R&D, offshore expansion among top priorities for aerospace, defence industries
July 7, 2015 By KPMG Aerospace
While mature aerospace and defence (A&D) markets continue to stagnate, companies are under pressure to deliver to investors and shareholders, and Canada may be an attractive option for growth. KPMG International's 2015 Global Aerospace and Defense Outlook finds organizations are looking for any opportunity to sustainably reduce costs and create new growth platforms.
Over the next two years, keeping the business model competitive is the biggest challenge for A&D organizations (38 per cent). Historically, the US and the UK have turned to China and India when looking to remain competitive through international expansion. But, from acquisition prospects to supply chain development to significant federal funding programs (as outlined in the federal Economic Action Plan), Canada may now be looking like a more promising player.
Key findings from the survey results include:
- Increasing sales and decreasing spend – to build strength, remain relevant and meet important targets, 53 per cent of respondents say sales growth is their top strategic priority over the next two years, followed by the 47 per cent who cited reducing their cost structure.
- Opportunities overseas – overseas expansion and portfolio shaping will create new growth opportunities. More than a quarter of respondents say they will enter into new geographic markets, which could represent a growth opportunity for Canada.
- Investing in research and development – investment in research and development (R&D) will increase as organizations look to new technologies and services for growth. Forty-one per cent of companies plan to spend in excess of six per cent of revenues on R&D over the next two years, a 13 per cent increase compared to the last two years. Half of all respondents say they expect new manufacturing technologies to drive future innovation.
- The supply chain of tomorrow – A&D organizations are reorganizing their supply chains to support future global growth and reduce working capital. A third of all respondents list restructuring the supply chain as a top priority this year and more than half are focused on lowering costs and working capital levels across the entire supply chain.