KPMG: Aerospace & Defence executives hunting down growth and a shift to new markets

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By TESTCustomwebLP TESTCustomwebLP July 11, 2016 11:43

KPMG: Aerospace & Defence executives hunting down growth and a shift to new markets

Two-thirds of aerospace and defence (A&D) senior executives say that they are confident or very confident in their company’s growth prospects over the next two years, according to the latest KPMG Global Aerospace and Defence Outlook. Aircraft OEMs and major defence contractors are particularly confident in their growth strategy, with 100 percent of respondents from larger organisations (those with global annual revenues of more than US$10 billion) voicing confidence in their growth prospects.

According to the survey of senior A&D executives from around the world, 41 percent now believe growth will be an extremely high priority over the next 2 years, up from just 13 percent last year. The survey also indicates that cost and performance management are still high on the agenda for A&D organisations, with 81 percent saying that they are focusing on improving cost and performance management.

Glynn Bellamy, head of aerospace at KPMG UK said: “Given the size of order backlogs across many A&D organisations the focus will now be on the need to drive profitable growth and performance, not just top line growth. This will impact across the supply chain with a focus on operational innovation and globalisation to drive cost and in support of accessing high growth markets. ”

With economies remaining sluggish and defence budgets flat in the mature markets, many A&D organisations are now looking to new foreign markets to generate new revenue. In fact, more than nine-in-ten of the A&D respondents say they plan to expand into new geographic markets over the next two years.

A&D businesses based in North America are the most likely to say they are using their foreign investment to gain access to new markets. Respondents from India and China, on the other hand, are among the most likely to say they are looking for reduced manufacturing costs from their foreign investments.

Two-thirds of non-US based respondents say they will make investments into the US and Canada. Sixty-six percent of US-based respondents say they will invest into India and 50 percent say they will invest into mature ASPAC (including Japan, South Korea, Australia and Singapore).

“A&D organisations are continuing to move manufacturing operations to the emerging markets – just think of Boeing and Airbus who have both recently opened final assembly lines in China – but as they do so, they are also thinking about how these investments help them better serve and attract the high growth regional markets. Moving from a ‘make in’ to a ‘sell to’ strategy for an emerging market requires a very different approach,” said Bellamy.

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By TESTCustomwebLP TESTCustomwebLP July 11, 2016 11:43