Lockheed Martin’s Entry Strategy in Australia

Business Plan for Lockheed Martin to enter Australian market that is worth $25.82bn for military technology products and services through an LLP with Quickstep Holdings Limited. The establishment of the corporation occurred in 1995 and is deemed as a leading defense contractor. Lockheed Martin provides software lifecycle services to different organizations. The company is engaged in various activities such as research, design, development, integration, and sustenance of the advanced technological systems, products, and services. The report establishes that the success of the international business expansion that the company seeks to make is dependent on its ability to adopt an excellent market entry strategy and streamline its objectives to the consumer needs. The outstanding ranking of the Australian defense and military in the global arena provides numerous incentives for the players in this industry. Therefore, the exploitation of the weak competition and the increased market share of Lockheed Martins would allow the company to thrive in the target industry and market. The report also establishes that Quickstep Holdings Limited is the best match for the corporation due to its excellent performance and the employment of advanced and unique technologies in providing solutions to other firms within the aerospace and defense industry.

Introduction

Purpose

Globalization has tremendously transformed the business landscape by providing avenues through which local corporations can expand and venture into other states (Giddens, 2018). Numerous multinational firms have exploited globalization and technology to establish branches in promising and emergent markets. The principal purpose of this paper is to explore and analyze the best market entry approach that would guarantee Lockheed Martin successful entry to Australia. The objective would be achieved by examining the available options that the corporation has and exploring the possible partnerships that this organization can make to facilitate the achievement of its business objectives. The discussion also entails marketing strategies that are most suitable for the company and the financial implications of the firm’s decision to expand its operations.

Industry Overview

The political and socioeconomic stability of Australia makes it ideal for thriving corporations to establish their branches and headquarters in the country. According to Almond and Verba (2015), Australia is a democratic country that has enjoyed political stability for decades. The nation has well-established legal and regulatory structures that encourage international investments from investors around the globe. Investment certainty in the country is relatively high with numerous investors gaining confidence in the established regulatory bodies (Almond & Verba, 2015). The Australian Aerospace defense sector is a thriving but sensitive market. The industry has a few traditional corporations that have dominated and commanded the market over the past few years. Some of the dominant players in this market include the Airbus Group, Boeing Defense Australia, Thales Australia, and BAE Systems Australia (Rodriguez-Segura, Ortiz-Marcos, Romero, & Tafur-Segura, 2016). The successful entry of Lockheed Martin in the Country would demand that the corporation adopts numerous strategies that would allow it to thrive in an economically tense country. Lockheed Martin would also develop strategic partnerships with local firms in the region that would enable it to strategically position itself as a Giant in the Defense and Aerospace industry.

Entry Strategy

The success of a corporation in an emergent market is dependent upon the strategies that the company adopts during the early entry stages. De Villa, Rajwani, and Lawton (2015) asserted that successful market entry is also subject to the depth of the planning process. Firms that plan extensively conduct in-depth research of their prospective markets before their entry thrive compared to the enterprises that they enter the markets with inadequate preparations. The first step of planning for market entry is the examination of the market as a site for actions that add value to the consumers and as a market for the company’s products.

Market Overview

Aerospace and defense markets are among the most promising sectors in different economies across the globe. The industry grew tremendously after the world wars when nations adopted the latest forms of technology that would allow them to remain influential in the global platform. Consequently, the urge to stay militarily dominant created avenues for the Arms race in the 20th century. Countries struggle with gaining global hegemony through the expansion of their military equipment and technology. Australian grew as a critical global power after its massive investment in the military sector and the adoption of the latest technology in this sector.

Ahmad (2018) asserted that the country is currently the 21st most potent state globally. Maintaining such an excellent ranking would require the adoption of the latest models of fighter jets and other equipment used by the Air Force as well as the most recent military technology that would enhance the confidentiality of military operations. The contribution of the company to the value chain is that the corporation would improve the current status of the military through the provision of sophisticated aerospace and defense products. According to Petrescu et al. (2017), the business model of Lockheed Martin is unique compared to that of other states in the same industry in that the company’s solutions are all suited for the defense industry. Most global powers have acquired the fighter jets, information security systems, and other advanced technologies produced by Lockheed Martin (Gail, 2015). Therefore, the entry of the company to the Australian market would change the military dynamics in the country and would potentially increase the country’s power rank from its current position.

Companies that plan to invest in a specific emergent market must explore the existing market and form partnerships that would be valuable to the two parties (De Villa et al., 2015). According to Dyer, Kale, and Singh (2001), alliances can only create value when they are formed strategically. The principal advantages of effective partnerships include the improvement of knowledge management, elimination of intervention and accountability problems, the provision of external coordination and increase of external visibility. Dyer et al. (2001) claimed that a dedicated function is a pivotal point for the acquisition of knowledge through the provision of multiple learning strategies. Partnerships establish sets of processes that encourage the management and sharing of knowledge among the two or more involved parties.

