Table of Contents:

Introduction:................................................................................3

Macro-environmental (PESTEL) Analysis of Lockheed Martin:....3

Porter’s 5 Forces analysis of Lockheed Martin:...........................6

Business Portfolio strategy (GE –McKinney’s 9 Cell matrix):.......9

Balance Score Card of Lockheed Martin:...................................12

References.................................................................................15
Introduction:

Lockheed Martin is an American global aerospace and defense technology company. The company was
founded in 1995 with the merger of Lockheed Corporation and Martin Marietta.

Lockheed Martin is one of the largest defense contractors in the world, providing advanced technology
systems, products, and services to government and commercial customers worldwide. The company
operates in four business segments: Aeronautics, Missiles and Fire Control, Rotary and Mission Systems,
and Space.

The Aeronautics segment is involved in the design, development, and production of military aircraft,
including fighter jets such as the F-35 Lightning II, transport aircraft, and unmanned aerial vehicles
(Lockheed Martin, 2023)

Macro-environmental (PESTEL) Analysis of Lockheed Martin:

Political Factors:  The country's political stability and the role of the Aerospace/Defense
Products and Services industry in the economy are important factors to
consider.
 There is a risk of military invasion that could impact the industry.
 Corruption is a concern, especially within the Industrial Goods industry.
 Government interference and bureaucracy can affect the Aerospace/Defense
Products & Services business.
 The legal framework for contract enforcement is an important consideration.
 Protection of intellectual property is crucial for the industry.
 Tariffs and trade rules may favor certain business partners in the industrial
goods sector.
 Antitrust laws are relevant to the Aerospace/Defense Products and Services
industry.
Economic Factors:

 The quality of the infrastructure in the Aerospace/Defense Products &

Services industry is an important factor to consider.
 It's important to assess the comparative advantages of the host nation
and the Industrial Goods industry in the specific country.
 The level of workforce skills in the Aerospace/Defense Products &
Services industry is important to consider.
 The level of education in the economy is a relevant factor to assess.
 Labor costs and economic productivity are important considerations for
the industry.
 The stage of the business cycle (such as prosperity, recession, or
recovery) is relevant.
 The rate of economic growth is an important factor to consider.
 Income from discretionary sources is a relevant factor.
 The unemployment rate is important to assess.
 The inflation rate is a relevant factor to consider.
 Interest rates are an important consideration.

(Straw, 2010)

Sociocultural Factors:

Population demographics and skill levels are important to consider.

Society has a class structure, hierarchy, and power structure that can impact the
industry.

The education level and standards of Lockheed Martin Corporation are important
factors to assess.

Gender roles, societal customs, and similar factors can impact the industry.

The level of entrepreneurship and overall character of society are relevant factors to
consider. Some societies encourage entrepreneurship more than others.

Attitudes, such as awareness of health and the environment, are important to assess.
(Straw, 2010)

Technological Factors:

 It's important to consider recent technological developments from

Lockheed Martin Corporation's competitors.
 The influence of technology on product offerings is an important factor to
assess.
 Technological changes can impact the cost structure of the
Aerospace/Defense Products and Services industry and the value chain
structure of the Industrial Goods sector.
 The rate of technological diffusion is an important factor to consider.
(Straw, 2010)

Environmental Factors:

 Changes in the climate are a relevant factor to consider.

 Legislation related to environmental pollution is an important
consideration.
 Regulations related to air and water pollution are relevant to the
Aerospace/Defense Products & Services industry, while recycling and
waste management are important in the Industrial Goods sector.
 Attitudes towards environmentally friendly products are important to
assess.
 The impact on threatened species is a relevant factor to consider.
 Support for and attitudes towards renewable energy are important to
assess.

(Johnson, 2018)

Legal Factors:

 Antitrust laws are relevant to the Aerospace/Defense Products &

Services industry and throughout the country.
 Laws related to discrimination are an important consideration.
 Patents and intellectual property laws are important to assess.
 Laws related to consumer protection and electronic commerce
are relevant.
 Employment legislation is an important factor to consider.
 Health and safety regulations are a relevant consideration.
 Data security is an important factor to assess.
 (Straw, 2010)

Porter’s 5 Forces analysis of Lockheed Martin:

According to Porter's Five Forces, there are five key forces that determine the profitability and
attractiveness of an industry, including the threat of new entrants, the bargaining power of suppliers and
buyers, the threat of substitute products or services, and the intensity of competitive rivalry within the
industry (Pawar, 2019)

In the case of Lockheed Martin, a leading aerospace and defense company, we can analyze its
profitability and potential attractiveness to new entrants through the lens of Porter's Five Forces:
Threat of New Entrants:

The aerospace and defense industry have significant barriers to entry,

including high capital requirements, complex technology, and strict
regulations. Additionally, existing players like Lockheed Martin have
established brands, strong relationships with governments, and long-
standing contracts that make it difficult for new entrants to compete.
Therefore, the threat of new entrants is relatively low, and it is unlikely
that new competitors will emerge and erode Lockheed Martin's
profitability in the near future (FILIPE, et al., 2020)

Bargaining Power of Suppliers:

Lockheed Martin has significant bargaining power over its suppliers

due to its size, scale, and long-term relationships. The company also
has the ability to vertically integrate and bring certain functions in-
house, further reducing its reliance on external suppliers. Therefore,
the bargaining power of suppliers is relatively low, and it is unlikely
that suppliers will significantly impact Lockheed Martin's profitability
(FILIPE, et al., 2020).

