KONGSBERG'S POSITION IN THE DEFENCE MARKET
The defence market calls for products and ships' systems for ground-based, air-based and sea-based defence. The market is political and protectionistic and excepted from international free trade agreements. This results in most countries choosing national suppliers, or requiring offset agreements if suppliers are chosen from countries other than their own. The market is bureaucratic, with stringent regulation and safety and security requirements. As the world's largest defence market, the US accounts for nearly 50 per cent of overall global defence spending. The market is nevertheless extremely difficult for foreign players to penetrate.
KONGSBERG has carved out a position in the US market through direct deliveries of proprietary systems and through cooperation with US alliance partners. A total of about 25 per cent of Defence & Aerospace's earnings are derived from the US market.
Today's defence market is in the process of shifting from seeking equipment adapted to a traditional invasion defence, to a defence based on multinational operations to a greater extent. Moreover, growing emphasis is being placed on the monitoring of natural resources, as well as on protecting one's own country against terrorist acts and environmental offences.KONGSBERG is Norway's premier defence enterprise in advanced, technological defence systems. We usually obtain a high proportion of the offset agreements generated by the Norwegian Armed Forces' procurements from foreign vendors.
By international standards, KONGSBERG is a small player. Small players in a market characterised by many large players must generally concentrate on niche products to achieve success. We have developed many systems and products that have proven competitive at the international level, both in collaboration with the Norwegian Armed Forces, international alliance partners and on our own.
OUR MOST IMPORTANT PRODUCT AREAS ON THE DEFENCE MARKET
Command and weapons control systems
- Different types of command and control systems for land-, air- and sea-based defence
Surveillance systems
- Maritime and land-based surveillance systems for civilian, military and other public sector installations
Dynamic systems
- Remote weapon stations developed to protect troops in armoured personnel carriers
Communications solutions
- Different types of tactical radio and communications systems, predominantly developed and delivered for land-based defence
Anti-ship missiles
- Penguin anti-ship missiles and the new NSM (Naval Strike Missile)
MARKET DRIVERS AND TRENDS
The Norwegian Armed Forces' level of investment
- The Norwegian Armed Forces is undergoing comprehensive reorganisation. Among other things, it is expected that reorganisation will improve the efficiency of non-operational activities. The savings are expected to be used to give more priority to operations and investments in materiel. Full effect is not expected until 2008 at the earliest.
This means that investment funding will largely be tied-up in existing programmes for the next few years.
Norwegian Armed Forces' investment contracts to Norwegian suppliers
- Approx. 45 per cent of the Armed Forces' investment contracts go to Norwegian suppliers.
- Any decision the Armed Forces might make to buy fighter aircraft will lock-in a large part of the overall investment funding. In such case, however, the offset share is expected to increase considerably.
Market protectionism
- Due to strict security requirements and the protection of different countries' domestic defence industries, it is often difficult for a defence supplier to win defence contracts outside its own borders.
However, protectionism both in the US and Europe does not rule out possibilities through long-term relationships and niche products.