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November 21, 2012

Global Defense Industry Seeks New Business Opportunities in Emerging Countries: Frost and Sullivan

By Shankar Pandiath, TMCnet Contributor

According to a study by Frost and Sullivan, the rapid rise in market outsourcing has caused the global defense industry to address gaps in future capability by outsourcing a part of the work involved in transitioning markets.

Further, under a financial crunch situation, the industries are facing a significant threat in the way of their growth – unexpected and unwanted competition arising from fast-emerging innovations in the Commercial of the Shelf (COTS) technologies. This is especially relevant to C4ISR, an intricate “Web of high-tech subsystems.”

Since the traditional defense markets don’t offer reliable and lucrative growth opportunities anymore, the global defense industries are forced to develop businesses in the adjacent markets, which also include new industries, geographies and new end users.

Research by Frost and Sullivan categorizes countries into three major types based on their respective levels of C4ISR capabilities. These are advanced, transitioning and limited capability. The company projects that the Advanced Market, which also includes major European countries and the United States, will spend a minimum of $500 each year on C4ISR, from 2012 to 2021. In spite of this huge investment by the Advanced Market, the market shares for the global C4ISR are still expected to decline during this period.

In this context, Sabbir Ahmed, a consultant with Frost and Sullivan, stated that this significant phenomenon is not majorly attributed to decline in Western market expenditure since there will be dramatic growth in investments in most transitioning markets. Emerging countries like India, Brazil, China, Russia and Saudi Arabia are among the major transitioning markets, with an exceptionally high growth rate in C4ISR investments over the next nine years.

More and more transitioning countries in the market are looking to transform their defense force’s capabilities with advanced C4ISR applications. With this, most defense majors can sustain growth in a significant manner, even though Western markets offer limited growth opportunities nowadays.

The ‘go to market’ strategy by the defense majors should particularly emphasize on the ‘forging true-partnership’ in the transitioning countries. According to Ahmed, those companies who are ready to license or share technologies and enter into joint ventures with local participants, with the focus of selling it to the third-world countries, will be positioned well in the transitioning market, as well as their respective home market.

"Defense Primes need to work with end-users, decision makers and influencers to shape demand in these markets; they need to push for less complex C4ISR systems for land-based applications at the initial stage of Force's development, and more complex systems for airborne/ship-board/space-based applications at the mature stage of development," advised Ahmed. "Those companies who are willing to share / license technologies and form joint ventures with local participants with the aim of selling to third countries, beside home market will be well positioned to succeed in the Transitioning Markets.”

Frost and Sullivan is a leading Growth Partnership Company, working in collaboration with clients to leverage visionary innovations that address issues like growth opportunities and global challenges. 

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Edited by Braden Becker

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