Introduction
The present-day business world dictates its rules to international companies. It requires them to correspond to the principles of sustainable development through the implementation of various strategies. However, strategic choices can be challenging due to the presence of numerous factors defining their success on the market. In this case, the intentions of companies to remain competitive are contained in their mission, vision, values, guiding principles, defined stakeholders, and various external circumstances. These considerations are applicable to any enterprise, and BAE Systems is no exception to the rule. Therefore, this paper aims to reveal the strategy of this company with the help of the analysis of the factors mentioned above, the macro environment, and its competitiveness. They will allow justifying the strategic choices of BAE Systems and anticipate the course of its future development.
Firm Overview
The company under consideration, BAE Systems, is one of the strongest players on the market of defense, aerospace, and security solutions, and this status is conditional upon the vast scope of its activity. Its operations spread over more than 40 countries, and this fact defines the enterprise’s leading position (“Corporate responsibility summary,” 2018). However, the company’s activities are more complex than the primary direction specified above. They also include partnerships with local enterprises aimed at supporting worldwide economic development through the exchange of knowledge, skills, and technology (“Annual report,” 2019). In this way, the company performs operations on both the local and international levels.
The areas, in which BAE Systems is engaged, include air, maritime, land, and cyber domains. They define the company’s significant international presence and numerous opportunities for future development and strategic planning (Landry and Mclarney, 2019). Nevertheless, such targets would be unachievable without governmental support, and that is what BAE Systems relies on in its regular activities (“Corporate responsibility summary,” 2018). It contributes to the company’s success in overcoming present and future obstacles since its services are highly demanded by all of the countries, especially by Australia and the United States. In this way, BAE Systems manages to deal with global challenges using an innovative approach and engineering excellence. Hence, the company is one of the main players in the market, and it needs a specific strategy for future development.
Analysis of the Firm’s Mandate
Mission and Core Purpose
The principal consideration that serves as a basis for BAE Systems strategy is the company’s mission, and it defines the general direction of its progress. The intended course of action is explicitly stated in its latest report. Hence, the company’s mission is to “provide a vital advantage to help our customers to protect what really matters” (“Annual report,” 2019, p. 18). This wording implies the alignment of all aspects of BAE Systems’ operations with the customers’ needs and, therefore, the provision of high-quality services in a full range. In this way, the company intends to remain competitive on a rapidly evolving market of international defense, aerospace, and security solutions.
The formulation of the mission of BAE Systems is directly connected to its core purpose since it represents the expanded idea of the company’s business expectations. As it is stated in the report, they intend to help governments to protect their people, and this aim is underpinned by the allocation of funds worldwide (“Annual report,” 2019). The specified purpose is complemented by the intention to develop business and ensure profits. According to the company’s chairman Roger Carr, they aim at employing technology to improve efficiency and competitiveness, which, in turn, would allow succeeding on the market (“Annual report,” 2019). Therefore, the mission and the core purpose of BAE Systems align with their strategy that is focused on the help to all countries of the world and the profits at the same time.
Vision and Major Goals
Another consideration than complements the definition of the strategy of BAE Systems is its vision. As can be seen from the report, it relates to being “the premier international defense, aerospace, and security company” (“Annual report,” 2019, p. 18). The vision reflects the objective to remain a leader in the industry, and it is achieved through the practical implementation of the mission and the core purpose identified above. However, in order to fully comply with the strategy based on these statements, it is necessary to divide it into separate goals. In this way, BAE Systems will be successful in attempting to address the needs of the business world and remaining competitive on the market.
There are five principal goals defined by the company and presented in the annual report. The first goal is to maintain and grow its defense business (“Annual report,” 2019). It relates to the sales growth, the increase in the number of programs, and finding new partners. The second goal is the continuation of the company’s development in adjacent markets, and it includes commercial work and the expansion of opportunities for cooperation with governments (“Annual report,” 2019). The third goal is the promotion and expansion of international business (“Annual report,” 2019). It implies exploring new markets and strengthening competitiveness on current markets.
The fourth goal is diversification of the workforce that can contribute to improved performance management and strategic HR plans. The outcome of its realization will be complemented by the increased representation of women in leadership and engineering roles and career development of all employees at different levels (“Annual report,” 2019). The fifth and final goal is to enhance financial performance through long-term programs (“Annual report,” 2019). The combination of these intentions underpins the overall strategy of BAE Systems.
