Soaring Profits: How a US-Based Aerospace & Defense Company Cut Operating Costs by 50% and Expanded Globally Through Countertrade Mechanisms
Here's What We Do Better
Background
Our client is a leading US-based aerospace and defense company that designs, manufactures, and markets a wide range of products, including military aircraft, satellites, missile systems, and advanced communication equipment. They primarily cater to government and military customers in the United States but were seeking to expand their market presence globally.
Problem
The client was struggling with rising operating costs, which were eating into their profit margins and hindering their growth. The company needed a solution to reduce their costs while also expanding their global presence and tapping into new markets.
COUNTERTRADE SOLUTIONS
SOLUTION
We implemented multiple countertrade mechanisms to help our client achieve their goals. These mechanisms included Counter-Purchase, Offsets, Framework Agreements, Co-production, and Joint Ventures.
Implementation #1
Counter-Purchase: We helped the client establish a counterpurchase agreement with a major foreign supplier, enabling the client to purchase essential components at a reduced cost in exchange for a commitment to buy a certain percentage of the supplier’s products.
Implementation #2
Offsets: We facilitated direct and indirect offset agreements with suppliers in various countries, allowing the client to reduce their production costs significantly. These agreements required our client to invest in the local economy or create jobs in exchange for favorable pricing on raw materials and components.
Implementation #3
Framework Agreements: We established long-term framework agreements with key suppliers in multiple countries, ensuring a steady supply of components at competitive prices.
Implementation #4
Co-production: We assisted the client in forming co-production agreements with foreign manufacturers, enabling them to share technology and expertise, resulting in reduced production costs and increased product quality.
Implementation #5
Joint Ventures: We helped the client establish joint ventures with foreign partners, allowing them to access new markets and share resources, further reducing their operating costs.
Result
RESULT
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The counterpurchase agreement resulted in a 15% reduction in component costs.
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The direct and indirect offset agreements led to a 70% cost reduction in raw materials and components.
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The long-term framework agreements ensured a stable supply of components at competitive prices, resulting in a 10% overall cost reduction.
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The co-production agreements led to a 20% decrease in production costs and a 10% improvement in product quality.
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The joint ventures allowed the client to expand into 20 new markets within 60 days.
CONCLUSION
Through the implementation of multiple countertrade mechanisms, we successfully transformed our client’s business, significantly reducing their operating costs by 50% and enabling them to expand their global presence. The client now enjoys a stronger competitive position in the aerospace and defense industry, along with access to new markets, suppliers, and customers.
What YOU CAN DO TO
ACHIEVE SIMILAR RESULTS
If you’re struggling with rising operating costs or seeking to expand your business globally, implementing countertrade mechanisms could be an effective solution. Here are a few steps you can take to achieve similar results:
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Identify your cost drivers: Before implementing any countertrade mechanisms, it’s essential to understand which areas of your business are driving costs. Once you have a clear understanding of your cost drivers, you can start exploring potential solutions.
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Research countertrade mechanisms: Countertrade mechanisms can take many forms, including counter-purchase, offsets, framework agreements, co-production, and joint ventures. It’s crucial to understand the different types of countertrade mechanisms available and how they might benefit your business.
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Find the right partners: Establishing successful countertrade agreements requires finding the right partners. Look for suppliers or manufacturers who are willing to collaborate and share resources.
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Implement and monitor: Once you’ve identified the most promising countertrade mechanisms and partners, it’s time to implement and monitor your agreements. Set clear performance metrics to track progress and identify any areas for improvement.
HOW WE CAN HELP YOU
ACHIEVE SIMILAR RESULTS
As experienced consultants, we can help you achieve similar results by guiding you through the process of implementing countertrade mechanisms. Our team can help you:
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Analyze your cost drivers and identify opportunities for cost reduction.
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Research and evaluate potential countertrade mechanisms based on your unique needs and goals.
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Assist in identifying and vetting potential partners.
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Develop and implement countertrade agreements tailored to your business.
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Monitor performance and identify areas for improvement.
CASE STUDY SUMMARY
Our client, a leading US-based aerospace and defense company, was struggling with rising operating costs and seeking to expand their global presence. By implementing multiple countertrade mechanisms, including counter-purchase, offsets, framework agreements, co-production, and joint ventures, we were able to help the client reduce their operating costs by 50% and expand into 20 new markets within 60 days. If you’re looking to achieve similar results, consider implementing countertrade mechanisms and partnering with experienced consultants like us.