STRATEGY AND INNOVATION

83% awarded
S1021400
Coursework
Professor David Edgar

‘Critically evaluate the Strategic Position of BAE Systems

and how emerging technology may impact on the future
position of the organisation’
 Strategy & Innovation

Contents

1 Introduction

1.1 Summary
1.2 Background

2 Current Strategic Position of BAE Systems

2.1 Identify Strategic Position

2.2 Internal Environment Analysis

2.2.1 Stakeholders
2.2.2 Culture
2.2.3 Balance of the Organisation
2.2.4 Process – Value Chain
2.2.5 Strengths & Weaknesses

2.3 External Environmental Analysis

2.3.1 PESTL
2.3.2 Porter’s Five Forces
2.3.3 Opportunities & Threats

2.4 Strategic Position (SWOT)

3 Emerging Technology

3.1 What is it?

3.2 How does it work?
3.3 Who uses it?

4 Impact of Emerging Technology on Strategic Position

4.1 Current Position

4.2 New Strategic Position
4.3 Impact on SWOT
4.4 Summary

5 Conclusion

6 References

7 Appendix

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Introduction

1.1 Summary

The following report will thoroughly describe the strategic position of BAE Systems
(British Aerospace Electronic) and the impact that new technology will have on the
position of the organisation. The report will analyse and investigate the defence
industry sector and the strategic position of BAE systems. The main focus within this
report is the military aerospace sector.

Scientists within BAE systems are constantly creating new ideas to ensure that they
remain of the biggest engineering industries in the world. New innovations within
BAE Systems mean that aircrafts are constantly developing as new technology
becomes available. BAE believe by 2040 or possibly earlier their aircrafts innovations
will be in production.

The vision of BAE systems is “To be the premier global defence, aerospace and
Security Company”. The vision statement indicates the direction that BAE systems
would like to take in the future. Their mission is “To deliver sustainable growth in
shareholder value through our commitment to Total Performance”. The mission
statement reminds all people involved with the company their main agenda.
BAE systems focus on four main sectors to ensure the company runs smoothly.
These four sectors are: Customer Focus, Financial Performance, Programme
Execution and Responsible Behaviour.

1.2 Background

BAA officially was founded back in 1961and has continued to grow over the last 50
years. The most significant development in BAA was in 1996 when it doubled in size
due to joining forces with AWA Defence Industries. As the company continued to
expand, BAE Systems (as it was renamed) was formed in 1999 when BAA (British
Aerospace Australia) merged with GEC Marconi Electronic Systems. Finally in 2008
BAE Systems acquired Tenix Defence, one of their fierce competitors at the time.
The following year BAE Systems acquired the rights to Tenix’s logistics, improving
the level of innovation within the company. According to BAE Systems, they currently
employ over 100,000 employees within the UK. Around 69% of BAE employees are
highly skilled engineers and engineering related roles.

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2 Current Strategic Position of BAE Systems

By evaluating the strategy of a business, it enables the strategic position to be

determined. The most effective way to identify the strategic position of any company
is to follow the process and develop a framework (Shown in Appendix A). The two
main stages involve an analysis of internal environment and external environment.
Each process is thoroughly discussed throughout this chapter.

2.1 Identify the Strategic Position

The main objective of strategic analysis is to gather information. For the company to
be able to make any decisive decision they must have the relevant data available to
ensure the correct decision is made.

The nature of environment within BAE systems is a complex environment. The

reason the environment is complex is due to the number of design stages that must
be carried out until the product/idea can be put into production. BAE’s strategy is
based on pleasing their main customer that is the government (MoD – Ministry of
Defence).

BAE are the third largest global defence company in the world, according to their
2012 turnover. BAE supply air, land and sea products to over 100 countries
worldwide. BAE is one of the major players in the defence industry and has five
home bases throughout the world. BAE Systems is a company that uses product
leadership as their main strategy.

2.2 Internal Environment

Internal analysis gives Management Staff a thorough understanding of the business.

