Research paper on United Technologies Corporation

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B2B Research Paper
UNITED TECHNOLOGIES CORPORATION

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INDEX:
INTRODUCTION ............................................................................................................................................3
HISTORY OF THE COMPANY.........................................................................................................................3
KEY PRODUCTS .............................................................................................................................................3
RECENT BUSINESS RESULTS .........................................................................................................................5
SALES PERFORMANCE..................................................................................................................................5
FINANCIAL PERFORMANCE..........................................................................................................................6
FUTURE GUIDANCE SET................................................................................................................................7
UTC MARKETING & SALES FORCE ................................................................................................................7
DIRECT/INDIRECT DISTRIBUTORS & PARTNERS..........................................................................................8
BUDGET AND MEASUREMENT.....................................................................................................................8
UTC MARKETING FIT.....................................................................................................................................8
PROMOTION AND PLACEMENT ...................................................................................................................8
PRIMARY COMPETITORS..............................................................................................................................9
UTC PERFORMANCE vs. KEY COMPETITORS..............................................................................................10
SWOT ANALYSIS - UTC................................................................................................................................11
CONCLUSION ..............................................................................................................................................12
REFERENCES................................................................................................................................................15

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INTRODUCTION:
United Technologies is a massive worldwide conglomerate who has a vast array of products and
competes in numerous markets. UTC has assembled a powerful company encompassing well positioned
specialist brands who are powerhouses in their respective markets. UTC’’s Carrier is the inventor of air
conditioning. UTC’s Sikorsky is the pioneering company helicopters creation. UTC’s Pratt and Whitney is
a giant in commercial and military jet engines production. UTC’s Otis is the world’s largest escalator and
elevator producers. United Technologies Aerospace Systems is a high level competitor in production
flight systems and engine controls for both military and commercial clients.
UTC operates through 4,000 locations in more than 70 countries. The US generates around 60% of its
total sales; Europe and the Asia/Pacific follow, contributing 20% and 15%, respectively. In this research
report we throw insights on various aspects of the company.
HISTORY OF THE COMPANY:
United Technologies Corporation provides high technology products and support services to customers
in the aerospace and building industries worldwide. It began with the amalgamation of various aviation
companies during the 1920s and has had severe ups and downs over the years, especially at Pratt &
Whitney. The engine maker once ruled the industry, then suffered a series of technical mishaps and fell
behind competitors like General Electric. Since the early 1990s, UTC has remade itself, putting more
emphasis on selling non-military products in foreign markets, where it has also shifted a substantial
portion of its production and employment.
UTC researches, develops, and manufactures high-technology products in numerous areas, including
aircraft engines, helicopters, HVAC, fuel cells, elevators and escalators, fire and security, building
systems, and industrial products etc. UTC is also a large military contractor, producing missile systems
and military helicopters, most notably theUH-60 Black Hawk helicopter.
KEY PRODUCTS:
United Technologies is classified in to four principal segments: 1. UTC Building & Industrial systems, 2.
Pratt & Whitney, 3. UTC Aerospace Systems, and 4. Sikorsky. Each segment groups similar operating
companies and the management organization of each segment has general operating autonomy over a
range of products and services.

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Segment wise employees count and net sales details respectively.
United Technologies
Building & Industrial Systems
(Otis,& UTC Climate controls
& security)
Pratt & Whitney UTC Aerospace
Systems
Sikorsky
118,369
Employees
$29.8B Net Sales
33,591 Employees
$14.5B Net Sales
42,550 Employees
$14.2 B Net Sales
15,264 Employees
$7.5 B Net Sales

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RECENT BUSINESS RESULTS:
The 85-year-old company is arguably the most diversified manufacturer. It has a very strong yet
underrated record of business growth and profitability. The company has in the past 20 years produced
shareholder returns of 16.3% per year, growing its market cap from $8 billion to $107 billion, which is
higher than its rivals GE (8.8%) and Boeing (11%).
United Technologies has paid dividends each year with constant increase in the payout. Even during the
financial crisis of 2008 and 2009, when many companies either reduced or suspended dividend payouts
entirely, the company increased its dividend per share by 15% and 14.5%, respectively.
SALES PERFORMANCE:
UTC’s portfolio is balanced across customer segments, markets and geographies. Net sales were USD
65.1 billion for the year ended December 31, 2014 with a count of 211,500 employees worldwide. And,
its R&D investment is USD 5.0 billion in 2014.
This statistic represents UT C's conglomerate net sales from the fiscal year of 2008 to the fiscal year of
2014.

