Running head: LOCKHEED MARTIN 1
LOCKHEED MARTIN 2
Institution of Affiliation
The success of a corporation depends on both its internal competencies and the external environment within which it operates. While the corporation can manipulate its competencies in order to gain competitiveness, it has little power over its external environment. When the competitiveness is controlled mainly by market forces as opposed to the corporations strategies, it becomes difficult to achieve organizational goals. This paper will analyze the Lockheed Martins case study, identify symptoms, goals, action plan and provide a diagnosis. The analysis will illustrate how tedious it is for a company to succeed when the factors that determine competitiveness are in the external environment.
The first sign of problems affecting Lockheed Martin is the reduction of stock prices. Between 2008 and 2011, the stock price per share reduced from $ 120 to $ 80. A reduction in stock prices is a symptom of negative prospects for the company. Investors could have been apprehensive about the companys future and thus refrained from purchasing its stocks. Speculations on their part could have sparked fears leading to stockholders selling off their stocks massively, a condition that could trigger a fall in stock prices. Secondly, Lockheed Martin downsized by dismissing 23000 workers. The dismissal could indicate that the company had little work, which did not require extra employees.
There are several goals that Lockheed Martin must fulfill to overcome its challenges. First, the corporation needs to diversify its ventures from the defense contracts with the aim of ensuring its longevity in the market. Overreliance on one customer is untenable because the loss of such a client can lead to the failure of the company. At the same time, diversification distributes risks so that when business in one segment is underperforming, others can help a firm stay afloat. Secondly, Lockheed Martin should develop a system of predicting the costs of operation to avoid overruns, which can ruin its reputation with customers. When the company continues to revise the costs during a projects implementation, it inconveniences the customers and may result in delays in delivering the final products. Thirdly, the firm must improve its internal efficiency to ensure that there is no delay and wastage. Efficiency can help the organization to maintain low costs and eliminate the need to increase costs during projects progress.
The critical problem that the company faces is its dependence on the defense contracts that are controlled by governments. The majority of the contracts for Lockheed Martin come from the United States government. In the recent past, the government has been reducing the defense budget on which Lockheed Martin depends. Consequently, it has decreased the number of defense projects and canceled some that were in progress. The government projects are unpredictable because they depend on conflicts around the world. For instance, Lockheed Martin was prospering while American was at war in Iraq. Contrariwise, when the government started withdrawing from Iraq, there were few projects for Lockheed Martin. Additionally, Lockheeds operations are affected by politics such as when the Congress and the administration fail to agree on the budget. At such times, the reduction in military spending is allowed by the Budget Control Act of 2011. When Lockheed Martin is dealing with foreign governments, restrictions by the United States government on countries with which not to trade begin to matter thus reducing the number of customers with whom the company can trade. Other factors such as foreign currency fluctuations diminish the firms profitability. Apart from dependence on governments for revenue, another issue is the inability to predict the costs accurately. The problem emerges from the fact that the defense projects may take decades within which costs can change drastically. The costs prompt the company to negotiate for more money with the clients to cover the overruns. The negotiations in its turn have several effects such as delaying the timelines and changes in the number of items ordered because of the increased cost. The problems illustrate how the external environment complicates effective implementation of successful strategies for Lockheed Martin.
Lockheed Martin should enter other market segments to mitigate the volatile business in the defense segment. Such markets provide a relief when the performance of the defense segment is below expectation. The diversification is essential because it can offer a sustainable source of revenue. Since Lockheed operates in four different areas in its model that has a civilian use, it should seek short-term projects from commercial customers while undertaking the long-term defense projects, which can sustain its cash flow.
The action plan is essential to avert the consequences of the problems faced by Lockheed Martin. The first step is scenario thinking by the management team, which helps the company to anticipate possible scenarios in the future. It is imperative to foresee changes in costs, regulations and other factors that affect the company. Secondly, the management team should develop solutions for each scenario and factor them in quotations when bidding for projects. Once the company has succeeded in bidding for defense contracts, it should plan its time in such a way that some of it can accommodate short-term civilian projects to complement its strategic work.
The symptoms at Lockheed Martin include a reduction in stock prices and downsizing. The organizations goals are diversification, accurate forecasting systems and improvement of internal efficiency. The problems include dependence on defense work, global conflicts, politics, regulations, and changes in the value of foreign currencies. The solution to the problems is to serve other market segments. Scenario thinking, the creation of solutions for every possible outcome and incorporation of diverse activities with short timelines constitute the action plan.