Magazine article National Defense

Partnerships Key to Corporate Survival

Magazine article National Defense

Partnerships Key to Corporate Survival

Article excerpt

Aerospace and defense industries develop global market strategies

Technology exchange and cooperative ventures are the wave of the future in the defense marketplace. While having a European partner is about the only way a U.S. company can hope to penetrate European defense markets, European companies who want to bid on U.S. Defense Department contracts have the same kind of problems in this country.

Firms in high-technology defense industries report that partnerships are major facets of their foreign marketing strategies. Even commercial aerospace projects such as aircraft and rocket boosters are regarded as strategic national assets, and in consequence their markets are strongly influenced by government action. As the French firm Aerospatiale discovered in developing a new transport plane, only an American partner can afford adequate access to the U.S. aircraft market.

Partnerships usually reflect the attempts of corporations, under competitive pressure of an increasingly global economy, to circumvent lingering trade restrictions.

Governments attempting to limit penetration of their domestic markets will find themselves thwarted by a partnership between a local and foreign company. The political effect of international business partnerships is the erosion of economic sovereignty.

Companies look for partners in joint ventures, both domestic and foreign, with a single goal-synergism. As a rule, they search for a partner whose strengths will offset their own weaknesses. In the late 1980s, for example, Lockheed, with spare transport aircraft production capacity, teamed up with Airbus Industrie, which needed a U.S. manufacturing base.

This process usually is driven by market forces, but at times fueled by governmental "incentives" as well. U.S. budget trimming in the last decade has reduced the availability of defense contracts, with the ensuing intensification of competition. The result has been a substantial increase in teaming-to share work, risk, and technology. Market growth is often the chief concern.

Similar occurrences are conspicuous within the European Union (EU). Collaborative ventures among European companies have produced several large aircraft such as the Concorde, the Airbus 300, and the Airbus 330/340, as well as a host of smaller aircraft and an array of military equipment. The ability of respective European companies to share costs, markets and production facilities has enhanced their competitive position vis-a-vis their powerful U.S. competitors.

Faced with maintaining their technological position in a world where U.S. and Japanese companies spend billions of dollars on research, many smaller European companies have specialized in technological niches.

The Eureka Project, a publicly funded multilateral program, is a salient example. This multibillion-dollar endeavor was originally designed to stimulate private sector research and development (R&D), and to disseminate the results throughout European high technology industry by encouraging joint R&D ventures.

Antitrust legislation in the late 1980s in both Europe and the United States added impetus to joint ventures. For its part, Japan has never had any significant legal restrictions on joint venture activity. European and U.S. legislation have displayed heightened awareness that joint ventures are a useful instrument in efforts to maintain technological capacity and economic status. …

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