Analysis of Northrop Grumman

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If you know the enemy and know yourself, you need not fear the result of a hundred battles. If
you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If
you know neither the enemy nor yourself, you will succumb in every battle.
- Sun Tzu
On dispersive ground, therefore, fight not. On facile ground, halt not. On contentious ground,
attack not. On open ground, do not try to block the enemy's way. On the ground of intersecting
highways, join hands with your allies. On serious ground, gather in plunder. In difficult ground,
keep steadily on the march. On hemmed-in ground, resort to stratagem. On desperate ground,
fight.
- Sun Tzu
Executive Summary
This is a case analysis of Northrop Grumman, a U.S. Aerospace & Defense Company. The
purpose of this case analysis is to conduct an in-depth analysis of Northrop Grumman by
analyzing it from an internal (Know Thy Self), external (Know Thy Ground), and competitive
prospective (Know Thy Enemy). The analysis will be followed by a conclusion and goals &
strategy recommendations.
The internal analysis is an analysis that focuses on the factors that make Northrop Grumman
function as the company that it is: Operations, Human Resources, Marketing and Finance. The
external analysis is an analysis that focuses on the outsides factors that effective Northrop
Grumman operating as an efficient and effective global leader in the Aerospace and Defense
Technology Industry: Demographics, Economics, Technological, Legal/Political, International
and Social. The competitive analysis is an analysis of Northrop Grumman in comparison to its
competitors by utilizing Porter’s Five Forces Factors: Threats of new entrants, Threats of

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substitutes, Bargaining power of customers, Bargaining power of suppliers, and Competitors
rivalry within an industry. The conclusion summarizes the findings of the case analysis in terms
of: Core Competencies, Distinctive Competitive Advantage, Driving Forces and Key Success
Factors. The Goals and Strategies Recommendations are the goals and strategies that will be
proposed to Northrop Grumman in order to enhance its continued growth and business
performance as a leader in the Aerospace & Defense Technology Industry.
Business Description
Northrop Grumman Corporation is an American Aerospace and Defense Technology company
that was originally formed in California in 1939 as the Northrop Corporation then reincorporated
in Delaware in 1985. In 1994, Northrop Aircraft merged with Grumman Aerospace to create the
company Northrop Grumman. Both companies were previously established in the airplane
manufacturing industry, and Grumman was famous for building the Apollo Lunar Module. The
new company acquired Westinghouse Electronic Systems in 1996, a major manufacturer of radar
systems. Logicon, a defense computer contractor, was added in 1997. Previously, Logicon had
acquired Geodynamics Corporation in March 1996 and Syscon Corporation in February 1995.
The company was the fourth-largest defense contractor in the world as of 2010 and the largest
builder of naval vessels. Northrop Grumman employs over 75,000 people worldwide. Its 2007
annual revenue is reported at US$32 billion. Northrop Grumman ranks #61 on the 2010 Fortune
500 list of U.S. industrial companies. It has its headquarters in West Falls Church,
unincorporated Fairfax County, Virginia, in the Falls Church area.

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Mission
Our mission is to be at the forefront of technology and innovation, delivering superior capability
in tandem with maximized cost efficiencies. The security solutions we provide help secure
freedoms for our nation as well as those of our allies. Squarely meeting our obligations, fiscally
and technologically, isn't just a business goal, but a moral imperative. To that end, as we evolve
as a company, the responsibility we feel for our country and the citizens and troops we help
support grows with us.
Vision
To be the most trusted provider of systems and technologies that ensures the security and
freedom of our nation and its allies. As the technology leader, we will define the future of
defense from undersea to outer space, and in cyberspace.
Values
We, the women and men of NORTHROP GRUMMAN, are guided by the following Values.
They describe our company as we want it to be. We want our decisions and actions to
demonstrate these Values. We believe that putting our Values into practice creates long-term
benefits for shareholders, customers, employees, suppliers, and the communities we serve.
We take responsibility for QUALITY
We deliver CUSTOMER satisfaction
We provide LEADERSHIP as a company and as individuals
We act with INTEGRITY in all we do
We value Northrop Grumman PEOPLE
We regard our SUPPLIERS as essential team members

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Internal Analysis of Northrop Grumman
OPERATIONS
1. Location & Facilities
Northrop Grumman’s principal corporate headquarters is located in Falls Church, Virginia and
its United Kingdom Headquarters in London, England. The Northrop Grumman’s corporate
headquarters was previously in Los Angeles, California, however, upon assuming the mantle of
CEO on January 2010, Wes Bush moved the company to Northern Virginia so executives could
be closer to their federal customers (FORBES, 2011). In addition, Northrop Grumman’s four
business sector headquarters (Aerospace Systems, Electronics Systems, Information Systems and
Technical Services) are located in Redondo Beach, California; Linthicum, Maryland; McLean,
Virginia; and Herndon, Virginia respectively with smaller corporate offices throughout the
United States.
Northrop Grumman maintains Aerospace Systems facilities in Carson, El Segundo, Manhattan
Beach, Mojave, Palmdale, San Diego, CA; Melbourne and St. Augustine, FL; Bethpage, NY;
and Clearfield, UT.
Electronics Systems facilities in Azusa, Sunnyvale and Woodland Hills, CA; Norwalk, CT;
Apopka, FL; Rolling Meadows, IL; Annapolis, Elkridge, Halethorpe, Sykesville, MD;
Williamsville, NY; Cincinnati, OH; Salt Lake City, UT; Charlottesville, VA with locations
outside in France, Germany, Italy and the United Kingdom.
Information Systems facilities in Huntsville, AL; Carson, McClellan, Redondo Beach, San
Diego, and San Jose, CA; Aurora and Colorado Springs CO; Washington D.C.; Annapolis
Junction and Columbia, MD; Bellevue, NE; and Chantilly, Chester, Dahlgren, Fairfax, Herndon,
McLean, and Reston, VA.

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Technical Services facilities in Sierra Vista, AZ, Warner Robins, GA; Lake Charles, LA.
Shipbuilding facilities in San Diego, CA; Avondale, LA; Gulfport and Pascagoula, MS; and
Hampton, Newport News, and Suffolk, VA.
Internationally, Northrop Grumman has a global presence in Europe, Middle East & Africa, and
the Asian Pacific region.
2. Functional Chart of Organization
Northrop Grumman is a centralized organizational structure composed of three main bodies of
leadership: a board of directors, corporate policy council and elected officers. In addition,
Northrop Grumman possesses corporate lead executives who are responsible for the customers-
focused business strategies throughout the continental United States and abroad, as well as,
corporate liaisons for Northrop Grumman business in their region.

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There are currently 12 members on the Northrop Grumman board of directors:

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The Northrop Grumman Corporate Policy Council assists the Chief Executive Officer and
President by serving as management’s key deliberative body for all major policy-level problems,
issues, and opportunities facing the company. The council consists of 12 members:

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Northrop Grumman’s elected officers are the corporation’s officer and are composed of a Chief
Executive Officer, President and 15 Vice presidents responsible for each department of Northrop
Grumman:

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3. Capacity
Northrop Grumman is a leading global security company providing innovative solutions, systems
and products for its customers from its five business sectors: Aerospace systems, Electronic
systems, Information systems and Technical services, and Shipbuilding.
The Aerospace systems business sector located in Redondo Beach, California is an
approximately $10 billion business whose approximately 24,000 employees comprise a premier
provider of manned and unmanned aircraft, space systems, missile systems and advanced
technologies critical to our nation’s security. Their Aerospace sector possesses the capacity to
produce:
Large Scale Systems Integration C4ISR Unmanned Systems
Airborne Ground Surveillance / C2 Naval BMC2 Global / Theater Strike Systems
Electronic Combat Operations ISR Satellite Systems Missile Defense Satellite Systems
MILSATCOM Systems Strategic Space Systems
Directed Energy Systems Environmental & Space Science Satellite Systems
The acquisitions of Litton Industries Inc., Newport News Inc., and TRW Inc. made Northrop
Grumman the No. 1 shipbuilder and the No. 2 U.S. defense contractor behind Lockheed Martin
Corporation (Northrop Grumman Space Technology, 2005). High-profile products include the B-
2 stealth bomber, amphibious assault ships, and oil tankers. Due to this breadth of expertise,
Northrop Grumman has a significant advantage among competitors. In December 2002 Northrop
Grumman’s shareholders approved TRW’s merger with the company; TRW Space & Electronics
became Northrop Grumman Space Technology. Until that time, Northrop Grumman did not
possess a space business. Northrop Grumman’s acquisition of TRW’s space business added the
final piece of the puzzle. It can now proclaim it builds products ranging from under seas to
cyberspace.

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The Electronic systems sector located in Linthicum, Maryland product line represents a balanced
mix of emerging technologies, developing programs, and mature product lines. Our customers
include all U.S. military services, non-defense government agencies, foreign governments and
commercial enterprises. Their Electronic Systems possesses the capacity to produce:
Radar Systems C4ISR Electronic Warfare Naval & Marine Systems
Navigation & Guidance Military Space Government Systems
The Information Systems sector located in McLean, Virginia Northrop Grumman Information
Systems is a leading global provider of advanced solutions that deliver timely, enabling
information where it’s needed most for its military, intelligence, civilian, state, local and
commercial customers. The Information Systems is an $8.4 billion business employing more
than 24,000 employees with offices in 50 states and 18 countries. The Information Systems
possesses the capacity to produce:
Command & Control Systems Network Communications Intelligence, Surveillance
Intelligence & Reconnaissance Systems Enterprise Systems and Security
IT/Network Outsourcing Federal, State/Local & Commercial
Homeland Security & Health
The Technical services sector located in Herndon, Virginia is a leading provider of network-
centric solutions and products, which consolidated its technical services capabilities to create one
integrated market. The consolidation gave Northrop Grumman a Technical Services business
sector that possesses enormous capabilities, scope and global reach. The Technical Service
possesses a capacity to produce:
Systems Support Base and Infrastructure Support Range Operations
Maintenance Support Technical and Operational Support Training and Simulations
Life Cycle Optimization Supply Chain Management Lead Support Integrator (LSI)
Performance Based Logistics Modifications, Repair and Overhaul (MRO)

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Live, Virtual and Constructive Domains
Shipbuilding sector located in Newport News, Virginia, is the nation’s sole industrial designer,
builder and re-fueler of nuclear-powered aircraft carriers, the sole supplier and builder of
amphibious assault and expeditionary warfare ships to the U.S. Navy, the sole builder of
National Security Cutters for the U.S. Coast Guard, and one of only two companies that builds
the U.S. Navy’s current fleet. Shipbuilding sector is also a full-service systems provider for the
design, engineering, construction and life cycle support of major programs for surface ships and
a provider of fleet support and maintenance services for the U.S. Navy. The Shipbuilding sector
possesses a capacity to produce:
Naval Systems Integrator Surface Combatants Expeditionary Warfare Ships
Marine Composite Technology Coast Guard Cutters Aircraft Carrier Auxiliary Ships
Commercial Ships Nuclear Aircraft Carriers Nuclear Submarines
Fleet Maintenance Overhaul & Refueling
(http://www.northropgrumman.com/about_us/index.html)
Do to Chronic underperformance in the last few years; CEO Wes Bush is planning to divestiture
Northrop’s naval shipbuilding business by spinning-off this sector to shareholders. The process
is expected to take place at the beginning of the first quarter of 2011(FORBES, 2011). As of
March 31, 2011, Northrop Grumman’s shipbuilding business sector is now Huntington Ingalls
Industries.
4. Processes
One of Northrop Grumman’s key strategic initiatives was to improve the quality and processes
around program management. Competitive pressures, internal performance goals along with
increasing government and customer requirements made it imperative that Northrop Grumman
improve its project management processes. Northrop Grumman had successfully instituted Lean

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Six Sigma as the de facto project management discipline across all sectors. Lean Six Sigma is
based on Six Sigma a statistically-based method developed by Motorola Inc. that reduces costs
of manufacturing by eliminating defects. With the addition of Lean Manufacturing techniques, a
term coined by Jim Womack, Ph.D., at MIT's International Motor Vehicle Program to describe
Toyota’s business practices, which reduce costs by eliminating waste and unnecessary
inventory(What is Lean?, Lean Enterprise Institute, 2009). Lean Six Sigma is a powerful, proven
method of improving business efficiency and effectiveness. In a nutshell, here are the key
principles of Lean Six Sigma to bear in mind:
 Focus on the customer.
 Identify and understand how the work gets done (the value stream).
 Manage, improve and smooth the process flow.
 Remove Non-Value-Added steps and waste.
 Manage by fact and reduce variation.
 Involve and equip the people in the process.
 Undertake improvement activity in a systematic way.
(http://www.dummies.com/how-to/content/the-key-principles-of-lean-six-sigma.html)
A prime example of the impact of Lean Six Sigma on Northrop Grumman’s business operations
processes can be seen it’s ship building sector. In January 2009, the U.S. Navy commissioned
the nuclear aircraft carrier U.S.S. George H.W. Bush (CVN 77), constructed over seven years by
Northrop Grumman Newport News shipbuilding plant at a cost of $6.2 billion. However, what
was more critical is the maintenance cost for the aircraft carrier with a 50 year life cycle. The
article “Staying Seaworthy” by Robert J. Kucner, details the lessons learned from Northrop
Grumman ship building sector applied Lean Six Sigma directly to their ship remanufacturing
process.

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Pre-Lean Six Sigma remanufacturing conditions entailed daily crisis management. Emphasis
was placed on shifting macro-level schedules and pulling resources from other jobs in progress
to support tasks on the daily critical path. Tooling came from several locations and materials
where delivered to employee’s supervisor. Technical instructions consisted of short and vague
tasks descriptions and component blueprints. Inefficiencies existed in coordination between
trades, because work was organized functionally. Shipboard component remanufacturing
commonly delayed the overall delivery date, and de-scoping occurred due to scheduling and cost
overruns (Staying Seaworthy, ASQ Six Sigma Forum Magazine).
Post Lean Six Sigma application saw significant improvements in Northrop Grumman’s ship
remanufacturing process. Through the empowered cross functional teams, and close engineer
support the production workers developed greater capacity to solve technical problems.
Production flow improved and new costs and scheduling benchmarks were established.