Bargaining Power of Buyers:

Lockheed Martin's primary customers are governments, which have

significant bargaining power due to their ability to negotiate prices and
terms of contracts. However, the company's long-standing relationships
with many governments, combined with the high switching costs
associated with changing suppliers, gives Lockheed Martin some
leverage in negotiations. Therefore, the bargaining power of buyers is
moderate, but unlikely to significantly erode Lockheed Martin's
profitability (Kuchkorov, 2023).
Threat of Substitute Products:

The aerospace and defense industry is highly specialized, and there are
limited substitutes for the products and services that Lockheed Martin
provides. Therefore, the threat of substitute products is relatively low,
and it is unlikely that substitutes will significantly impact Lockheed
Martin's profitability (Riffard, 2016).

Intensity of Competitive Rivalry:

Lockheed Martin operates in a highly competitive industry, with other

large players like Boeing, Northrop Grumman, and Raytheon also vying
for market share. However, Lockheed Martin's strong brand, deep
expertise, and established relationships give it a competitive advantage
over many of its rivals. Therefore, while the intensity of competitive
rivalry is high, Lockheed Martin is well-positioned to maintain its
profitability (Riffard, 2016).

Overall, based on the analysis of Porter's Five Forces, it is unlikely that new entrants will significantly
erode Lockheed Martin's future profitability. While there are competitive pressures and risks, the
company's established brand, strong relationships, and deep expertise make it a formidable player in the
aerospace and defense industry.

Business Portfolio strategy (GE –McKinney’s 9 Cell matrix):

The GE-McKinsey 9 Cell matrix is a tool used to assess a company's business portfolio and recommend a
strategy based on its growth potential and market position. This matrix is similar to the BCG matrix, but
it takes into account more factors such as industry attractiveness, competitive strength, and business size
(Zukowski, 2006).

Now, let's use the GE-McKinsey matrix to recommend a strategy for Lockheed Martin, a global aerospace
and defense company.

First, we need to identify the key factors to consider when evaluating Lockheed Martin's business
portfolio:

Market growth rate: The rate at which the overall market for aerospace and defense products and
services is growing.

Market size: The total size of the market for aerospace and defense products and services.
Competitive position: Lockheed Martin's competitive strength within its industry, including its market
share, brand reputation, and technological capabilities.

Industry attractiveness: The overall attractiveness of the aerospace and defense industry, including
factors such as profitability, market size, and growth potential.

Synergies: The potential for synergies and economies of scale between Lockheed Martin's different
business units.

Based on these key factors, we can place Lockheed Martin's different business units into the GE-
McKinsey matrix as follows:

As shown in the matrix, Lockheed Martin's Aeronautics and Space

Systems divisions are in the upper-right quadrant, indicating high
industry attractiveness and high business unit strength. These
divisions have strong market positions and are involved in cutting-edge technology development, making
them highly attractive for investment and growth (Gikunda, 2012)

Lockheed Martin's Missiles and Fire Control division falls into the
upper-middle quadrant, indicating high industry attractiveness but
medium business unit strength. This division produces a wide
range of missile systems and defense electronics and may require
additional resources to strengthen its position and fully capitalize
on market opportunities.

Lockheed Martin's Rotary and Mission Systems division falls into

the upper-left quadrant, indicating high industry attractiveness
but low business unit strength. This division produces military and
civilian communications systems and may require significant
investment and restructuring to become competitive.

Lockheed Martin's Information Systems and Global Solutions

division falls into the middle-right quadrant, indicating medium
industry attractiveness but high business unit strength. This
division provides IT services to government and commercial
clients and has a strong competitive position in its market.

Lockheed Martin's Commercial Engine Solutions division falls into

the middle-left quadrant, indicating medium industry
attractiveness but low business unit strength. This division
provides aftermarket services for commercial aircraft engines and
may be worth divesting or restructuring to improve its position.

Lockheed Martin's Training and Logistics Solutions division falls into

the lower-right quadrant, indicating low industry attractiveness but
high business unit strength. This division provides training and
logistical support for military and commercial clients and may be
profitable but may not offer significant growth potential.
 Overall, based on the GE-McKinsey 9 Cell matrix, we would recommend that Lockheed Martin invest
further in its Aeronautics and Space Systems divisions, hold its Information Systems and Global Solutions
division, and divest or restructure its Commercial Engine Solutions division. The remaining divisions
require careful consideration as to whether they should be held, divested, or require further investment,
based on a more detailed analysis of their strategic position and market.