It highlights whether their current strategies used within the company are effective
and any aspects that can be improved, for example, save resources. The analysis
enables management to make changes within processes and gain a competitive
edge over competition.

An internal environment analysis consists of a number of different sectors. These can

be seen in Appendix A.

2.2.1 Stakeholders

The stakeholder map shown in Figure 1indicates the specific strategies used within
BAE Systems to run a successful company.

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Low Level of Interest High

Universities/Students Suppliers

Low
Minimum Effort Keep Informed
Distributor Unions
Competitors Channels

Level
of Shareholders
Power Council Executive
Board

Keep Satisfied Key Players

High CEO
Government Customers

Figure 1

As displayed in Figure 1above, the map is split into four sections. Each sections
purpose is explained below:

The ‘Minimal Effort’ sector involves the parties that are of a low priority to the strategy
of BAE Systems. For example, if the circumstances changed and the students from a
particular university became an essential part within the BAE Systems work place,
BAE would take a greater interest in the standard of teaching.

The ‘Keep Informed’ sector includes people with high interest within BAE, however
have minimal effect on how the company is run. For example, unions have a very
high interest and want the best for their members yet have no great deal power over
BAE’s strategies.

The next sector is ‘Keep Satisfied’. These particular stakeholders have an important
say on how BAE Systems approach things and can affect their strategy. However
they rarely use their powers as they have low interest unless something drastic
occurs at the company.

The final section is ‘Key Players’. Essentially these stakeholders make the key
decisions that affect BAE’s strategy. Each stakeholder in this section is given high
priority and in the best interest in the company to keep them involved.

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2.2.2 Culture

The culture is what defines the company; each company’s culture is unique. Culture
is important as it affects a number of different aspects of the company’s tasks, for
example, employee motivation. BAE explains their culture as:

“We have a culture of Total Performance; a commitment to the highest standards in

every aspect of the way we do business. This is guided through four embodying
elements: Customer Focus, Financial Performance, Programme Execution and
Responsible Behaviour.”

BAE Systems has a good code of conduct regime in place to ensure the employee’s
act appropriately within the workplace. It is important that each member of staff acts
accordingly to prevent any injuries and keep safety levels as high as possible.

Stories Symbols

Fraud Investigation
CEO Logo
Human Rights Quality

Rituals &
Power Structures Routines
Starting TimesResponsibility
Weekly Meetings Unions Trust
Competitive Customers
Professional
Executives

(Figure 2, Cultural Web)

tional
ures

2.2.3 Balance of Organisation

The balance of organisation is displayed in Figure 3. (Each product is labelled in

Appendix B) The BCG (Boston Consulting Group) is a representation of the
company’s products on the market and their services. It displays the market growth
and share. The BCG determines which products BAE Systems should either sell or
invest in to improve profits. The higher value of the market share, the more income it
generates for the company.

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The ‘Star’ section of the matrix indicates products that have a large market share in a
fast growing industry. They generate a large amount of revenue for the company;
however they require a large investment to develop. Once successful the products
would become ‘cash cows’ for the company.

‘Cash cows’ also have a large market share within a slow growing industry. ‘Cash
cows’ will generate a great amount of revenue with minimal investment.
This allows the company to invest profits in other products and improve their position
within the industry.

‘Dogs’ sector represents low market share with a low growth rate. In other words they
do not generate a great amount nor do they consume a lot.

Finally ‘Question Mark’ has high growth and also low market share. Therefore they
are costing the company a large amount of money but not creating much revenue.
These products do have the potential to generate large amounts of revenue, however
they must be analysed thoroughly to see if it is worth the resources.

7 2
1
10
The Star ?