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LEAN SIX SIGMA METHODS
APPLIED TO SHIPBOARD COMPONENTS
REMANUFACTURING
Observed Lean Context: High-process-variability remanufacturing
Six Sigma methods Case: Shipboard component remanufacturing
to develop
Internal Created virtual work cells.
process Created cross-functional production teams.
stability Developed standard work for each work cell,
highly general in nature
Established consumables trailer near dry dock
for materials.
Created tool kits for trade and specific job
tooling.
Established visual metrics board to track
productivity to schedule.
Just-in-time Established work-in-processes (WIP) controls for
production each supervisor and skilled trade.
Developed pull system between work teams to
manage WIP.
Established visual control board to manage flow
of production personnel.
Leveled production by using critical chain
scheduling and WIP controls.
Built-in quality Implemented job rotation and cross-functional
training.
Placed phones strategically in production zones
with direct line to engineering.
Scheduling daily stand-up meetings of production
team to discuss process abnormalities.
Assigned full-time engineers to production zones.
Required engineers to always carry pagers for
immediate contact.
(Staying Seaworthy, ASQ Six Sigma Forum Magazine).
5. Inventory
Northrop Grumman produces and provides a wide range of products and services for its
customers (see Appendix A, list of Northrop Grumman programs and description).

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HUMAN RESOURCES
1. People and Staffing
The men and women of Northrop Grumman come from diverse backgrounds and have unique
skills and experience. It is this diversity that makes them great! It fosters creativity and
innovation and enables them to create some of the most technically sophisticated products and
services in the world.
2. Type of Skills
Northrop Grumman hires candidates who have a wide range of skills to support their innovative
systems, products and solutions. The Aerospace, Electronics, Information Systems, and
Technical Services business sectors utilize these diverse skills when supporting government and
commercial customers worldwide. The following are career opportunities available at Northrop
Grumman:
Business
Business Development Business Management Program Management
Quality Assurance Supply Chain
Cyber-security
Database Architect Intelligence Analyst Network Engineer
Software Engineer Systems Engineer
Engineering
Civil/Structural Engineer Electrical Engineer Mechanical Engineer
Quality Assurance Software Engineer Systems Engineer
Work Control Analyst
Health IT
Business Process Analyst Computer Systems/Security Analyst Health Research Analyst

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Scientific Data Analyst Software Development Analyst Systems Administrator
Web Content Developer
Human Resources & Administration
Production/Manufacturing
Assembler Composite Mechanic Electrician Quality Assurance
(http://careers.northropgrumman.com/career_areas.html)
3. Organizational Chart (Number of Employees & Skills)
2011 Workforce Data Chart
Job Category Total
%
Men
%
Women
%
White
%
African
%
Hisp/Lat
%
Asian
%
Other
Executive 285 83.16% 16.84% 87.37% 4.91% 2.81% 1.05% 3.70%
First/Middle Managers 18,596 81.76% 18.12% 80.58% 9.91% 3.53% 4.89% 0.97%
Professionals 53,825 74.18% 25.81% 73.21% 8.77% 5.32% 11.02% 1.67%
Technicians 10,437 82.39% 17.55% 70.08% 13.51% 7.64% 6.82% 1.90%
Sales Workers 10 70.00% 30.00% 80.00% 20.00% 0.00% 0.00% 0.00%
Administrative 7,627 27.42% 72.57% 60.71% 21.33% 10.90% 5.19% 1.86%
Craft Workers 20,270 90.82% 9.06% 47.54% 40.29% 8.61% 2.10% 1.33%
Operatives 4,657 73.80% 26.20% 43.31% 42.52% 7.43% 5.75% 0.99%
Laborers 687 73.80% 26.20% 31.30% 53.13% 13.54% 1.02% 1.02%
Service Workers 2,289 65.18% 34.82% 45.48% 31.98% 13.72% 6.86% 1.97%
Total Workforce 118,683 75.76% 24.19% 66.99% 17.58% 6.45% 7.43% 1.51%
(http://www.mergentonline.com/documents.php?compnumber=6136 2010 Annual Report
Supplement)
4. Payroll
Year Ended December 31
$ in millions, except per share 2010 2009 2008 2007 2006
Payroll and employee benefits 14,032 14,751 13,036 12,301 11,918
(Northrop Grumman Corporation’s Proxy Statement Form 10-K, 2010).

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5. Union/Non-Union
Northrop Grumman maintains good relations with its 117,100 employees, of which
approximately 20 percent are covered by 32 collective bargaining agreements. In 2010, they
negotiated or renegotiated twelve of their collective bargaining agreements. Collective
bargaining agreements generally expire after three to five years and are subject to renegotiation
at that time. In 2011, Northrop Grumman may experience difficulties with renewals and
renegotiations of existing collective bargaining agreements. If they experience such difficulties,
we could incur additional expenses and work stoppages. Any such expenses or delays could
adversely affect programs served by employees who are covered by collective bargaining
agreements (Northrop Grumman Corporation’s Proxy Statement Form 10-K, 2010).
http://www.mergentonline.com/documents.php?compnumber=6136
6. Training
Northrop Grumman is committed to cultivating the best within its employees, increasing job
skills and knowledge of the business, and providing opportunities for career exploration and
advancement.
 Education
Northrop Grumman has an enterprise online learning management system that will provide its
employees with easy access to shared learning resources and information. This online system
supports employees by identifying required or recommended learning, accessing growth
opportunities, tracking progress and closing competency gaps to improve job performance. They
also offer an e-Learning portal available to all employees 24/7, which allows for the creation of
customized development plans and course selection based on alignment with career goals.

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Northrop Grumman has resources specifically designed to help their employees who desire to
continue their education through a generous and innovative education assistance program to
pursue college or post-baccalaureate studies that are related to their roles at the company.
 Career Planning
Trained professionals at Northrop Grumman can offer guidance on everything from mapping out
its employee’s career path to guidance for developing specific targeted skills. Northrop
Grumman’s eAdvisor provides online coaching and development advice for its employees at all
levels. The site includes development suggestions, action steps, resources, and planning
templates to help employees work through business challenges and develop the skills you
choose.
 Mentoring
Northrop Grumman believes mentoring is of extreme importance in developing talent at all
levels, transferring knowledge, providing career guidance, and fostering an inclusive culture. In
order for companies to sustain growth, knowledge must continually be passed on to cultivate the
next generation of employees and enable the current workforce to achieve new goals and
increased levels of employee engagement.
 Functional Talent Development
Northrop Grumman has designed specific programs to enhance professional growth. Below are
two examples of programs that may be offered based on sector and location.

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 The Systems Engineering Associates program is a selective 2-year Information Systems
Sector developmental rotation program, designed for high-potential individuals interested
in systems engineering. Its purpose is to increase an individual's awareness and exposure
to systems engineering and the company, thereby expanding the employee's network and
accelerating career growth.
 Future Technical Leaders Program (FTLP) is a recruiting and professional development
opportunity aimed at identifying and investing in Northrop Grumman's next generation of
visionary technologists. In this forward-thinking program, selected individuals will spend
three years working on a variety of projects from the technically innovative to the
socially significant.
 Performance Management
Common performance management process, PERFORM1NG or "Performing One Northrop
Grumman", accomplishes these objectives and also helps to focus on employee development.
All managers and employees are encouraged to discuss development for employees’ current and
future jobs frequently to support performance and continuous improvement in both the short- and
long-term. Development conversations support understanding ability, career interests, and level
of engagement to ensure success in current assignments and potential for future job
opportunities.
 LEAD1NG Curriculum
There is a wealth of programs created to support leadership development for our employees at all
levels of the organization. Northrop Grumman employees are encouraged to exhibit leadership
and to act as thought leaders, therefore we have designed programs with our various employees’
needs in mind.

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 360 Feedback Instrument
The 360 degree feedback instrument is a tool that allows our leaders to receive confidential
feedback from people who interact with them on all sides – managers, peers, subordinates and
themselves – as the “360 degree” name suggests. After all participants have submitted their
feedback, a trained coach meets with the leader to interpret the report and helps to establish
developmental goals based on the results.
 Executive Education
These programs and classes usually do not result in a degree, however, they provide valuable
insight as well as the unique perspective that comes from interacting with leaders at other
companies that cannot be gained by attending internal programs alone. Meeting people from
other organizations to hearing their thought on relevant topics and being in an academic setting
lends itself to complete concentration and engagement in the experience.
 Leadership Coaching
Certified coaches can help employees establish targeted goals that are aligned with the goals of
the organization. The topics including leadership communications, conflict management, critical
thinking, decision making, presentation skills, talent management, strategic thinking and
planning. (http://careers.northropgrumman.com/learning_development.html)
7. Management Structure
At Northrop Grumman, employees work in an environment of cutting-edge technology that is
characterized by a strong sense of caring, community and mutual respect. Employees share
experiences, insights, diverse perspective and creative solutions with some of the best minds in
the industry through integrated product teams, cross-functional teams, employee resource groups
and time spent with mentors (http://www.careers.northropgrumman.com/benefits_culture.html).

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Northrop Grumman recently opened the Innovation Institute. The five-story, 156,000-square-foot
leased office building is situated on West Nursery Road in the West Quest Technology Park
where Northrop Grumman already maintains its Electronic Systems sector headquarters. The
new office facility features several uniquely-configured collaboration areas where small to
medium-sized teams of employees can work together on various advanced technology
development projects. The goal is to take people out of conference rooms or dark offices and
encourage them to work together in an area that allows for natural light and more free-flowing
ideas (http://www.es.northropgrumman.com/media/whitepapers/innovation_institute.html).

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MARKETING
1. Target Market
Northrop Grumman’s primary customer is the U.S. Government. Revenue from the U.S.
Government (which includes Foreign Military Sales) accounted for approximately 92 percent of
total revenues in 2010, 2009, and 2008. No single product or service accounted for more than ten
percent of total revenue during any period presented (Northrop Grumman Corporation’s Annual
Report. Form 10-K, 2010). The remainder of their target market is international agencies,
commercial agencies, and state & local governments.
2. Market Share
Of the four major U.S. Aerospace and Defense companies: Boeing, Lockheed Martin, Northrop
Grumman and General Dynamics; the follow graph depicts the total market share of U.S.
Aerospace and Defense industry:
NOC= Northrop Grumman BA= Boeing GD=General Dynamics LMT=Lockheed Martin
Data for graph was obtained from http://finance.yahoo.com/q/co?s=NOC+Competitors.
Sales as of
2010
NOC
BA
GD
LMT
33.88 Bil.
64.97 Bil.
36.6%
46.37 Bil.
26.1%
32.29 Bil.
18.1%
19.1%

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3. Size
It is estimated that the value of total U.S. aerospace industry shipments in 2010 was $171 billion,
a decrease of 4.5 percent from the 2009 figure of $179 billion.
Estimated total U.S. aerospace industry shipments in 2010 were roughly half and half, military
and civil, with the value of civil shipments ($90 billion) slightly exceeding that of military
shipments ($82 billion). (Analysis of the U.S. Aerospace Industry Office of Transportation and
Machinery International Trade Administration U.S. Department of Commerce March 2011).
4. Advertising Business to Business (B2B)
a. Marketing
The majority of Northrop Grumman’s marketing comes directly from a business-to-business
(B2B) marketing or business development practice to market its products. Northrop Grumman
utilizes business development personnel as ambassadors that connect the needs of the war-fighter
to innovative and affordable solutions, in a balanced continuum.
Business development’s purpose is to provide an integrated capability to pursue new business
opportunities in a manner that reaches beyond the traditional business development framework.
It pulls together all elements associated with defining a winning offer or business opportunity,
such as customer requirements, long range campaign planning, environment shaping, capture
planning, and the business management and systems engineering integration infrastructure to

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efficiently balance these elements. Business development personnel participate in all aspects of
identifying, qualifying, pursuing, bidding, and winning new business opportunities. Business
development encompasses a variety of detailed task areas ranging from strategic planning and
strategy formulation to capture management and proposal development
(http://careers.northropgrumman.com/career_areas/business_development.html).
b. Media marketing
Northrop Grumman's newest advertising campaign, The Value of Performance, showcases the
value of Northrop Grumman’s performance in our key areas of focus: Unmanned Systems,
Cyber-security, C4ISR and Logistics. The Value of Performance reflects the importance the
company places on both values and performance. In concert with this, The Value of Performance
focus is also being leveraged in our newest employee recruitment advertising campaign, themed
At the Heart of What We Do.
(http://www.northropgrumman.com/advertising)

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c. Marketing venues
Threw out the year, Northrop Grumman attends several Trade and Air shows to promote, engage
and attract new business opportunities such as the 2011 International Paris Air Show 2011.
Northrop Grumman Corporation participated in a series of media
briefings during the International Paris Air Show 2011 held at Le Bourget, France. The company
highlighted a wide variety of its programs and capabilities, including unmanned aerial vehicles,
electronic warfare systems and its airborne early warning and control platforms
(http://www.northropgrumman.com/Paris/index.html).

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FINANCIAL
The growth of the Aerospace and Defense industry depends largely on the spending outlook of
government departments, with the U.S. defense budget being the primary driver. The U.S. is the
world’s largest aerospace and defense market, and also home to the world’s largest military
budget.
In 2010, the total global defense expenditure of $1.6 trillion grew 1.3% from 2009 levels in real
terms. The majority of this growth came from the U.S. Defense spending, which was $698
billion in 2010, accounting for roughly 43% of the total global defense expenditures
(http://finance.yahoo.com/news/Aerospace-Defense-Stock-zacks-4045185011.html?x=0).
1. Revenue
a. Consolidated Operating Results(Corporation)
Selected financial highlights are presented in the table below:
$ in billions, except per share 2010 2009 2008
Sales and service revenues $ 34,757 $ 33,755 $ 32,315
Cost of sales and service revenues (28,609) (28,130) (26,375)
General and administrative expenses (3,078) (3,142) (3,143)
Goodwill impairment (3,060)
Operating income (loss) 3,070 2,483 (263)
Interest expense (281) (281) (295)
Charge on debt redemption (231)
Other, net 37 64 38
Federal and foreign income taxes (557) (693) (859)

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Diluted earnings (loss) per share from continuing operations 6.77 4.87 (4.12)
Net cash provided by operating activities 2,453 2,133 3,211
Sales and Service Revenues
Sales and service revenues consist of the following:
$ in millions 2010 2009 2008
Product sales $ 21,776 $ 20,914 $ 19,634
Service revenues 12,981 12,841 12,681
Sales and service revenues $ 34,757 $ 33,755 $ 32,315
Sales and service revenues for 2010 increased $1 billion, or 3 percent over 2009. The increase is
due to $862 million higher product sales and $140 million higher service revenues. The 4 percent
increase in product sales reflects sales growth in Aerospace Systems and Shipbuilding. The 1
percent increase in service revenues reflects sales growth at Technical Services.
Sales and service revenues for 2009 increased $1.4 billion, or 4 percent, over 2008. The increase
is due to $1.3 billion higher product sales and $160 million higher service revenues. The 7
percent increase in product sales reflects sales growth in Aerospace Systems, Electronic Systems
and Shipbuilding. The 1 percent increase in service revenues reflects sales growth in Information
Systems and Technical Services (Northrop Grumman Corporation’s Annual Report. Form 10-K,
2010).

