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Sae Aerotech Oct 2011 New Business Opportunities In A&D

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New Business Models in Aerospace. SAE Aerotech 2001 Toulouse France.

New Business Models in Aerospace. SAE Aerotech 2001 Toulouse France.

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  • 1. Differentiated Global Value Chain Architecture: The 21st Century A&D Organization Sandeep “Sandy” Muju KPMG LLP Session: New Business Opportunities for Aerospace SAE 2011 AeroTech Congress and Exhibition October 18-21, 2011 Toulouse, France© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network ofindependent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. 1 PAPER # 11ATC-0020All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarksof KPMG International. 51836SFO
  • 2. Differentiated Global Value Chain Architecture: The 21st Century A&D Organization UTC talks to buy Goodrich accelerate Shares in Goodrich, the aerospace company, jumped about 15 per cent on Monday, as negotiations continued with United Technologies Corporation about a deal worth as much as $15bn. Financial Times, London September 19, 2011 Defense-industry consolidation is expected, experts say Defense-industry executives are expecting merger mania to hit, with United Technologies interest in Goodrich possibly the start of a consolidation wave. Insiders are expecting acquisitions of second- and third-tier defense firms, but changes are also possible in the top tier. AIA September 21, 2011© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network ofindependent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. 2All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarksof KPMG International. 51836SFO PAPER # 11ATC-0020
  • 3. Differentiated Global Value Chain Architecture: The 21st Century A&D Organization "Military-industrial complex" is outdated term, Blakey says President Dwight Eisenhower warned half a century ago that the U.S. must guard against the "military-industrial complex," but AIA President Marion Blakey says the term is outdated as the reality has changed. "The word complex implies a larger and [more] interwoven industry than you have today," Blakey said. "In a sense its an old-fashioned term thats outmoded. It is more historical than a real-life term." September 12, 2011 AIA© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network ofindependent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. 3All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarksof KPMG International. 51836SFO PAPER # 11ATC-0020
  • 4. Differentiated Global Value Chain Architecture: The 21st Century A&D Organization  Nature of the firm …. ◦ YoY Shareholder value creation … ◦ YoY growth … ◦ YoY profitability ◦ YoY Share price increase …  Increasing success tends to reduce risk taking appetite …  Nobel Laureate Coase, argues that the size of a firm is a result of finding an optimal balance between the competing tendencies of growth (internal costs) and suppliers/partnerships (transaction costs outside the firm). Balancing Risk exposure and YoY Shareholder value creation …© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network ofindependent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. 4All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarksof KPMG International. 51836SFO PAPER # 11ATC-0020
  • 5. Differentiated Global Value Chain Architecture: The 21st Century A&D Organization  Flattening and Boundaryless global market ….  Exchange of ideas, information and resources is becoming easier ….  Over 6 Billion global minds which for most part are “free” to create ideas ….  Financial resources are no longer exclusive to “mega” monolithic corporations …. These slowly evolving tectonic shifts have been in play for years …© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network ofindependent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. 5All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarksof KPMG International. 51836SFO PAPER # 11ATC-0020
  • 6. Differentiated Global Value Chain Architecture: The 21st Century A&D Organization  Emergence of Asian giants - China and India  Combined Population: ~2.5 Billion (~37% of World)  Combined GDP: >$8 trillion (~50% of EU or USA)  Average GDP growth: >8% YoY (~3X that in USA or EU) In <10 years “China+India” is projected to have greater purchasing power than either EU or USA … Civilian as well as Defense industry implications are tremendous …© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network ofindependent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. 6All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarksof KPMG International. 51836SFO PAPER # 11ATC-0020