11

9
3 4

Cash Cow The Dog

8

5 6

Figure 3

Product (Aircraft) Justification

BAE Systems Taranis Taranis is a future project that requires a large amount of
investment to develop. As it is not in production it is not
generating a great amount of revenue, therefore a
question mark.
BAE Systems Mantis Mantis is a prototype aircraft with only 1 in production. It

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Unmanned Aircraft has encountered some problems hence the delay. As the
product develops it has the potential to be a star/cash cow
for BAE.
Eurofighter Typhoon The Eurofighter is one of BAE’s best sellers within the
aircraft sector therefore is a cash cow.
McDonnell / BAE QF-4 BAE are paid $2.6 million per modification of McDonell’s
aircraft. Therefore it is a cash cow as it generates a large
profit for BAE due to no investment needed.
BAE 146-200 BAE 146-200 is fully developed and generates a
substantial amount of revenue therefore is a cash cow.
Panavia Tornado IDS Panavia is the 3rd best seller for BAE Systems. It requires
GR.4 minimum investment but has large returns therefore is a
cash cow.
BAE Sea Harrier FA2 The Sea Harrier is a star as it generates a large amount of
income. However there is less in production as expected
therefore large investment is put into the product. Hence
why it is a star for BAE.
BAE Hawk 128 The Hawk 128 the highest in production currently for BAE
by some margin. This is BAE’s largest cash cow.
BAE/ Hawker Siddely The Nimrod is a dog for BAE. The Nimrod is the oldest
Nimrod aircraft for BAE, first being created in 1968. This project
does not generate much revenue for BAE hence ‘the dog’
sector.
The Survivor The Survivor is a future project that isn’t expected to be in
production until at least 2040. It requires large investment
however is generating no revenue. This is why it’s in the
problem child section although it is expected to become a
cash cow in the future.
Transformer Transformer is in the same situation as ‘The Survivor’ for
same reasons above.

2.2.4 Process & Value Chain

The process of BAE Systems can be analysed by a number of analysis techniques,

in this case a value chain. The value chain for BAE Systems is displayed Figure 4.

Value chain analysis (Porter, 1985) is a technique that was created to give a
company a competitive advantage over their rivals. It indicates the list of activities
that are carried out for the company to run efficiently. The value chain is split in two,
primary and secondary activities. The main purpose of the support activities is to
improve the over efficiency of the primary activities. The company will develop a
strategy that adds value to their products. The value is set in terms of what BAE’s

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customers are willing to pay for their products. The competencies for the primary
activities are displayed in Figure 5.

Figure 4

Inbound Operations Outbound Marketing & Service

Logistics Logistics Sales
Sub- Testing Distribution Advertising Customer
Contractors Products Service

Materials Finishing Sort Reputation Maintenance

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Employees Inspection Brand

Tools Experience

Testing
Equipment

Transportation

Figure 5

The core competencies in Figure 5 above have been highlighted in red. The core
competencies are what separates BAE from their rivals and give them a competitive
edge. The core competence that separates BAE within the inbound logistics is the
employees. Majority of BAE”s staff are highly skilled engineers (69% as mentioned
previously in the report). BAE employ some of the best engineers in the world, which
ensure they maintain their position within the industry. They have developed a
strategic training programme, which develops their staffs’ skills over the years.

The main task within Operations is Inspection. Inspection is carried out to ensure that
each product is of a high quality. If every product is of the highest quality customers
will remain loyal and it will also attract new customers throughout the world. For
Outbound Logistics the main task is their Distribution. BAE’s distribution channels are
key to their success and it is essential they maintain a good relationship with their
buyers/suppliers. They need to ensure if any manufacturing is out sourced it meets
BAE’s high standards. For Marketing & Sales, BAE use their years of experience to
their advantage. Although the UK Branch is only recently founded, they still have
experience of other branches to learn from. Being able to understand the market is
key to being successful in the defence industry. Finally BAE’s main activity in Service
is their Customer Service. BAE staff ensures their interactions with customers are
always pleasant to ensure they return for business. BAE is dependant on their
customers business therefore it is in their best interest to keep them satisfied at all
times.

2.2.5 Strengths & Weaknesses

After carrying out an internal environment analysis it’s possible to identify strengths
and weaknesses of BAE Systems.