28
b. Revenue by Business Sector
AEROSPACE SYSTEMS
$ in millions 2010 2009 2008
Sales and Service Revenues $ 10,910 $ 10,419 $ 9,825
Segment Operating Income 1,256 1,071 416
As a percentage of segment sales 11.5% 10.3% 4.2%
ELECTRONIC SYSTEMS
$ in millions 2010 2009 2008
Segment Operating Income 1,023 969 947
INFORMATION SYSTEMS
$ in millions 2010 2009 2008
Segment Operating Income 756 624 626

29
SHIPBUILDING
$ in millions 2010 2009 2008
Segment Operating Income (Loss) 325 299 (2,307)
As a percentage of segment sales 4.8% 4.8% (37.5%)
TECHNICAL SERVICES
$ in millions 2010 2009 2008
Segment Operating Income 206 161 144
(Northrop Grumman Corporation’s Annual Report. Form 10-K, 2010).
2. Expenses
Cost of sales and service revenues and general and administrative expenses are comprised of the
following:
$ in millions 2010 2009 2008
Cost of sales and service revenues
Cost of product sales $ 16,820 $ 16,591 $ 15,490
% of product sales 77.2% 79.3% 78.9%
Cost of service revenues 11,789 11,539 10,885
% of service revenues 90.8% 89.9% 85.8%
General and administrative expenses 3,078 3,142 3,143

30
% of total sales and service revenues 8.9% 9.3% 9.7%
Goodwill impairment 3,060
Cost of sales and service revenues $ 31,687 $ 31,272 $ 32,578
Cost of product sales in 2010 increased $229 million, or 1 percent, over 2009 primarily due to
the higher sales volume described above. The decrease in cost of product sales as a percentage of
product sales was primarily due to lower GAAP pension expenses and performance
improvements in Aerospace Systems and Electronic Systems.
Cost of service revenues in 2010 increased $250 million, or 2 percent, over 2009 and as a
percentage of service revenues increased 90 basis points, primarily due to program mix changes
at Information Systems.
Cost of product sales in 2009 increased $1.1 billion, or 7 percent, over 2008 primarily due to the
higher sales volume described above. The increase in cost of product sales as a percentage of
product sales was primarily due to higher GAAP pension costs across all of its businesses.
Cost of service revenues in 2009 increased $654 million, or 6 percent, over 2008 primarily due to
the higher sales volume described above. The increase in cost of service revenues as a percentage
of service revenues was primarily due to higher GAAP pension costs across all of its businesses.
(Northrop Grumman Corporation’s Annual Report. Form 10-K, 2010).
3. Cash Flow
The table below reconciles net cash provided by operating activities to free cash flow:
$ in millions 2010 2009 2008
Net cash provided by operating activities $ 2,453 $ 2,133 $ 3,211
Less:

31
Capital expenditures (770) (654) (681)
Outsourcing contract & related software costs (6) (68) (110)
Free cash flow from operations $ 1,677 $ 1,411 $ 2,420
a. Operating Activities
Net cash provided by operating activities in 2010 increased $320 million as compared with 2009
and reflects improved cash collections from its customers and lower tax payments. In 2009, net
cash provided by operating activities included $508 million taxes paid related to the sale of ASD
(Advisory Services Division). Pension plan contributions totaled $894 million in 2010, of which
$830 million was voluntarily prefunded.
In 2011, Northrop Grumman expects to contribute the required minimum funding level of
approximately $62 million to its pension plans and approximately $160 million to its other post-
retirement benefit plans, and also expect to make additional voluntary pension contributions of
approximately $500 million. Northrop Grumman expects cash generated from operations for
2011 to be sufficient to service debt and contract obligations, finance capital expenditures,
continue acquisition of shares under the share repurchase program, and continue paying
dividends to its shareholders. Although 2011 cash from operations is expected to be sufficient to
service these obligations, it may borrow under credit facilities to accommodate timing
differences in cash flows. Northrop Grumman has a committed $2 billion revolving credit
facility that is currently undrawn and that can be accessed on a same−day basis. Additionally,
Northrop Grumman believes it could access capital markets for debt financing for longer-term
funding under current market conditions, if needed.
Net cash provided by operating activities in 2009 decreased $1.1 billion as compared with 2008,
reflecting higher voluntary pension contributions and increased income taxes paid resulting from

32
the sale of ASD. Pension plan contributions totaled $858 million in 2009, of which $800 million
was voluntary prefunded.
Net cash provided by operating activities in 2008 increased $321 million as compared with 2007,
and reflects lower income tax payments and continued trade working capital reductions. Pension
plan contributions totaled $320 million in 2008, of which $200 million was voluntarily
prefunded, and were comparable to 2007. Net cash provided by operating activities for 2008
included $113 million of federal and state income tax refunds and $23 million of interest income.
b. Investing Activities
Cash used in investing activities was $761 million in 2010 and reflects $770 million of capital
expenditures, which includes $57 million of capitalized software costs. Capital expenditure
commitments at December 31, 2010, were approximately $444 million, which are expected to be
paid with cash on hand.
Cash provided by investing activities was $867 million in 2009. During 2009, Northrop
Grumman received $1.65 billion in proceeds from the sale of ASD, paid $68 million for
outsourcing costs related to outsourcing services contracts, and paid $33 million to acquire
Sonoma Photonics, Inc. and the assets from Swift Engineering’s Killer Bee Unmanned Air
Systems product line. Capital expenditures in 2009 were $654 million and included $36 million
of capitalized software costs.
Cash used in investing activities was $626 million in 2008. During 2008, Northrop Grumman
received $175 million in proceeds from the sale of the Electro Optical Systems business. It spent
$92 million for the acquisition of 3001 International, Inc., paid $110 million for outsourcing
costs related to outsourcing services contracts, and released $61 million of restricted cash related
to the Gulf Opportunity Zone Industrial Development Revenue Bonds. Northrop Grumman had

33
$11 million in restricted cash as of December 31, 2008 related to the Xinetics Inc... Capital
expenditures in 2008 were $681 million and included $23 million of capitalized software costs.
c. Financing Activities
Cash used in financing activities in 2010 was $1.3 billion, which was comparable to 2009.
Financing activities in 2010 reflect $1.2 billion in debt payments, including the repurchase of
$682 million of higher coupon debt, $231 million for fees and associated premiums paid to the
tendering holders of these debt securities, and the repurchase of $178 million of Shipbuilding
indebtedness in connection with our analysis of strategic alternatives for that business.
These financing outflows were offset by $1.5 billion in net proceeds from new debt issuances.
In addition, we repurchased $1.2 billion of our common shares outstanding in 2010.
Cash used in financing activities in 2009 was $1.2 billion compared with $2 billion in 2008 and
reflects $843 million in net proceeds from new debt issuance in 2009.
Cash used in financing activities in 2008 was $2 billion compared to $1.5 billion in 2007. The
$532 million increase is primarily due to $380 million more for share repurchases and $171
million lower proceeds from stock option exercises.
Northrop Grumman repurchased 19.7 million, 23.1 million, and 21.4 million shares in 2010,
2009, and 2008, respectively. (Northrop Grumman Corporation’s Annual Report. Form 10-K,
2010).
4. Debt Obligations
The following table presents our contractual obligations as of December 31, 2010, and the
estimated timing of future cash payments:

34
2012 − 2014 – 2016 and
$ in millions Total 2011 2013 2015 beyond
Long−term debt $ 4,808 $ 773 $ 9 $ 855 $ 3,171
Interest payments on long−term debt 3,035 241 430 416 1,948
Operating leases 1,514 367 499 330 318
Purchase obligations 9,303 6,042 2,782 464 15
Other long−term liabilities 1,488 321 347 239 581
Total contractual obligations $ 20,148 $ 7,744 $ 4,067 $ 2,304 $ 6,033
The table above also excludes estimated minimum funding requirements and expected voluntary
contributions for retiree benefit plans as set forth by ERISA (Employee Retirement Income
Security Act of 1974) in relation to the company’s pension and postretirement benefit obligations
totaling approximately $5.5 billion over the next five years: $722 million in 2011, $494 million
in 2012, $698 million in 2013, $696 million in 2014, and $719 million in 2015. The company
also has payments due under plans that are not required to be funded in advance, but are funded
on a pay−as−you−go basis (Northrop Grumman Corporation’s Annual Report. Form 10-K,
2010).
5. Liquidity
As stated in section (a) Operations Activities, Northrop Grumman has evaluated its future
liquidity needs, both from a short−term and long−term perspective. It is expect that cash on hand
at the beginning of the year plus cash generated from operations and cash available under credit
lines will be sufficient in 2011 to service debt, finance capital expansion projects, pay federal,
foreign, and state income taxes, fund pension and other post-retirement benefit plans, and
continue paying dividends to shareholders. Northrop Grumman has a committed $2 billion

35
revolving credit facility, with a maturity date of August 10, 2012, that can be accessed on a same
day basis. It can also obtain additional capital to provide for long-term liquidity, if necessary,
from such sources as the public or private capital markets, the sale of assets, sale and leaseback
of operating assets, and leasing rather than purchasing new assets.
6. Company Stock
a. Common stock
The following table sets forth, for the periods indicated, the high and low closing sale prices of
Northrop Grumman’s common stock as reported in the consolidated reporting system for the
New York Stock Exchange Composite Transactions:
2010 2009
January to March $ 65.78 to $ 55.63 $ 49.72 to $ 34.35
April to June $ 69.38 to $ 54.44 $ 50.54 to $ 43.98
July to September $ 60.63 to $ 54.10 $ 52.75 to $ 43.23
October to December $ 65.34 to $ 60.11 $ 56.84 to $ 49.59
The approximate number of common stockholders was 32,388 as of February 7, 2011.
Quarterly dividends per common share for the most recent two years are as follows:
2010 2009
January to March $ 0.43 $ 0.40
April to June 0.47 0.43
July to September 0.47 0.43
October to December 0.47 0.43
$ 1.84 $ 1.69

36
Northrop Grumman has 800,000,000 shares authorized at a $1 par value per share, of which
290,956,752 shares and 306,865,201 shares were outstanding as of December 31, 2010, and
2009, respectively.
b. Preferred Stock
Northrop Grumman has 10,000,000 shares authorized at a $1 par value per share, of which no
shares were issued and outstanding as of December 31, 2010, and 2009.
On February 20, 2008, Northrop Grumman’s board of directors approved the redemption of the
3.5 million shares of Series B Convertible Preferred Stock on April 4, 2008. Substantially all of
the preferred shares were converted into common stock at the election of stockholders prior to
the redemption date. All remaining non converted shares were redeemed on the redemption date.
Northrop Grumman issued approximately 6.4 million shares of common stock as a result of the
conversion and redemption.
7. Comparison to Industry
The following is a financial comparison of Northrop Grumman’s major competitors: Lockheed
Martin, Boeing, and General Dynamics:
Direct Competitor Comparison
NOC BA GD LMT Industry
Market Cap: 14.19B 44.10B 20.23B 24.02B 2.95B
Employees: 117,100 160,500 90,000 132,000 7.50K
Qtrly Rev Growth (yoy): -9.60% 6.20% -2.80% 2.40% 15.10%
Revenue (ttm): 33.88B 64.97B 32.29B 46.37B 876.70M
Gross Margin (ttm): 18.45% 19.34% 18.38% 10.54% 29.78%
EBITDA (ttm): 4.03B 6.37B 4.49B 4.71B 246.09M
Operating Margin (ttm): 9.72% 7.22% 12.14% 8.38% 7.00%
Net Income (ttm): 1.90B 3.53B 2.66B 2.70B N/A
EPS (ttm): 6.53 4.73 7.01 7.99 0.45
P/E (ttm): 7.82 12.58 7.97 9.03 17.34
PEG (5 yr expected): 0.96 1.09 1.06 1.02 1
P/S (ttm): 0.42 0.67 0.63 0.53 1.21
NOC =Northrop Grumman. BA = Boeing Co. GD = General Dynamics Corp.
LMT = Lockheed Martin Corporation Industry = Aerospace/Defense - Major Diversified
(http://finance.yahoo.com/q/co?s=NOC+Competitors)

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Internal Analysis of Northrop Grumman Summary
SWOT Analysis
Northrop Grumman Corporation is a leading global security company providing innovative
systems, products and solutions in aerospace, electronics, information systems, and technical
services to government and commercial customers worldwide. Their core competencies are
aligned with the current and future needs of their customers and address emerging global security
challenges in key areas, such as unmanned systems, cyber-security, C4ISR, and logistics that are
critical to the defense of the nation and its allies. The following is a SWOT Analysis (Strengths,
Weaknesses, Opportunities and Threats) of the internal segments of Northrop Grumman
(Operations, Human Resources, Marketing and Finance) from the data collected in regards to the
internal analysis of Northrop Grumman:
Strengths Weaknesses
Brand Name Niche Market (dependent on U.S. Government)
Capital Resources
Superior Business Processes
Highly educated and trained work force
Opportunities Threats
Mergers, Acquisitions and Joint Business
Ventures with competitors Current U.S. Economy
Emerging Markets
Draw down of U.S. Forces in Iraq and
Afghanistan

38
Strengths
1. Brand name recognition
Northrop Grumman is a highly respected name in the Defense Industry with an impeccable
reputation for quality products and services, as well as employment opportunities. It is number
61 on the Fortune 500 list. It is number 23 on BusinessWeek Global 1000 7, based on market
capitalization. Fortune Global 500 number 207, based on 2010 revenue. Fortune Global Most
Admired (7th in industry) based on criteria such as management, investment value and employee
talent. Forbes 2000 listed Northrop Grumman number 216, based on sales, profits, assets and
market value. Fortune 20 Great Employers for New Grads, based on opportunities, benefits and
compensation offered to recent college graduates. Number 2 in the Los Angeles Business Journal
Top Los Angeles County Private Employers based on number of employees. It is number 2 in
the Washington Technology list of Top 100 Federal Prime IT Contractors based on IT revenue. It
is number 3 in the Government Executive list of Top 200 Federal Contractors based on total
DOD procurement for 2010. These are just a few of the many accolades that attest to the brand
name and reputation of Northrop Grumman.
(http://www.northropgrumman.com/media/by_the_numbers/index.html)
2. Capital resources and infrastructure
In 2010, Northrop Grumman grossed over $34 billion in sales, which was a 3% from 2009 sales
revenue. In addition, each of its business sectors saw a sales increase from 1 to 2% from 2009 to
2010. Its stock from January 2010 to December had a high of $69.38 to a low of $54.10 with an
average variance of $61.74 market price and a standard deviation of 7.86; thus, making its stock
price less volatile and a more desirable investment for investors.