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Net Sales by Type as a Percent of Total Net Sales
Net Sales by Geography as a Percent of Total Net Sales
FINANCIAL PERFORMANCE:
During the fiscal year 2014, United Technologies saw a mixed performance. The company’s free cash
flow stood at only $5.6 billion, 10% below reported net income and similar to what it saw last year. UTX
further trimmed its guidance for the coming year in terms of revenues and profits. The US dollar’s
strength is the main driver behind this weakness in the company’s performance.

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UTX derives about 62% of its sales from outside the US. With a strengthening dollar, the company’s
profits and sales suffered a blow. The foreign currency translations primarily hurt the Pratt & Whitney
segment, while also impacting the Sikorsky and Aerospace segments.
United Technologies closely tracks the performance of the Industrial Select Sector ETF (XLI). This ETF
includes Lockheed Martin (LMT), Boeing (BA), and Northrop Grumman (NOC), UTX’s strongest
competitors in the aerospace and defense space.
FUTURE GUIDANCE SET:
UTX issued guidance for sales growth at less than 3% on an organic basis to reach $65–$66 billion for the
year 2015-16. The EPS (or earnings per share) is expected to be at $6.68–$7.05 for the year. The
company expects its free cash flow to remain at 90–100% of net income attributable to common share
owners. This would be the third consecutive year for UTX to have its cash flows under 100%.
UTC MARKETING & SALES FORCE:
UTC has branches across the globe with independently- owned dealers. They have direct marketing and
sales force in each business vertical respect to region, territory and country they operate around the
world. Each marketing/sales manager is entitled to make a sales plan, programs for company products
which suits to that specific region they operate.
Business Development Manager, Product Marketing Manager, National Controls Sales Manager,
Regional Sales Manager, Sales & Marketing Analyst, Sales Representatives for all branch offices are the
key people who helps the company to reach its sales and revenue goals.

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DIRECT/INDIRECT DISTRIBUTORS & PARTNERS:
To maintain world class, integrated supply chain, UTC works with suppliers from all over the world. The
UTC supplier registration system allows suppliers to register with the company and be part of their
business.
BUDGET AND MEASUREMENT:
The budget and measurements of each individual product is based on which sub companies the product
belongs to. Each individual sub companies decides the how they will come up with the budget for that
specific section.
UTC MARKETING FIT:
United Technologies is a massive worldwide conglomerate who has a vast array of products and
competes in numerous markets. It’s hard to have one marketing plan that will market all of products.
UTC allows each sub company (such as Pratt and Whitney) freedom to interact and market their
products as they see fit. The organizational level in which the marketing position falls in is determined
by each member of UTC. For example Pratt and Whitney has a vice president of sales and marketing. It
may seem as though UTC is just a large conglomerate who has obtained a large array of miscellaneous
companies, but the acquisitions where done strategically to either fall in two categories, building and
industrial systems or aerospace systems and propulsion. Many of the companies complement each
other and help each other advance in the market place.
PROMOTION AND PLACEMENT:
United Technologies strategically places its manufacturing facilities in locations in which they would like
to expand into. For example, the joint venture facility created in Hyderabad was created with the main
intent of sparking interest and encouraging sales in that region of India in which the market for
helicopters and aerospace systems and propulsion is on the rise. UTC also utilizes many deferent forms
of promotion. Kidde donated over 1 million smoke and carbon monoxide alarms to fire departments
promoting their product. Another Key factor of UTC is their participation in both commercial and
military worlds and taking advantage of their different demand cycles. For example when International
tensions rise, the use and demand of commercial aero propulsion and aerospace systems is strained,
however at the same time the need and demand for these components begins to rise in the military
world.

