1. July 19, 2013
Expanding Foreign Sales of U.S. Military Equipment:  Industry Perspectives
By Jon Barney Partner, Avascent
Prepared for:

2. A&D companies – expand globally
Q: Will foreign markets be of greater importance to your company in the coming years? (March 2013 Avascent and Fleishman Hillard survey of senior A&D leaders on international markets)
YES! (93%)
“An important element of our growth strategy is our focus on increasing our international business from about 17% [of total revenues] today to 20% over the next several years.”
“We put on a real push to grow internationally. It’s easier for US companies to hunker down and stay home. But the other side of the coin is that there is a huge market out there that’s available to us.”
“Our strategy focuses on the growing importance of winning international business, where growth markets remain.”

3. Flat/Declining Budgets Growing Economic Power
Growth will be in the Rest of the World
Flat/Declining Budgets
Growing Economic Power
DoD Budget
Rest of World
Countries included: Australia, India, Japan, Malaysia, Pakistan, Singapore, South Korea, Taiwan, Indonesia, Thailand, Saudi Arabia, Egypt, Iraq, UAE, Qatar, Kuwait, Jordan, Turkey, Algeria, Morocco, South Africa, Oman, Mexico, Colombia, Chile, Brazil
*Source: Avascent Analytics International Database
+ All figures in Billions of USD

4. Countries: Uneven growth picture… but with opportunity
Segments
Legacy: High GDPs and high levels of defense spending face declines/flat budgets
Major: Sizable markets and growth offer significant opportunities for companies looking to gain traction globally
Minor: Numerous smaller markets will continue to show moderate growth in defense spending – niche strategies UK
Japan
France
$60B
Major
Legacy
India
Saudi Arabia
Germany
Brazil
ROK
Topline Defense Budget 2013
Australia
Canada
UAE
Italy
Israel
Minor
Turkey
Spain
Columbia
Netherlands
Taiwan
Iraq
Chile
Indonesia
Poland
Egypt
Pakistan
Singapore
Kuwait
$0B
Thailand
Finland
South Africa
Algeria
Morocco
Oman
Sweden
Norway
Malaysia
Jordan
Qatar
Greece
Mexico
-5%
15%
2013 GDP
Projected Defense Spending Growth 2013 – 2017*
> $1T
$400B - $1T
$0B - $400B
*Source: Avascent Analytics International Database

5. Readiness Checklist – 6 Steps
Survey: BUSI not BRICS
Readiness Checklist – 6 Steps
Q: Which of these countries do you consider most important to your company in terms of growth potential?
18%
18%
38%
45%
21%
45%
35%
*Source: Avascent and Fleishman Hillard Survey of A&D Leaders on International Markets and Offsets

6. Readiness Checklist – 6 Steps
Offsets - The Growing Half Trillion Dollar Challenge
Readiness Checklist – 6 Steps
*Source: Avascent and Fleishman Hillard Survey report on offsets “Half Trillion Dollar Challenge”

7. Offset Growth in All Regions Increasing
MENA Obligations
Asia/Pacific Obligations
9.0%
6.5%
Europe & Canada Obligations
Latin America Obligations
4.6%
9.6%
*Source: Avascent and Fleishman Hillard Survey report on offsets “Half Trillion Dollar Challenge”

8. Readiness Checklist – 6 Steps
Largest markets = largest challenges
Readiness Checklist – 6 Steps
$15B 1
The Reality:
Vital Markets with Challenging Offset Environments 1
India 2
KSA 2
The Ideal:
High Spenders and Offsets Leaders
South
Korea
UAE
Size of FY13 Defense Investment (Procurement)
Turkey
Canada 3
The Second Tier: Smaller Addressable Markets with Complex Offsets
Brazil
Taiwan
Netherlands
Finland
Colombia 4
Mature Markets:
Smaller but Strongly Structured Offset Environments
Greece 3 4
$0B
Effectiveness of Offset Regime
Low
High
*Source: Avascent Analytics International Database
+ All figures in Billions of USD

9. Readiness Checklist – 6 Steps
Global Expansion Challenges and Recommendations
Readiness Checklist – 6 Steps
Challenge
Recommendation
“Boots on the ground” and effective JV partnering
Solution centric approach
Raise visibility and view as opportunity not risk
Campaign to educate and train offset authorities
Integrate strategy, policy, reps, compliance, brand
Fly-in/fly-out approach to global expansion
Product centric approach
Offsets rapidly increasing in $$$ and importance
Offset authorities economic dev results
Building a global organization