Two-thirds of aerospace and defence (A&D) senior executives say that they are confident or very confident in their company’s growth prospects over the next 2 years, according to the latest KPMG Global Aerospace and Defence Outlook.
Aircraft OEMs and major defence contractors are particularly confident in their growth strategy, with 100 percent of respondents from larger organisations (those with global annual revenues of more than USD10 billion) voicing confidence in their growth prospects.
According to the survey of senior A&D executives from around the world, 41 percent now believe growth will be an extremely high priority over the next 2 years, up from just 13 percent last year. The survey also indicates that cost and performance management are still high on the agenda for A&D organisations, with 81 percent saying that they are focusing on improving cost and performance management.
Glynn Bellamy, head of aerospace at KPMG UK said: “Given the size of order backlogs across many A&D organisations the focus will now be on the need to drive profitable growth and performance, not just top line growth. This will impact across the supply chain with a focus on operational innovation and globalisation to drive cost and in support of accessing high growth markets."
With economies remaining sluggish and defence budgets flat in the mature markets, many A&D organisations are now looking to new foreign markets to generate new revenue. In fact, more than nine-in-ten of the A&D respondents say they plan to expand into new geographic markets over the next 2 years.
A&D businesses based in North America are the most likely to say they are using their foreign investment to gain access to new markets. Respondents from India and China, on the other hand, are among the most likely to say they are looking for reduced manufacturing costs from their foreign investments.
Two-thirds of non-US based respondents say they will make investments into the US and Canada. Sixty-six percent of US-based respondents say they will invest into India and 50 percent say they will invest into mature ASPAC (including Japan, South Korea, Australia and Singapore).
“A&D organisations are continuing to move manufacturing operations to the emerging markets – just think of Boeing and Airbus who have both recently opened final assembly lines in China – but as they do so, they are also thinking about how these investments help them better serve and attract the high growth regional markets. Moving from a ‘make in’ to a ‘sell to’ strategy for an emerging market requires a very different approach,” said Bellamy.
About KPMG’s 2016 Aerospace and Defence Outlook
This report is based on a survey of 76 senior A&D executives conducted in early 2016 by Forbes Insights. Around half of our respondents are based in Europe and 21 percent are based in the Americas. Almost one third of our respondents represent companies with annual global revenues of more than USD5 billion and 8 percent represent organizations with revenues of more than USD25 billion.
To support the survey data, KPMG International conducted a series of interviews with leading A&D manufacturers around the world. Their experiences, combined with insights from KPMG professionals around the world, provide valuable context for today’s manufacturers.
The full A&D Outlook can be downloaded here.
About KPMG International
KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. We operate in 155 countries and have 174,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
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