Industry Analysis

Strategic Management

Company: Lockheed Martin

Segment: Information Systems and Global Solutions (IS &GS)

Industry: IT Consulting in the US

Lockheed Martin operates five major business segments, where the IS & GS contributes the second highest source of revenue. Under this segment, Lockheed Martin provides information technology (IT) solutions, management services and advanced technology expertise (1).

The industry “IT Consulting in the US” was the most representative of Lockheed Martin’s IS & GS business segment.  In 2013 the company’s revenue in the industry as a percentage of its total was 18.45%, and its operating income 28.03% (Appendix A). Obviously, this segment is a significant driver in the profitability of Lockheed Martin, and the IT Consulting industry will therefore be analyzed in this report. While Lockheed Martin could be considered a strong leader in Civil and Defense IT Consulting, it may not be an industry leader for all clients.

General Overview

Firms in the IT Consulting industry provide services such as writing, testing and supporting custom software, planning and designing integrated hardware, software and communication infrastructure, and on-site management of computer systems and data processing facilities for client companies (2). While the industry generates $337 billion in revenue from a variety of products and services (Appendix B), it is highly fragmented, despite the presence of numerous high-profile global corporations. Furthermore, the industry is in the mature stage of its industry life cycle and is characterized by growth similar to that of the overall economy (Appendix C). Moreover, industry value added is forecast to grow by an average annual rate of 2.8% which exceeds the expected overall economy growth of 2.1%, and profit is expected to increase slowly over the next five years as price competition intensifies.  In terms of profitability, the most recent revenue figure was $337 billion, and annual growth from 08-13 was 2.2%. Annual growth for 13-18 is expected to grow to 2.9% (Appendix D).  Lastly, profit was $25.3 billion, which represented an estimated 7.5% of revenue (2).

Industry Trends and PESTLE Analysis

As the nature of the IT Consulting industry broadens to accommodate the numerous technologies created and to secure companies from hazardous new technology, it is expected that overall revenue will grow at approximately 3% (2). Additionally, firms expanding through M&A will seek the assistance of IT consultants to improve operational efficiency through system upgrades and system integration. Overall, since there is a high trend of technological growth, and increased consolidation in large industry players, the industry profitability is also expected to rise. Lastly, although IBM holds the majority of the industry, at 5.9%, the industry is largely comprised of many other companies, including Lockheed Martin (2) (Appendix E).

From the Political, Economic, Social, Technological, Legal, and Environmental, analysis, it is evident that the IT Consulting industry can be affected by the various factors. As elaborated in Appendix F, there can be many political, legal, and environmental stipulations that may cause overall industry profitability to decline due to regulatory accommodation. On the other hand, social, economic, and technological factors can all continue to contribute to the industry and actually cause further profitability due to increased demand for IT Consultants. Overall, as information and technology continues to grow, more IT Consultants will be needed to monitor and make sure clients’ systems remain secure and to accommodate new needs; however, as regulations increase in this changing industry, the IT Consulting industry may also experience greater expenses in learning and conquering the newly emerging technology.

Competitive Analysis

Porter’s Five Forces model, which includes Barriers to Entry, Threat from Buyers, Threat from Suppliers, Threat from Substitutes, and Competition from Rivals, was also used to conduct competitive analysis. Overall, for the IT Consulting industry, while barriers to entry, threat from buyers, threat from suppliers, and threat from substitutes are relatively low, the threat and competition from rivals is high. Please refer to Appendix G for a more detailed analysis and a visual. From the five forces, it can be concluded that the IT Consulting industry is likely to remain profitable.

Goals, Assumptions, Strategies, and Capabilities of Competitors

Since the IT Consulting Industry is very broad and has many large players, it would be more feasible to discuss IBM, which has the majority of the market share with 5.9%. It is assumed that IBM will continue to be a large player in this industry, with an expected 1.8% growth in market share. Largely, IBM’s major goal is to grow their consulting for cloud services, which is believed to be their growth driver after acquiring Softlayer Technologies Inc. Moreover, as a competitor, IBM is extremely capable, as it contributes significantly in this industry through its strategy and transformation segment, which is highly technology-based. The IBM technology strategy service helps client companies use technology to drive business innovation and create growth while optimizing IT organization. Nonetheless, the company has still lagged in industry revenue growth relative to others in the industry as a result of their increased acquisitions. (2)

Requirements for Future Success (KSFs)

In order to retain future success, the IT Consulting industry needs to adopt a commercial focus in order to tailor their expertise to the clients’ needs. They also need to gain access to the latest available and most efficient technology and techniques to understand the latest hardware and software systems so that they can attract more clients. Moreover, the industry should also gain access to highly skilled workers as it is heavily labor intensive and relies on qualified individuals to provide services. Effective costs controls are also needed to ensure that projects are on budget and satisfy the client’s financial requirement. Lastly, good project management skills are needed to make sure the client’s project needs are managed well. (2)

Range of Strategic Alternatives

Based on the above research, it would seem that there are few strategic alternatives in the IT Consulting industry. Largely, competitors in the industry need to make sure that they are keeping up with the technology that is being generated, and making sure they can combat any difficulties or problematic situations that arise. Please see Appendix H for detailed response.

Works Cited

(1) Lockheed Martin Annual Report

(2)”IT Consulting in the US.” IBISWorld. N.p., n.d. Web. 17 Feb. 2014. <http://clients1.ibisworld.com/>.

