Aerospace and Defense Sector SWOT and PESTLE Analysis

Strength

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Weakness

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Opportunity

1. Adoption of highly agile production including digital technologies: Defense contractors and defense suppliers are going to have greater opportunities for getting contracts because of an increase in global defense spending which is expected to continue rising for the next few years. Defense companies need to set up efficient strategies which improve production yields and which will be capable of fulfilling the high demands. The strategies should moreover be adaptable to fluctuations in demand and at the same time compatible with digital technologies. Smart factory initiatives are a potential solution capable of driving 10–12 percent gains in factory utilization and labor productivity without necessitating any significant capital investments.

2. Airlines will also replace aging fleets with modern and fuel-efficient aircrafts: It is estimated that around 86% of the existing fleet will have to be retired and replaced by 2036. These will be replaced by newer fuel efficient aircrafts. To this end, Bombardier has invested nearly $16.7 million into two cooperative aerospace research projects which will be tasked with developing advanced aircraft systems design and environmentally friendly technologies. Airlines thus need to build engines which are capable of providing long term profitability in order to improve the overall sustainability of the aircrafts.

3. Regional jet market set to be robust: Forecasts have predicted a requirement of more than 5,000 regional jets spaced out over the next twenty years. This places the overall outlook of the regional market at fairly positive levels. The primary basis behind this forecast is the assumption that airlines will have to replace older aircrafts. The fact that the Asia-Pacific, the Middle East, and Latin American regions are looking to expand regional connectivity is also expected to drive demand. Moreover, in recent years, the regional jet market has seen major changes in the form of alliances made between A&D companies. Airbus has acquired a majority ownership in Bombardier’s C-Series aircraft program. Other such acquisitions are also underway like Boeing’s plan to take over Embraer’s passenger jet unit and Mitsubishi Heavy Industries intentions to buy out Bombardier’s CRJ regional jet program. Such alliances are likely to have a major impact upon supply chains, leading not only to manufacturing consolidations but also significantly lowered production costs.

Threat

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Political

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Economic

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Social

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Technological

1. Growing adoption of 3D printing: The aerospace supply chains are likely to depend strongly upon additive manufacturing in the long term. A&D companies have long been using 3D printing for the manufacturing of testing prototypes as well as for research. However, it is only recently that companies have started to introduce 3D printing for the final manufacturing of aircraft/engine parts. In this early stage of additive manufacturing, aerospace companies are seen to be using 3D printing only for concept modeling and prototyping, tool cavities, low-volume complex aerospace parts and replacement parts. The civilian turboprop engine by GE Aviation is a good example as the manufacturing of this involved 3D printing along with several other innovative technologies. the manufacturing team reduced 855 separate components to only 12, leading to a total weight reduction of more than 100 pounds. This was impressive as it resulted in a fuel burn improvement of nearly 20%, easier maintenance as well as 10% more power.

2. Digitization gathers momentum in defense: Competition within the A&D industry is slowly changing form as the ongoing digital transformation leads to the entry of several novel players. The older players of the industry are now presenting the military with innovative business models and turnkey solutions. The industry is seeing a growing emphasis for the development and adoption of the autonomous underwater vehicles (AUV) technology against the autonomous aerial vehicle (AAV) technology even though the former is not as well developed. The technology is used extensively today by the military for intelligence, surveillance, inspection, underwater repair maintenance, navigation and communication purposes. The military and commercial organizations in the defense sector thus need to plan ahead successfully and develop appropriate strategies to manage the shift.

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Legal

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Environmental

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