39
Northrop Grumman’s debt obligations appear to be at a minimal ranging from $2 million to $8
million based on a 2011 to 2016 time frame and with its future liquidity needs, both from a short-
term and long-term perspective, there is no foreseeable financial crisis for Northrop Grumman
and will continue to operate in the black for the foreseeable future.
Northrop Grumman possesses a vast array of production facilities in the continental U.S. and
abroad to support the needs of its customers. In addition, the decision to move its corporate
headquarters from Los Angeles to Falls Church, Virginia in order to be closer to its customer
will give it a comparative advantage over its competitors in particular Boeing which is
headquartered in Chicago, Illinois.
3. Superior business processes
Since its adoption of Lean Six Sigma into its business processes, Northrop Grumman
improvements in business efficiency and effectiveness has become its competitive advantage. It
offers its customers business process solutions in areas such as: business process management,
human capital management, and supply chain management solutions. Consequently, Northrop
Grumman has received several awards recognizing its business processes and practices: 2004
Top Maryland Employer of Distinction Maryland Society for Human Resource Management
State Council and The Daily Record for achievements and best practices in human resources,
NASA George M. Low Award, for demonstrated excellence and outstanding technical and

40
managerial achievements in quality and performance, Thirty-eight Capability Maturity Model
Integration (CMMI) Level 5 awards for commercial and defense industry best practices for
software(most in the defense and information technology industries), Department of Defense
Best Value Gold Medal Supplier Award and the Department of Defense Nunn Perry Award
honoring the relationships between large companies and small firms they mentor.
4. Highly educated and trained work force
Northrop Grumman employs some of the most highly educated and diverse people to support its
innovative systems, products and solutions:
(http://careers.northropgrumman.com/meet_our_ftl_employe.html)
Northrop Grumman’s commitment to cultivating the best within its employees thru several
employee educational programs specifically designed to improve job performance and the
quality of its products and services…i.e., The Systems Engineering Associates program and
Future Technical Leaders Program, reinvests itself into its business process. Thus, because of its
small cell and cross-functional team concepts, these teams have diverse array of experts to
develop innovated products and solutions for Northrop Grumman and its customers.
Weaknesses
1. Niche Market (dependence on U.S. Government)
Northrop Grumman’s dependence on the U.S. Government, a client that is 92% of its business,
carries many burdens. One such burden is that the government can cancel contracts anytime
creating loss revenue that would make it difficult for Northrop Grumman to recoup. Since the
recent debt crisis, the U.S. Congress is currently seeking new areas to cut spending in order to

41
lower the U.S. National Debt. Another burden is that Northrop Grumman must obtain licenses
and authorization from the US government to sell its products outside the US.
Opportunities
1. Mergers, acquisitions and joint business ventures
With the uncertain of the recovery of the global economy and the planned withdraw of military
forces in Iraq and Afghanistan; it is an ideal time for the companies within the Defense Industry
to pull their resources together in the form of company mergers, acquire smaller profitable
companies or take on other defense companies as subcontractors when pursuing contracts.
Business ventures such as these would ensure the survivability of the companies. A prime
example is Northrop Grumman has a principal subcontractor on the F-35 Joint Strike Fighter
contract led by Lockheed Martin Aeronautics that is developing, demonstrating and producing
three variants of this single-engine, 5th generation fighter: a conventional take-off and landing
(CTOL) variant; a short-take off, vertical landing (STOVL) variant and a carrier variant (CV).
The F-35 Joint Strike Fighter team also includes BAE Systems as a principal subcontractor.
2. Emerging Market
The U.S. is currently engaged in asymmetric warfare and low-intensity conflicts and will
continue to engage in such military actions for the foreseeable future. Northrop Grumman is in a
prime position to produce low-cost high quality products to support such military engagements.
Each of their business sectors already produces products like unmanned aerial vehicles and
surveillance and intelligence gathering equipment that are more suited for such military
campaigns than most of their major competitors like Boeing and Lockheed Martin who are more
aircraft oriented manufacturers.

42
US officials: US attack in Yemen kills al-Awlaki
By KIMBERLY DOZIER and MATT APUZZO - Associated Press
http://news.yahoo.com/us-officials-us-attack-yemen-
kills-al-awlaki-130835684.html
U.S-born cleric Anwar al-Awlaki and Samir Khan, who edited the slick Jihadi Internet magazine,
were killed in an air strike on their convoy in Yemen by a joint CIA-U.S. military operation,
according to counterterrorism officials. After three weeks of tracking the targets, U.S. armed
drones and fighter jets shadowed the al-Qaida convoy before armed drones launched their lethal
strike early Friday.
It is likely that the unmanned drones that conducted the attack where manufactured by Northrop
Grumman or its competitors; thus, proving the company’s understanding of the warfighters
needs.
Threats
1. Current U.S. Economy
With the uncertainty of the U.S. economy and congress seeking new measures to develop a
balanced budget and reduce the national debt, it likely that this will affect the Defense Industry
since a large percentage of the U.S. Budget is in defense appropriation.

43
2. Draw down of military forces in Iraq and Afghanistan
As the U.S. begins its draw down of its troops in the Middle East region any current and or
future contracts supporting those campaigns maybe subject to immediate cancelation.
Summary
Operationally, Northrop Grumman possesses a business strategy that is customer focus and a
lines its products to meet their customer’s need. It maintains a vast array of facilities around the
world so that it can deliver its products to where ever the customer is or needs its products. It
possesses business process that has allowed it grow and prosper into global name in the
Aerospace and Defense Technology Industry.
Human Resources, Northrop Grumman hire only the best and it re-educates its workforce in the
latest technology in order to improve the quality and performance of its product and create
innovated products that meets the needs of its customers.
Marketing, Northrop Grumman takes a personal approach that appeal directly to its customers.
Its approach is a one-on-one or business-to-business where they advertising directly to the
customer and ask them, “What do you need? This is what we can do for you.”
Financially, Northrop Grumman is fiscally responsible. Its forward thinking allowed it to
increase revenue year after, while still being able to pay dividends to shareholders and have a
liquidity plan if such a need arises.

44
External Analysis of Northrop Grumman
1. Demographics
Northrop Grumman’s primary client is the U.S. Government. Therefore, it does not deal with
demographics in the traditional sense. They don’t target women between the ages of 21 to 35 as
a target market to sell unmanned aerial vehicles.
2. International
(http://www.northropgrumman.com/international)
A key element of Northrop Grumman’s growth is its commitment to the international
marketplace. The company has a range of industry-leading capabilities available for international
markets and sells products and services to customers in 25 nations.
Northrop Grumman has a well-established international presence outside the United States and
maintains a network of more than 30 regional business development offices and local businesses
serving customers in key international markets in Europe, the Middle East and Asia Pacific
regions.

45
UNITED KINGDOM
The United Kingdom (UK) is Northrop Grumman’s largest international customer and remains a
critically important market for the company as a supplier base and a source for technology
partners. The company has a heritage of operating in the UK that spans 100 years. Northrop
Grumman’s UK-based businesses play a key role in supporting the UK armed forces as well as
developing security and resilience capabilities for the UK. Its UK businesses are also significant
exporters to countries around the world. Northrop Grumman operates from ten key locations in
the UK and provides avionics, communications, electronic warfare systems, marine navigation
systems, robotics, C4I solutions and mission planning, air traffic management, cyber-security,
aircraft whole life support, IT systems and software development. Since 2007 the company has
opened four new UK facilities increasing its in-country technical capabilities and enabling it to
be more responsive to customers’ needs.
EUROPE
In mainland Europe, Northrop Grumman operates from locations in France, Germany, Italy and
Norway providing navigation, air traffic control and postal automation systems. The company
also has offices in Belgium and Switzerland.
France
SOLYSTIC is a major player in the postal sorting market and has built its reputation as an
industry leader in the field of mail sorting machines and character recognition technology. It has
supplied post handling systems in 25-countries on all five continents. SOLYSTIC is based in
Gentilly, Paris and at Bourg les Valences near Lyons.

46
Germany
Northrop Grumman has been established in Germany since 1961 and has facilities in Freiburg
and Hamburg. Northrop Grumman LITEF, based in Freiburg, is a leader in the development and
manufacture of navigation and reference systems for air, land and maritime applications for
military and civilian customers around the world. Northrop Grumman LITEF is a world leader in
fiber-optic gyro systems and has produced and delivered more than 64,000 systems customers.
Northrop Grumman Sperry Marine has its mainland Europe facility in Hamburg, and provides
smart navigation and ship control solutions for the international marine industry together with
customer service and support.
Italy
Northrop Grumman has been operating from its Pomezia facility near Rome in Italy since 1961
and today Northrop Grumman Italia specializes in the design, development and production of a
range of integrated navigation systems. Primarily used in avionics and tactical applications, its
products are also for naval and land applications and include Inertial Navigation Systems (INS),
Global Positioning Systems (GPS), Air Data Sensors (ADS) and Magnetic Sensor Units (MSU).
Norway
Northrop Grumman Park Air Systems has facilities in Oslo and Horten, Norway and supplies air
traffic management systems for air-space operations worldwide.
MIDDLE EAST & AFRICA
Northrop Grumman has had an active presence in the Middle East for more than a decade with
its regional headquarters in Abu Dhabi, UAE and has well established partnerships with Dubai,
the UAE and other countries in the region, where it supports a variety of defense and civil
programs. The company opened an office in Riyadh, Saudi Arabia in 2008.

47
ASIA PACIFIC
Northrop Grumman has offices across the Asia Pacific region: Seoul, Korea; Tokyo; Taipei,
Taiwan; Singapore; New Delhi; and Canberra, Australia
Australia
Northrop Grumman has offices in Canberra and with well-established relationships with
Australia and other countries in the region and has been supporting a variety of both defense and
civil programs for more than 20 years.
India
Northrop Grumman has been working with the Indian armed forces and Indian industry for more
than 25-years. We support India in a variety of defense and civil applications including air traffic
control communications systems and radars, unmanned ground vehicles for the Indian Army and
marine navigation systems for the Indian Navy and bring significant, capabilities for homeland
defense modernization and command & control, intelligence, surveillance and reconnaissance
(C2ISR). We continue to develop our presence in India through strategic industrial partnerships
and in 2007 opened offices in New Delhi which has been expanded to include representatives
from several Northrop Grumman businesses (http://www.northropgrumman.com/international).
3. Economic
The weaknesses in the U.S. and markets around the world in addition to the austerity measures
that are currently or will likely take place will have a profound effect on the Global Defense
Industry. As of 29 September, 2011, Northrop Grumman’s stocks are trading at $52 dollars a
share and has been trading at this stock price plus or minus for several months. This is a $2 dollar
difference from the lowest stock price of $54 dollars from 2010 and $7 dollars difference from
its 2010 average variance of $61 dollars.

48
It is important for any company to understand the current economic conditions of the nations that
it conducts business in. Understanding the economic conditions allows a company to gather
business intelligence, analyze the information, and develop possible outcomes and solutions; an
assessment process very similar to a SWOT Analysis. The following information is an economic
overview of the countries and regions Northrop Grumman conducts business with:
United Kingdom
In 2008, the global financial crisis hit the economy particularly hard, due to the
importance of its financial sector. Sharply declining home prices, high consumer
debt, and the global economic slowdown compounded Britain's economic problems,
pushing the economy into recession in the latter half of 2008 and prompting the then
Brown government to implement a number of measures to stimulate the economy and
stabilize the financial markets; these include nationalizing parts of the banking
system, cutting taxes, suspending public sector borrowing rules, and moving forward
public spending on capital projects. Facing burgeoning public deficits and debt
levels, the Cameron government in 2010 initiated a five-year austerity program,
which aims to lower London's budget deficit from over 10% of GDP in 2010 to
nearly 1% by 2015. The Bank of England periodically coordinates interest rate
moves with the European Central Bank, but Britain remains outside the European
Economic and Monetary Union (EMU).
In addition, 2.4% of the United Kingdom’s GDP (2005 est.) is spent on military
expenditures, making them number 63 in comparison to the world
(https://www.cia.gov/library/publications/the-world-factbook).

