Season 3

Team: The Intoxicated
Arpita Mathur N

Tushar Singhal

Sristi Gupta

 Milco can consider stepping out of the Military Facility Construction segment due to tremendous competition and very insignificant market share. Although having strong revenues. China. data analytics and cognition and cyber security can also be adopted. The market share for the MRO IT systems can be increased through M&A with competitors B and D which will enable better technology solutions and bring down costs.Executive Summary  Milco is a leading Aerospace and Defense provider in the US with core products such as Military Flight Simulators (MFS) and MRO technology systems. Milco can also focus on expanding the MFS segment internationally. Infact there is no increase in demand for MFS and its services over the next 5 years. . India and Brazil are going to increase their defense budgets and they can be the new markets that Milco can target. as well as corresponding services. The financials of the company are doing good right now but the projected financials for 2019 do not show any significant growth in any segment. Technological innovations like ISR. and also because of increasing global focus on sea-air operations. Countries like Russia. Milco will need to adapt to the budget cuts by the US Government and increasing competition by new market entrants. This in turn will create greater demand for the products in the new markets that Milco can venture into.

Tax is calculated on the taxable income (Operating Profit) 2.46 Working Note: 1. COGS & Sales Product COGS ($M) Revenue($M) Flight Simulator 360 600 MRO IT Systems 180 300 Flight Simulator Instruction 120 350 Flight Simulation Maintenance 200 400 MRO IT System Services 115 230 Military Facility Construction 75 125 1050 2005 Particulars Amount ($M) Sales 2005.8 MRO IT System Services 320 25 12.Basic Income Statement .Milco Expenses Particulars Income Amount ($M) Cost of Goods Sold 1050.00 SG&A 421.00 Tax 64.8 Military Facility Construction 500 25 20 2100 106.) Depreciation ($M) Flight Simulator 320 10 32 MRO IT Systems 320 20 16 Flight Simulator Instruction 320 25 12.4 .00 4.00 D&A 106.14 Profit after tax 23.8 Flight Simulation Maintenance 320 25 12.40 Interest 340. Depreciation and Amortization Product Value ($M) Lifespan (yrs. WACC is used as the interest rate for the Long Term Debt 3.

67 191.9 100 100 66.67 66.67 59 MRO IT Systems 66.66 100 99.Financial Performance  Milco has made profit but profits have been declining since 2011 and will continue to decline till atleast 2019 (projected data) (Assumption: Milco is among the top 20 defense companies in the US) Product/Service Profit % 2014 Military Flight Simulator 66. Milco might consider an exit from the military facility construction segment due to  Only 0.66 191.67 100 Military Flight Simulator Instruction Military Flight Simulation Maintenance MRO IT System Services Military Facility Construction  2019 Although profitable.1% of US market share and 6% of Milco’s business  Extremely large competition in US market (>100 companies)  Global requirement to conduct operations without direct access to airfields and land bases  Market contraction for concentrating more on the primary products (MFS and MRO IT) .

and Military Flight Simulator Instructions and Maintenance.Competitive Position Competitor Analysis Major Business Competitor A Competitor B Competitor C Competitor D Competitor E MFS na MRO IT na Competition Segment with Milco MFS Significance in the US market share (wrt Competition Segment) Very High Future Planning International na MRO IT & MRO IT & Services Services MRO IT & MRO IT & Services Services Very Low High Very Low Very Low Expand MRO Expand IT Solutions Shut down MRO Entering Military Market Milco is currently the market leader in Military Flight Simulator. Competitor C is the market challenger . Competitor A is the market challenger It is also safe to assume that Milco is market leader in MRO IT System and Services.

Recommendations for Milco  Investment: It should try to explore international markets for Military Flight Simulators because:        Primary source of revenue for Milco (30%) No growth in demand in the US from 2014 to 2019. Russia. South Korea. greater need for Military Flight Simulators Collaboration: It can consider a M&A of the MRO IT System segments with competitor D and also B because:     Many players in the market (>15). M&A will give quick access to greater market share Competitor D wants to exit the MRO market Competitor B’s plans to expand MRO offerings will enable better technology and IT solutions which will bring down costs and also create greater demand. esp. 2013) Competitor A planning to do the same Defense spending increasing in Middle East. India. declining projected profits US defense expenditure about to be cut by US$52 billion every year for next 9 years (Budget Control Act. in international markets The market in US is also currently growing (US$3 bn increase in market size in 2014) . China. Brazil and Japan Global shift towards sea-air operations.

Iraq etc.Going Global  Adaptation: Expand internationally:     Brazil. Six Sigma technology .  Terrorism has declined in the developed nations.). Pakistan. India and Russia to provide maximum defense budget increase Indonesia’s growth has led to increased military investment Russia has pledged nearly $1 bn for Russian aerospace industry China’s interest in East and South China Sea will create more requirement for air and sea carriers. but increased greatly among lowincome nations (India. Computer Aided Design. China. Thus an increase in their defense budgets  Technological innovations:     Cyber security ISR Data analytics & cognition Investment in next generation technologies that can be developed and maintained at lower costs: Digital product development.

Collaborate and Invest.Bibliography   2014 Global Aerospace and Defense Industry Outlook. by Deloitte. Global Defense Outlook 2014 – Adapt. THANK YOU . by Deloitte.