BAE Systems

BAE Systems, Europe’s largest defence contractor were formed in the year 2000 when Marconi Electronic Systems merged with British Aerospace. BAE Systems is an international company who is proud of its role as one of the leaders in the defence sector with operations across five continents. BAE now operate in over 100 countries. Although BAE Systems can trace their history back to 1560, the merged companies are still relatively new.

At BAE Systems there are main management groups who are answerable to the chief executive. One group is responsible for the marketing direction, finance, communications and strategy of the company, another group is responsible for the audit, co-operation and management structure side of the business, and the last group is responsible for the actual products. Each person of the committee heads up their specific division and they have many managers around the world that answer to them. Each manager, in turn, oversees many project leaders and each project leader oversees each of the team leaders that operate on the different sections of a project. Beyond the team leaders are the normal employees which make up most of BAE’s 100,000 strong work force. In 2007 the chief executive took home over £900,000 including bonuses, the rest of the executive committee took home between £400, 000 and £650,000. A new employee in to the company, depending on experience, typically starts on £30,000. (BAE Systems, BAE Systems Annual Report 2008, 2009) Lockheed Martin is one of BAE Systems biggest rivals they have over 140,000 employees with their chief executive taking home £6,900,000 in 2007. (Reuters UK, 2009). The chief executive of BAE Systems in 2001, John Weston, was the chief executive of British Aerospace before the merger, his average yearly pay before and after the merger was £650 000. This compares to the current CEO who earns over £900,000.

BAE Systems divides its business into five business groups: electronics, intelligence & support, land & armaments, programs & support, international businesses, and HQ & other businesses. The company’s business model is based around its six key home markets, UK, Sweden, Saudi-Arabia, Australia, South Africa, and USA. Their plans involve growing their presence within these markets. As well as selling their products, they also increase growth by acquiring and partnering with other business that will allow them to increase their presence and productivity. They have specifically targeted growth in emerging and developing markets such as Africa and Asia.

In 2001 BAE Systems came twelfth for USA defence contracts worth $2,881,194,622 where as Lockheed Martin was rated top with contracts worth $19,419,289,026. This compares to BAE systems moving up the rankings to sixth in 2007 winning $8,338,652,180 f US contracts. Lockheed Martin remained top. (Fed Spending, 2008)
This increase in the amount of US contracts won by BAE Systems and by moving up the rankings by six places in 6 years clearly shows that part BAE Systems’ strategy is to grow their US market. In 2003, BAE Chief Executive, Mike Turner made known the fact that he wanted better access to the Pentagon’s growing defence budget. He said: “The market place is in the US, the technology is in the US; that is where the spending is..” (James Ashton, The Scotsman 17th June 2003).

BAE Systems’ expansion in the US is quite simply that Britain and Europe were spending less on armament while the US budget remained huge and growing (over 45% of all the world’s military expenditure). (David Leigh Guardian.co.uk 7th June 2007) is another reason why BAE were increasing their contracts in the US. In 2009 BAE Systems reported a 31 per cent surge in annual profits resulting from an increase in military spending to support forces fighting overseas. The company’s order book grew by 20 per cent helped by a 15 year UK munitions contract and further orders for land vehicles for the US military. The weakness of the pound against the dollar has also boosted the figure. BAE Systems has successfully targeted the higher-growth sectors of the US defence market, while the scale of recent military operations, including Iraq and Afghanistan has boosted its land systems operations. (Peter Ranscombe, The Scotsman 20/02/2009.) BAE Systems have bolstered their exposure in the US because of their acquisition of Armor who are a major supplier of kit to the military and security forces.

BAE Systems is registered with the London Stock Exchange. The company’s share price on 27th March 2009 was valued at 330.70p. As there are 3,528.45 million BAE System’s shares, the current market value of the company is estimated at over £11.5 billion. For 2008 the company made a 49.6p profit per share. (Digital -Look, nd) This compares with the company value in the year 2000.

During the period between 2000 and 2008, BAE systems successfully expanded and their yearly profit rose from 368 million in 2001 to 1,768 million in 2008. Lockheed Martin in 2008 made £2,316 million which is approximately 35% higher profit than BAE Systems. (CNN Money, 2007)

My personal reflection is that BAE Systems is a large profitable company; they require extensive communication to allow them to achieve their business strategies. Their strategy is "to deliver sustainable growth in shareholder value by being the premier global defence and aerospace company.") (BAE Systems, director's report.) They have implemented a 'good housekeeping system' as well as incorporating the Japanese 5S work environment technique in to their company structure. (The manufacture, February 2009) With this technique it requires short sharp decision making sessions in the form of weekly group performance review and a fortnightly continuous improvement reviews, this helps them achieve a 90% manufacture time. Overall BAE Systems’ strategy is specifically tailored to deliver maximum dividends to their shareholders. Part of their strategy is to increase sharing of expertise, technology and best practice between their global businesses. The objectives are directly underpinned by a set of financial performance indicators that are regularly reported to the board and linked to executive remuneration. This is a meaningful way to assess performance. BAE Systems have an effective management of risk and their approach is to remove,or reduce the likelihood and effect of risks before they actually happen, and to be able to deal with problems if they occur. (BAE Systems Annual Report 2007.) In this current climate BAE Systems are committed to be more efficient through 'lean techniques' (Greg White, vice president electronic & integrated solutions) and assess all its functions, as well as its partners, to take out steps, time and cost.



Bibliography

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BAE_Systems. (2007, February 27). Strategy. Retrieved March 30, 2009, from BAE Systems Strategy: http://production.investis.com/investors/overview/strategy/annual06

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Systems, B. (2009, January 01). Organisation Charts. Retrieved March 29, 2009, from BAE Systems: http://www.baesystems.com/AboutUs/CompanyStructure/OrganisationChart/index.htm

CNN Money (2007), Fortune Global 500, Retrieved April 2nd 2009, from http://money.cnn.com/magazines/fortune/global500/2007/snapshots/263.html

Reuters UK, (27 February 2009), Lockheed Martin CEO's cash pay rose in '08, Retrieved April 2nd 2009, http://uk.reuters.com/article/tnBasicIndustries-SP/idUKN2737499320090227?feedType=RSS&feedName=tnBasicIndustries-SP

Fed Spending, (6th June 2008) Top 100 Recipients of Federal Contract Awards for FY 2001, Retrieved 2nd April 2009, http://www.fedspending.org/fpds/tables.php?tabtype=t2&subtype=t&year=2001

Fed Spending, (6th June 2008) Top 100 Recipients of Federal Contract Awards for FY 2007, Retrieved 2nd April 2009, http://www.fedspending.org/fpds/tables.php?tabtype=t2&subtype=t&year=2007

James Ashton (17th June 2003) The Scotsman, Retrieved 3rd April 2009, www.Thescotsman.com/business/BAE

Peter Ranscombe (20th February 2009) The Scotsman, Retrieved 3rd April 2009, www.Thescotsman.com/business/BAE

The Manufacture, (Februraury 2009), BAE Systems Lean, mean flying machines, Rereived 03/04/2009, http://www.themanufacturer.com/uk/profile/8924/BAE_Systems?PHPSESSID=c88

(BAE Systems Annual Report 2007.)
www.production.investis.com

Greg White, vice president electronic & integrated solutions
www.themanufacturer.com/uk