49
France
France has weathered the global economic crisis better than most other big EU
economies because of the relative resilience of domestic consumer spending, a large
public sector, and less exposure to the downturn in global demand than in some
other countries. Nonetheless, France's real GDP contracted 2.5% in 2009, but
recovered somewhat in 2010, while the unemployment rate increased from 7.4% in
2008 to 9.5% in 2010. However, the government pursuit of aggressive stimulus and
investment measures in response to the economic crisis are contributing to a
deterioration of France's public finances. The government budget deficit rose sharply
from 3.4% of GDP in 2008 to 6.9% of GDP in 2010, while France's public debt rose
from 68% of GDP to 82% over the same period. Paris is terminating stimulus
measures, eliminating tax credits, and freezing most government spending to bring
the budget deficit under the 3% euro-zone ceiling by 2013, and to highlight France's
commitment to fiscal discipline at a time of intense financial market scrutiny of euro
zone debt levels. President SARKOZY, who secured passage of pension reform in
2010, is expected to seek passage of some tax reforms in 2011, but he may delay
additional, more costly, reforms until after the 2012 election.
In addition, 2.6% of France’s GDP (2005 est.) is spent on military expenditures,
number 54 in comparison to the world (https://www.cia.gov/library/publications/the-
world-factbook).
Germany
The German economy the fifth largest economy in the world in terms of PPP
(Purchasing Power Parity) and Europe's largest. Germany is a leading exporter of

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machinery, vehicles, chemicals, and household equipment and benefits from a highly
skilled labor force. Like its western European neighbors, Germany faces significant
demographic challenges to sustained long-term growth. Low fertility rates and
declining net immigration are increasing pressure on the country's social welfare
system and necessitate structural reforms. The modernization and integration of the
eastern German economy where unemployment can exceed 20% in some
municipalities continues to be a costly long-term process, with annual transfers from
west to east amounting in 2008 alone to roughly $12 billion.
Reforms launched by the government of Chancellor Gerhard SCHROEDER (1998-
2005), deemed necessary to address chronically high unemployment and low average
growth, contributed to strong growth in 2006 and 2007 and falling unemployment.
These advances, as well as government subsidies, reduced working hour scheme,
help explain the relatively modest increase in unemployment during the 2008-09
recession, the deepest since World War II and its decrease to 7.4% in 2010. GDP
contracted 4.7% in 2009, but grew by 3.6% in 2010. In its annual projection for
2011, the Federal Government expects the upswing to continue, with GDP forecast
to grow this year at a real rate of 2.3%. The recovery was attributable primarily to
rebounding manufacturing orders and exports increasingly outside the Euro Zone.
Domestic demand, however, is becoming more significant driver of Germany's
economic expansion.
Stimulus and stabilization efforts initiated in 2008 and 2009 and tax cuts introduced
in Chancellor Angela MERKEL's second term increased Germany's budget deficit to
3.3% in 2010. The Bundesbank expects the deficit to drop to about 2.5% in 2011,

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below the EU's 3% limit. A constitutional amendment approved in 2009 likewise
limits the federal government to structural deficits of no more than 0.35% of GDP
per annum as of 2016.
In addition, 1.5% of Germany’s GDP (2005 est.) is spent on military expenditures,
making it number 98 in comparison to the world
Consequently, Germany is currently facing the challenge of staving off a Greek
economic default. Greece is a member of the European Union and Euro Zone, thus a
Greek Default will have a profound effect on the price of the Euro, Germany’s
economy and the global markets.
Italy
The international financial crisis worsened conditions in Italy's labor market, with
unemployment rising from 6.2% in 2007 to 8.4% in 2010, but in the longer-term
Italy's low fertility rate and quota-driven immigration policies will increasingly
strain its economy. A rise in exports and investment driven by the global economic
recovery nevertheless helped the economy grow by about 1% in 2010 following a 5%
contraction in 2009. Italy has struggled to limit government spending, but its
exceedingly high public debt remains above 115% of GDP, and its fiscal deficit just
1.5% of GDP in 2007. It exceeded 5% in 2009 and 4% in 2010, as the costs of
servicing the country's debt rose.
In addition, 1.8% of Italy’s GDP (2005 est.) is spent on military expenditures,

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Norway
The Norwegian economy is a prosperous bastion of welfare capitalism, featuring a
combination of free market activity and government intervention. The government
controls key areas, such as the vital petroleum sector, through large-scale state-
majority-owned enterprises. The country is richly endowed with natural resources
such as petroleum, hydropower, fish, forests, and minerals and is highly dependent
on the petroleum sector, which accounts for nearly half of exports and over 30% of
state revenue. Norway is the world's second-largest gas exporter; its position as an
oil exporter has slipped to ninth-largest since production begun to decline. Norway
opted to stay out of the EU during a referendum in November 1994; nonetheless, as a
member of the European Economic Area, it contributes sizably to the EU budget. In
anticipation of eventual declines in oil and gas production, Norway saves state
revenue from the petroleum sector in the world's second largest sovereign wealth
fund, valued at over $500 billion in 2010. After solid GDP growth in 2004-07, the
economy slowed in 2008, and contracted in 2009, before returning to positive
growth in 2010.
In addition, 1.9% of Norway’s GDP (2005 est.) is spent on military expenditures,
Middle East Region
Even with the looming draw down of U.S. and Coalition forces in Iraq and
Afghanistan, the Middle East is still a hot spot. Terrorism is still active in the
region and as well as the recent uprising from Libya to Syria to Bahrain.

53
The company opened an office in Riyadh, Saudi Arabia in 2008. Saudi Arabia is major player in
the region and ally to the U.S… Saudi Arabia has an oil-based economy with strong
government controls over major economic activities. It possesses about 20% of the
world's proven petroleum reserves, ranks as the largest exporter of petroleum, and
plays a leading role in OPEC. The petroleum sector accounts for roughly 80% of
budget revenues, 45% of GDP, and 90% of export earnings.
Saudi Arabia is encouraging the growth of the private sector in order to diversify its
economy and to employ more Saudi nationals. Diversification efforts are focusing on
power generation, telecommunications, natural gas exploration, and petrochemical
sectors. Almost 6 million foreign workers play an important role in the Saudi
economy, particularly in the oil and service sectors, while Riyadh is struggling to
reduce unemployment among its own nationals. Saudi officials are particularly
focused on employing its large youth population, which generally lacks the
education and technical skills the private sector needs. Riyadh has substantially
boosted spending on job training and education, most recently with the opening of
the King Abdallah University of Science and Technology, Saudi Arabia's first co-
educational university. As part of its effort to attract foreign investment, Saudi
Arabia acceded to the WTO (World Trade Organization) in December 2005 after
many years of negotiations. The government has begun establishing six "economic
cities" in different regions of the country to promote foreign investment and plans to
spend $373 billion between 2010 and 2014 on social development and infrastructure
projects to advance Saudi Arabia's economic development.

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Saudi Arabia boasts an impressive 10% of GDP (2005 est.) spending on military
expenditures. Making it number 2 in comparison to the world.
ASIA PACIFIC
Australia
The Australian economy grew for 17 consecutive years before the global financial
crisis. Subsequently, the Rudd government introduced a fiscal stimulus package
worth over US$50 billion to offset the effect of the slowing world economy, while
the Reserve Bank of Australia cut interest rates to historic lows. These policies and
continued demand for commodities, especially from China helped the Australian
economy rebound after just one quarter of negative growth. The economy grew by
1.2% during 2009 and by 3.3% in 2010, the best performance in the OECD.
Unemployment, originally expected to reach 8-10%, peaked at 5.7% in late 2009 and
fell to 5.1% in 2010. As a result of an improved economy, the budget deficit is
expected to peak below 4.2% of GDP and the government could return to budget
surpluses as early as 2015. Australia was one of the first advanced economies to
raise interest rates, with seven rate hikes between October 2009 and November 2010.
The Gillard government is focused on raising Australia's economic productivity to
ensure the sustainability of growth, and continues to manage the symbiotic, but
sometimes tense, economic relationship with China. Australia is engaged in the
Trans-Pacific Partnership talks and ongoing free trade agreement negotiations with
China, Japan, and Korea.

55
In addition, 3% of Australia’s GDP (2009) is spent on military expenditures,
India
In 2010, the Indian economy rebounded robustly from the global financial crisis in
large part because of strong domestic demand and growth exceeded 8% year-on-year
in real terms. Merchandise exports, which account for about 15% of GDP, returned
to pre-financial crisis levels. An industrial expansion and high food prices, resulting
from the combined effects of the weak 2009 monsoon and inefficiencies in the
government's food distribution system, fueled inflation which peaked at about 11%
in the first half of 2010, but has gradually decreased to single digits following a
series of central bank interest rate hikes.
Consequently, in 2010, New Delhi reduced subsidies for fuel and fertilizers, sold a
small percentage of its shares in some state-owned enterprises and auctioned off
rights to radio bandwidth for 3G telecommunications in part to lower the
government's deficit. The Indian Government seeks to hold its budget deficit to 5.5%
of GDP in FY 2010-11, down from 6.8% in the previous fiscal year. India's long
term challenges include widespread poverty, inadequate physical and social
infrastructure, limited non-agricultural employment opportunities, insufficient
access to quality basic and higher education, and accommodating rural-to-urban
migration.

56
In addition, 2.5% of India’s GDP (2006) is spent on military expenditures, making it
number 62 in comparison to the world (https://www.cia.gov/library/publications/the-
world-factbook).
4. Technological
a. Research & Development Budget
No data is currently available for 2010; however, form the data below in 2009, Northrop
Grumman spent $610 million on research and development.
(http://www.battelle.org/aboutus/rd/2011_inter.pdf)
b. Technology importance and technology areas of focus
The U.S.'s security depends upon sophisticated space systems, microelectronics and aircraft
avionics technologies developed, designed and integrated by Northrop Grumman Aerospace
Systems. Advanced technologies are Northrop Grumman’s specialty. Since the company's
inception over 50 years ago, when President Eisenhower asked Northrop Grumman to manage
what was then the nation's highest priority program, the ICBM or Inter-continental Ballistic

57
Missile; Northrop Grumman has used its unique technological capabilities to solve the nation's
toughest problems. Presently, it is directing its technologies toward four primary applications:
 National security, such as ISR (intelligence, surveillance and reconnaissance)
 Laser weapons for missile defense, from understanding the basic phenomenology
to integrating advanced sensor systems to detect, track and defeat enemy targets
 Civil space, such as environmental monitoring and space science
 Software-defined radios
Fulfilling each of these critical mission areas and preparing to address our nation's future needs
depends on talent and technology that span every possible scientific and engineering discipline
including:
 Lasers
 Electronics
 Spacecraft platforms and enabling technologies
 Systems Engineering
 Sensors and instruments
 Antennas
(http://www.as.northropgrumman.com/by_capability/technology/index.html)
c. Patents
Aerospace System's patents and trade secrets contribute strongly to the assets and capabilities of
Northrop Grumman, which now has the second largest aerospace company patent portfolio in the
world. Northrop Grumman’s commitment to basic technology and product inventions has
resulted in an extensive patent portfolio and international recognition of its leading edge
technology. The United States Patent Office issues approximately 100 patents per year in the

58
U.S. to Aerospace Systems; a similar number of foreign patents are issued annually to protect its
intellectual property internationally. To date, three thousand patents have been issued worldwide
for inventions in the following major technical categories:
 Lasers/Photonics
 Microelectronics
 Spacecraft Structures
 Space Sensors
 Satellite Communications
 Avionics
 Microwave Electronics and Antennas
Aerospace System's shares its technology with the world by licensing it to commercial entities
and through donations to charitable organizations. For example, Northrop Grumman licensed its
hetero-junction bipolar transistor (HBT) technology, which enabled more efficient consumer cell
phone transmitters and longer battery life. Northrop Grumman’s donation of intellectual property
and equipment to University of Central Florida’s College of Optics could enable the next
generation semiconductor manufacturing process called extreme ultraviolet (EUV) lithography.
(http://www.as.northropgrumman.com/products/patents/index.html)
5. Legal / Political
a. Legal
As customary, any legal engagements that Northrop Grumman is currently evolved in are not
likely to be public information. However, according to their 2010 Annual report, it states that
the company is subject to a range of claims, lawsuits, environmental and income tax matters, and
administrative proceedings that arise in the ordinary course of business. Estimating liabilities and

59
costs associated with these matters requires judgment and assessment based upon professional
knowledge and experience of management and the company’s internal and external legal
counsel. In accordance with its practices relating to accounting for contingencies, Northrop
Grumman records amounts as charges to earnings after taking into consideration the facts and
circumstances of each matter known to us, including any settlement offers, and determine that it
is probable that a liability has been incurred and the amount of the loss can be reasonably
estimated. The ultimate resolution of any such exposure to Northrop Grumman may vary from
earlier estimates as further facts and circumstances become known. When a range of costs is
possible and no amount within that range is a better estimate than another, it records the
minimum amount of the range.
It is Northrop Grumman’s assessment that based on the information available that any such
proceedings will individually, or in the aggregate, have a no material adverse effect on its
financial position, results of operations, or cash flows
b. Protect intellectual property
Northrop Grumman has developed an intellectual property booklet that outlines the regulations
regarding such topic and has instituted an employee intellectual property agreement form to
ensure protection (see Appendix B, Intellectual Property Booklet, an Appendix C, Employee
Intellectual Property Agreement).
b. Government regulations
Northrop Grumman must obtain licenses and authorizations from various US government
agencies to sell its products outside the US. For instance, the US Department of State must notify
Congress at least 15-60 days, depending on the size and location of the sale, prior to authorizing

60
certain sales of defense equipment and services to foreign governments (Northrop Grumman
SWOT analysis, Datamonitor, Aug 2010).
6. Social
a. Environmental
Northrop Grumman’s Environmental, Health & Safety (EHS) organization is heading the
company’s efforts to provide a safe and healthy workplace for its employees, and ensure that its
business activities are conducted in an environmentally responsible manner, thus preserving
natural resources and minimizing adverse impacts on the environment.
The greeNG Program “greeNG” is the company’s comprehensive company-wide program that is
driving improved, proactive and strategic actions that mitigate its environmental impact while
enhancing its sustainability practices. The program supports Northrop Grumman’s five-year goal
to reduce greenhouse gas (GHG) emissions and its commitment to sustainability objectives in its
water usage and minimization of solid-waste generation.
The greeNG program includes key strategic initiatives:
1. Improved measurement and transparency of key sustainability metrics.
2. A five-year plan to reduce it environmental impact.
3. Engagement with its employees.
4. Incorporation of the environment in key business processes and design decisions.
5. Engagement with key stakeholders for mutually beneficial environmental improvement
(NGOs, local communities, universities, government, etc.).