Additionally, strategic alliances provide the opportunities of managing the operations of one corporation in its absence. Welch (2015) contended that the multinational companies engage local corporations that understand business dynamics of the target market with the goal of understanding the consumer-market coordination in these countries. The local companies may offer to use the concept of franchising as a means of coordinating the operations of these multinational firms. These local partners can also provide the appropriate interventions when one party experiences business-based challenges. Therefore, Lockheed would explore the local corporations with which it will form strategic business alliances.

Shortlisting Partners

The potential partner company candidates that Lockheed will consider during its entry into the Australian market include Quickstep Holdings Limited, the “Electro Optic Systems Holdings Ltd (EOS),” and BAE Systems Australia. The companies dominate the local aerospace and defense industry and have successfully secured contracts with the government to provide a wide array of products to the military. EOS specializes on aerospace and space technology and offers products such as telescopes, optics, electronics, and laser equipment (EOS, 2018). BAE systems is a renowned contractor contributing to $1.2bn of the country’s GDP (BAE Systems, 2018). The company specializes on systems of first line defense. However, the most suitable partner that Lockheed Martin will select in the market is the Quickstep Holdings limited since the two companies have similar business models.

Choice of Partners

Quickstep Holdings Limited is a growing multinational firm that provides advanced solutions to companies and organizations within the advanced manufacturing, automotive, defense and aerospace sectors. The corporation focusses on the production of aerospace-grade composites using manufacturing processes that are composite-based using the ”out-of-autoclave technologies.” Australia and the US are the main markets of operation of the company. The complexity of the solutions provided by the company makes it an ideal partner for Lockheed Martin. According to Marsh (2001), Quickstep Holdings Limited have an advanced infrastructure that allows them to develop complex products that meet the changing needs of consumers. The company announced its plans to realign its business operations to achieve growth and profitability in the 2010 financial year under a banner that it named the OneQuickstep. The banner entails a system of values that requires all the members of the Quickstep business family to engage in a cultural change that would facilitate the achievement of the company’s corporate values and vision. Employees will adopt behaviors that would deliver the achievement of increased financial performance. The efforts made by Quickstep to achieve economic growth and profitability makes it an ideal choice for Lockheed Martin. The partnerships between the two corporations would be beneficial for both parties as production ideas will be exchanged. Lockheed Martin will understand the market expectations and adopt internal strategies that will allow it to thrive in the global arena.

The planning phase of market entry also entails the identification of an ideal entry mode into the target market. Lockheed Martins may adopt three key marketing strategies that include exporting its products to Australia, licensing a local firm, and forming joint ventures and strategic alliances. According to Welch (2015), exporting is the most traditional means of operation in foreign and unfamiliar markets. The strategy involves the marketing of the goods produced by one country in another and does not require the establishment of a production plant in this new location. Welch (2015) asserted that while the nature of exporting does not allow firms to make massive investments in the target countries, heavy marketing presence is key to their success. The benefits of exporting as a market entry strategy is that it allows corporations to minimize the costs of their operations in the foreign markets and gives the companies the chance to learn or explore overseas markets before they can make full investments. However, exporters lack control in these new markets. The firms also face high transportation and storage charges and must pay other professionals who work as intermediaries between the manufacturer and the consumers.

Licensing is the second mode of entry into new markets that permits a producer to issue trading licenses to companies in the target country. The licenses are issued for the trademark, manufacturing, processing, and other business activities that are consistent with the operations of the licensor (De Villa et al., 2015). While the technique allows firms to save a substantial amount of income since the capital used has no connections to foreign operations, firms using licensing are disadvantaged due to their limited participation in the production processes occurring in the new market. The final approach mode of entry to foreign or emergent markets is the creation of joint ventures and strategic alliances. Joint ventures allow a firm to partner with another investor that originates from the target country (Welch, 2015). The rate of participation of the two or more parties in the alliance is more intensive compared to the other two strategies. Welch (2015) asserted that profits derived from the sales of products are shared among the partners with information transfer being the key benefit of this type of market entry methodology. Joint ventures are beneficial as they provide an avenue through which partners can converge strategic goals, solve emerging problems together, and enhance creativity and innovation among the staff of both companies that form the partnership. However, the critical issue that might arise from the strategic alliances is the emergence of conflicts between the partners, difficulties in splitting returns, mistrust, and cultural differences between the two companies. Therefore, firms ensure that they draft agreements that would guide their operations to avoid the emergence of such confrontations.

