Analysis of General Environment
1. Political & Legal Environment Analysis:
Policy decisions: The industry is highly dependent upon defense budget
sanctioned by the ruling party in the country. It varies between different parties
elected to power, some priorities the defense budget, some dont. Also the
Government policies is a factor for defense deals. Like some countries goes for L1
bidding, some goes for basis of nomination, etc.
Some Govt policies may ask for In-sourcing of defense deals. Like Make in India
project. Though Govt gives order to the firms for supply of defense aircraft but there
may be a condition for manufacturing the same within the same country or transfer
of technology to give growth to their indigenous firms by Know how technology.
Lobbying for contracts: It was always seen that there is a great lobbying for
signing of defense deal. Same has been seen, in the recent Augusta Westland
helicopter deal which was later scrapped by GOI. However this always remains in
the defense deals in some way or other and affects the procurement procedure.
Subsidies: Some like PSUs get subsidies form Government in supply of defense
helicopters, to facilitate their growth.
Political Stability: Political stability plays a major role in helicopter industry.
Different political parties are with different views, and creates instability in decision
making. Sometimes industries, invest heavily thinking for some new project but
change in Government may defer the same or scrap the same project.
Export & Import: Certain countries rely heavily on import of defense aircraft,
mostly under developed countries and countries which are not having advanced
technology in defense aircraft sector. Data enclosed at Exhibit-2. That helps foreign
manufacturer to bid for the same. The data shows United Technology Corporation is
8th largest exporter in world.
Wars and rescue operations: Helicopters play a major role in transportation of
arms and personnel during wars and natural calamities. Countries like India where
natural calamities happen frequently helicopter is a major requirement.
Taxation and duties also plays a significant factor in growth of aircraft industry.
Labor problems and contract laws: It varies from countries to countries. In
China they follow strict labor law. So industries operating there have to adhere their
law. In Germany stakeholders are given utmost priorities. Contract laws also varies
between different countries and companies have to adhere the same.
2. Economic environment analysis:
Economic Reform: Major economic reform and economic boom happened in last
10 years. And countries started investing in aircraft industries which is good sign.
Presently Indias annual defense outlay has been increased by 12% to $38.35 billion
(Data: From Forbes). Economic boom is a good sign for both military and
commercial helicopter industry.
FDI: FDI plays a major role for foreign players in aircraft industry. Recently India has
increased FDI in defense sector to 49%.
Recession plays an adverse role in growth of helicopter industry, as investment in
these industries decreases.
Economic infrastructure: This plays a major role in development of aircraft
industry. Availability of skilled labor, better infrastructure, Transportation, roads,
availability of land, better financing, lower interest rate in financing, facilitates
growth of aircraft industries.
3. Social Environmental Analysis:
In the recent global environment, a lot of decisions are made considering public
opinion and Governments go & abide by theat. There are growing concern on below
mentioned issues;
In Recent years helicopter operators in the Los Angeles area have come under
tremendous pressure from citizen groups, state and federal legislators due to
concerns over noise. This has led to the enactment of federal legislation in January
2014 requiring the Federal Aviation Authority (FAA) to scrutinize helicopter
operations over Los Angeles and to unilaterally adjust routes if FAA determines that
such action is needed to lower noise levels. [1]. There is growing demand for
development of helicopters with reduced noise level. Firms are investing a lot in
battery operated helicopters which will have nil emission.
There is continuous demand of single pilot helicopter with all safety features, to
reduce the risk factor of life and at times when the mission is really dangerous. The
outrage is increasing in USA during its mission in Iraq and Afghanistan when a lot of
military personnel lost their lives.
There is a growing concern and demand on all fronts for not going towards war,
and the major concern is in America, to make economy stable, is definitely a
threat to the Military helicopter industry.
Helicopter industries play a major role in natural calamities in rescue operation and
can be used as air ambulance. In countries like India, where it is affected regularly
by natural calamities, helicopter plays a major role of rescue and transportation.