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Since its inception in 2008, the greeNG program has helped Northrop Grumman make
considerable strides. It improved its Carbon Disclosure Project score by 62 percent in 2010.
Northrop Grumman went from No. 335 to No. 173 in Newsweek magazine’s 2010
comprehensive environmental ranking of the 500 largest businesses. This is the biggest one-year
improvement among its peers. This improved score represents major progress in both
transparency and its policy commitments. Computerworld magazine ranked Northrop Grumman
as one of the Top 12 Green IT organizations in 2010
(http://www.northropgrumman.com/pdf/2010-noc-csr-report.pdf).
b. Company’s charitable initiatives
Northrop Grumman strives to be a community partner of choice. Through dynamic partnerships,
Northrop Grumman’s philanthropy programs help to address the challenges facing the nation and
local communities and strive to meet the diverse needs of the people of those communities. To
make the most effective use of its resources and expertise, Northrop Grumman has identified
priority issues and key initiatives for investment in local communities through the Northrop
Grumman Corporate Contributions program.
Its main focus is science, technology, engineering and mathematics (STEM) education and its
partners with local organizations that provide unique programming to inspire the next generation
of scientists, engineers and technicians.
Aid to Higher Education grants enhance STEM programs and contribute to activities that support
its relationships with college and university partners. These grants provide funding for
scholarships, student organizations and STEM programs and projects.

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The Northrop Grumman Foundation is committed to supporting unique, diverse and sustainable
national-level STEM programming. Additionally, it supports its employee’s contributions to
qualified educational institutions through the Northrop Grumman Foundation Matching Gifts for
Education program.
It also provides support to programs that support troops and veterans, health and human services
and the environment. During times of national disaster, Northrop Grumman often provides
funding to organizations that are responding to local needs.
Northrop Grumman provides an opportunity for its employees to support their communities and
the issues they care about through the Employees Charity Organization of Northrop Grumman
(ECHO) (http://www.northropgrumman.com/corporate-responsibility/corporate-
citizenship/philanthropy.html).

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External Analysis of Northrop Grumman Summary
SWOT Analysis
The external analysis or macro-environment consists of the broad trends and patterns in the
nation and world beyond a company. These patterns and trends that highly influence the
customer and the company are based on five aspects of the environment: economic,
political/legal, technological, socio-cultural, and demographic. The following is a SWOT
Analysis of the external influences on Northrop Grumman (focusing on Opportunities and
Threats) from the data collected in regards to the external analysis of Northrop Grumman:
Opportunities Threats
Civil infrastructure solution development Weak European Economy
Postal solutions for the U.S. Postal
Service
Opportunities
1. Civil infrastructure solution development
With the uncertainty of the global market and the drawdown of U.S. and coalition forces in Iraq
and Afghanistan is cause for Northrop Grumman to seek new business opportunities. There is
still a need for infrastructure development in many of the countries around the world, especially
India, a newly developed economic nation or BRIC (Brazil, Russia, India and China) Nation and
Northrop Grumman partner.
A small, but significant portion of its business is devoted to state and local government
information technology (IT) infrastructure solutions. Without information technology civil
infrastructure cannot function efficiently and Northrop Grumman is a leading provider of IT
infrastructure managed services and outsourcing. Northrop Grumman provides public and
private sector organizations with an integrated suite of managed IT services and outsourcing that
supports the total life-cycle of its customers IT infrastructure, from planning and design, to

64
implementation, operations, security, and maintenance. Northrop Grumman can design, deploy,
and operate their clients entire IT infrastructure, including networks, servers, service desks,
desktop systems, mobile devices, peripherals, business systems, application development, and
more. Northrop Grumman can support IT solutions for a nation’s civil sectors such as: Criminal
Justice, Human Services, Public Health, Public Safety, Secure Wireless Communications, and
Transportation.
An example of its proven experience helping state and local governments and agencies
modernize and transform their IT operations, include the city of Indianapolis/Marion County,
San Diego County, and the Commonwealth of Virginia.
(http://www.is.northropgrumman.com/by_market/statelocal/index.html)
2. Postal solutions for the U.S. Postal Service
According to the May 2011article in Bloomberg Businessweek entitled The U.S. Postal Service
Nears Collapse, the U.S. Postal Service is failing and on the verge of collapse. The U.S. Postal
Service has 571,566 full-time workers, making it the country's second-largest civilian employer
after Wal-Mart Stores. It has 31,871 post offices, more than the combined domestic retail outlets
of Wal-Mart, Starbucks and McDonald's. It operates six days a week delivering an average of
563 million pieces of mail, which is 40 percent of the entire world's volume at a price of a 44¢
stamp. Postal service executives proudly note that if it were a private company, it would be No.
29 on the Fortune 500 list. Last year its revenues were $67 billion, however its expenses were
even greater.
The problem with U.S. Postal Service is that it relies on first-class mail to fund most of its
operations, but first-class mail volume is steadily declining. In 2005, it fell below junk mail for

65
the first time. This was a significant milestone. The U.S. Postal Service needs three pieces of
junk mail to replace the profit of a vanished stamp-bearing letter.
Northrop Grumman owns and operates SOLYSTIC, postal solutions company based in France
that has been designing and installing postal sorting solutions throughout the world for 60 years.
SOLYSTIC is major player in the postal sorting market and has built its reputation as an industry
leader in the field of mail sorting machines and character recognition technology. It has supplied
post handling systems in 25-countries on all five continents.
An opportunity would be for Northrop Grumman to develop a postal solution in the form of
electronic mail. This idea was actually proposed by a fellow capstone classmate in his SWOT
analysis of the U.S. Postal Services. He stated that U.S. Postal Service could reduce the cost it
incurs on delivering junk mail by delivering it threw the low cost medium of email. Northrop
Grumman is capable of developing this solution with its information systems capabilities and
SOLYSTIC.
http://www.businessweek.com/magazine/content/11_23/b4231060885070.htm
Threats
1. Weak European Economy
The economy’s that comprise the European Union (EU), from Britain to Germany, have been hit
particularly hard due to the 2008 Global Financial Crisis. Each country has suffered similar
economic problems such as declining home prices, high consumer debt and raising
public deficits and debt levels. Several EU nations have been forced to implement
austerity measures that included reducing government spending in order to lower
their budget deficit. It is likely that each nation’s minister of finance or treasury
department equivalent will make cuts in its budget that will include government

66
welfare and retirement, health care, and military spending just to name a few. To
look at the impact of government austerity measures would be to take military
spending as an example. The percentages of military expenditures for each of the
countries that Northrop Grumman conducts business with ranged for 1%to3% based
on GDP that was stated in the data above. According to Trading Economics.com, as
of Dec 2010, the United Kingdom’s GDP was 2,246.08 Trillion Pounds
(http://www.tradingeconomics.com/united-kingdom/gdp).
If the UK currently spends approximately 2.6% of its GDP on military expenditures
which equates to £58,398,080,000 and decides to reduce military expenditures to
2.5% the .1% reduction would equates to a £2.2 billion loss in potential revenue for
Northrop Grumman. According ExchangeratesUK.com, the current Dollar to Pound
exchange rate is1 USD = 0.6352 GBP. Therefore, £2,200,000,000 British Pound =
$3,463,476,070.52 U.S. Dollar (http://www.exchangerates.uk.com).
Summary
Demographically, Northrop Grumman’s target market is strictly government and commercial
agencies. Internationally, Northrop Grumman is very will spread out and strategically positioned.
This allows it to service its customers, while reaching new emerging markets. Economically,
Northrop Grumman must understand the economic on-goings in each of the nations it operates.
Economic conditions of its partner nations are the external forces that can and will effect
Northrop Grumman’s business operations. Technology wise, Northrop Grumman develops many
of the Aerospace & Defense Technology Industries’ most sophisticated and innovative products.
It continues to maintain that level of quality through its re-investment in research and
development and patents. Legally, Northrop Grumman does not disclose its legal proceedings.

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However, based on the information it does follow the rule of law.Socially, Northrop Grumman’s
environment initiatives have benefited both the company and the environment. The initiatives
have reduced business operation’s impacts on the environment, while reducing company waste.
In addition, its charitable initiatives have improved the quality of life in the community from
education to disaster relief.

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Competitive Analysis of Northrop Grumman
1. Porter’s Five Forces Analysis
Porter's Five Forces is a framework for industry analysis and business strategy development
formed by Michael E. Porter of Harvard Business School in 1979. It draws upon Industrial
Organization (IO) economics to derive five forces that determine the competitive intensity and
attractiveness of a market. They consist of the following forces that affect a company’s ability to
serve its customers and make a profit:
Source: http://en.wikipedia.org/wiki/Porter_five_forces_analysis
a. Threat of new entrants
The U.S. Aerospace & Defense Technology Industry is a closed-nit market with each company
within the industry possessing decades of established experience. Thus, making it difficult for a
newly established defense company enter the market. However, the U.S. Defense market is
susceptible to new entrants from established foreign defense contractors, for example, France’s
Airbus. Airbus is one of the world’s leading manufacturers of commercial jetliners and military
airlifters, having evolved during the past 40 years on the vision, innovation and passion of its
employees.
According to a November 6, 2009 article in Reuters, Airbus carried out its maiden flight of a
new freight plane that could mark its entry into plane assembly in the United States, if it wins an

69
epic contest with Boeing over refueling planes. The Airbus A330-200F is the freight version of
the European plane maker’s mid-sized passenger jet and aims to capture a larger share of a civil
air cargo market dominated by Boeing. Airbus said it will build the A330 civil freighters next
alongside an assembly line for military tankers that would be located in Alabama, if it wins the
Pentagon contract. (http://in.reuters.com/article/2009/11/06/idINIndia-43690620091106)
b. Threat of substitute products
It is unlikely that substitute products will ever find its way into the U.S. Aerospace and Defense
Industry. Even if new entrants like Airbus would not manufacture and sell cheap and low-
quality substitute products to the U.S. Government or other government and commercial
agencies. The clients of Defense companies are specific in the products they are requesting.
Their clients expect those products to perform in the manner to which those products where
designed to do.
c. Bargaining power of customers
As stated in the weakness portion of the SWOT Analysis of the Internal Analysis of Northrop
Grumman, Northrop Grumman’s dependence on the U.S. Government makes up 92% of its
business. This creates a tremendous bargaining power for the U.S. Government since the
government can cancel contracts at anytime creating loss revenue that would make it difficult for
Northrop Grumman to recoup. Also, the U.S. Government is free to solicit government contracts
to any of Northrop Grumman’s competitors. Thus, this bargaining power forces all the defense
companies competing for government contracts to submit a bid proposal for consideration.
Another burden is that Northrop Grumman must obtain licenses and authorization from the U.S.
government to sell its products outside the U.S... Economists term this industry relationship as a

70
monopsony. Monopsony is a market in which there are many suppliers and one buyer. In a
monopsony, the buyer sets the price.
d. Bargaining power of suppliers
One can look at the bargaining power of suppliers in two ways: defense companies as the
supplier and the U.S. Government as the buyer, and the supply companies that supply raw
material and technical parts to the defense companies as the buyers. For the defense companies
to U.S. Government supplier relationship, it is clear as stated above that the supplier’s bargaining
power is low.
However, the bargaining power of suppliers to defense companies is quite different. Northrop
Grumman utilized many suppliers from steel to chip manufacturing firms (see Appendix D,
Northrop Grumman Suppliers). Therefore, Northrop Grumman has options when acquiring
materials to build its products.
On the other hand, supply chains are susceptible to external forces. Northrop Grumman’s
suppliers may delay or discontinue delivery of materials due to legal issues, employee strikes, or
shortages of raw materials due to natural disasters are but a few external factors that place
Northrop Grumman at the mercy of its suppliers. A prime example of external forces and supply
chain is to look at Apple’s release of the iPad 2 on the very same day a 9.0 earthquake rocked
Japan, one of the centers of NAND (type of flash memory) flash production. According to
analyst Jim Handy at Objective Analysis Semiconductor Market Research, he stated in an article
published on .zdnet.com by David Morgenstern that “a number of Fujitsu and Toshiba
manufacturing sites are located near the earthquake epicenter. In addition, Tokyo, Kobe and
other centers are located on the east coast of Japan.” Jim Handy further stated that “Over 40
percent of the world’s NAND flash and roughly 15 percent of the world’s DRAM are

71
manufactured in Japan. Japan is a significant source of chips to support consumer electronics
devices. A two-week shutdown would remove from production a sizable share of each of these.
It doesn’t take a large production decrease to cause prices to increase dramatically. Objective
Analysis anticipates phenomenal price swings and large near-term shortages as a result of this
earthquake. Demand will be impacted as well since many electronics manufacturers are in Japan,
and their consumption of semiconductors will be halted until earthquake damage is repaired.”
Apple NAND suppliers are not all in Japan according to iSuppli. Apple is supplied by Toshiba
and Samsung as well as other vendors.
The article further states that Apple primarily purchases flash memory from “top flight” vendors,
such as Samsung and Toshiba. Most of Apple’s DRAM comes from Korean vendors and would
be unaffected. The article concludes that everyone else, big and small will feel the pinch more
than Apple; way more (http://www.zdnet.com, How will Japan earthquake affect Apple's iPad
supply chain?).
In conclusion, the bargaining power of Northrop Grumman’s suppliers is both strong and weak.
It is weak in the fact that what conspires in its supplier’s environment will effect Northrop
Grumman. It is strong in the fact that Northrop Grumman can select from multiple suppliers,
thus mitigating any risk due to external factors. Furthermore, Northrop Grumman is in a position
to set conditions and prices for the production material being ordered.

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e. Competitors rivalry within an industry
The Northrop Grumman has determined that these companies provide a reasonable and relevant
comparison of market data. The target industry peer group consists of the following 11
companies:
United Technologies Corp. The Boeing Co. The Dow Chemical Co. Raytheon Co.
Lockheed Martin Corp. Johnson & Johnson General Electric Co. Alcoa, Inc.
E. I. du Pont de Nemours & Co. Honeywell International General Dynamics Corp.
Of the 11 companies Northrop Grumman recognizes six core competitors with which it competes
for executive talent: Boeing, General Dynamics, Honeywell, Lockheed Martin, Raytheon and
United Technologies
(https://appserv.northropgrumman.com/RFIFormsWeb/wrapers/CORP%20Forms/shareholder25.
jsp).
2. Internal analysis of Northrop Grumman’s competitors
The following is an abbreviated internal analysis of the four major core competitors selected
from its 11 target industry peer group in terms of the top four in sales revenue and how they
compare to Northrop Grumman: The Boeing Co., Lockheed Martin, and General Dynamics. The
purpose of this analysis is to expound on the competitors rivalry within an industry of Porter’s
Five Forces framework.