One of BAE’s biggest strengths is its strong Research & Development department.
R&D is responsible for innovations, which maintains BAE’s competitive edge over
competition. Another strength is BAE’s good reputation throughout the world. BAE
has been within the defence industry for a number of years and is known for
delivering a quality product. Therefore when customers buy their products they are

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confident in the product and likely to return for business. Other strengths are
displayed in the SWOT in Figure 8 (section 2.4).

The internal analysis unfortunately identified several weaknesses within BAE

Systems. One of the main weaknesses is the strong competitor’s. The defence
industry is a difficult industry to compete within, BAE need to constantly develop new
products and invest to keep up. Another weakness is their distribution market. BAE
Systems main customer is to governments throughout the world. However there is a
private market throughout the world that they could possibly sell to. This could
substantially increase their revenue. This would also come with risks of tarnishing
their image or affecting current relationships. Therefore it would be best to investigate
this market thoroughly before conducting business.

2.3 External Environment

The external environment analysis involves components out with the influence of
BAE Systems however it can still have an impact on the company. Changes within
the external environment will affect all companies within the industry and in certain
circumstances affect the market they are involved in.

2.3.1 PESTL

PESTL is a framework that analyses the affect that external factors have on a
company. PESTL is an abbreviation for “Political, Economic, Social, Technological
and Legal”. In some cases Environmental Influence can be added to the analysis.
Each factor analysis on BAE Systems is below:

Political Explanation
Reason
War Every country feels it is necessary to arm themselves with resources in
the event of a war. Therefore BAE Systems main priority in sales is to
keep a good relationship with governments around the world. BAE
Systems largest customers are the US government (MoD), due to their
on-going warfare throughout the world
Change of BAE’s transactions are completed with the governments, therefore a
Government change could affects relationships and the possibility of losing business
Exchange BAE does business worldwide therefore exchange rates would be an
Rate important matter.
Relationship BAE Systems biggest buyers are the governments in different

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with countries. BAE Systems transactions are only between countries that
Government have a stable government in power. This is to ensure civilian safety
within the country and prevents illegal sales.

Minimum Minimum wage is a rate set by the government, therefore any changes
Wage could see an increase in staff’s wages
Target Due to governments being BAE Systems main target customer, their
Customer - products are designed to meet their needs. The manufacturers must
Government uphold a number of regulations set by governments and must ensure
no lives are endangered.

Economic Explanation
Reasons
Recession During a recession each company must minimise costs to the
bare minimum to keep the company in business. With majority
of customers to BAE Systems being governments income
decreases due to cuts being made within parliament. The only
upside to a recessions for BAE is that countries will always need
a supply of military products as long as there is a threat.
Lack of employee’s BAE Systems requires highly skilled employee’s for certain jobs,
who are not easy to come by
New Competitor New Competitor could mean less business for BAE therefore
less revenue
Current Competitor Current competitor investment would mean BAE would lose
Investment their competitive edge and would also need to invest
Raw Material Raw materials prices such as copper etc. Metals prices are
Increase known to continuously waver which could affect the overall profit
of BAE. However BAE Systems is a worldwide company that
has the resources available to deal with these situations
comfortably.

Approved Budget Approved budget which can not be exceeded

Social Reasons Explanation

Unions Represent the employee’s within BAE Systems

Universities/Schools Persuade students to follow the path of engineering to increase

Involvement numbers of candidates for workforce

Image BAE Systems are known for supplying products that are used
within war e.g. jets, vehicles etc. Large sectors of the population
do not believe in warfare, some believe BAE Systems
customers are participating in “illegal wars”. Therefore the ethics

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of the company could be questioned due to their products being

used to kill.
Community BAE are known to give money to schools etc. to improve image
Development

Demand for Safer The pressure of supplying safer equipment to be used within
Products warfare. Majority of equipment will be used by soldiers/pilots so
must be safe as possible. Family members expect their loved
ones to return home safely therefore there is a social pressure
on BAE Systems supplying the best possible equipment.

Technology Explanation

Buy Suppliers Buy up suppliers which saves costs

Possibly Expand Enter different technology markets outwith the defence industry
Markets

‘The Survivor’ The most impressive innovation from BAE Systems is “The
Survivor” which is discussed in further detail later in the report.