Helicopter played a major role in recent rescue operation during rehabilitation
programme after massive earthquake in Nepal and floods at Kedarnath in India.
Firefighting, power grid maintenance, news gathering are also sectors that are
seeing increased use of helicopters.
Many businessmen use helicopter as an easy mode of movement for day to day
activities and go for chattered aircraft. Petroleum companies use helicopter to a
large extent as transportation usually happens from land to stations at seas.
Many countries use helicopter in military purpose. The United States has used
helicopters in military operations in both Korea, Vietnam and Iraq. They perform
important tasks in sea-air rescues, patrolling, evacuation of the wounded, and the
transportation of human being and equipment into battle. Also rescue of people
during terrorist attacks. Soviet helicopters were used in military action in
Afghanistan and Ethiopia.
The construction industry uses helicopters to lift equipment to upper stories of
buildings being erected. Heavy construction materials such as steel beams are also
raised in this fashion.
Petroleum companies use egg beaters as commuter vehicles.
Several police departments have found helicopters particularly effective in spotting
and helping to eliminate traffic jams. Police also use them for patrol duty and to
track down criminals.
Helicopters are important to the Forest Service in combating forest fires.
Hence helicopter plays an important role in different sociological sectors and uses.
4. Technological Factors:
Innovation and technological development goes hand in hand in aircraft
industry. In last decades there is continuous development in aircraft industry. Recent
technologies of Fly by wire, advanced weapon carrying technology, new radars,
innovation for speed and better fuel efficiency are some of the recent innovations.
The most disadvantage in the helicopter is its low speed & vibration. So there is a
lot of technological development in recent past for achieving better speed in the
range of 275 miles per hour, that's more than 100 mph faster than a conventional
helicopter, giving it twice the range. The recent development of Sikorsky S-97 and
V-280 of Bell is a step forward in this field.
Similarly there is continuous technological development for providing jet-like
smoothness in helicopters with active vibration control of structural responses.
Manufacturers: such as AgustaWestland are also investing in advanced technologies
as product differentiators.
The X3 technology of Airbus helicopters, two propellers on the sides of the aircraft
both stabilize the helicopter which cuts the requirement of a tail propeller as well
as help it gain excellent acceleration and speed. It is intended for the chopper to be
used for search-and-rescue, patrolling at border, operations by Special Forces, and
transportation of troops.
Innovation and use of composites, in material reduce the weight of the helicopter
and enhance the fuel efficiency and stability.
There are a lot of patents being filed after development of new technologies
which gives the firms an upper edge.
There is strict compliance to quality control while manufacturing the aircraft and
hence technology advancement is a must for reduction in waste and hence cost
savings.
Technology developments in airframe, engine and mission systems that provide
more airworthiness, resilience, performance and responsiveness are enabling the
new generation of helicopters to function in tough environments.
Data on R&D expenditure of top 10 aerospace firms show, there is a cost cutting in
R&D programme across defense industry. This may be the fact due to concentration
on supply of aircraft rather than innovation and market slowdown.
5. Global environmental analysis:
Big Emerging markets: The global Aerospace & Defense industry has experienced
transformation
in the past 5 years. Following a decline in orders and backlogs in 2008 and 2009
aircraft manufacturers are seeing phenomenal growth after 2011. The industrys
growth are the overall improvement of the global economy and increasing demand
for aircraft from the developing economies of China and India.
Trade barriers: Trade barriers are reducing due to Globalization. Any firm is able to
do business in any country.
Global market: Global market is back to economic reform and countries are
spending for defense sectors. Exhibit -5 shows a forecast of projected defense
expenditure of major powers for the year 2045.
Summary:
It may be summarized that external environment quite conducive for industry
growth. There is always emphasis for new technology, better speed and lessor
vibration. Sikorsky is investing a lot in R&D for better technology. Also the industry
growth in USA is also showing better result. As Sikorsky is a major supplier to US
defense sector the future of Sikorsky is looking bright.
