A new report by Deloitte says aerospace and defense firms that modified their business models and strategies based on changing market conditions outperformed by sevenfold those that did not make any adjustments to their strategies.
The finding is based on an analysis of performance of 100 largest firms in the aerospace and defense sector in the last 25 years, Deloitte said.
The study also showed that 50 percent of the analyzed A&D firms could be categorized as “staying the course“ or those that continue to implement the same business strategies amid market disruption.
Deloitte also found that financing activities accounted for approximately $93 billion or 25 percent of $366 billion in total shareholder return among 20 largest defense firms between 2009 and 2014, according to the report.
Share buybacks and rising dividends have helped increase TSR despite vulnerabilities in operational performance, the report said.
The study noted that A&D companies should adopt a business strategy that aims to create value, implement an agile business model that would adapt to the changing market needs and create new operating models that seek to “break the traditional constraints of the past and radically improve affordability for markets facing increasing competition and commoditization.“