Lockheed Martin Corporation is known for operating a global aerospace and Security Company which engages in the design, research, development, integration, sustainment, and manufacture of advanced products, technology systems, and services. It also provides a range of engineering, logistic, management, information, technical, and scientific services. The company operates in several segments that include mission systems and training, missiles and fire control, Aeronautics, Space Systems, and mission systems and training.
History
The History of Lockheed Martin begins over one hundred years ago, more specifically on 16 th August 1912 when Glen L. Martin started the Glenn L. Martin Company that was located in Los Angeles, California. The company was started after he successfully built his first plane. After four months in December 1912, four hundred miles away the Alco Hydro-Aeroplane Company was founded by Allan and Malcolm Lockheed. Being talented mechanics, the two set up shop out of a garage and started to construct seaplanes that would increase the shutter speed and distance record for the overwater flights. These individuals had humble beginnings but at the same time were men of unwavering purpose and unrelenting vision. The individuals looked past any obstacles and understood that performance, innovation, and ambition were vital in ensuring that there is a brighter tomorrow. In 1995, Lockheed Martin Corporation was founded when Lockheed Corporation and Martin Marrietta, which two of the most significant technological and defense contractors united. It was known as the merger of the equals because the two companies were considered as being the largest defense, aerospace, and technology companies. Currently, the company specializes in four principal business segments that include Electronic Systems, Space Systems, Aeronautics, and Integrated Systems and Global Solutions. The company aims to maintain their leadership in the global security sector by concentrating on innovative research and development. However, the company still faces competition from some of the companies that operate in the same field.
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Competition
Lockheed Martin Corporation is considered to be one leading and most successful firms in the Defence and Aerospace Products and Services. Over the years, the company has found innovative ways of doing its business. However, just like any other company, Lockheed Martin Corporation faces the threat of competition. The current competition among the firms that are existing in the Defence industry is considered to be high. The company faces competition from other big companies such as Northrop Grumman and Boeing when it comes to winning defense contracts. Because the industry has very few players, the companies often analyze each other’s move and make counter moves when necessary. Lockheed Martin Corporation often uses new technology and innovation to differentiate its products and services so that it can remain competitive. It can be able to handle the increase in the level of competition by being innovative ( Bensoussan, 2013) . Innovation results in new products and services that attract new customers and help in maintaining the existing customers. To ensure that the company remains competitive, it is vital to understand the internal and external factors which affect its operations.
SWOT Analysis
SWOT analysis is considered to be a framework that is applied by businesses to extensively asses the internal and external business environment as part of the corporate and strategic planning process. The structure aims at generating a snapshot of the strength and weakness as part of the internal environment analysis, and the threats and opportunities as being part of the external environment assessment.
Strengths
An analysis of the company indicates that it has strengths in various functions such as the finance and accounting where it has a strong cash flow which helps it to get the necessary resources that are needed to expand into new projects. Also, the finance function has the strength of having good returns on the capital expenditures because the company has over the years been successful in executing its new projects. It has also been successful in generating good returns on its capital expenditure by developing new revenue streams. Finally, the company has been able to be consistent in its positive financial performance.
The company also has strength in its research and development function where it is known for having high product innovation. Also, the company has been able to maintain a high research and development expenditure that helps it in maintaining a competitive advantage. It also has a strong public relations function because the company is enjoying strong relations with the government of the United States, which is also one of its largest buyers. The company enjoys winning contracts that are in line with its history of competencies. Therefore, the company is sure of being in existence in the future because of the long-term contracts that it gets which stretch for five to even ten years.
The human resource function of the company is also a strength to the company because it has been able to maintain employee retention which is vital in any organization. Also, the company has a successful learning and training program that ensures that it has a highly skilled workforce. The company is continuously investing in training and developing its workforce which has resulted in highly skilled and motivated employees.
The company’s production function has the strength of being useful. Automation of activities in the company has resulted in an inconsistency in the quality of the goods that are being produced by Lockheed Martin and has helped the company in scaling up or down based on the demand condition of the market which they are operating in. The production function of the company also has the strength of being able to produce diverse products that help the company in maintaining the competitive advantage. It has a wide range of services in four main sectors that include Information Technology , Aerospace and Defence , emerging technologies , and Space technologies .