Core Values and Guiding Principles
The values of BAE Systems that support their strategic choices are divided into three categories. The first value is trust, and it is vital for delivering the company’s commitments. According to the website, it takes responsibility for everyone involved in its business operations and remains honest to the stakeholders (“Company strategy – values,” no date). The second value is innovation, and it reflects the focus of BAT Systems on creating leading-edge solutions while empowering teams and collaborating for exploring new technologies (“Company strategy – values,” no date). The third value is boldness, and it is transmitted through the company’s readiness to take risks and face challenges while setting stretching goals (“Company strategy – values,” no date). The combination of these values increases the attractiveness of the company among stakeholders.
The guiding principles of BAE Systems complement the core values by emphasizing the importance of the company’s sustainable development and determining its direction. They include safety and wellbeing, integrity, accelerated performance, resource efficiency, community investment, product stewardship, and responsible procurement (“Corporate responsibility summary,” 2018). These principles ensure development while addressing emerging global challenges. They cover all the aspects of the company’s business operations, including climate change, environmental risks, societal needs, and economic growth.
Stakeholder Analysis
Another factor that determines the success of the company’s operations is the engagement of principal stakeholders. It is vital for ensuring the timely resolution of issues related to people involved in its activities (“Corporate responsibility summary,” 2018). Therefore, BAE Systems emphasized the importance of finding a balance between stakeholders to satisfy all their interests (“Corporate responsibility summary,” 2018). It is achieved through open communication about business operations that allows understanding their perspectives and informing them of the company’s approach (Landry and Mclarney, 2019). In this way, all views are included, and interests are respected.
The principal stakeholders of BAE Systems include employees, customers, regulators, shareholders, NGOs, communities, governments, and financial institutions. They are engaged in all the company’s operations and have specific interests that should be considered. Thus, for example, employees need opportunities for communication, volunteering, and participation in forums (“Corporate responsibility summary,” 2018). NGOs, in turn, require being involved in practice sharing and defense group activities, and communities need fundraising, school roadshows, and STEM initiatives (“Corporate responsibility summary,” 2018). Hence, their interests vary, and the consideration of all of them is a challenging task for the company. Taking into account the fact that BAE Systems’ success mostly depends on the people involved in its activities, their inclusion in the strategy seems to be reasonable.
External Analysis
Competitive Forces
To overcome the difficulties emerging as a result of possible changes in the government’s policies and complications deriving from macro-environmental factors, it is vital to evaluate the competitive forces of BAE Systems. The first force is related to the potential threat of new entrants on the market, and it does not present a problem for the company since its leadership position is strong (“Annual report,” 2019). It even evokes serious concerns of the UK government since BAE Systems holds the monopoly (Mance and Hollinger, 2017). The second and third forces are the bargaining of suppliers and buyers, and they are both weak. It means that the company’s profits are tied to the profits of suppliers and buyers. Hence, it should focus on innovation and develop their relationships.
The fourth competitive force is a threat of substitute products or services, and it also poses no threat to BAE Systems. The company’s products have no analogs regarding the combination of price and quality, and this fact allows to consider it as one of its principal advantages over other enterprises (“Annual report,” 2019). The fifth force is rivalry among the existing firms, and it is relatively high for the market. Therefore, the attempts of BAE Systems to remain innovative would also address this problem and increase its competitiveness among companies with similar products and services.
Macro Environmental Analysis
The market environment of BAE Systems is continuously changing, and this fact leads to the necessity to readjust to the needs of the time. These changes primarily reflect geopolitical and technological situations as well as current and future customer requirements (“Corporate responsibility summary,” 2018). Since the company renders services and provides products for national governments and their armies, geopolitical factors will relate to these target consumers (“BAE Systems SWOT analysis,” 2020). At present, the situation from the perspective of demand is stable, and it allows to conclude on a favorable environment for sustainable development of BAE Systems (“Annual report,” 2019). Nevertheless, the change in the government’s policies specified above might have a negative impact on the company’s position, and its strategic choices should reflect this threat.
As for the technological situation, this aspect remains one of the most beneficial areas for BAE Systems. The business’s expertise in manufacturing and delivering heavy-duty military equipment makes it attractive for the U.S. government. It defines their intention to sustain the level of spending on such products (Lund-Yates, 2020). Its operations are also supported by high demand from Qatar, Canada, and Australia (Lund-Yates, 2020). They compensate for the restrictions posed by the UK government and allow the company to remain a leader in the industry. In this way, the interests of the countries specified above ensure a supportive macro environment for BAE Systems.
