General competitive position of BAE Systems Essay

Custom Student Mr. Teacher ENG 1001-04 5 June 2017

General competitive position of BAE Systems

On the group current strategy based on its vision in which to be the premier global defence, security and aerospace company; and mission to remain to deliver sustainable growth in shareholder value through a commitment to Total Performance (BAE Systems 2010:14). The current focus of strategy is positioning to optimise progress the business in the current environment, the Group Strategic Framework continues to develop to recognise against the strategic objectives, and to highlight the Group’s focus on delivery and performance (BAE Systems 2010:14).

This strategy has worked effectively during all the acquisitions and disposals transacted from the year 200 to 2009. For the group/department of BAE systems the Electronics, Intelligence & Support, the acquisition on the year 2000 of two former Lockheed Martin businesses, Control Systems and Aerospace Electronics Systems, have made BAE and the group the world leader in digital engine controls, flight controls and electronic warfare solutions.

For the Land & Armaments group, another key strategy of acquisition that has established a global land systems business was implemented on years 2004, 2005 and 2007, when the company acquired Alvis, United Defense and Armor Holdings respectively. For the Programmes & Support Division, another key acquisition that has provided access to government security business was done in 2008, when the company have finally acquired Detica and together with the acquisition of VT Group’s shipbuilding business has further strengthened the Group’s global maritime business (BAE Systems 2010:16).

And lastly for the international sector BAE as a group has become Australia’s largest defence contractor primarily due to the acquisition of Tenix Defence in 2008 (Smith & Frost 2008). According to the firms most current Annual report total sales revenue is at ? 22. 4 billion (see Table 1) an increase of 21% from 2008 numbers, operating income at ? 982 million (see Appendix 2: Group Income Statement), total assets listed at ? 25. 4 billion and total equity at ? 4. 7 billion (2009).

Table 1 show the percentage of Sales generated by each group under the BAE Systems in 2009 Source extracted from the Annual Report 2009. Using the Porter’s five forces analysis, we can derive a strategy outlining the major forces in Aerospace & Global Defence Industry. Bargaining Power of Suppliers BAE Systems has a wide range of suppliers for both large and small companies, thus if decided to switch; costs is not an issue, as long it can find a better supplier that can match technological capability to customer requirements.

Currently BAE systems apply SBAC 21st Century Supply Chain Programme – SC21 tools and techniques for operational performance management and the tiered approach to supplier management (BAE Systems 2010). There are some areas of production for BAE like the creation of fighter aircrafts in which its supplier’s are usually concentrated and has strong labor unions, but again due to diversity of the overall business operations of BAE the assessment of this supplier power can be considered at medium risk.

Threat of Substitutes BAE systems is aware of its competitors’ ability to provide other substitute weaponry to its customers, but not every competitor can offer in-house equipment and production quality that BAE can actually deliver. The threat of substitute can be considered medium, because there is still the existence of low priced but relatively competitive arms and weapons companies in the aerospace industry. Bargaining Power of Buyers

The power of buyers describes the effect that the firm’s customers have on the profitability of BAE overall. Even though based in the UK, BAE’s main buyers are in the US. BAE’s US subsidiary alone has accounted for 58. 5% of total group sales (West 2010). The US Government in defence is by large have a lot of economic power and because of this the buyer’s power can be considered high due to the challenge of capturing a high proportion of the value created is reduced.

BAE’s large buyers have significant leverage to negotiate lower prices because of the threat of losing a buyer that accounts for more than a half of total sales revenue, BAE is on a weak position. Threat of New Entrants The threat of new entrants for BAE can be considered low, due to the Aerospace and defence large capital requirements, customer’s brand loyalty, government regulations, economies of scale unique products and BAE’s wide range access to inputs for continuous production.

If a new firm decides to enter the market, in order to just compete with the wide range of products and services being currently available for BAE, the former needs to undertake a massive an expensive campaign for marketing just to introduce their products, and the challenge is also the effectively of this marketing campaign since BAE systems have already established a strong brand identity in arms industry.

BAE has also the advantage of an advanced production system with key access to inputs, which a new firm may be overwhelmed to know that in order to be at par with the existing firms it has to have an outstanding production system with access to key inputs as well.

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