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The Boeing Co.
a. Overview
The Boeing Co. headquartered in Chicago, an aerospace firm that employs more than 165,000
people across the United States and in 70 countries. The company has four principal segments:
Commercial Airplanes, which develops, produces and markets commercial jet aircraft and
provides related support services to the commercial airline industry; Boeing Military Aircraft,
Network & Space Systems, and Global Services & Support, which comprise Boeing Defense,
Space & Security business segment, involves the research, development, production,
modification and support of products and related systems such as global strike systems, global
mobility systems, airborne surveillance and reconnaissance aircraft, and network and tactical
systems; and Boeing Capital Corporation, which provides financing services. The Boeing
Company Shared Services Group, or SSG, provides the company's business segments and
Corporate Offices with innovative and effective common services that support the competitive
design and manufacture of aerospace and defense products.
(http://www.mergentonline.com.uiwtx.idm.oclc.org/companydetail.php?compnumber=1048&pa
getype=synopsis
b. Capabilities
Boeing Commercial Airplanes business segement is comprises of five airplane programs: VIP-
derivative airplanes, extensive fabrication and assembly facilities, and a global customer
support organization. It is committed to being the leader in commercial aviation by offering
airplanes and services that deliver superior design, efficiency and value to customers around the
world. There are more than 12,100 Boeing commercial jetliners in service, flying passengers
and freight more efficiently than competing models in the market. Boeing Commercial

74
Airplanes offers a family of technologically advanced airplanes, including one that can seat
more than 500 and another that boasts the longest range in the world, at more than 9,300
nautical miles (14,966 km). Meanwhile, Boeing Commercial Airplanes and its global network
of suppliers are hard at work building the airplane of tomorrow, a next-generation jet that will
set the standard for fuel-efficiency and passenger comfort. Boeing Commercial Airplanes
employs about 60,000 people under the leadership of President and CEO James (Jim) F.
Albaugh. The business segments's revenue in 2009 was $34 billion and has operations in more
than a dozen cities and countries (http://www.boeing.com/commercial/overview/index.html).
Boeing Defense, Space & Security includes tactical and airlift aircraft, missiles, unmanned
airborne systems, and surveillance and engagement programs, which combines manned and
unmanned airborne capabilities, intelligence and security systems, communications architectures
and extensive large-scale integration expertise across several diverse business areas. A $32
billion business with 64,000 employees worldwide, Defense, Space & Security's strategy is to
understand the enduring needs of customers and provide capability-based solutions to meet their
rapidly evolving requirements. The strategy includes understanding the art of using current and
emerging technologies to improve the capabilities of existing products and deliver new solutions.
Boeing Defense, Space & Security's success will continue to be driven by its ability to provide
customers with the right solutions at the right time and the right cost. To effectively address
future evolving requirements for capability-driven solutions, the business is organized around
capabilities to further improve execution, reduce organizational complexity and improve
competitiveness, helping to better serve customers and compete for and captures new business.
(http://www.boeing.com/bds/overview.html)

75
Boeing Capital Corporation is a global provider of innovative financing solutions. Its primary
mission is to support the other Boeing business segments by arranging, structuring and/or
providing financing to assist in the sale and delivery of Boeing products and services. A wholly
owned subsidiary of The Boeing Company, Boeing Capital provides comprehensive customer
financing support, primarily utilizing third-party financing, while aggressively managing risk and
delivering strong financial performance (http://www.boeing.com/bcc/).
The Boeing Company Shared Services Group, or SSG, provides the company's business units
and Corporate Offices with innovative and effective common services that support the
competitive design and manufacture of aerospace and defense products. The group provides a
broad range of services worldwide, including facilities services, employee benefits and services,
recruitment, wellness programs, security, fire protection, site operations, disaster preparedness,
construction, reclamation, conservation programs, virtual workplace, creative services,
transportation, business continuity and the purchase of all non-production goods and services. It
also offers comprehensive travel services to Boeing employees. In addition, Shared Services
Group manages the sale and acquisition of all leased and owned property. By integrating
services, Shared Services Group delivers greater value, creates "lean" processes and operations,
leverages buying power and simplifies access to services for all of Boeing
(http://www.boeing.com/ssg/).
c. Types of skills
What skills Boeing usually looks for in its prospective employees are:
Engineering Engineering technology Computer science Mathematics Business
In addition, Boeing looks for employees who posses strong sense of teamwork and a good
understanding of one or more of the following disciplines:
Engineering science fundamentals Mathematics, including statistics

76
Physical and life sciences Information technology (beyond basic computer literacy)
Design and manufacturing processes Economics Business
Prospective employees also should be able to think critically and creatively, and work
independently and cooperatively. Other qualities Boeing looks for include the ability to adapt to
rapid or major change, a desire for lifelong learning, the highest ethical standards and excellent
communication skills.
d. Market share
As of December 2010, Boeing currently possesses 36.6% or $64.97 billion of the Aerospace and
Defense Security market share. Please refer to the market share pie chart in the market section of
the internal analysis of Northrop Grumman.
e. Financial reports (Sales, debt and stock prices)
i. Sales
Years ended December 31, 2010 2009 2008
Commercial Airplanes $31,834 $34,051 $28,263
Boeing Defense, Space & Security 31,943 33,661 32,047
Boeing Capital Corporation 639 660 703
Other segment 138 165 567
Unallocated items and eliminations (248) (256) (671)
Total $64,306 $68,281 $60,909

77
ii. Debt Obligations
Less
than 1 1−3 3−5 After 5
(In millions) Total years years year years
Long−term debt $ 12,253 $ 876 $ 3,510 $ 2,103 $ 5,764
Interest on debt 6,990 622 1,025 773 4,570
Pension and other postretirement
cash requirements 20,638 632 1,622 6,643 11,741
Capital lease obligations 190 63 97 30 0
Operating lease obligations 1,159 217 280 164 498
Purchase obligations not recorded
on the Consolidated Statements of
Financial Position 104,775 34,572 40,197 20,442 9,564
Purchase obligations recorded
on the Consolidated Statements of
Financial Position 12,676 12,345 331 0 0
Total contractual obligations $158,681 $49,327 $47,062 $30,155 $32,137
(The Boeing Company’s Annual Report. Form 10-K, 010http://www.mergentonline.com).

78
iii. Stock prices
Boeing Company (The) Common Stock (NYSE: BA)
After hours: 57.65 1.49 (2.52%) 4:42PM EDT 4 October, 2010. The stock has been trading
between $ 56.01 and $80.6527during a 52 week range. (http://finance.yahoo.com/q?s=lmt)

79
Lockheed Martin
a. Overview
Lockheed Martin headquartered in Bethesda, Maryland in the Washington D.C. Metropolitan
Area is a security company that is principally engaged in the research, design, development,
manufacture, combination, and sustainment of systems and products. Lockheed Martin also
provides a range of management, engineering, technical, scientific, logistic, and information
services. It serves both domestic and international customers with products and services that
have defense, civil, and commercial applications, with its principal customers being agencies of
the U.S. Government. The company operates in four principal business segments: Aeronautics;
Electronic Systems; Information Systems & Global Solutions; and Space Systems.
http://www.mergentonline.com.uiwtx.idm.oclc.org/companydetail.php?compnumber=5271&pag
etype=synopsis
a. Capabilities
Lockheed Martin specializes in providing solutions to the most complex and challenging
technological issues imaginable. To address these issues, it has built a company with
unparalleled technological depth. It possesses the tools and technologies to solve virtually any
problem and to provide the systems and services to its customers needs in order to carry out their
vital missions.
The Lockheed Martin team has the largest concentration of software expertise you'll find
anywhere, and its clients tell them that they choose Lockheed Martin because of its experience
and expertise. Lockheed Martin technology with engineering discipline to meet their tough
business challenges, leads to its total commitment to its success.
This is an abbreviated list of the areas in which Lockheed Martin provides expertise:

80
Air power Missiles & Missile Defense Distribution Systems Radar Systems
Homeland Security Information Superiority Space Systems Information Technology
Technology Research Training & Simulation Surveillance & Fire Control
Air Traffic & Transportation Management
Here's a snapshot of how Lockheed Martin implements its capabilities to work for its customers:
 Its ground systems handle more bits of data per day than all of the U.S. cable companies
combined.
 It provides the Pentagon's Network Infrastructure Services Agency with the computer
network that connects 25,000 of our top policy and military leaders
 It developed the Theater Battle Management Core Systems, which allows war-fighters to
see a complete picture of air operations in battle. This system was deployed in
Afghanistan and Iraq.
 Its air traffic management systems manage and control more than 60% of the world's air
traffic.
 It developed the recognition technologies and database search algorithms that enable the
FBI to match a fingerprint against 420 million prints in just minutes, including the one
that solved the infamous D.C. sniper case.
 Its postal systems provide automated scanning, sorting and now biochemical detection
systems for the U.S. Postal Service.
 Its simulators train truck drivers to drive trucks, pilots to fly aircraft, and astronauts to
work in space (http://www.lockheedmartin.com/capabilities/index.html)
b. Types of skills
Like its competitors, Lockheed Martin is a science and technology based industry, thus is
seeking prospective employees with skills such as:

81
Engineering Engineering technology Computer science
Information Systems Mathematics Aircraft & Ship Manufacturing
In addition, Lockheed Martin seeks prospective employees with knowledge in business skills
such as:
c. Market Share
As of December 2010, Lockheed Martin currently possesses 26.1% or $46.37 billion of the
Aerospace and Defense Security market share. Please refer to the market share pie chart in the
market section of the internal analysis of Northrop Grumman.
d. Financial reports (Sales, debt and stock prices)
i. Sales
(In millions) 2010 2009 2008
Net Sales
Aeronautics $13,235 $12,201 $11,473
Electronic Systems 14,363 13,532 12,803
Information Systems & Global Solutions 9,959 9,608 9,069
Space Systems 8,246 8,654 8,027
Total $45,803 $43,995 $41,372
Operating Profit
Aeronautics $ 1,502 $1,577 $ 1,433
Information Systems & Global Solutions 890 895 919
Space Systems 972 972 953

82
Total business segments $ 5,076 5,104 4,888
VESP and other charges (220)
Other unallocated Corporate income (expense), net (759) (689) 161
Total $ 4,097 4,415 5,049
Lockheed Martin’s long−term debt is primarily in the form of publicly issued notes and
debentures, as follows:
(In millions) Interest Rate 2010 2009
Notes due 3/14/2013 4.12% $ 500 $500
Debentures due 4/15/2013 7.38% 150 150
Debentures due 5/1/2016 7.65% 451 600
Notes due 11/15/2019 4.25% 900 900
Debentures due 9/15/2023 7.00% 200 200
Notes due 6/15/2024 8.38% 167 167
Debentures due 6/15/2025 7.63% 150 150
Debentures due 5/1/2026 7.75% 275 423
Debentures due 12/1/2029 8.50% 206 317
Debentures due 5/1/2036 7.20% 97 300
Notes due 9/1/2036 6.15% 1,079 1,079
Notes due 11/15/2039 5.50% 600 600
Notes due 6/1/2040 5.72% 728
Unamortized discount N/A (505) (351)
Other Various 21 17

83
$5,019 $5,05
(Lockheed Martin’s Annual Report. Form 10-K, 010 http://www.mergentonline.com).
iii. Stocks
Lockheed Martin Corporation Com (NYSE: LMT )
After Hours: 72.70 0.00 (0.00%) 6:11PM EDT4 October, 2010. The stock has been trading
between $ 66.36 and $82.4327during a 52 week range. (http://finance.yahoo.com/q?s=lmt)

84
General Dynamics
a. Overview
General Dynamics headquartered in West Falls Church, Virginia, operates through four business
groups: Aerospace, which produces Gulfstream aircraft, performs aircraft outfitting and
refurbishments for other manufacturers, and provides aircraft services; Combat Systems, which
designs and manufactures combat vehicles, weapons systems and munitions; Marine Systems,
which designs and constructs surface ships and submarines; and Information Systems &
Technology, which provides communications and information technology products and
services. The company's primary customers are the U.S. military, other U.S. government
organizations, the armed forces of other nations, and corporate and individual buyers of business
aircraft
(http://www.mergentonline.com.uiwtx.idm.oclc.org/companydetail.php?compnumber=3596&pa
getype=synopsis).
b. Capabilities
Since 1997, General Dynamics has acquired more than 50 companies with revenue that has
grown from $4 billion to approximately $32 billion and a workforce that has increased from
29,000 to approximately 90,000 employees today (http://generaldynamics.com/about/corporate-
overview/index.cfm).
General Dynamics is a market leader in the Aerospace and Defense Industry, providing products
and services designed to meet the needs of the most demanding customers. General Dynamics
operates in four business sectors, producing the following products:

85
Aerospace
Jet Aviation Gulfstream
Combat Systems
Armament and Technical Products European Land Systems Land Systems
Ordnance and Tactical Systems
Information Systems and Technology
Advanced Information Systems Information Technology United Kingdom Limited
C4 Systems
Marine Systems
Bath Iron Works Electric Boat NASSCO (National Steel and Shipbuilding Company)
http://generaldynamics.com/downloads/pdf/about/General%20Dynamics%20Capabilities%20Br
ochure%202011.pdf
c. Type of skills
Like its competitors, General Dynamics is a science and technology based industry, thus it seeks
prospective employees with skills such as:
Engineering Engineering technology Computer science Mathematics Information Systems
Aircraft & Ship Manufacturing
In addition, General Dynamics seeks prospective employees with knowledge in business skills
such as:
d. Market Share
As of December 2010, General Dynamics currently possesses 32.29% or $32.29 billion of the
Aerospace and Defense Security market share. Please refer to the market share pie chart in the
market section of the internal analysis of Northrop Grumman.