Weaknesses
Weaknesses are considered to be areas where the company can improve on so that it can build and maintain its competitive advantage. More specifically, Lockheed Martin lags in some areas that are linked to its financial function. The company’s 85% of its sales revenues are made from sales to the US government. This is an indication of dependency on one customer which would then affect the growth and expansion of the company. Another weakness in the financial function of the company relates to cost as it is considered to be a company which is not cost effective. The recent project that indicates that the company is not cost effective involves the high developmental cost that was incurred in the JSF F-35 project. The cost that has been used in this project is considered to be the most expensive in the U.S weapon program. The cost was approximately $1.508 trillion and aimed at covering the research, development, military construction, and procurement.
The company also has a weakness in its human resource function which has seen challenges such as the poor relationship between the employees and the management team. A good example of the conflict between the company and its employees was seen in the year 2015 where the company had to pay a lawsuit settlement of $62 million after the employees accused it of mismanaging their 401(k) retirement plan (Reuters, 2015) . More than 108,000 plan employees were engaged in the lawsuit which started in 2006. In this case, it was proven that the company concealed excessive fees that were being imposed on the employees and which then dampened the returns on the investment. According to the case, the company issued payments to individuals who may have left the company or made payments directly to the retirement plans of class members. It also took steps so as to keep the future fees low. The company denied any form of wrongdoing but made the settlement to avoid uncertainty and the expenses that are related to the litigation.
Opportunities
Opportunities include the things that the company can utilize so that it can improve its performance. One of the opportunities which the company has is the rise in defense spending by the US government. It is worth noting that since the September 11 th attack on the United States, the country has increased its spending on defense. Also, Congress has approved spending on the military operation in various countries that pose a security risk to the United States and its interests. The military market has seen a strong growth that is likely to continue which is an opportunity for the company to make more growth.
There is also an opportunity in the space business initiatives where Lockheed Martin is the main contractor for some of the business initiatives that have been initiated by NASA. More initiatives mean that the company would get new business opportunities that will help in increasing its competitive advantage ( Szymanski, 2011) .
Several companies have shown increased interest in the F-35 fighter jet, which is also the company’s highest-profile product. Even though this is considered to be the largest contract for the U.S Government the company could take the opportunity to make sales in other countries. It is worth noting that by 2017, it was reported that the company had almost $37 billion deals that it had done with 11 different countries including the United States. There is also an increase in the demand for C-130 cargo planes and the Black Hawk helicopters which is an opportunity for higher earnings and revenue.
The acts of terrorism have increased dramatically across the globe. The areas that have been affected by a sharp increase in the rate of terrorism include the Middle East and Asia. Western countries are also prone to the risk, especially those that are in Europe as it is easily accessible by the new threat which is ISIS. As a result of the increase in terror, there has also been a rise in defense needs for these countries which Lockheed Martin can take advantage of so that it can increase its profits ( Fleisher, 2015) .
Threats
Threats are considered to be factors that pose a risk to the company. The biggest threat that the company is facing currently comes from competition. Some of the companies that pose great competition to Lockheed Martin include Boeing Company which is the largest manufacturer of government and commercial aircraft. It is also heavily involved in the development of advanced technology solution for space, national security, and for defense. The next competing company is the BAE System Plc or BAK which is a British defense contractor that previously around $22.7 billion regarding revenue in the year 2016. A high percentage of the revenue that was generated by the company was from defense contracts. The company is considered to be one of the biggest manufacturers of naval submarines and ships for governments all over the world. It is also known for being the producer of guided weapon systems and military aircraft. Raytheon Corporation is the third competitor because it is the largest manufacturer of missiles. The company has been the biggest beneficiary of the increased tension that has been seen around the world. In the year 2016, it was estimated that the company’s revenues had increased by 3.5% to be $24.1 billion. Countries in Europe, Asia, and the Middle East are strengthening their defense systems using weapons from this company. One disadvantage that Lockheed Martin Corporation has over most of its competitors is that their ability to transfer technology have not been restricted by their governments and thus, Lockheed Martin faces the risk of losing out on big defense contracts ( Fleisher, 2015).
The next threat to the company is the uncertainty in the amount of money that the U.S Government is willing to spend in the future because of the intense pressure to have defense budget cuts. It is worth noting that the company heavily depends on the U.S government as its major customers and thus its future depends on the government. The threat that is posed to the going concern of the company has encouraged the company to improve its international sales to have more customers. However, the company still faces intense competition from other companies such as the Boeing company as analyzed above.