The joint venture or strategic alliances would be the most appropriate for Lockheed Martins during its entry into Australia. The company will form a solid alliance with Quickstep Holdings limited and would share different values that would result in the success of both parties (Quickstep, 2018). The strategic partnership would also ensure that Lockheed Martin exploits the entire Australian market and adopt the use of ultra-modern production technologies such as the use of composites. The vast size of the Australian aerospace and defense market would require that the company spends at least 100 million in entering and dominating the industry.

Organization’s Degree of Fit with The Country

Burns, Bush, and Sinha (2014) suggested that successful market surveys and entry plans analyze the fit between an organization, its culture, and the value that the target market would bring to the company. Multinational firms engage international trade experts who possess unbeatable knowledge in the operations of large business across multiple countries to assess the legal and economic factors that may facilitate their successful entry to a given market (Bush et al., 2014). The major challenge of the creation of alliances is the comprehension of how it should be organized (Bush et al., 2014). Three key steps would be taken to ensure that the partnership between Lockheed Martins and Quickstep Holdings limited works sufficiently.

The first approach will be the identification of the vital strategic parameters and their organization. According to Dryer et al. (2001), the organization of important strategic metrics facilitates the chances of the success of the partnership. The two partners will determine the main functions in their operations and design all their future processes based on their current operational activities. The second approach that the two partners in the business alliance would take to guarantee the success of the partnership would be to organize their operations in a way that they facilitate the acquisition of new knowledge and information transfer. Dryer et al. (2001) asserted that knowledge is a pivotal asset that organizations across the globe possess. Firms patent their ideas to ensure that other companies do not adopt specific ideas that they hold. Therefore, the primary approach that Lockheed and Quickstep limited would take to ensure the success of the alliance is to create an environment that would facilitate the transfer of knowledge and critical ideas that would benefit both parties. The final step of guaranteeing the success of the partnership between the two organizations in the alliance would be to locate the strategic-alliance function within the organization. Dedicated alliance functions are pivotal in organizations when done correctly since they offer internal legitimacy to the partnerships while defining the best ways to prioritize the resources (Dryer et al., 2001). Therefore, the two parties in the business alliance would engage the leaders at each level to facilitate the process of the location of the strategic-alliance functions that would be pivotal for the success of the partnership.

Different countries possess different regulations that govern the various types of legal nosiness entities. The main entities in Australia include the limited liability partnerships (LLP), Limited, Incorporated, No Liability, Unlimited Propriety, and Propriety Limited Company (Roach, 2016). The most recommended legal business entity for the company would be the LLP. According to Roach (2016), LLPs are suitable for partnerships where one company is new to the market while the other has dominated a given industry. The legal business entity comprises of a limited and general partner with either party not being responsible for the misconduct of the other. The rationale for recommending an LLP is its flexibility and the existence of limits to member liabilities. LLPs facilitate high degrees of flexibility to the parties involved while limiting member liabilities. Consequently, all the firms in the alliance would strive to make the best out of the partnership and limit the risk of business failure. The Australian business regulations support LLPs through the provision of incentives and the minimization of the amounts of taxes levied on these entities (Roach, 2016). Consequently, most foreign corporations prefer forming LLPs when entering the promising Australian market.

Each of the partners of the business alliance would have distinct operational goals that would be designed in line with the original corporate values and cultures. The organization would have one director from Lockheed martins who will be deputized by two professionals from Quickstep holdings. The key roles of the three professionals would be to manage the daily activities of the corporation and report to the executive boards of the two companies in the alliance. The organization of the two corporations will be as shown in the chart below.

Figure 1. Proposed organizational structure (Author, 2018)

The three members of the top management would be supported by the chief operations officer (Quickstep Limited), chief finance officer (Quickstep Limited), the chief of staff (Lockheed Martin), IT and security manager (Lockheed Martin), and an administrative officer from Lockheed Martin. The significance of such a structure is that it represents both companies in at the senior managerial levels and enhances knowledge transfer between experts from both ends of the alliance. Additionally, the chosen organizational structure focusses on the equal distribution of responsibilities between the two key players to ensure that no conflicts arise in the future due to the role distribution.

Globalization of business activities is a well-thought process whereby firms identify the geographic, cultural, and legal factors that might affect their operations in a given nation. Most corporations focus on the cultural norms of the target country and its potential implications for the company’s value chain activity and organizational geography (Shenkar, Luo, & Chi, 2014). The advantage of entry into the Australian market is that most of its cultures are similar to that of the country of origin of the corporation. Additionally, Endsley (2007) argued that while the military tactics utilized by different states may vary significantly, the machinery that countries use in their defense ministries or sectors have numerous similarities. Therefore, Australian culture would potentially facilitate the value-chain activities of Lockheed enterprises.

