PricewaterhouseCoopers global aerospace and defence leader Neil Hampson raised some eyebrows in London when presenting findings of his group's latest A&D Insights report: "There are no truly global companies in aerospace and defence."
He did add the qualifier "yet", and went on to note that the industry's clear direction is global. But it may come as a surprise to many in the business to be told that while they operate internationally, they are far behind top companies in industries ranging from computers to automobiles in establishing a truly global corporate culture.
The distinction is significant. Most aerospace and defence companies already have international customers, sources of production and research and development. But their operations and supply chain remain much less global than is the case in other high-technology industries. Clearly, companies that can globalise effectively - to take advantage of supply from low-cost countries, for example - will have an advantage over rivals in recruitment, efficiency, R&D and access to growth markets of the future, which will be outside North America and Europe.
As Hampson puts it, there is a big difference between having executives "living, breathing and being part of a culture" and simply "having a rolling suitcase packed with three suits in it".
WHO IS IN CHARGE?
The most striking measure of globalisation put forward by PwC's study is in the composition of corporate boards. Of more than 250 board members at the 10 largest aerospace companies, 88% are home-country nationals. In pharmaceuticals, that figure is less than three-quarters.
To change from being essentially parochial to having a global corporate culture, aerospace companies will have to improve their ability to immerse executives in customer cultures.
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Hampson says the main reason for aerospace company boards - and executive cadres generally - being less global than those in other industries is the obvious one of national security considerations, which often bar foreigners from positions with access to details of military technology.
In interviews with executives from leading companies and organisations around the world, PwC identified key risks, or opportunities, that must be mastered to win in what Hampson calls "the race towards true globalisation".
Critically, companies increasingly open to foreign suppliers and customers must protect their intellectual property, and there are risks associated with any method of operating in foreign countries. External supplier or joint venture relationships may seem most risky, but it is also crucial to know what is really going on in a subsidiary, says PwC partner Latika Sharma.
And, she adds, some countries offer relatively little protection for intellectual property so patents can prove to be worthless and secrecy may be the best safeguard.
Companies must also treat compliance with domestic and local laws as integral to every programme. Whether it is adhering to export controls or ethical business practices, companies should consider compliance from day one to avoid costly, and sometimes legally disastrous, mistakes.
PwC's global aerospace compliance director Mike Farrell says many companies can handle a programme technically, but not all can manage compliance: "It's a competitive edge."
Another, related, minefield is offsets. Often seen as an unfortunate cost of doing business in developing countries and a risk to intellectual property, offsets need careful management. But, stresses PwC's risk assurance director Guy Higgins, they also offer opportunities, not least to be seen to be a good corporate citizen.
Of this race to globalisation, Hampson reckons speed matters. "The winners will be the leaders in markets that will drive growth over the next 20 years and beyond," he says.
Source: Flight International