Globalization Theories in the Defense Industry

Topics: Military budget of the United States, Military budget, Keynesian economics Pages: 13 (3544 words) Published: January 15, 2013

DCU Business School
EF 410
Lecturer: Dr. Siobhain McGovern Student: Stéphane Peretti
Student ID: 1111 4207
Word count: 3098


Project Submission Form

Project Title:| Defense industry analysis|
Module code:| EF410 – Globalisation|
Lecturer:| Dr. Siobhain McGovern|
Project Due Date:| Monday, January 14th, 2013|

DeclarationI the undersigned declare that the project material, which I now submit, is my own work. Any assistance received by way of borrowing from the work of others has been cited and acknowledged within the work. I make this declaration in the knowledge that a breach of the rules pertaining to project submission may carry serious consequences.I am aware that the project will not be accepted unless this form has been handed in along with the project.|

Name| Student No| Signed|
Stéphane Peretti| 1111 4207| |

Table of contents:


A. The industry analysis: a constructive overviewP.6

1. Who are the main buyers?P.6

2. Who are the main sellers?P.6

3. Where are the developed & future markets?P.7

4. How importance is cost reduction?P.8

5. What is the Research & Development focus?P.8

6. What are the main challenges facing the industry?P.9

7. Dunning’s OLI model of internationalization P.10

B. Globalization theory: Governmental intervention P.10

1. Adam Smith on the role of State intervention P.11

2. Chomsky on free market and Keynesian intervention P.13

Conclusion P.16

References P.17

The defense industry is becoming increasingly competitive due the stagnating or decreasing in the developed countries military expenditure (especially the United States and Europe); as a result, new buyers have reached these contractors (who nearly all belong to the same developed countries above), but the industry’s new market development is greatly restrained by government regulation and political intervention. This commerce has also evolved beyond the traditional products to have an increasing percentage of services, like cyber-protection and C4I (communication, control, command, computers and intelligence).

A. The industry analysis: a constructive overview

1. Who are the main buyers?

Governments compose the main body of buyers in the arm industry; McFarland (2011) describes the current market with monopsonistic buyers, meaning that a single buyer, looking for a particular product or service, will receive offers from several competing companies. The arms industry demand is mainly contract-based; producing small orders at high unit costs. The United States of America are, by far, the biggest client in the defense market; in 2010, the US government represented 42,8% of the world military expenditure, in front of China (7.3%), the United Kingdom (3.7%), France and Russia (3.6%).

2. Who are the main sellers?

In the top 100 defense contractors, 47 are based in the United States, 10 in the United Kingdom, 8 in Russia, 6 in Japan and 5 in France; the top 8 shows a similar structure, with 5 American, 1 British, 1 European and 1Italian corporation. Their 2010 defense revenues ranged from 10 to 30...
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