Marketing Strategy

Market Analysis

Lockheed Martin’s principal competitors in the Australian market would include Airbus Group, Boeing Defense Australia, Thales Australia, and BAE Systems Australia, ”Electro Optic Systems Holdings Ltd,” and Hellfire Systems LLC. The actual size of the Australian defense and Aerospace market is relatively wide (AUD 35bn) due to the evolving nature of the industry. Endsley (2017) argued that the powerful states in the international arena are continually changing their military technique to match the evolving world and the emergent threats that such evolution may cause. Therefore, the country would invest a significant amount of resources in the acquisition of the advanced military technologies and equipment that Lockheed Martin would offer. The growth and profitability of the market and segment that Lockheed Martin targets are promising due to the country’s quest to remain among the top most powerful nations in terms of their military might and the influence that they have in the global arena.

Cost structures assist companies in defining the flow of their financial resources one they delve in the prospective or target countries (Doellgast, Sarmiento-Mirwaldt, & Benassi, 2016). Table 1 below shows an ideal cost structure for Lockheed enterprises during its entry and operations within the Australian market.

Table 1: The costing structure (Author, 2018)

Direct operating costs

Indirect operating costs

Overhead costs

Labor

Staff wages and piece rate wages

Manufacturing overhead

Materials

Commission

Administrative overhead

Legal fees and licenses

Bonuses

Warranty claims

Product supplies

Product returns

Customer service

Machinery and equipment

The structure above indicates the essential costs that Lockheed Martin will adopt in the target market. The costs linked directly to the operation include the purchase of materials, labor, legal fees and taxes, the acquisition of machinery and equipment, and production supplies. Staff wages, commission, bonuses, inventory costs and the resources that would be consumed during the product return processes are the key indirect operating costs that the company would most likely incur. The overhead costs include manufacturing, customer service, administrative, and warranty claims.

Distribution channels are chains or paths through which the products move from the production line to the consumers. Sa Vinhas and Heide (2014) asserted that the distribution channel might contain different intermediaries such as distributors, retailers, or e-commerce platforms. Firms can either allow consumers to purchase goods directly from them or distribute their products to retailers and wholesalers. The market segment that Lockheed enterprises engage in will enable it to adopt one key distribution channel that is the use of e-commerce or e-marketing. According to Sa Vinhas and Heide, the globalizing effect has significantly affected how businesses conduct their operations. The existence of technology platforms allows firms to parade their products on their web pages and sell them to prospective buyers. Lockheed Martin would ensure that they engage the key players in the market through the internet and adopt e-marketing strategies as channels of the distribution of their products. Unlike other corporations that mainly target the air force and other branches of the Australian army, Lockheed Martin would focus on the learning institutions that train the servicemen in addition to the other key institutions that form the aerospace and defense industry.

Characteristics of Potential Customers in The Country

The marketing mix is a set of tools utilized by corporations to identify their key targets and align their marketing processes with the company objectives and consumer needs (Khan, 2014). The 4ps is the leading marketing mix tool utilized by corporations in the identification of the unique features and characteristics of customers in a given market. The first P is the product that is tailored to create value for the consumer. Lockheed Martin focusses on the production of defense and aerospace products that are uniquely designed for the military and other institutions within the aerospace industry. The strong emphasis on the latest technology makes the company’s products to be unique and suitable for all the consumers in the target market segment. The company would enhance the customer experience by providing attractive warranties for the products and the provision of high-quality services that would motivate customer loyalty. The second P is the place whereby the company would develop multiple channels for the sale of their products. The presence of a physical location increase sales since customers have the liberty of visiting and testing equipment on site before their purchase (Khan, 2014). Therefore, in addition to the online platforms that Lockheed Martin will use in marketing and selling their products, the company will establish a physical address where the customers can visit and test the products and services offered by the firm.

The third component of the marketing mix is the promotion of the products. Khan (2014) asserted that production companies employ diverse promotional strategies that may include endorsements, special offers, advertising, the issuance of gifts, joint ventures, and competition to fit in the target market. However, multinational corporations must first assess the suitability of such practices before adopting them to avoid spending numerous resources on courses that would not yield the expected returns. Lockheed Martin would use joint ventures and strategic alliances as its key promotional strategy. The company will align itself with Quickstep Holdings; a market leader in the Australian defense and aerospace industry, to promote its unique products to the new consumer base. Other promotional strategies such as endorsements and gifts might be irrelevant for the companies operating in this industry.