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PRIMARY COMPETITORS:
It’s hard to find any one company that matches the large array of products that UTC manufactures.
However, there are companies who compete with UTC’s individual divisions. For example Honeywell
and Northrop Grumman are intensive competitors against UTC’s aero propulsion and aerospace
systems. ThysenKrupp Competes with Otis in elevator and escalator manufacturing and companies such
as Good Man Global and Trane AC compete with Carrier in Air-conditioning system markets. With the
focus of UTC spread out through such a vast array of products some of the products may lose value in
the customer’s eyes. For example a customer may be more inclined to go with a company that only
specializes in elevators thinking that the end result will be a higher quality product.
As developed economies such as the US and China grow at a slower pace, other emerging
economies are poised to be the next growth markets. Urbanization in these countries would create
new opportunities for the company’s building segment.
Newer markets that are potential contributors are India, which adds 50 million urban residents a
year and has a good GDP growth rate, Central and South America, whose biggest market is Brazil,
Africa, and the Middle East region though much of the expansion will be confined to Turkey and
high-income urban areas in the Middle East.
Pratt & Whitney UTC Aerospace &
Systems
Sikorsky Otis
GE Aviation
Rolls-Royce
Honeywell
Turbomeca
CFM International
Honeywell
Parker Hannifin
Bell Helicopter
AgustaWestland
Airbus Helicopters
ThysenKrupp
Good Man Globe &
Trane AC

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These new market opportunities will help the Power Shares Aerospace and Defense ETF (PPA).
Companies like General Dynamics (GD), Boeing (BA), Embraer (ERJ) will likely benefit from this
growing market.
With a company as large as the global conglomerate United Technologies it only makes sense that
they have implemented a variety of ways to reach the global market. United technologies is
comprised of six business sectors who have reached out into the global markets in different ways.
Overall, United Technologies main strategies for tapping into the global economy include foreign
outsourcing, exporting, direct investments, joint ventures, and partnerships. Competitors such as
Honeywell and Northrop Grumman, who compete on a global scale, also have taken on similar
strategies to tap into the global economy.
UTC PERFORMANCE vs. KEY COMPETITORS:
The company’s revenue has grown by 1.31% on average in the last five years. In the same period, its
peers included in the Dow Jones Industrial Average (DIA) like Boeing Company (BA), General Electric
(GE), and General Dynamics (GD) have clocked average growth rates of 7.29%, -4.37%, and 1.28%,
respectively.
Also, while UTC’s net margins are 11.47% that of its peers BA, GE, and GD are 5.73%, 9.78%, and
8.98%, respectively. Thus, UTC doesn’t seem to have any significant advantage over its peers when it
comes to revenues.

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SWOT ANALYSIS - UTC
SWOT ANALYSIS
Strengths
• The sub companies are set up in a way that
they complement each other and make UTC
a one stop shop location for industrial
building system and aerospace and
propulsion fields.
• UTC is participates in both military and
private sectors. When global tensions rise
some private sectors are strained but
military sectors move forward and vice
versa.
• UTC has narrowed its conglomerate to two
specific fields, building systems and
aerospace systems and propulsion.
Weaknesses
• UTC is a massive conglomerate with many
moving parts, add that to the fact that it is
spread out across the globe and it becomes
a very hard company to monitor.
• United Technologies Has many funds in
different countries that is hard to get to
due to the expense of taxes.
• UTC products can lose value in the eyes of
the customer. They may prefer to go with a
company who specializes in the product
they desire.
• Falling Domino effect of sub companies
within UTC is possible due to their reliance