‘Unmanned Aircraft’ Technological developments within the aircraft field have helped
improve the safety of soldiers. For example, unmanned aircrafts
such as UAV’s scout the area ahead and indicate whether it is
safe for the troops on the ground to move forward.
Changes to Could affect the efficiency of the workplace as would take time
Software/Hardware for staff to get used to new products

Legal Explanation

Laws BAE Systems supply products worldwide, therefore they must

understand and abide by the laws and regulations within the
country they are doing business. Although most laws are similar
across the world, some countries can be more lenient/strict than
others. For this reason BAE Systems has their own code of
conduct in place to ensure no illegal transactions take place.

Tax BAE Systems must pay tax on their revenue annually

Waste Materials BAE Systems must safely dispose of their waste materials

Safety Employee’s safety must be ensured within the workplace

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Wages Employee’s wages must meet the minimum standards (Minimum

Wage)
Working Hours Employee’s must get the legal amount of breaks throughout the
day (one every 4 hours)

2.3.2 Porter’s Five Forces

Porter’s Five Forces is an analysis technique that determines the main competition of
company within their industry. This technique has been applied to BAE Systems,
displayed in Figure 7. Each force is evaluated below in relation to BAE Systems.

Bargaining Power of Suppliers

"BAE Systems relationships with Small to Medium sized Enterprises (SMEs) is

extremely significant. We have a strong interest in supporting the vibrant SME sector
and promoting innovation through investment, which supports the Government’s
objective of ensuring a healthy, agile and vibrant supply chain."

BAE Systems have adopted a tiered approach for supplying materials.

In other words BAE Systems tends to use smaller companies to supply themselves
with the necessary materials. Using this supply method means smaller companies
are able to have a steady revenue which helps improve the industry overall. These
smaller companies can then improve resources and expand. BAE Systems use “ADS
21st Century Supply Chain Programme” which uses strategic techniques to improve
performance of suppliers. BAE spends over £10 Billion per annum with over 20,000
suppliers worldwide to supply the best possible products for their customers.
Bargaining powers for suppliers in BAE Systems is low priority due to the number of
suppliers they have throughout the world. The suppliers also have restrictions of
knowledge when it comes to products. This is to protect BAE Systems innovations
and ensure a rival company does not steal their ideas.

Threat of New Entrants

The defence sector of is one of the largest within the engineering industry, which has
many large successful companies competing for customers. With being such a large
markets new companies need to overcome a number of barriers. According to BAE
Reports (BAE Systems Annual Report 2013) there total revenue was £18,180m and
an operating profit of £806m. This is a huge loss in profit compared to the previous
year, which was £1,605m. Evidently this is a difficult field to compete in, with high
initial costs needed to get the company up and running.

Another barrier for new entrants would be distribution of their products. The main
buyer within this sector is the government, which have had relationships with their
suppliers for years. Therefore new entrants would need to able to offer something
different, while at the same time meeting all regulations. Most transactions are done
overseas therefore the new company must be able to prove itself internationally to
succeed. They would be competing with companies that have a history and expertise

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in this industry. Most importantly they have a trusting relationship with their
customers. These barriers make it unlikely for any major new entrants to compete.

Threat of Substitutes

Threat of substitutes is an important factor within the defence sector. With so many
competitors there is always a possibility of a superior product replacing that of BAE
Systems, For example: a more stealth jet. If this is the case BAE Systems would
need to follow the same path as their competitors and attempt to match their product.
However they could also inject their funding into another product that will replace that
of their competitors. Threat of substitutes is very important within BAE for this reason.

