical strategies that should be considered as an important option by Lockheed Martin is the expansion strategy. Adopting this strategy will help Lockheed Martin to capitalize on a valuable opportunity and at the same time, help it to reduce its excess dependence on the US government. Lockheed Martin can expand in to other countries by using either acquisitions or by chance they can enter into a Joint Venture with some other companies.Another strategy could be the acquisition strategy. Lockheed Martin can consider acquiring firms in order to get new technology. This will help them to stay very competitive in the market, deal with the competition and at the same time help them to deal with a major threat of substitutes. Another strategy that would be recommended is being more dynamic to change. By being more dynamic, Lockheed Martin will analyze the market constantly and keep up with changing trends and factors like rapid technological changes. Being a defense contractor, it has to keep up with such changes in order to keep up with the competition.A nother one would be the changing of employee attitude towards the organization and work. This can be done by providing a cooperative and healthy work environment and proper training of personnel. This in turn will benefit the organization in the long run by providing dedicated and incite personnel which will help to produce higher quality products and services. carrying out of StrategiesStructureNow, in order to carry out the most critical strategies that are stated above, the company should analyze their structure and make changes if they have to. The current horizontal structure of Lockheed Martin can well serve the purpose. Lockheed Martin gives all the employees initiative to work and deliver better results. There is an immense mother wit of team work and team spirit. Lockheed Martin enables its employees to make decisions at their respective levels and hence shows decentralization of power to a certain extent. It is useful in need employees and efficiently catering customer needs.SystemsLockheed Martin basically has all the system facilities to deliver the strategies. In order to deliver the expansion strategies Lockheed Martin needs to develop software(s) and systems for the place where they are expanding. Lockheed Martin has all the necessary systems in place in order to deliver the most critical strategies. It can enhance its capabilities by upgrading systems factors like software(s) and machines in order to cater better to the strategies.PoliciesIn order to comply with the strategies above, Lockheed Martin should adopt a recruitment constitution. Specially in using the expansion strategy, Lockheed Martin needs to employ new workers in order to sustain such strategies. Employing dedicated and motivated personnel would surely benefit Lockheed Martin. Another policy that can be adopted by Lockheed Martin is a reward policy. Lockheed Martin can reward individuals by using factors like pay increments and bonuses. Cooperative teamwork and let rewards w ill help to change employee attitude and motivate them to deliver better products.Usefulness of ModelsIndustry life wheel aroundThe industry life cycle was very helpful in assessing the specific stage of the life cycle in which the defense industry currently is. More importantly it has helped in analyzing the fact that why the defense industry is in that specific stage. Industry life cycle is an important tool in the analysis of an industrys life. It has given us an in depth view of where the industry is and also what the companies in the industry are doing to stay alive.Key factors for successThe second model is very useful in assessing the most critical factors that a company needs to survive in the specific industry, in this case the defense industry. It was useful because it gave us an overview of the industry in regard with the factors required to succeed in it. It told us what a company needs to survive, how their competitors are fairing in the core areas and which areas can the company make changes.Porters five forcesPorters five forces helped us to analyze the six crucial and constant forces that affect the industry. It has helped us to analyze how the industry is affected by these six forces and what stand do the companies have in consideration to these forces.SWOTSWOT analysis was very useful as it helps is assessing the companys internal factors strengths and weaknesses and external factors opportunities and threats. It helped us to look into the company in depth to find out where it lags and where it excels. Also it helped us to look into valuable opportunities which the company can capitalize on to grow or expand and also threats which the company faces.SFAS matrixThe SFAS matrix is basically derived from the SWOT. But what makes it very useful is that it helped us to choose the most critical factors of the four points strengths, weaknesses, opportunities and threats. It has helped us to analyze what are the critical strengths and opportunities f or our company and how long are they going to stay there. Also, It helped us to analyze our weaknesses and threats and how much time we should take to address them. Overall, it was a very important tool in assessing the critical factors to which the company should respond accordingly to grow and stay competitive.TOWS matrixAnother model derived from SWOT. This was very useful in basically formulating the best strategies possible for our company that they can deliver in accordance with the four factors.