Moving 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.

Aside from the quest for revenue growth, lower manufacturing costs are a major driver behind the non-domestic investments for half of the respondents. Additionally almost three-in-ten say that their foreign investment strategies are driven primarily by their desire to move closer to customers and to gain access to new markets.

A&D organisations based in North America were 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, were among the most likely to say they are looking for reduced manufacturing costs from their foreign investments. 

Two-thirds of the non-U.S. based respondents say they will make investments in the U.S. and Canada. Sixty-six per cent of U.S.-based respondents say they will invest in India and 50 per cent say they will invest in mature ASPAC economies (including Japan, South Korea, Australia and Singapore).

Tom Mayor, National Service Group Leader, Industrial Manufacturing Strategy, KPMG in the US comments:

"A&D organizations 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."

(Continued on the next page)