Balance Score Card of Lockheed Martin:

Perspective Objective Measures Targets Initiatives

Expand market share
4% increase in 2020 (Lockheed
Revenue growth through acquisition of
Martin, 2020)
new companies
Reduce costs through
Net profit margin of 10.7% in lean manufacturing
Increase revenue Profit margins
Financial 2020 (Lockheed Martin, 2020) and supply chain
and profitability
optimization

Increase investment in
Return on 28.2% in 2020 (Lockheed
high-growth areas such
investment Martin, 2020)
as space exploration

Ranked highest in customer

Enhance customer
Customer satisfaction among large
communication and
satisfaction defense contractors (J.D.
feedback mechanisms
Improve customer Power, 2020)
Customer satisfaction and High customer retention rate
retention with long-standing Develop long-term
Customer retention relationships with the U.S. partnerships with key
Department of Defense and customers
other government agencies
Reduced greenhouse gas Implement lean
Process efficiency emissions by 17% since 2010 manufacturing and six
Enhance
(Lockheed Martin, 2020) sigma principles
Internal operational
Processes efficiency and 99.9% on-time delivery rate Improve quality
product quality and a 99.7% product quality control processes and
Product quality
acceptance rate in 2020 invest in automation
(Lockheed Martin, 2020) technologies
Develop new
Invested $1.7 billion in
Research and technologies for space
research and development in
Foster a culture
Learning and of innovation and defense
Innovation continuous
learning

The balanced scorecard is a management tool used to measure organizational performance from four
perspectives: financial, customer, internal processes, and innovation and learning. This dashboard aims
to measure the performance of Lockheed Martin from each of these perspectives (Norton, 1992)

Financial Perspective:

The financial perspective measures the company's financial performance, including revenue, profit
margins, and return on investment. Lockheed Martin's financial performance can be measured through
the following metrics:

Revenue Growth: This metric measures the increase in the company's revenue over time. According to
Lockheed Martin's financial reports, the company had a revenue growth of 4% in 2020.

Profit Margins: This metric measures the profitability of the company. Lockheed Martin's profit margins
have been consistently high, with a net profit margin of 10.7% in 2020.

Return on Investment: This metric measures the return on investment for the company's shareholders.
Lockheed Martin's return on investment was 28.2% in 2020.

Customer Perspective:

The customer perspective measures the company's ability to deliver value to its customers. Lockheed
Martin's customer performance can be measured through the following metrics:
Customer Satisfaction: This metric measures the level of satisfaction of Lockheed Martin's customers.
According to a survey conducted by J.D. Power, Lockheed Martin ranks highest in customer satisfaction
among large defence contractors.

Customer Retention: This metric measures the company's ability to retain its customers. Lockheed
Martin has a high customer retention rate, with long-standing relationships with the U.S. Department of
Defence and other government agencies (Shukor Sanim M. Fauzi, 2009).

Internal Processes Perspective:

The internal processes perspective measures the company's internal operations and processes. Lockheed
Martin's internal process performance can be measured through the following metrics:

Process Efficiency: This metric measures the company's ability to execute its processes efficiently.
According to Lockheed Martin's 2020 sustainability report, the company has reduced its greenhouse gas
emissions by 17% since 2010.

Product Quality: This metric measures the quality of Lockheed Martin's products. According to the
company's 2020 sustainability report, the company has a 99.9% on-time delivery rate and a 99.7%
product quality acceptance rate (Kevin M. Taaffe, 2014)

Innovation & Learning Perspective:

The innovation and learning perspective measure the company's ability to innovate and learn from its
experiences. Lockheed Martin's innovation and learning performance can be measured through the
following metrics:

Research and Development: This metric measures the company's investment in research and
development. According to the company's 2020 sustainability report, Lockheed Martin invested $1.7
billion in research and development in 2020.
Employee Training: This metric measures the company's investment in employee training and
development. According to the company's 2020 sustainability report, Lockheed Martin provided over 6.7
million hours of employee training in 2020 (Lockheed Martin, 2020)

This balanced scorecard dashboard provides a comprehensive overview of Lockheed Martin's

performance from each of the four perspectives. It is evident that the company is performing well in
each of the perspectives, indicating a strong overall performance. By regularly tracking these metrics,
Lockheed Martin can identify areas for improvement and make necessary adjustments to continue its
success.

References

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3. Johnson, G., 2018. Exploring Strategy. s.l.:s.n.

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process control. Journal of Quality in Maintenance Engineering.

5. Kuchkorov, I., 2023. S.W.O.T and Porter`s Five Forces.

6. Lockheed Martin, 2020. Sustainibility report Propalled By Principle , s.l.: s.n.

7. Lockheed Martin, 2023. About us. [Online]

Available at: https://www.lockheedmartin.com/en-us/who-we-are.html
[Accessed 12 4 2023].

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Harvard Business Review .

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Journal of Physics.

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