Frost & Sullivan’s recent analysis, “Post-pandemic Growth Opportunity Analysis of the Defence Industry,” presents the impact of global spending on defence under three scenarios—gradual containment, severe pandemic, and global emergency.
As governments around the world allocate funds to contain the COVID-19 pandemic and reactivate the economy, under the severe pandemic scenario, defence spending will stagnate at current levels for the short term (2020-2021). In the global emergency scenario, defence spending will reduce, though this will mainly depend on global and regional political conditions.
But, in the long term, it will be cut by at least 10%, as witnessed in the past.
Nevertheless, Defence market participants are likely to increase revenue realisation from a services portfolio by redesigning their strategies and customer engagement models, including:
— Mergers and acquisitions: Identify businesses/SMEs whose acquisition/partnership would diversify and strengthen the existing portfolio.
— Vertical integration: Focus on offering aftermarket services such as simulator training, PBL contracts, spare parts or maintenance, repair, and operating (MRO).
— Robotics and artificial intelligence: Develop and upgrade products that serve military-medical, commercial-security, containment, and logistics purposes.
— Chemical, biological, radiological and nuclear defence (CBRN): Strategic acquisitions or diversification of product portfolio should include CBRN protective clothing and equipment.