To thrive in this environment, defense contractors can no longer rely on a classic arm’s-length framework, in which a U.S.-based defense company, for instance, does business with a foreign country only as an exporter of products. Instead, defense contractors will be building closer relationships with more countries: assessing each market individually, deciding which are appropriate to do business with, and designing programs tailored to each country for business development, industrial participation by local businesses, and long-term investment. This is particularly important for U.S. contractors, which are somewhat hamstrung by the strong dollar. As U.S. products become more expensive than similar equipment produced in non-dollar denominated countries, American defense companies will have to “sell” cooperation and collaboration as a valuable benefit that makes it worthwhile and affordable for foreign customers to access U.S. military devices and technology. Defense contractors should focus on the following six critical rules.
1. Think long-term
Investment and partnerships in the local economy are now a cost of doing business long before any defense contract is signed. Gone are the days when a company could simply show up and bid on a lucrative contract. For access, companies need to demonstrate commitment to the military and industrial base and a willingness to transfer technology and skills beforehand. Given that the return on this kind of investment might be 10 years or more, some companies will struggle to justify the expense. But at least a few contractors see this as a winning strategy. For example, Rolls-Royce has established an engineering center in India to train 1,500 locals, just one part of a deep involvement in the country that the company believes will bolster its defense aviation business. As India places more emphasis on its “Make in India” campaign, it will “allow companies like us to further support the country’s modernization needs,” said Kishore Jayaraman, Rolls-Royce president for India and South Asia, in an article on the website Aviation & Defence Universe.
2. Study history