(3) Mergent. Lockheed Martin. Business Segments. 2013. Retrieved from    www.mergentonline.com

Appendix A—Lockheed Martin Financials

   Revenue  (millions)Operating Income  (millions)
Information Systems & Global Solutions $   8, 367 $  1, 612
  Lockheed Martin Totals $  45, 358 $  5, 752
Industry % of Totals18.45 %                         28.03%

(3)

Appendix B—Segments within the IT Consulting Industry

(2)

Appendix C—Industry Life Cycle

(2)

Appendix D—Revenue and Profit

  (2)

Appendix E—Market Share

(2)

Appendix F—PESTLE Analysis

Political

  • Government intervention in the economy can cause certain strict regulations on the IT Consulting Industry.
  • Since information systems are so broad and unique, information may be manipulated for government and intelligence purposes.
  • Information systems will need to be protected greatly to keep sensitive government information out of the wrong hands.

Economic

  • As information systems and information technology becomes more diverse, detailed, and continues to grow, the IT Consulting industry will also generate more revenues and perhaps more profit in the future.
  • Increased R&D to understand new information systems and technology may also increase industry expenses, and thereby reduce industry profitability.
  • More expansion from current industry players due to low interest rates may also contribute to increased overall industry profitability.
  • Revenue volatility is low in an industry where revenue has been increasing again gradually (following the financial crisis).

 (2)

Social

  • Social factors are largely driven by the general public and their responses to new and upcoming information systems and technology
  • IT Consulting may profit if firms need IT experts to help prevent hackers into their system

Technological

  • Technology is a large part of the IT Consulting industry. As information systems and information technology continue to expand, the IT Consulting industry needs to be present to accommodate their clients’ needs.
  • The industry will need to further their R&D, and their concrete technological systems to complete accommodation.

Legal

  • Regulation is likely expected in by the very nature of Information Technology and Management Consulting.
  • Expected Mergers and Acquisition activity in the industry will also need to be monitored to ensure prevention against anti-trust issues.

Environmental

  • The focus on environmentally friendly is becoming increasing important all around the world. Hence, information systems and therefore IT consulting must also continue to vouch that their technological resources do not negatively affect the environment too greatly. Technological disposal could be a key issue in IT Consulting

Appendix G—Five Forces Model

  • Barriers to entry are low and expected to increase gradually. Since the industry is so labor-intensive, establishing a firm requires the entrepreneur to possess knowledge and experience in the field and a functioning IT system. Those trying to enter the industry have major barriers of educational experience and the ability to attract clients. In the market for large corporate clients, brand-recognition and scale are substantial obstacles to entry.
  • Threat from buyers is relatively low because companies rely on IT Consultants to make sure their information systems are secure and accurate, and IT Consulting likely adds value to the firm. However, larger firms may trouble smaller IT Consulting firms to reduce price by threatening to switch to a more known company such as IBM.
  • Threats from substitutes are low. Since the IT Consulting industry is diverse and constantly changing to accommodate new technology, it is hard to obtain comparable products and services from those outside of the industry. Largely, obtaining such intricate and specialized resources to make a comparable product can be tough.
  • Threat from suppliers is low. The industry is highly labor intensive, which is evident by the high share of revenue devoted to labor costs. This reflects the service-oriented nature of IT consulting and the high level of education required of employees. Therefore, since most of the suppliers are employees who demand a wage, there is little wiggle-room unless a potential employee is extremely educated or qualified.
  • Lastly, competition from rivals is high and steady. Competition within the industry is based on price, quality of service, expertise, and the scope of services offered. Many IT consulting firms try to advertise all of their services so that they could provide clients with all of the services they may need. This price dependence and desire to sell all services to clients further increases the competition amongst rivals in the industry.


Appendix H—Strategic Alternatives

As mentioned in the report, it would seem that there are few strategic alternatives in the IT Consulting industry. Largely, competitors in the industry need to make sure that they are keeping up with the technology that is being generated, and making sure they can combat any difficulties or problematic situations that arise. Clients today generate a large amount of sensitive information, which needs to be protected from the various parties outside the firm, be that the public or company competitors. Firms in the IT Consulting industry should focus on how they can keep up with information systems and information technology while keeping costs in control. New technology can create increased overhead and R&D expenses, which should be carefully budgeted and monitored in order to provide the IT Consulting firm, as well as its clients with the greatest amount of value. Lastly, Lockheed Martin should especially be careful with their work and resources in this industry. As a large consultant to the U.S. civil and defense department, the company needs to make sure the IT Consulting they provide is perfect, and that their employees are competent, and their technological controls in place. Lockheed Martin should understand the importance their consultants and information systems have on U.S. intelligence, and the security of the country.

All papers are written by ENL (US, UK, AUSTRALIA) writers with vast experience in the field. We perform a quality assessment on all orders before submitting them.

Do you have an urgent order?  We have more than enough writers who will ensure that your order is delivered on time. 

We provide plagiarism reports for all our custom written papers. All papers are written from scratch.

24/7 Customer Support

Contact us anytime, any day, via any means if you need any help. You can use the Live Chat, email, or our provided phone number anytime.

We will not disclose the nature of our services or any information you provide to a third party.

Assignment Help Services
Money-Back Guarantee

Get your money back if your paper is not delivered on time or if your instructions are not followed.

We Guarantee the Best Grades
Assignment Help Services