86
e. Financial reports (Sales, debt and stock prices)
i. Sales
Year Ended December 31 2008 2009 2010 10
Revenues Revenues Revenues
Aerospace $ 5,512 $ 5,171 $ 5,299
Combat Systems 8,194 9,645 8,878
Marine Systems 5,556 6,363 6,677
Information Systems and Technology 10,038 10,802 11,612
Corporate
Total $ 29,300 $ 31,981 $32,466
The following tables present information about our contractual obligations and commercial
commitments on December 31, 2010:
Payments Due by Period
Total Less Than 1 1−3 4−5 More Than 5
Year Years Years Years
Long−term debt $ 3,620 $ 905 $ 1,240 $ 1,466 $ 9
Capital lease obligations 2 1 1 – –
Operating leases 914 187 259 151 317
Purchase obligations 22,460 11,218 6,468 2,762 2,012
Other long−term 14,516 2,247 2,172 1,759 8,338
Liabilities
$ 41,512 $ 14,558 $ 10,140 $ 6,138 $ 10,676

87
(General Dynamics’s Annual Report. Form 10-K, 010http://www.mergentonline.com).
iii. Stocks
General Dynamics Corporation Co (NYSE: GD)
After Hours: 57.71 0.00 (0.00%) 4:26PM EDT 5 October, 2011
The stock has been trading between $53.95 and $78.27during a 52 week range.
(http://finance.yahoo.com/q?s=lmt)

88
Competitive Analysis of Northrop Grumman Summary
SWOT Analysis
The competitors’ analysis is a face-to-face comparison of Northrop Grumman as an Aerospace &
Defense Technology Company and how it fairs with its competitors. The information collected
and analyzed from the Competitors Analysis, the following SWOT analysis provides Northrop
Grumman with what its strengths and weaknesses are in relation to its competitors:
Strengths over its competitors Weaknesses over its competitors
Broader capabilities than most of its
competitors
Does not possess an internal financial service
sector
Financially stable Smaller market share
Centrally located to its primary customer
Strengths
1. Broader capabilities than most of its competitors
Like all its competitors, Northrop Grumman also possesses an aerospace business sector.
Currently the aerospace market is dominated by Boeing. However, Northrop Grumman can
compete on par with Boeing in aircraft manufacturing. For example, Northrop Grumman
developed the highly successful B-2 Stealth Bomber. Boeing does possess a defense, space &
security business sector and performs well; however, they are an aircraft oriented manufacturer
which their sales revenue alone can attest to that fact. What differentiates Northrop Grumman is
that it has broader capabilities in producing products than just aircrafts. Northrop Grumman can
produce a wide assortment of products from its other two technology sectors: Electronic systems
and Information systems. Along with its Technical services sector to provide the support need
for those products. When Northrop Grumman acquired Litton Industries Inc., Newport News
Inc., and TRW Inc, then restructured its business sectors into the four it maintains today
(Aerospace systems, Electronic systems, Information systems and Technical services) gave it

89
broader capabilities for its business performance. According to Northrop Grumman Space
Technology, Business Process Management, the acquisitions and restructuring made Northrop
Grumman No. 2 U.S. defense contractor behind Lockheed Martin Corporation. The following is
a comparison of sales of Northrop Grumman and Lockheed Martin by business sectors:
Northrop Grumman
Net Sales (In millions) 2010 2009 2008
Aeronautics $10,910 $10,419 $9,825
Electronic Systems $7,613 7,671 7,048
Information Systems $8,395 8,536 8,174
Technical Services $3,230 2,776 2,535
Total $30,148 $29,402 $27,582
Lockheed Martin
Net Sales (In millions) 2010 2009 2008
Aeronautics $13,235 $12,201 $11,473
Information Systems & Global Solutions 9,959 9,608 9,069
Space Systems 8,246 8,654 8,027
Total $45,803 $43,995 $41,372
2. Financial stability
Northrop Grumman, in terms of debt obligations, is more financially stable than the majority of
its major competitors.
The following is a debt obligation chart of the four major defense contractors based on a total
debt accumulated for the next five years:
Debt obligations in millions
Northrop
Grumman
Lockheed
Martin Boeing
General
Dynamics
$20,148 $5,019 $158,681 $41,512

90
Northrop Grumman has a low debt obligation in comparison to its competitors. In addition, it has
the ability to generate cash if need be to pay off its debts. Its expected cash on hand at the
beginning of the year plus cash generated from operations and cash available under credit lines
will be sufficient in 2011 to service debt. Northrop Grumman has a committed $2 billion
revolving credit facility, with a maturity date of August 10, 2012, that can be accessed on a
same-day basis. It can also obtain additional capital to provide for long-term liquidity, if
necessary, from such sources as the public or private capital markets, the sale of assets, sale and
leaseback of operating assets, and leasing rather than purchasing new assets.
In comparison to Boeing, whose debt is at $158,681, also ran up an extensive bill and years of
delays for its new 787 Dreamliner passenger aircraft. According to the Christian Science
Monitor, Boeing already took a $2.5 billion in charges in 2009 on the program, and it owes
additional money to customers for the late deliveries
(http://www.csmonitor.com/Business/Latest-News-Wires/2011/0926/787-Dreamliner-to-be-
delivered-by-Boeing-after-years-of-delays).
3. Centrally located to its primary client.
The Northrop Grumman corporate headquarters was previously in Los Angeles, California,
however, upon assuming the mantle of CEO on January 2010, Wes Bush moved the company to
Northern Virginia so executives could be closer to their federal customers (FORBES, 2011).
This move will allow Northrop Grumman to be more attentive to the needs of its government
cliental and compete on par with General Dynamics and Lockheed Martin who also have
corporate offices in the Washington D.C. Area.

91
Weaknesses
1. Does not possess an internal financial service sector
Out of all of Northrop Grumman’s top competitors mentioned above, Boeing possess is the only
one that possesses a financial service sector called Boeing Capital Corporation, which provides
financing services for its subsidiaries and customers. This gives Boeing a comparative
advantage over Northrop Grumman, because it allows Boeing to work directly with its clients
who need financial assistants in purchasing Boeing products. Also, in order to compete with
other financial leading institutions, Boeing can offer more attractive interest rates to its
customers, thus providing a one stop shopping experience. A good analogy is to take a Toyota
car dealership and Toyota Financial Services. The majority of banks will offer auto loans,
however, many Toyota dealerships are offering 0% financing for 36 months on some of its
selected models. In addition, having a financial service sector is an excellent way to generate
cash flow.
The following is the Boeing Capital Corporation’s revenue data from Boeing’s 2010 Annual
Report to the U.S. Security and Exchange Commission:
Dollars in millions
Years ended December 31 2010 2009 2008
Boeing Capital Corporation $ 639 $660 $703
2. Smaller market share
According to the U.S. Department of Commerce March 2011, the U.S. Aerospace & Defense
Industry estimated the value at $171 billion. Northrop Grumman possesses only 19.1% of the
market share. Its closest competitor Lockheed Martin possesses 26.1% of the market share with
Boeing commanding the largest piece of the pie with 36.6%. From a macro-level it makes the

92
company look small, thus presents the image of a weak company who is easy pickings for bigger
company that is looking to swallow up another.
Summary
From the Porter’s Five Forces Analysis, it can be deduced that the U.S. Aerospace & Defense
Industry is an exclusive and intensely competitive market. Each company possesses relatively
the same business capabilities as the other, yet possessing a distinct business capability
advantage over the each other, while competing with each for business opportunities.
Northrop Grumman vs. its competition, Northrop Grumman may not possess an out-right
dominance of the industry. However, it is a versatile company. Its core capabilities in Aerospace
Systems, Electronic Systems, Information Systems, and Technical Services allows it to be
known as a defense company that excels in producing many products as opposed to Boeing who
is known as the dominant commercial and military aircraft manufacturer. There will always be a
need for aircraft that can provide air superiority and support roles, however, aircraft where
designed to have life-cycles of 30 years plus.
Because of the changing military climate and the global economy, Northrop Grumman is better
positioned to handle the needs of the war-fighter than its competitors. As long as terrorist
organizations and state sponsored terrorism continues, the future wars are going to be low-
intensity conflicts, while fighting an enemy that employs asymmetric warfare. In this battlefield,
products like satellite systems, surveillance and intelligence equipment, and electronic
communication systems are just a few of the products the war-fighter will need most in this
battlefield.

93
Conclusions from the Internal, External and Competitive Analysis
The following responses for Core Competencies, Distinctive Competitive Advantages, Driving
Forces and Key Success Factors of Northrop Grumman were derived from the conclusions
drawn from the case analysis:
Core Competencies
 Aerospace Systems
 Electronic Systems
 Information Systems
 Technical Services
Distinctive Competitive Advantages
 Possesses broader product capabilities than most of its competitors
 Financially strong, allowing for opportunities to expand and invest
Driving Forces
 Committed to being a global leader in the Aerospace & Defense Technology Industry
 Providing quality& cost saving products, services and solutions for its customers
Key Success Factors
 Their core competencies are aligned with the current and future needs of its customers
and future global security challenges
 Their superior business processes made it a leading global security company providing
innovative systems, products and solutions in aerospace, electronics, information
systems, and technical services to government and commercial customers worldwide

94
Strategies and Goals
This section of my case analysis will consist of my recommendations of future goals and
strategies for Northrop Grumman’s consideration. I will present five goals and five strategies. I
will then select three strategies to test and finally select one to implement.
Goals
 Increase total sales revenue by 3% annually over the next five years
 Increase market share by 8% in order to possess the 2nd
largest market share of the U.S.
Aerospace and Defense Technology Industry within the next five years
 Be a major provider of information technology (IT) infrastructure and postal service
solutions within the next five years
 Possess your own financial services business sector within 10 years
 Reduce employee turnover and union issues over the next five years
Strategies
The following recommended strategies are not aligned with any specific goal from the ones
mentioned above. However, multiple strategies could answer more than one goal.
 Develop new or update surveillance, intelligence and communication Defense Satellite
Technology systems capabilities
 Acquire Raytheon Aerospace and Defense Company who already possess assets and
resources in aerospace technology
 Engage in business-to-customer (C2C) marketing with local, state and national
government officials of emerging markets to promote Northrop Grumman’s information
technology (IT) infrastructure solutions capabilities
 Sell or lease capital resources to achieve these goals

95
 Partner with an existing financial institution.
Testing Strategies
 STRATEGY 1- Develop new or update surveillance, intelligence and communication
Defense Satellite Technology systems capabilities
Pros
1. Years in of
experience in
producing satellite
systems
2. Holds patents in
satellite
communications
systems
3. Strengthens the
position of
Northrop
Grumman
4. High profit
margins
Cons
1. Longer
manufacturing
timeframe
Risks
1. Delays in
production
Costs
1. Minimal Costs. Do
not have to re-
invent the wheel,
just improve on the
technology
STRATEGY 2-Acquire Raytheon Aerospace and Defense Company who already possess assets
and resources in aerospace technology
Pros
1. Years of
experience in
producing
Aerospace &
Defense
Technology
products
2. Strengthens the
position of
Northrop
Grumman
3. Gains additional
capital resources
Cons
1. Costly venture. A
lot of capital has to
be raised
2. Acquisition
process is time
consuming
3. Will not see
immediate returns
on investment
Risk
1. U.S. Government
does not approve
acquisition
2. Post-acquisition
integration failure
Costs
1. Adhere to
government
regulations on
mergers
2. Monetary loss
from research of
business
acquisition, if
acquisition fails

96
STRATEGY 3-Sell or lease capital resources to achieve these goals
Pros
1. Quick way to
obtain cash
Cons
1. Loss of capital
resources that will
effect production
capabilities
2. No potential
buyers
Risk
1. Receiving less than
market value for
sale of capital
resources
Costs
1. Costs associated
with the marketing
and selling or
leasing of capital
resources
Scoring method is based on a 1 to 3 rating scale. A score of 1is the best choice. A score of 3 is
the least desirable choice. The strategy that possesses the most pros over cons will receive the
highest rating score.
Strategy-1. Score 1 Strategy-2. Score 2 Strategy-3. Score 3
Implementation
Of these three strategies selected, it is of my opinion that the best strategy to support the
recommended goals for Northrop Grumman is Strategy-1; develop new or update surveillance,
intelligence and communication Defense Satellite Technology systems capabilities.
Report GAO 09-325, recently released by the Government Accountability Office (GAO), stated
that some of the satellites that provide the signals that Global Positioning System (GPS) devices
need to operate are aging and approaching or exceeding the end of their service life cycles. GPS
uses range from providing personal driving directions to aiding critical military missions
requiring precision bombing capabilities could see its signal fade as early as next year when the
required satellites stop functioning, according to a Government Accountability Office report.
The U.S. currently has 31 GPS satellites in orbit, and 24 are needed to provide the high level of
accuracy and reliability we enjoy today. The GAO report places the probability of keeping a full,
24-satellite constellation operating as low as 80 percent by year 2011. GPS satellites have been

97
outlasting their predicted service lives, so this is likely a worst-case scenario, thus recommending
more focused leadership, and higher budget priority for the GPS updates.
In addition, to other military satellites such as surveillance, communication and weather that are
aging, scientific satellites that monitor oceanic and climate conditions are facing the same
dilemma.
To implement this strategy:
1. Analyze the current conditions of satellites in orbit and prioritize work based on critical
needs.
2. Develop several new satellite systems solutions or select from current aerospace products as
replacements.
3. Lobby the U.S. Congress. Stress to Congress the importance of satellite technology and the
need for new satellites or upgrades to existing ones. Present Northrop Grumman’s latest
satellite systems solutions.
Recent news
On May 9, 2011, The U.S. Air Force awarded the Northrop Grumman with a $372M Contract to
Develop EHF Satellite Communications Antenna for B-2 Bomber. The new antenna system now
under development by Northrop Grumman Corporation will enable the B-2 Spirit stealth bomber
to send and receive battlefield information securely by satellite up to 100 times faster than it can
today.
According to NASA, who manages the program on behalf of NOAA (National Oceanic and
Atmospheric Administration) Northrop Grumman was awarded a $30 million contract which
will involve the manufacture, testing and delivery of the Advanced Technology Microwave
Sounder (ATMS), support instrument integration on the Joint Polar Satellite System (JPSS-1)

98
which will carry the ATMS, and they will also provide launch and post-launch support for the
mission. The contract runs from 2011 through 2017.
Projected Financial Results
In the previous five years Northrop Grumman’s Aerospace business sector sales revenue grew
1% annually with the exception 2006 to 2007.

99
It is mostly likely that Northrop Grumman’s Aerospace sector will continue to see a 1% annual
growth rate based on the previous 1% sales trend. However, has it acquires more contracts it
could see an increase from 1.2% to 1.4%.

Analysis of Northrop Grumman

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