General Dynamics Corporation SWOT and PESTLE Analysis

Strength

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Weakness

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Opportunity

1. Growth in the Aerospace and Defense Industry: Based on the report on Aerospace & Defense industry by Deloitte titled “2018 Global aerospace and defense industry financial performance study Commercial aerospace”, this industry is positioned for strong global growth. In addition, Boeing also forecasts an $8.7 trillion A&D market by 2028. The commercial aircraft backlog is approximately 14000 and around 38000 aircrafts are expected to be produced in the upcoming 20 years. Due to increase in geopolitical tensions, there is an increase in the demand of military equipment, signaling an increase in defense spending in the coming years. Although, the A&D industry is mainly driven by the United States, but a few other countries like UK, China, France, India, Middle East, will be contributing towards the growth of this industry in the future.

2. Innovations in the A&D industry: As per reports, the global spending on research and development in the A&D Industry is low, that is, 4.1 % (comparatively slightly higher in Europe, i.e., 5.1%). With the increase in US defense budget spending; there is a scope of increase in investments in terms of innovation involving digitizing armed forces and lowering procurement expenditures. As per reports, China is trying to develop military artificial intelligence technologies, sophisticated air to air missiles using advanced imagery and sensors to pre-empt any enemy intrusions. Due to these external pressures, there is a push for making strategic investments choices in order to promote technological innovations through research and development that will yield long term value. Some companies like Lockheed Martin are using venture funds to invest in early stage technology companies that are involved in autonomous systems and robotics, artificial intelligence. Boeing, Raytheon and Airbus have also grabbed stakes in high-tech firms working in areas that include cyber-security, drones, small electric planes and augmented reality.

3. Expansion in Emerging markets: Among the top 15 countries in terms of defense expenditure, six of the countries (India, Russia, Brazil, Turkey, China and Saudi Arabia) are emerging markets. The average expected CAGR of these countries is 4.5% as opposed to the average of 1.9% of developed countries. The level of defense expenditure is also impacted by other factors like, political stability, relationship with neighboring countries, terrorist activities. The governments of these emerging markets are looking for opportunities to modernize their armed forces. In the aerospace industry, these economies, especially China, will drive the demand in the coming decade. Domestic India is expected to become the 5th largest route in the world by 2036 in terms of origin and destination air passenger flow. Therefore, it is beneficial to expand operations in these markets to bring the companies closer to the customers.

Threat

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Political

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Economic

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Social

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Technological

1. Risks associated with cyber-security: Companies involved in A&D industry regularly exchange confidential information on technology, flight data, specifications and performance of equipment and services, with the purpose of improving collaboration on design, development and support. All such data can be misused by cyber terrorists who use these confidential data to copy products and undercut process to gain competitive advantage. In commercial aerospace industry the data generated during flight navigation and control, propulsion, landing and braking and information systems are used to monitor and improve the safety and optimization of the products. Cyber security is not the sole responsibility of the IT industry, rather a secure cyber environment can be achieved through inputs from different business segments, to strengthen and mitigate risks that may interrupt the business operations.

2. Technological Disruption Vulnerability: Belonging to the A & D sector it is vulnerable to the number of disruptive opportunities and challenges over the coming years. Few such disruptive trends are: advances in the nanotech and material sciences will result into a new set construction materials which possess exotic qualities like, shape shifting, light weight, heat and impact resistance and more; significant innovations in aerospace industry will result into re-introduction of hypersonic airlines for commercial use; shrinking costs and advancement in use of robotics in manufacturing thereby improving quality while slashing costs; development of reusable rockets, increased investment from emerging nations leading to commercialization of space more economical etc.

3. Digital transformation with trusted partners: Aerospace & Defense sector has one of the lowest innovation intensity percentages at approximately 4.1%. The industry is expected to see an increased adoption of digital innovation with the emergence of artificial intelligence, robotics/anonymous systems, sensor technology and additive manufacturing. A disciplined approach is in process, wherein low risk solutions will be pursued with trusted partners, this will balance the inherent complexity of new technology and increase capabilities at the lowest possible cost. Due to a smaller customer base, high risk investments, like digital transformation, do not always pay off as it is difficult to gain scale. Therefore, the focus in 2019 will be towards developing new technologies and develop test cases to prove a scalable concept. From an internal process perspective, a greater growth is expected to be observed, as it involves less risk. Therefore, the end users in the air and battlefield may seek greater innovation, but the risk adverse nature of this industry may lead to a slow adoption of the market technologies. But as the industry expects to achieve more with fewer resources, therefore, an early adoption of technology may be expected in the factory floor achieving increased process efficiency and reduced costs.

Legal

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Environmental

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