Bargaining Power of Buyers

As mentioned previously in the report the main buyers are the governing bodies of
countries. There is both pro’s and cons for providing to such a narrow market. The
advantages are as follows:

Firstly, governments always set aside a budget to spend for the defence sector. For
residents to feel more secure with the on-going threat of wars countries are also
looking to upgrade their defence products. In most cases the country is not going to
go bankrupt therefore their business is virtually guaranteed for the foreseeable future
as long as the products are still at a high quality. Buyers (governments) have a very
strong bargaining power with companies within this industry. The governments
usually make deals with companies, in this case BAE Systems, and persuade them
not to supply their products to other governing bodies that they may be in current or
future conflict with. This ensures that they are receiving the nest equipment, which
gives them an advantage over their enemies. Although BAE would make more sales
if selling to both sides they would lose the trust and relationship with their partners.
Therefore this would be in the best interest to listen to the suggestion and only sell
their products to one side.

BAE has bargaining powers when it comes to the UK government due to employing
over 100,000 UK residents, as mentioned previously in the report. If BAE Systems
was to go out of business there would be a great increase in the unemployment rate,
therefore it is in the best interest of both parties to have a healthy relationship. This
highlights that bargaining powers are of high importance due to BAE Systems having
such a narrow market.

Rivalry

Rivalry is the fifth and final force, which is directly related to each above force and the
relationship BAE have with their competitors.

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According to the database of Stockholm International Peace Research Institute

(SIPRI) BAE Systems is 3rd in the world for total arms sales/revenue (SIPRI Report
2012). These sales include sales outwith the aerospace sector, however they have
been included as it indicates the overall position of BAE Systems within the defence
sector. Total sales can be seen in figure 6.

(Figure 6, SIPRI 2012)

With the top four companies all generating a profit over 1,900 million, it is clear that
rivalry is very evident within the defence industry. During the recession expenditure
on defence products hugely decreases, therefore creating a tense rivalry between
companies. For BAE Systems to continue to compete they must maintain high
barriers for new entrants to enter the industry.

New Entrants

Hawker
Beechcraft

Suppliers Rivalry Buyers

Lockheed Page 16
Martin US MoD
Boeing UK MoD
Raytheon Saudi Arabia
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Substitutes

AH-64 Apache
F-15K
A-110 Thunderbolt II

Figure 7

2.3.3 Opportunities and Threats

BAE Systems has the opportunity to broaden their horizons and explore several
different markets. New markets will help them maintain their worldwide reputation
and increase revenue. By continuously investing in the research & development
sector there is an opportunity to make more technology developments and gain a
competitive edge over competition.

A threat towards BAE Systems is ethical pressure from society. BAE Systems are
supplying products that are used within warfare which take lives. Therefore the ethics
of the company can be put into question. However BAE Systems counteract this by
saying it is to protect the country and they are not the ones putting the products into
use. Another threat would be an increase in raw materials prices, such as copper.
Raw materials prices are constantly changing which can affect the total profit of the
organisation.

All Opportunities and Threats are displayed in the SWOT in Figure 8 (section 2.4)

2.4 Strategic Position (SWOT)

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“Our Strategy:

- Support our customers in safeguarding their vital interests

- Inspire and develop our people to drive our success
- Drive shareholder value by improving financial performance and competitive
positions across the business. “

The current strategic position of BAE Systems based on the thorough analysis
discussed throughout the report is that BAE Systems is one of the strongest
companies within its industry. BAE Systems is a world-renowned company with a
reputation of always producing products of the highest quality.

BAE Systems are continually making technological innovations that give them the
competitive edge over their rivals. BAE Systems do business worldwide, however
they are defined to a narrow market as mentioned previously. The possibility of
selling products to the private sector if it does not affect current relationships is worth
considering.

BAE Systems competes within 5 key markets: Australia, Kingdom of Saudi Arabia,
USA, India and United Kingdom. The total revenue of the BAE Systems (United
Kingdom) is shown in Appendix C. BAE Systems competing in such large markets
indicates their intentions to grow as a company and thrive on their position within the
industry. BAE Systems (UK Branch) have only been in the industry for 15 years;
however are 3rd top sellers in 2012 according to SIPRI shown in Figure [Link]
statistic highlights that BAE is applying effective strategies to successfully compete
within the industry.