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• Joint ventures a strategically selected and
located to spark interest in other nations.
• Outsourcing of certain areas such as IT has
become beneficial.
• With such a diverse array of products UTC
has virtually no competitors that can offer
what UTC offers as a whole.
on one another.
• UTC does not market their company as a
whole very much.
• UTC provides not set structure for
marketing to its sub company.
• Direct investment and even joint ventures
in other countries can be extremely
challenging and does not cut costs or
generate higher profit.
• Constant extreme changes in ROI can be
discouraging to investors.
Opportunities
• New technological innovations such as
geared turbofan, which is prospected
achieve 10 to 15% boost in fuel efficiency.
• New acquisitions
• New joint ventures
• Direct Investments of facilities in new
countries.
• New partnerships.
• A growing market for aerospace systems
and propulsion in India.
Threats
• Competitors such as Honeywell and
Boing are always on the verge of having
the next best innovation.
• UTC involvement with other countries
military creates grey areas and
opportunity’s to have infractions against
U.S law, costing millions.
• An acquisition of a company who is on
the verge of collapse will be very costly.
• Defense spending can have a long term
negative impact on UTC.
• Defense spending is unpredictable and
changes quickly making it hard to have
efficient long term planning.
CONCLUSION:
Ever since the abrupt retirement of former CEO Louis Chenevert in November 2014, the market has
speculated over the future strategic direction of United Technologies. A change of CEO often means
a change of direction, and given that the stock is down more than 18% this year, investors will be
questioning whether CEO Gregory Hayes is taking the company on the right path. Here, let's see
about the three points he discussed in his recent presentation which could play a major role in the
future operational and strategic direction of the company.
The Future of Sikorsky: Best known as being the manufacturer of Black Hawk helicopters -- has long
been a moot point, with speculation rife that management would be willing to sell or spin off the
business.
It's not hard to see the logic behind a potential sale. Unlike the other two aerospace segments,
Sikorsky has heavy exposure to military spending, with 52% of its sales going to the U.S. government

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alone in 2014. The other two aerospace-focused segments, Pratt & Whitney and UTC Aerospace
Systems, have less exposure, with 22% and 19% of sales going to the U.S. government in 2014.
Moreover, Sikorsky has the lowest operating profit margin of all its segments -- suggesting
management could sell it and use resources to focus on generating synergies within the overall
company's commercial aerospace operations.
Acquisition Plans: It was said that UTC has the plans to make an acquisition for more than $5 Billion.
It's large amount, but a company of United Technologies' size needs scale in order to efficiently use
management resources and generate significant synergies from a deal. CEO Hayes stated that he
would look at companies with "mechanically actuated systems" for acquiring process.
One company long associated as a potential target is U.K. aerospace company Meggitt (LSE:MGGT).
With a market cap of around $7 billion, it has the scale to attract United Technologies, and it already
manufactures parts for Sikorsky military rotorcraft. Meggitt currently generates 48% of its revenue
from civil aerospace, and its aircraft braking systems (21% of first-half 2014 revenue) and control
systems (23% of first-half revenue) appear to be a good fit for United Technologies. Moreover,
around 57% of Meggitt's military revenue already goes to the U.S.

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Increasing Productivity:
From the above chart, we can see the breakout of its segmental return on assets (ROA) and
therefore management could look to increase the ROA generated with UTC Aerospace Systems.
Furthermore, a DuPont analysis comparing United Technologies with Honeywell International shows
how United Technologies' asset utilization fell after the acquisition of Goodrich in 2012. Also,
Honeywell's aerospace segment ROA is significantly higher than United Technologies.
Cutting out unnecessary costs for UTC Aerospace is obviously a focus. In January, management
announced plans to eliminate UTC Propulsion & Aerospace Systems, or PAS. Pratt & Whitney and
UTC Aerospace used to operate under the PAS structure. Hayes outlined that this move would help
cut costs by $50 million to $60 million.
What next for United Technologies?
It's possible that Sikorsky could be sold--something the market would welcome. Potential upside
could also come from the acquisition of a company like Meggitt, not least because United
Technologies could generate cost synergies from such a deal.
All told, United Technologies investors should prepare themselves for an active year in 2015, and
management making the right strategic moves could propel the stock higher.

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REFERENCES:
1. https://sites.google.com/a/email.vccs.edu/bus100eortez/home/marketing-plan
2. http://www.morningstar.com/stocks/XNYS/UTX/quote.html
3. http://www.forbes.com/sites/chuckcarnevale/2013/03/22/united-technologies-has-
transitioned-itself-for-accelerated-growth/2/
4. http://www.fool.com/investing/general/2015/02/28/united-technologies-utx-outlines-growth-
strategy-3.aspx
5. http://www.vault.com/company-profiles/aerospace-and-defense/united-technologies-
corporation/company-overview.aspx
6. http://marketrealist.com/2015/02/investors-guide-united-technologies-businesses/
7. http://www.statista.com/statistics/261562/net-sales-of-united-technologies/
8. http://2014ar.utc.com/
9. http://www.nasdaq.com/symbol/utx/analyst-research
10. http://www.fool.com/investing/general/2015/02/28/united-technologies-utx-outlines-growth-
strategy-3.aspx

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