Internal Analysis
Firm Organizational Structure and Governance
The Governance of BAE Systems implies the involvement of shareholders and board members in the process. The former includes about 100,000 individual, corporate, and employee participants (“Corporate governance,” no date). They gather for meetings at least once a year and discuss important matters (“Corporate governance,” no date). These people can vote for or against critical decisions regarding the company’s business operations, and they have the number of votes corresponding to their shares (“Corporate governance,” no date). Such issues may include election or re-election of directors, their remuneration, the payment of dividends, and the appointment of the auditors (“Corporate governance,” no date). In this way, they influence the overall performance of the company.
The Board of Directors communicates with shareholders on a regular basis. The Chief Executive and Group Finance Director meet them to exchange the views on different matters and current operations (“Corporate governance,” no date). The Board also includes the Chairman, Senior Independent Director, and Company Secretary (“Corporate governance,” no date). They are complemented by Board committees that are responsible for leadership, oversight governance areas and consist of non-executive directors (“Corporate governance,” no date). In this way, duties are shared, and BAE Systems is governed.
Strengths and Competitive Advantages
Since protecting people and ensuring national security are vital tasks for any country, the defense, aerospace, and security market implies the presence of numerous players from all over the world. The principal competitors of BAE Systems include Boeing, Lockheed Martin, and Northrop Grumman Corporation (“BAE Systems SWOT analysis,” 2020). However, their market share is not a problem for the company since it has the reputation of a leader in the area and steadily grows in revenue and profits (“BAE Systems SWOT analysis,” 2020). The possible complications are more likely to derive from governmental policies, and it is proved to have a negative impact on the business.
Even though the situation for BAE Systems seems to be quite stable, the market circumstances are currently changing. In light of recent UK government policies intended to foster competition in the industry, it especially relates to naval shipbuilding (Mance and Hollinger, 2017). The actions of the Ministry of Defense pose a threat to the monopoly of BAE Systems in the field as their shipbuilding strategy implies the increase in the number of competitors (Mance and Hollinger, 2017). The construction orders are being given specifically to local shipyards, and their participation might worsen the situation for the company (Mance and Hollinger, 2017). Therefore, BAE Systems needs to readjust its strategy in order to remain competitive on the market.
Weaknesses
The company’s leading position does not indicate that it faces no problems. They mostly derive from its weaknesses that are to be eliminated in the future. In the case of BAE Systems, the principal issue relates to relatively low employee productivity and high turnover rates (“BAE Systems SWOT analysis,” 2020). It reflects the company’s incapability to provide the required benefits and consequently leads to even greater costs of training for the personnel (“BAE Systems SWOT analysis,” 2020). This situation can be critical due to the presence of numerous competitors on the market who are more attractive to high-skilled specialists.
Another weakness of BAE Systems is the ongoing process of workforce diversification, and it poses a threat from companies with better HR management. It is directly connected to the practical implementation of strategic plans ensuring future sustainable development (“Annual report,” 2019). This circumstance can be a barrier to potential employees with the required skills, experience, and an innovative approach to business operations. Moreover, it can deteriorate the company’s image among them by seemingly fewer opportunities for career development. Therefore, the weaknesses of BAE Systems primarily relate to poor HR management and, therefore, relatively low overall performance.
Conclusion
The analysis of BAE Systems provides the basis for their future strategic decisions and allows creating plans on increasing the efficiency of the company’s operations. The overview of its business revealed the leading position on the market that is its primary advantage and, at the same time, the circumstance that can negatively influence the enterprise in the future. This situation is conditional upon to government’s concerns about BAE Systems’ monopoly. Therefore, it follows the mission to remain an international company rendering services to different countries, thereby maintaining its leadership. In this way, BAE Systems tries to ensure the business’s sustainable development and growth in profits. However, in order to do it, the company should readjust its strategy and focus on the weaknesses related to HR management.
Reference
Annual report 2019 – investors – BAE Systems (2019) Web.
BAE Systems SWOT analysis, competitors, segmentation, target market, positioning & USP (2020). Web.
Company strategy – values (2020) Web.
Corporate governance – shareholder and board governance (2020) Web.
Corporate responsibility summary 2018. Web.
Landry, N. and Mclarney, C. (2019). ‘Using human resource management to drive business strategy: the case of BAE Systems,’ IUP Journal of Business Strategy, 16(4), pp.7-22.
Lund-Yates, S. (2020) ‘BAE Systems – full year results in line with guidance,’ Hargreaves Lansdown. Web.
Mance, H. and Hollinger, P. (2017) ‘BAE’s monopoly on naval shipbuilding faces more competition,’ Financial Times, Web.