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The Rising Global Offset Challenge - addressing the half trillion dollar question
The Rising Global Offset Challenge - addressing the half trillion dollar question
The Rising Global Offset Challenge - addressing the half trillion dollar question
The Rising Global Offset Challenge - addressing the half trillion dollar question
The Rising Global Offset Challenge - addressing the half trillion dollar question
The Rising Global Offset Challenge - addressing the half trillion dollar question
The Rising Global Offset Challenge - addressing the half trillion dollar question
The Rising Global Offset Challenge - addressing the half trillion dollar question
The Rising Global Offset Challenge - addressing the half trillion dollar question
The Rising Global Offset Challenge - addressing the half trillion dollar question
The Rising Global Offset Challenge - addressing the half trillion dollar question
The Rising Global Offset Challenge - addressing the half trillion dollar question
The Rising Global Offset Challenge - addressing the half trillion dollar question
The Rising Global Offset Challenge - addressing the half trillion dollar question
The Rising Global Offset Challenge - addressing the half trillion dollar question
The Rising Global Offset Challenge - addressing the half trillion dollar question
The Rising Global Offset Challenge - addressing the half trillion dollar question
The Rising Global Offset Challenge - addressing the half trillion dollar question
The Rising Global Offset Challenge - addressing the half trillion dollar question
The Rising Global Offset Challenge - addressing the half trillion dollar question
The Rising Global Offset Challenge - addressing the half trillion dollar question
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The Rising Global Offset Challenge - addressing the half trillion dollar question

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  • 1. THE RISING GLOBAL OFFSET CHALLENGE ADDRESSING THE HALF TRILLION DOLLAR QUESTIONGOCA SEPTEMBER 10, 2012
  • 2. AgendaIntroductions– Steve Ganyard, President, Avascent International– Jon Barney, Partner, Avascent– George Thompson, Senior Partner, Fleishman-HillardNew Data: Big money, getting biggerNew Realities: Growing risk, demands for new thinkingNew Opportunities: Three strategies for success
  • 3. Who We Are: AvascentThe leading strategy and management consulting firmadvising clients globally in government-driven markets• Offices: Washington, Client Industries and Sectors Paris Aviation & Defense Global Healthcare Intelligence• 25 years of experience Aerospace Systems Development and more than 3,000 Logistics, Security & Outsourced Information Engineering & Space assignments Operations Public Safety Services Technology• Core capabilities: Strategy and growth M&A Avascent International 050 Data Product Organizational Capture support• Global network in Asia, MENA, and Latin America
  • 4. Who We Are: Fleishman-Hillard• 80 offices delivering full scope Clients of communications services worldwide• Global client base, including industry and governments• Largest PR services provider to the U.S. government• Largest B2G communications practice in D.C. — defense and technology market leaders• Former PAOs, public-sector communicators• FH International Advisory Board Gen. Barry McCaffrey (Ret.) Sec. Tom Ridge Adm. Vern Clark (Ret.) Sec. Andrew Card Sec. Mickey Kantor Günter Verheugen
  • 5. 3 Drivers of Change A&D Growth Is Changing Offset International Regimes Increased volume of sales Offerors more sophisticated, and focus will mean more aligning offsets with national offset obligations in future development goals, stepping up enforcement Opaque Offset Landscape Lack of transparency in global offset obligations is hindering the ability of The stakeholders to think strategically about offsetsHalf-Trillion DollarChallenge Increasing pressure on governments to create jobs and skilled industries, be responsive, accountable to citizens
  • 6. New Reality: With U.S. and European budgets in decline, new procurements are increasingly occurring in other countries Flat Defense Budgets Growing Defense Budgets U.S. Rest of World$800 $600$700$600 $500$500$400 $400$300$200 $300 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $200 Europe $100 $400 $- $300 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $200 $100 Countries included: $- Australia, India, Japan, Malaysia, Pakistan, Singapore, South Korea, Taiwan, Indonesia, Thailand, Saudi 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Arabia, Egypt, Iraq, UAE, Qatar, Kuwait, Jordan, Turkey Algeria, Morocco, South Africa, Oman, Mexico, Colombia, Chile, BrazilSOURCE: 050 + All figures in Billions of USD
  • 7. New Reality: International markets are growing and offsets impactsales in many of these large and fast-growing A&D markets 15% Iraq SOURCE: 050 Projected Defense Spending Growth 2011-2016 Thailand UAE 10% India Singapore Brazil Malaysia Turkey Taiwan ROK Saudi Arabia 5% Pakistan Poland NorwayColombia Israel Chile Australia Sweden Canada Japan New Qatar 0% Zealand Denmark France Germany Offset Policy Active UK Spain Alternative Policy -5% 0 $30B $60B Overall Defense Budget 2011
  • 8. New Data, New Realities
  • 9. How Big Are Offset Obligations?www.strategicoffsets.com
  • 10. How Big Are Offset Obligations?www.strategicoffsets.com
