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Future of the Saudi Arabian Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2018

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Product Synopsis This report is the result of SDI’s extensive market and company research covering the Saudi Arabian defense industry, and provides detailed analysis of both historic and forecast defense industry values including key growth stimulators, analysis of the leading companies in the industry, and key news. Introduction and Landscape Why was the report written? The Future of the Saudi Arabian Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2018 offers the reader an insight into the market opportunities and entry strategies adopted by foreign original equipment manufacturers (OEMs) to gain market share in the Saudi Arabian defense industry. What is the current market landscape and what is changing? Saudi Arabia is estimated to have the fourth largest defense budget in the world, behind the US, China, and Russia. Valued at US$52.9 billion in 2013, the country’s defense expenditure is at the seventh position among the top 10 military spenders and is expected to grow at a CAGR of 7.92% to reach US$77.3 billion by 2018. Saudi Arabia’s military expenditure as a percentage of GDP will from its current 7.3% to 9.1% by 2018 due to slowing economic growth over the forecast period. An underdeveloped domestic defense industry coupled with the country’s high spending power presents ample opportunities for foreign OEMs to enter the market through an alliance route. What are the key drivers behind recent market changes? A strained relationship with Iran, high spending power, and the need to develop a skilled military force to be key factors driving defense expenditure. The Saudi Arabian government’s hopes of strengthening its defense infrastructure in order to emerge as the most powerful nation in the Middle East have been supported by many years of high oil prices and strong economic growth. The rivalry between Saudi Arabia and Iran in the Middle East is a regional power struggle for influence, in which both sides have aime

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									Future of the Saudi Arabian Defense Industry –
Market Attractiveness, Competitive Landscape
             and Forecasts to 2018
Future of the Saudi Arabian Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2018


 TABLE OF CONTENTS

 1.   Introduction ......................................................................................................................... 10
   1.1. What is this Report About? ..........................................................................................................10
   1.2. Definitions .....................................................................................................................................10
   1.3. Summary Methodology .................................................................................................................12
   1.4. SDI Terrorism Index ......................................................................................................................13
   1.5. About Strategic Defence Intelligence ..........................................................................................13
 2.   Executive Summary ............................................................................................................ 14
 3.   Market Attractiveness and Emerging Opportunities ........................................................ 16
   3.1. Defense Market Size Historical and Forecast..............................................................................17
      3.1.1. Defense expenditure expected to grow at a CAGR of 7.92% over the forecast period .......................... 17
      3.1.2. Strained relationship with Iran, high spending power, and the need to develop a skilled military force to
      be key factors driving defense expenditure ...................................................................................................... 19
      3.1.3. Saudi Arabian defense expenditure as a percentage of GDP expected to increase .............................. 20
   3.2. Analysis of Defense Budget Allocation .......................................................................................22
      3.2.1. Large spending on training of personnel expected to continue ............................................................. 22
      3.2.2. Military modernization drives Defense Capital Expenditure .................................................................. 24
      3.2.3. Per capita defense expenditure expected to increase over the forecast period ..................................... 26
   3.3. Homeland Security Market Size and Forecast ............................................................................28
      3.3.1. Saudi Arabia is expected to be the second largest homeland security spender in world, after the US,
      over the forecast period ................................................................................................................................... 28
      3.3.2. Internal Security threat and Energy infrastructure protection will be the key drivers of homeland
      security............................................................................................................................................................ 30
      3.3.3. Saudi Arabia considered at ‗moderately affected‘ of terrorist attack ...................................................... 32
   3.4. Benchmarking with Key Global Markets .....................................................................................34
      3.4.1. Saudi Arabia to be among the fastest-growing defense spenders......................................................... 34
      3.4.2. Saudi Arabia tops the leading military spenders in terms of defense expenditure as a percentage of
      GDP 37
      3.4.3. Saudi Arabia faces moderate risk of terror attacks ............................................................................... 38
   3.5. Market Opportunities: Key Trends and Drivers ..........................................................................40
      3.5.1. Fighters & Multi-Role Aircraft ............................................................................................................... 40
      3.5.2. Attack Helicopters................................................................................................................................ 41
      3.5.3. Border Security.................................................................................................................................... 42
      3.5.4. Main Battle Tanks ................................................................................................................................ 43
      3.5.5. Cyber Security ..................................................................................................................................... 44
      3.5.6. Air Defense Missile Systems................................................................................................................ 45




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Future of the Saudi Arabian Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2018
      3.5.7. Homeland Security Infrastructure ......................................................................................................... 46
 4.   Defense Procurement Market Dynamics ........................................................................... 47
   4.1. Import Market Dynamics ...............................................................................................................47
      4.1.1. Defense industry heavily relies on imports from foreign countries ......................................................... 47
      4.1.2. The UK and the US are the key defense suppliers to Saudi Arabia ...................................................... 48
      4.1.3. Aircraft to dominate the Saudi Arabian defense imports ....................................................................... 49
   4.2. Export Market Dynamics ..............................................................................................................50
      4.2.1. Saudi Arabia‘s defense export market is negligible............................................................................... 50
 5.   Industry Dynamics .............................................................................................................. 51
   5.1. Five Forces Analysis.....................................................................................................................51
      5.1.1. Bargaining power of supplier: medium ................................................................................................. 52
      5.1.2. Bargaining power of buyer: medium to high ......................................................................................... 52
      5.1.3. Barrier to entry: low to medium ............................................................................................................ 52
      5.1.4. Intensity of rivalry: high ........................................................................................................................ 53
      5.1.5. Threat of substitution: high................................................................................................................... 53
 6.   Market Entry Strategy ......................................................................................................... 54
   6.1. Market Regulation .........................................................................................................................54
      6.1.1. Defense industry remains closed to FDI ............................................................................................... 54
      6.1.2. Offset Program to aid defense industry and economy .......................................................................... 54
   6.2. Market Entry Route .......................................................................................................................56
      6.2.1. Double digit growth and underdeveloped domestic industry attracts foreign defense players ................ 56
      6.2.2. A large number of foreign corporations enter the defense market by winning contracts ........................ 57
   6.3. Key Challenges .............................................................................................................................58
      6.3.1. Bribery, corruption, and political affiliations........................................................................................... 58
      6.3.2. Scarcity of skilled Labor and Nitaqat law .............................................................................................. 58
 7.   Competitive Landscape and Strategic Insights ................................................................ 59
   7.1. Competitive Landscape Overview ...............................................................................................59
      7.1.1. Saudi Arabian defense sector is dominated by foreign competitors ...................................................... 59
      7.1.2. Domestic participation in the Saudi Arabian defense industry limited to only two companies................. 60
   7.2. Key Foreign Companies ...............................................................................................................61
      7.2.1. BAE Systems Plc.: overview ................................................................................................................ 61
      7.2.2. BAE Systems Plc.: products and services ............................................................................................ 61
      7.2.3. BAE Systems Plc.: recent announcements and strategic initiatives ...................................................... 62
      7.2.4. BAE Systems Plc.: alliances ................................................................................................................ 63
      7.2.5. BAE Systems Plc.: recent contract wins ............................................................................................... 64
      7.2.6. BAE Systems Plc.: financial analysis ................................................................................................... 64
      7.2.7. EADS N.V.: overview ........................................................................................................................... 66




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Future of the Saudi Arabian Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2018
      7.2.8. EADS N.V.: products and services ....................................................................................................... 66
      7.2.9. EADS N.V.: recent announcements and strategic initiatives ................................................................. 66
      7.2.10. EADS N.V.: alliances ........................................................................................................................... 67
      7.2.11. EADS N.V.: recent contracts wins ........................................................................................................ 68
      7.2.12. EADS N.V.: financial analysis .............................................................................................................. 69
      7.2.13. General Dynamics Corporation: overview ............................................................................................ 71
      7.2.14. General Dynamics Corporation: products and services ........................................................................ 71
      7.2.15. General Dynamics Corporation: alliances............................................................................................. 73
      7.2.16. General Dynamics Corporation: recent contract wins ........................................................................... 73
      7.2.17. Lockheed Martin: overview .................................................................................................................. 75
      7.2.18. Lockheed Martin: products and services .............................................................................................. 75
      7.2.19. Lockheed Martin: recent announcements and strategic initiatives......................................................... 75
      7.2.20. Lockheed Martin: alliances................................................................................................................... 76
      7.2.21. Lockheed Martin: recent contract wins ................................................................................................. 77
      7.2.22. Science Applications International Corporation: overview ..................................................................... 78
      7.2.23. Science Applications International Corporation: products and services ................................................. 78
      7.2.24. Science Applications International Corporation: alliances ..................................................................... 78
      7.2.25. Science Applications International Corporation: recent contract wins.................................................... 79
      7.2.26. Sikorsky Aircraft Corporation: overview ................................................................................................ 80
      7.2.27. Sikorsky Aircraft Corporation: products and services ............................................................................ 80
      7.2.28. Sikorsky Aircraft Corporation: recent announcements and strategic initiatives ...................................... 80
      7.2.29. Sikorsky Aircraft Corporation: alliances ................................................................................................ 81
      7.2.30. Sikorsky Aircraft Corporation: recent contract wins ............................................................................... 82
      7.2.31. Thales: overview.................................................................................................................................. 83
      7.2.32. Thales: products and services.............................................................................................................. 83
      7.2.33. Thales: recent announcements and strategic initiatives .....................
								
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