Case “The Last Supper” by Kent Kresa

What is a CEO’s job? Maximize shareholder value

What Drives Strategic Actions Environment Specific Options Available Perceptions of Future Market Place

Early 1990’s – Defense Environment End of Cold War Peace Dividend Last Supper DoD procurement budget decline New weapons technology emphasis Wall Street pressure on defense firms The World Had Changed

Strategic Options – Early 1990’s Shrink in place Sell off programs and businesses Merge with another military aircraft manufacturer Make strategic acquisitions to reposition company in defense growth areas (adding more value over the parts; add market shares, look at industry future; go after other market segments)

1990’s Company Perspective – Threat Spectrum Most Likely Scenarios Peace Keeping Terrorism Regional Conflict Major Resurgent Power Future Needs Global Force Projection Precision Strike Surveillance Targeting Survivability Information Warfare Missile Defense

Northrop Grumman Merger & Acquisition History  Grumman Corporation (Integrated Systems)  Vought Aircraft (Aerostructures) 1994  Westinghouse Electronic Systems Group (Electronics)  Allied – sold (Truck Bodies)  Logicon (Information Technology)  INRI (Information Technology)  California Microwave (Electronics)  Data Procurement Corporation (InformationTechnology)  Ryan Aeronautical (Integrated Unmanned Systems)  Litton Industries (Electronics, Information Technology, Ships)  Newport News Shipbuilding (Ships)  EIS of Aerojet (Electronics)  Comptek Research (Information Technology)  Sterling (Information Technology)  Federal Data (Information Technology)  Navia (Electronics)  Aerostructures – sold 2002  TRW (Satellites, Electronics, Information Technology)

Ideally Aligned for Future Defense Needs… 21 st Century Defense Needs Large-Scale Integrated Systems Design and Manufacture of Sophisticated Electronic Sensor Systems Naval Shipbuilding & Propulsion Systems Air Vehicle Design / Systems Integration Stealth Technology Information Operations Navigation & Guidance Systems Space Systems Lasers Aircraft Carriers, Attack Subs, B- 2, F/A-18, F-35, Destroyers, Amphibious Assault Ships, ICBM Satellites, JSTARS, E-2C, Guardrail, AWACS, Hunter, Global Hawk F-22, F-35, F-16, Longbow, B-1B, Air Defense Radars, LITENING Electronic Warfare Aircraft, Radar and IR Jamming Systems Intelligence, Infrastructure Protection, Information Assurance, Advanced EHF, Milstar, Deepwater STSS, SBIRS High, Integrated ISR, Battle Management, Laser Weapons GLOBAL FORCE PROJECTION / PRECISION STRIKE SURVEILLANCE TARGETING SURVIVABILITY INFORMATION WARFARE MISSILE DEFENSE Core CompetenciesPrograms HOMELAND SECURITY

commercial Hush hush Resources Mentality Customers Scientists not entrepreneurs Advertising Costs

Top 3 Lessons Ethics: honest, open Good communication: communicate your vision, technical issues, problems Vision: be prepared to take a position and follow through; have the courage to change

The New Northrop Grumman: Market Leadership Top Tier Defense Contractor World’s Largest Shipbuilder Largest IT Provider to the U.S. Government Largest Provider of Airborne Radar and Electronic Warfare Systems Leading Systems Integrator One of Three Major Contractors in Military and Civil Space, Missile Defense Strong Overall Competitor in Other Key Areas of DoD Budget 125,000 Employees Locations in 50 States $30.7 Billion SalesLocations in 25 Countries

Any issues with Aerospace?