STRENGTHS WEAKNESSES
Internal
- Good Reputation - No involvement in Private
- History/Experience Sector
- High Bargaining Power - High Transaction Costs
Suppliers - Strong Competitors
- Strong R&D Department
- Investment in New
Technology

OPPORTUNITIES THREATS

- New Markets - Ethical Pressure

- Technology Development - Economic Crisis
- Expand Company (Recession)
- Raw Material Increase

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Environment

External
Environment

Figure 8

3 Emerging Technology

3.1 What is it?

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At BAE systems there are a number of different advancements within the defence
sector. The biggest advancements in technology are within the aircrafts. The main
development discussed in this report is that of ‘The Survivor’. This innovation, if
successful, could change the engineering industry drastically.

Scientists are developing an aircraft that would be able to ‘heal’ itself if any
components become damaged during flight. For example, if a fighter jet is damaged
from a missile this technology will be able to repair the jet and potentially save the
pilots life. If successful this technology could be adapted into civil flights in case any
problems occur during the journey. This would decrease the number of accidents that
occur through material failure of aircrafts..

3.2 How does it work?

“The technology is a lightweight adhesive fluid inside a pattern of carbon nanotubes

from which the aircraft is constructed and is released when damaged to quickly ‘set’
mid-flight and heal any damage.”

Essentially using these advanced materials the jet would be able to attempt more
dangerous missions with a much greater success rate than previous aircrafts. Once
in production the technology could be slightly altered to suit for other
aircrafts/vehicles. This technology could be used on jeeps/cars on the ground during
warfare, again minimizing the amount of soldier’s deaths. The technology doesn’t
need to be just used within military sector; it could even be used within every day
cars for civilians.

3.3 Who uses it?

The technology will be used by soldiers/pilots most likely members of the Ministry of
Defence (MoD). These are skilled professionals who will have a greater chance over
surviving dangerous missions over enemy lines due to the new technology.

Unfortunately this technology is not on the current market. BAE Systems believe their
new ideas within the aircraft sector will be in production sometime before 2040, as
previously mentioned. However this expectation will always fluctuate due to new
technology continuously becoming available as time goes on.

4 Impact of Emerging Technology on Strategic Position

4.1 Current Strategic Position

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The current strategic position of BAE Systems has been thoroughly analysed
throughout the report. It has been determined that BAE has an incredibly strong
position with the defence industry. However there is always room for improvement,
as BAE strive to be the best in their industry. The position of company will change by
adapting new strategies and new innovations.

4.2 New Strategic Position

The technology discussed in the previous chapter will possibly impact the strategic
position of BAE Systems. The impact on the strategic position can be determined to
be a successful one. The new technology will have a huge affect on the engineering
industry if successful. BAE will have one of the most innovative and safest aircrafts in
production. This will lead to new customers and current customers spending more
money on BAE’s new product.

With using this new technology it would have effects on both the primary and
secondary activities in the value chain. The chain (Figure 5) highlights employees are
the core competence. The staff would need to be trained to manufacture this new
product with new machines, as it is does not use the same materials as other
aircrafts currently in production at BAE. The next stage would be inspection. Again
new techniques would need to be developed to thoroughly inspect the product, as it
is different from other aircrafts. After the inspection stage BAE would again use their
experience within marketing & sales. Finally in the service activity it would affect the
maintenance of the products. Different maintenance techniques would need to be
adapted in this situation. In the secondary activities the main change would be in the
technology section. The new technology will substantially improve the section and set
BAE apart from their rivals. These changes will help increase the overall profit margin
of the company.

There would be a large effect on competition once BAE’s technology is in production.

‘The Survivor’ will become the best aircraft on the market, therefore BAE will
hypothetically generating more revenue than their competitors in the aircraft sector. It
can be said for certain as it is not possible to predict the future on how successful
they will become on this venture. The extra revenue means BAE would have more
profit to invest in other projects giving them a further competitive edge over their
opponents. This would force competitors to invest or risk falling behind rivals.

