PRIVATE & CONFIDENTIAL
July 19, 2013
Expanding Foreign Sales of U.S. Military Equipment: Industry Perspectives By Jon Barney Partner, Avascent Prepared for:
A&D companies – expand globally 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%) “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.”
“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.”
PRIVATE & CONFIDENTIAL | AVASCENT | 2
Growth will be in the Rest of the World Flat/Declining Budgets
Growing Economic Power
DoD Budget
Rest of World $600 $500 $400 $300 $200 $100
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
$-
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
*Source: Avascent Analytics International Database
+ All figures in Billions of USD
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Countries: Uneven growth picture… but with opportunity Segments $60B
UK
Japan
1. Legacy: High GDPs and high levels of defense spending face declines/flat budgets
France
Major
Topline Defense Budget 2013
Legacy Germany
Saudi Arabia Brazil
ROK
Australia Canada
UAE
Israel Italy Spain
$0B
Finland Greece -5%
India
Minor
Turkey Columbia Iraq Taiwan Indonesia Netherlands Poland Chile Pakistan Egypt Kuwait Singapore Thailand South Oman Morocco Algeria Malaysia Africa Qatar Jordan Sweden Mexico Norway 15%
Projected Defense Spending Growth 2013 – 2017*
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
2013 GDP
$0B - $400B $400B - $1T > $1T
*Source: Avascent Analytics International Database
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Survey: BUSIChecklist not BRICS– 6 Steps Readiness Q: Which of these countries do you consider most important to your company in terms of growth potential?
18% 18% 38%
45%
21%
45%
35%
*Source: Avascent and Fleishman Hillard Survey of A&D Leaders on International Markets and Offsets
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Offsets - TheChecklist Growing Half Trillion Dollar Challenge Readiness – 6 Steps
*Source: Avascent and Fleishman Hillard Survey report on offsets “Half Trillion Dollar Challenge”
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Offset Growth in All Regions Increasing
$25 $20
Asia/Pacific Obligations
9.0%
Millions
Millions
MENA Obligations $25 $20
$15
$15
$10
$10
$5
$5
$-
$-
$25 $20
4.6%
Latin America Obligations Millions
Millions
Europe & Canada Obligations
6.5%
$25 $20
$15
$15
$10
$10
$5
$5
$-
$-
*Source: Avascent and Fleishman Hillard Survey report on offsets “Half Trillion Dollar Challenge”
9.6%
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Largest markets = largest Readiness Checklist – 6challenges Steps $15B
2
1
1 The Reality:
Vital Markets with Challenging Offset Environments
Size of FY13 Defense Investment (Procurement)
India
KSA
UAE Turkey
Brazil
Taiwan
Colombia
Canada
3
The Second Tier: Smaller Addressable Markets with Complex Offsets
Netherlands
4 Mature Markets:
Finland
4
3 Low
The Ideal: High Spenders and Offsets Leaders
South Korea
Greece $0B
2
Effectiveness of Offset Regime
*Source: Avascent Analytics International Database
+ All figures in Billions of USD
Smaller but Strongly Structured Offset Environments
High
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Global Expansion Challenges and Recommendations Readiness Checklist – 6 Steps Challenge
Recommendation
Fly-in/fly-out approach to global expansion Product centric approach
“Boots on the ground” and effective JV partnering Solution centric approach
Offsets rapidly increasing in $$$ and importance
Raise visibility and view as opportunity not risk
Offset authorities economic dev results
Campaign to educate and train offset authorities
Building a global organization
Integrate strategy, policy, reps, compliance, brand PRIVATE & CONFIDENTIAL | AVASCENT | 9