The pricing of a product defines that number of consumers who would be willing to invest in these products (Khan, 2014). Common pricing strategies include penetration, skilling, cost-plus, and psychological planning. Lockheed Martin will be one of the newest players in the industry after their entry into the Australian market. Therefore, the most appropriate pricing strategy that the corporation can adapt to increase its margin of sales is the penetration pricing. Spann, Fischer, and Tellis (2014) defined penetration pricing as a strategy that new firms use to attract consumers to their products. However, the prices change after the consumers realize the value of the services and goods produced by a specific corporation. Penetration strategy would strategically position Lockheed Martin as a new but vibrant player in the defense and aerospace sector in Australia. Such positioning would allow the corporation to outpace its competitors in this target market and attain a competitive advantage during the first years of its operations in this market.

The solid connection that exists between brand name and consumer preference is undebatable. Cavusgil, Knight, Riesenberger, and Rammal (2014) reported that successful multinational corporations invest numerous sets of resources in ensuring their brand visibility and dominance. Lockheed Martin will stick to private labels as a branding strategy. The significance of the use of s private label is that it provides a brand with a competitive edge over its rivals. The reputation that the corporation made in the US and other nations of operation would allow the brand name to thrive in this new but promising market. The pros of the use of brand labels are that they provide corporations with marketing independence, grant control over the products and services provided by these corporations and allow firms to adopt the most appropriate strategies of changing the preferences of the consumer base.

Lockheed Martin will also adopt four primary brand decisions. The first approach would be the positioning of the brand and will entail a clear description of the various beliefs, attributes, and values of the firm. Brand positioning allows the companies to create unique impressions that link them to a given attribute. The company would use the positioning to create a perception where customers will connect its name with quality products. The second strategy will be the protection of the name of the brand after its positioning. The company will protect its trademark by patenting most of its principal activities to prevent the emergence of corporations that would imitate them. Third, the company would utilize core branding as a strategy for brand sponsorship. Lockheed Martins would brand its products together with its prospective partner (Quickstep holdings limited) to increase the visibility of the company’s name. The final step will be the development of the brand whereby the company would extend the range of its products to meet the market demands and expand its dominance in this market.

Use of Web Networks and Social Media (step 5)

Technology and globalization have transformed the business landscape through the provision of tools and strategies that corporations can utilize to reach the target consumers (Tabrizi & Kabirnejat, 2015). The extensive internet coverage allows Lockheed Martin Corporation to adopt e-marketing strategies that will enable the firm to meet its objective. Aichner and Jacob (2015) asserted that the most widely used social media platforms globally include Twitter, Facebook, WhatsApp, and YouTube. The company will create web networks that will incorporate business clients and retailers who would wish to become a link between the company and the clients. The exploitation of these social media platforms will be advantageous to the corporation as they would influence the expansion of the scope of operation through customer reviews, enhance interactivity, and increase the firm’s reach. Tabrizi and Kabirnejat (2015) reported that e-marketing platforms increase the immediacy of the corporation by sealing the information gap that exists between customers and firms while allowing firms to understand the demographics of the clientele base that they serve.

Market Shares Estimate

According to IBISWorld (2018), the current total revenue obtained by the Australian aerospace and defense market is AUD 35bn. The financial records of Lockheed Martin Corporation indicate that the total revenues derived in the fiscal year 2016/2017 are $14.318 billion (Lockheed Martin Corporation, 2018). Therefore, the market share of the company in the target nation will be:

The value of the current worth of the Australian military has been converted to USD in the equation above and expresses in billions. Based on this market share, Lockheed would potentially command the market with the revenues being expected to rise consistently with the current annual growth rate of the country that is 6% (IBISWorld, 2018).

Revenue Forecasts

Table 2 below indicates the short term and long term revenue forecasts.

Table 2: Revenue Forecasts (Author, 2018)

Historical

Forecast

Year

2017

June 2018

June 2019

Dec 2019

2020

2021

Percentage increase

2.1%

6%

10%

10%

10%

10%

Revenues

51.048bn

54.111bn

59.522bn

65.474bn

72.022bn

79.224bn

The values given in table 2 are in USD. The forecasts indicate that the company’s growth would be exponential based on the Australian aerospace and defense sectorial growth.

Justification

The projections made are based on the industrial performance of the aerospace and defense sector of the target market. Deloitte (2018) asserted that the industry had grown by a margin of close to 4% to achieve the 6% market. Similar growth is expected in the preceding years due to the rapid rise in this industry. The growth in market size is evident through the government’s recent action of increasing the spending on this sector. Therefore, Lockheed Mar