Global Defense Suppliers’ Outlook Survey 2012–2013 Industry Dynamics, Market Trends and Opportunities, Expenditure and Marketing Strategies

Thursday 19 May 2011, Amsterdam

Throughout the global defense supplier industry, 39% of respondents are ‘more optimistic’ about revenue growth for their company over the next 12 months compared to the previous 12 months. A further 34% of respondents are ‘neutral’ about revenue growth compared to 25% who are ‘less optimistic’ about their company’s revenue prospects.

42% of respondents expect an increase in marketing expenditure of between 1% to 10% in 2012, while only 10% of respondents expect a decrease between 1% and 10% (reference see graph below). Marketing budgets of global defense supplier industry supplier companies are expected to rise by an average of 5.5% over the next 12 months. Supplier respondents plan to spend more on social media and different online media formats such as newsletters, blogs, videos, webcasts, podcasts, online resource centers and talkback.

Executives from the global defense industry expect increased levels of consolidation, with an average 54% from defense contractors and 49% from other service providers projecting either a ‘significant increase’ or ‘increase’ in M&A. However, 31% of defense contractors and 30% of other service providers expect no change in consolidation activities in 2012.

The expected levels of consolidation in the industry could be due to new cost or demand pressures, repayment of debt, the potential need to meet new compliance procedures, quick access to new markets, business expansion, and an increase in market share.

Additionally, global defense contractors and other service providers reveal that they will increase capital expenditure towards ‘new product development’, ‘IT infrastructure and development ’and ‘machinery and equipment purchase’ over the next 12 months.

Global defense industry respondents identify India to be the most important region for growth among emerging markets, along with Middle East and Brazil. The Indian defense industry is a fast growing market in the world as a result of demand for advanced military hardware and the concerns of domestic insurgencies and hostility from neighboring countries.

Furthermore, South Korea and Singapore with Taiwan and Hong Kongare the developed regions with the highest growth potential, as identified by 42% and 35% of respective respondents from defense contractors companies. Additionally, according to 37% of respondents from other service providers, South Korea will demonstrate ample growth in this sector.