  • 7. Differentiated Global Value Chain Architecture: The 21st Century A&D Organization Boeing targets half of new aircraft orders from China, exec says Ihssane Mounir, an executive at Boeing, said the firm is striving to earn at least half of the orders for new aircraft in China over the next couple of decades. China is expected to order about 5,000 new planes over the next 20 years September 21, 2011 AIA Indian carrier IndiGo orders a record 180 planes from Airbus Airbus said Wednesday it has received "the biggest order in aviation history" from Indian low-cost carrier IndiGo for its hugely successful new fuel-efficient A320neo jets. June 22, 2011 USA Today© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network ofindependent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. 7All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarksof KPMG International. 51836SFO PAPER # 11ATC-0020
  • 8. Differentiated Global Value Chain Architecture: The 21st Century A&D Organization  Increasing purchasing power brings economic prosperity ….  Basic necessities (food, clothing, shelter) are fulfilled …  Minds are free to “think” and “create” …. 2.5 Billion Minds – for most part, free to Innovate ….© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network ofindependent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. 8All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarksof KPMG International. 51836SFO PAPER # 11ATC-0020
  • 9. Differentiated Global Value Chain Architecture: The 21st Century A&D Organization COMAC Microsoft 2008 ? 1975 EV Globalization is a fairly recent phenomenon, AeroVironment 1970s- historically speaking … IAI UAVs 1971 First UAVs 2000s 1970s ~1960-90 Airbus Internet Boeing 1960s 1970-90s 1916 “Berlin Wall” IBM Telegraph 1989 1911 Marconi, 1909 First Manned Flight Wright Bro, 1903 Automobile Benz 1886 Steam Locomotive Innovation is was a slow process …. Battery Trevithick, 1804 It is “Revolutionary” when it happens .. Volta, ~1800Steam Engine It is “Evolutionary” in the meantime ..Savery, 1698 © 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. 9 All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. 51836SFO PAPER # 11ATC-0020
  • 10. Differentiated Global Value Chain Architecture: The 21st Century A&D Organization “In the natural world, species evolve – that is, they change to meet new challenges – or they die. The same genetic imperative operates in business”. Charles Fine, Clockspeed A company is its chain of continually evolving capabilities – that is, its own capabilities plus the capabilities of everyone it does business with.© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network ofindependent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. 10All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarksof KPMG International. 51836SFO PAPER # 11ATC-0020
  • 11. Differentiated Global Value Chain Architecture: The 21st Century A&D Organization Value Chain: Michael Porter, HBR© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network ofindependent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. 11All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarksof KPMG International. 51836SFO PAPER # 11ATC-0020
  • 12. Differentiated Global Value Chain Architecture: The 21st Century A&D Organization Innovation … Who is supposed to do “that”? Should internal teams of engineers, product marketers, and R&D personnel Be charged to develop new ideas for technology product and/or service andsupply chain (“procurement”) to source resulting commodities at the cheapest cost? OrM&A and Strategy folks should acquire “innovative products/services” from outside? … and Why?© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network ofindependent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. 12All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarksof KPMG International. 51836SFO PAPER # 11ATC-0020
  • 13. Differentiated Global Value Chain Architecture: The 21st Century A&D Organization Innovation is Multi-dimensional, and … the resulting Value Chain Architecture ……© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network ofindependent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. 13All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarksof KPMG International. 51836SFO PAPER # 11ATC-0020
  • 14. Differentiated Global Value Chain Architecture: The 21st Century A&D Organization Speed of Innovation has been increasing …. With lower entry barriers globally, new entrants are emerging …. Tremendous possibilities for new ideas and creation …. Purchasing power is rapidly increasing in the “Developing” world … Ability to bring idea to reality increasing with increasing global financing … Opportunities as well as Wake-up call for well established businesses to re-invent business models ….© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network ofindependent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. 14All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarksof KPMG International. 51836SFO PAPER # 11ATC-0020
  • 15. Differentiated Global Value Chain Architecture: The 21st Century A&D Organization Contact: Sandeep “Sandy” Muju, PhD KPMG LLP 355 S. Grand Avenue, Suite 2000 Los Angeles, CA 90071 Phone: (213)500-0551 Email: smuju@kpmg.com© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network ofindependent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. 15All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarksof KPMG International. 51836SFO PAPER # 11ATC-0020