The technology would have a positive effect on the strategic position of BAE. Like
every company, BAE will always have the threat of new entrants. However with ‘The
Survivor’ in production it would require a larger capital cost for a new company to be
able to compete with BAE’s designs. This would raise barriers to ensure no
newcomers within the defence industry. Once ‘The Survivor’ became a successful
product (cash cow) it allows BAE to invest in struggling products and improve their
position within the market.

4.3 Impact on SWOT

Strengths Effect(+,- or N/A)

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Good Reputation +

History/Experience +

High Bargaining Power Suppliers N/A

Strong R&D Department +

Investment in New Technology +

Weaknesses Effect(+,- or N/A)

No involvement in private sector N/A

High Transaction Costs N/A

Strong Competitors +

Opportunities Effect(+,- or N/A)

New Markets N/A

Technology Development +

Expand +

Threats Effect(+,- or N/A)

Ethical Pressure _

Economic Crisis N/A

Raw Material Increase +

Figure 9

4.4 Summary

Overall the new technology will have a positive effect on the SWOT. Although there
is improvement, there isn’t enough to change any weaknesses to strengths. The new

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technology helps BAE move in the right direction and drive them to become the most
successful and innovative company within the industry.

5 Conclusion

This chapter is an overall summary of the report which answered the question below:

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‘Critically evaluate the Strategic Position of BAE Systems and how emerging
technology may impact on the future position of the organisation’
The analysis determined that the defence industry is a largely regulated industry with
fierce competition. Companies within this sector are put under severe ethical
pressure as many people don’t believe in war and also want safer equipment for the
soldiers. The main threat to BAE Systems that was highlighted within porter’s five
forces is the threat of substitution. This constant threat is what causes rivalry
between companies and what drives the companies into creating new products. BAE
strives to be the best and always have the competitive edge over competition.

It would be wise for BAE to expand their markets and sell to the private sector. Some
of BAE’s top competitors have already have taken this path, therefore it is unusual
that BAE hasn’t also took this direction. Another benefit would be that BAE would no
longer depend on government contracts for business

In conclusion BAE Systems is one of the top innovative companies in the industry
with a strong strategic position. BAE’s main strategy is to meet the needs of the
government which could be altered to access more markets and generate more
revenue.

6 References

Anderrson, G. G. (2011). Shifting landscapes [Defence industry]. Engineering &

Technology

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C. Hill and G Jones, Essentials of Strategic Management, 2nd Edition, 2009

David Campbell, Bill Houston, and George [Link] Strategy: An

Introduction. Palgrave Macmillan, 2002.

Gates, E. (2004). The defence firm of the future. Defence & Peace Economic

Miles, R;Snow, C (1978) Organisation strategy: structure and process, McGraw Hill

Porter, M. E. (2008). The Five Competitive Forces that Shape Strategy

Sanderson, J. (2009). Buyer-Supplier Partnering in UK Defence Procurement

Internet Sources

[Link]

[Link]

[Link]

[Link]
DefenceFor/Business/DefenceIndustrialStrategy/

[Link]

[Link]
Files/B/BAE-Systems-Investor-Relations-V2/Annual%20Reports/BAE-annual-
[Link]

7 Appendix

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Appendix A

Number Product ( Aircraft ) Section

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1 BAE Systems Taranis ?

2 BAE Systems Mantis ?

Unmanned Aircraft
3 Eurofighter Typhoon Cash Cow

4 McDonnell / BAE QF-4 Cash Cow

5 BAE 146-200 Cash Cow

6 Panavia Tornado IDS GR.4 Cash Cow

7 BAE Sea Harrier FA2 Star

8 BAE Hawk 128 Cash Cow

9 BAE/ Hawker Siddely Dog

Nimrod
10 The Survivor ?

11 Transformer ?

Appendix B

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Appendix C

Competitive
Advantage
Lower Cost Differentiation

Broad
Target
Cost Leadership Differentiation

Competitive
Scope

Cost Focus Focus

Narrow Determination
Target

Appendix D

Product

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Present New

Present Market Penetration

Product Development
Consolidation

Market

Market Development Diversification

New

Market Scope

Appendix E

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