The company also faces regulations that are linked to disclosure of acquisition and cost because it deals with many government agencies. In some cases, the procedures may be too long and might interfere with the smooth operations of the company. The regulations also pose a risk on the normal operations of the company as some agencies are likely to hinder their operations through restrictions.
The next threat is the social-cultural trend where people and businesses want to be associated with companies that are environmentally friendly. The company has been involved in environmental issues and potential proceedings that relate to groundwater and soil contamination and the disposal of hazardous materials that act as a threat to the profits of the company. Such proceeding also acts as a threat to the reputation of the company because customers have now become environmentally conscience as a result of the effects of climate change.
Modernization has also become a threat to the company because it is forced to keep up with the changing times by being innovative regarding developing new products and services. It also needs to acquire new technology that will be useful in keeping up with the rapid changes in technology and which will help it in ensuring that it remains competitive.
Conclusion and Future Study
An analysis of the SWOT analysis of Lockheed Martin Corporation is vital in increasing its competitive advantage in the market. More specifically, the analysis helps the company is working on its weaknesses so that they can be strengths. It is also able to take advantage of the opportunities that are available and also work on strategies that will help in avoiding the threats that might negatively affect their performance. To ensure that it remains competitive, the company it needs to work on the weakness of depending on one customer by engaging with others to ensure the success of its growth and expansion. The company also needs to work on the way it relates to the employees to avoid any form of conflict as was seen in the year 2015. Employee involvement is a good strategy that will ensure that the company does not find itself in another lawsuit that results from misappropriating the funds of the employees. It is also vital for the company to work in ways that will help in eliminating the threats that it is facing. More specifically, it should get involved in environmental issues considering that it is now operating in a society that has become environmentally conscience. Therefore, the company needs to look at environmentally friendly ways of disposing hazardous material and making sure that the soil does not get contaminated. The action will ensure that the company maintains its good reputation.
As indicated above, m odernization has also become a threat to the company because it is forced to keep up with the changing times by being innovative regarding developing new products and services. It also needs to acquire new technology that will be useful in keeping up with the rapid changes in technology and which will help it in ensuring that it remains competitive. It means that there is the need for future research on the technologies that will be needed in the changing environment.
Future research should be done in various areas including the demographic qualities of the customer base. This is vital because there is the probability of change in the customer base. It is evident that the US government is trying to reduce its spending on defense while countries in the Middle East and Asia, where there has been an increase in the war there have been increases in demand of defense equipment. The new customer base is different and has different motivations which need to be considered by the company. The information can be found through analyzing the customer information, customer interactions, and through surveys. Future research for the company should be on ways in which it can reduce costs, especially that which relates to research and development. From the analysis, the company is considered not to be cost-effective. The recent project that indicates that the company is not cost effective involves the high developmental cost that was incurred in the JSF F-35 project. The cost that has been used in this project is considered to be the most expensive in the U.S weapon program. The cost was approximately $1.508 trillion and aimed at covering the research, development, military construction, and procurement. A reduction in the production cost will ensure that there is a reduction in the prices of the products which is vital because the company is operating in a competitive environment with few customers who want value for their money. The company needs to analyze the entire production process and also the technology that it is currently using. It also needs to research on new technologies that can help in reducing the production costs while at the same time ensuring that there is efficiency in the process.
References
Bensoussan, B. E., & Fleisher, C. S. (2013). Analysis without paralysis: 12 tools to make better strategic decisions . Upper Saddle River, NJ: Pearson Education .
Fleisher, C. S., & Bensoussan, B. E. (2015). Business and competitive analysis: Effective application of new and classic methods . Upper Saddle River, New Jersey.
Fleisher, C. S., & Bensoussan, B. E. (2015). Business and competitive analysis: Effective application of new and classic methods . Upper Saddle River, New Jersey: Pearson Education .
Reuters. (2015, 02 21). Lockheed Martin to pay $62 million to settle 401k lawsuit. Retrieved from Reuters: http://fortune.com/2015/02/20/lockheed-martin-to-pay-62-million-to-settle-401k-lawsuit/
Szymanski, A. (2011). The competitive analysis of the commercial aircraft industry . Munich GRIN Verlag .