  • 11. To understand the magnitude of the offset challenge, Avsacent leveragedits proprietary 050 database to analyze global offset obligations Offset Data & Methodology 050 • Group past and forecasted contractor sales by country • Apply offset threshold for eachData-driven market and competitor countryanalytics with forecast • Apply country rules on amount• Detailed database of global defense markets subject to offset (e.g., 60% of total value)• Visibility into market size, segmentation, forecasted • Adjust for exempt transactions growth, competitor market share, and opportunity space (e.g., intra-EU sales) and local content provisions• Scope spans the USA and 30 global countries, across • Bottom-up approach: obligations C4I, Sensors, Weapons, Platforms, and Services by year, country, and company
  • 12. Obligations are growing worldwide, with MENA and Asia/Pacificrepresenting the largest volume and LatAm the fastest growth MENA Obligations Asia/Pacific Obligations $25 $25 9.0% 6.5% Millions Millions $20 $20 $15 $15 $10 $10 $5 $5 $- $- Europe & Canada Obligations Latin America Obligations $25 $25 4.6% 9.6% Millions Millions $20 $20 $15 $15 $10 $10 $5 $5 $- $-
  • 13. What does this mean? New Risks, Missed Opportunities Now is the time to rethink how offsets are Significant change to the business constructed, communicated, and discharged Increased scrutiny = increased risk to reputation Positive outcomes falling short
  • 14. Three Strategies for Success
  • 15. Imperative: Implement Business Fundamentals Offset Authorities Local Partners ObligorsEvaluate concepts based on Choose business strategically to Integrate offsets into the salesstrong business fundamentals to bolster the national development strategy planning processbolster the chances of a goalssuccessful offset venture Engage before the sale is final to Design a globally competitive ensure offset risk mitigation isAlign approval process for offset approach for the offset venture to well understoodconcepts to national achieve success beyond thedevelopment goals home country Design a portfolio approach to offset global obligations, ratherBe proactive with investment Conduct independent than one-off, ad hoc approachchoices and offer guidance to assessment of the marketobligors from an early concept potential for the offset venture Develop a core competency indevelopment stage offset Implement best practices in partnering whether as a Joint Diligence concepts as if they Venture or another structure were M&A targets
  • 16. Imperative: Deepen Involvement Offset Authorities Local Partners ObligorsEducate government Contact obligors prior to sale to Elevate offsets discussion tostakeholders about the potential build reputation and evolve offset executive leadership ofof offset in the nation’s concepts corporationdevelopment Research obligors to understand Broaden the network of offsetCommunicate goals, not just the range of available partners and consultants topolicies to the obligor and partner obligors, their obligations and shape evolve an offset executioncommunity what they can (realistically) offer strategy in line with development goals of customer’s governmentExpand network to include non- Broaden partnerships beyondtraditional offset players in areas obligors based on specific goalsof development and strategy of the offset concept; this should be done as early as possible
  • 17. New Reality: Visibility is Increasing Average number of mainstream media 100+* 1.37M articles on “defense/military offsets‖ Results for “defense offset “defense offset” agreement” 66 First entry: October 2008 400+ additions 22 and contributions Last 90 days: 16 418 10,273 views2001-2009 2010-2011 2012 Sept. 2004 Sept. 2009 TODAY *projected to to Aug. 2005 Aug. 2010
  • 18. Imperative: Communicate Strategically Offset Authorities Local Partners ObligorsCommunicate the role of the Highlight your role and value in Use offsets to build reputation andauthority in supporting economic the offsets process strengthen business developmentdevelopment goals Enhance your brand through (past)Offer clear guidance to Market investment needs widely offsets – highlight successes thatcompanies, obligors: have made positive contributionsguidelines, policy objectives, focusareas, sample contracts Engage with multiple obligors ―Sell‖ your offset approach up-front pre-sale to facilitate post-sale in your bid proposalBuild positive reputation for implementationaccountability, effectiveness –• Fact sheets Be prepared to talk about• Annual reports offsets, clearly demonstrating• Speeches, interviews connection between• Articles program/offering and benefit• Speaker series• Success stories
  • 19. Wrap-Up and Looking AheadKey Takeaways– Growth and changes in offsets demand new thinking, strategic approaches– Change brings new opportunities for forward-looking companies and governments – successful offset approaches equals competitive differentiation– Basic market data on offsets remains largely absent from the discussion and hinders strategic planningActions– Analysis of global portfolio obligations– Integration of offsets into international sales/business development strategy– Audit of communications and capture processes– Deeper partner and offset concept due diligence
  • 20. ContactsAvascent Fleishman-HillardSteve Ganyard George ThompsonT: +202.280.6811 T: +202.828.9708sganyard@avascent.com George.Thompson@fleishman.comJon Barney www.fleishman.comT: +202.280.6812jbarney@avascent.comwww.avascent.com www.strategicoffsets.com
  • 21. Thank you.

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