Defense Industry Archives

Brazil is gearing up to host the 9^th Annual LAAD Defense and Security Exhibition in April 2013, and while that seems like eons from now, smart defense companies are already making plans to attend. In a year of tight budgets (or budget cuts!) participating in international defense trade shows begs the question: is it worth it? This, of course, depends on what your company seeks to get out of the show.

Worth it: You’re more likely to “get your money’s worth” out of a major trade show if you go in well-prepared and with realistic goals. Your company probably meets most of the following:

You represent a large company with a significant portion of their business overseas.
You already have lots of international contacts and make plans ahead of time to meet up at the conference.
You’re seeking investors for a new product or R&D.
You see the conference as a marketing opportunity, not a sales opportunity.

That last one needs a little explanation. Trade shows are great for marketing and raising the profile of your company — but not as great for generating sales. While attendees will probably include investors and international decision-makers, most of the visitors at defense trade shows are just “window shopping,” with no real to intention to buy. Shows should be seen as an opportunity build relationships, raise your companies’ profile, and market your product with a view to long-term sales.

Probably not worth it:

Your company is smaller or just getting started.
Most of your income is from the domestic market, and you have few overseas projects or sales.
You want to expand into the international market, but don’t yet have many international contacts.
You already reach international customers by participating in domestic defense trade shows.

In other words, given the very high costs associated with participating, international defense trade shows are not the right venue to “break into” the international market. Smaller companies seeking to enter the international market would do better by focusing on laying the groundwork for international sales. For example, they can begin making international connections by reaching out to foreign defense attaches in Washington, or by participating in domestic trade shows.

It all comes down to having realistic expectations — an international defense trade show is a great marketing opportunity, but unless your company already has significant revenue from international sales, it’s unlikely that a trade show alone will be a break-even proposition.

New Foreign Military Sales (FMS) recently passed $65 billion for FY2012, according to AOL Defense online, and are expected to continue growing through the end of the fiscal year.

Were the FY2012 numbers a fluke, or part of a long-term trend? The AOL Defense article points out that this year’s number could be an outlier due to large, one-time sales of high-value items, specifically, large fighter plane deals with Saudi Arabia and Japan.

However, even without these two sales, FMS for FY2012 are nearly $30 billion (and counting). DSCA historical data (pdf file) shows a dramatic rise in FMS sales over the last few years. FMS sales totaled $28.4 billion in FY2011, and about $24.4 billion in FY2010. Just 10 years earlier, in FY2002, FMS sales were only 11.5 billion (see table below).

What would explain this increase? The recent explosion in FMS agreements results from growing interest both from the defense industry, and from foreign governments, in using FMS to facilitate international sales. With the threat of sequestration, defense companies are increasingly looking toward the international market for new growth opportunities. As I’ve discussed, FMS is often the best way for defense companies to reach an international market.

Foreign governments, as well, have realized that the FMS model is often the most convenient way to procure defense items. Foreign governments may benefit politically by signing a government-to-government deal with the USG, and they gain the confidence that the DOD will manage all the logistics of their purchase. Depending on local procurement regulations, government-to-government agreements may be non-competitive, avoiding the long and burdensome process of an open competition.

Given this growing focus on FMS, these numbers will only continue to rise as U.S. defense companies further expand into the international market.

FY2002-2010 data from DSCA (pdf) / FY 2011 data from UPI.com / FY 2012 data from AOL Defense online

International Trade Shows: Worth the Cost?

Growth in Foreign Military Sales — Fluke or Long-Term Trend?

Welcome to LMDefense

New Here?

Search LMDefense: