Lockheed Martin Case

Lockheed Martin largely relies upon government contracts, mostly from the U.S. However, as sizeable budget cuts to defense spending are expected in the near future, Lockheed should consider increasing growth in other sectors in order to mitigate or negate the shrinking amount of government defense dollars by using its diverse products and capabilities to diversify the customers it serves. From analyzing LM's past experience, the firm does have several valuable capabilities that could transfer over well into other industries such as small-business jets, corporate security, or Homeland Security. All three of these industries have great potential for growth and Lockheed is in a position to use its resources and capabilities to capitalize on that growth.

Lockheed Martin has been in the business of aerospace engineering and defense for about 100 years – granting it invaluable experience from path dependency on everything from airplanes to computer systems. In addition, there are several other important capabilities Lockheed has had to develop in order to be so successful in its highly competitive industry - management/security/information systems development, logistics, production, and engineering. Lockheed has had to have an excellent supply chain in order to consistently obtain substantial amounts of high-quality materials, and then manufacture those materials into products to meet aggressive deadlines. It's had to be very innovative to provide cutting-edge technology as well very skilled in order to provide such a wide range of products.

While much of Lockheed's business is focused on military defense, it does have the ability to apply its core skills in developing successful commercial and civil products – and indeed it already has been applying these skills in those areas. Its aerial and naval systems are used to make a significant amount of air and oceanic travel possible. Its management and information systems are used by government institutions such as the Department of Energy and the IRS. It has been investing and developing significantly in environmental technologies.

Because of Lockheed Martin's rare business model, valuing the company and determining whether or not it is a good investment can be quite challenging. This is because of the many different value propositions that Lockheed can potentially transfer into high stock prices. Lockheed Martin's major business comes from government contracts, specifically the United States government. Because of these contracts, and the reputation that Lockheed has with these governments, Lockheed's profits are somewhat cemented. It is evident that this will continue to be the case as Lockheed has a large backlog of $80.7 billion in guaranteed contracts with these governments through 2017. These profits, to some degree, drive Lockheed's