Businessmodel of Huntington Ingalls Industries

Customer Segments

Huntington Ingalls designs and manufactures nuclear and non-nuclear ships, primarily for military purposes. The Company conducts the majority of its business with the US Government, principally the Department of Defense, participating in a number of high-priority US defense technology programs as prime contractor, principal subcontractor, team member, or partner. In 2015, 2014, and 2013, approximately 89%, 88%, and 94%, respectively, of the Company’s revenue was generated from the US Navy, and approximately 7%, 8%, and 6%, respectively, were generated from the US Coast Guard.

Huntington Ingalls also derives a smaller portion of its revenue from contracts with commercial customers. This customer segment principally comprises companies operating in the energy and oil and gas industries, to which it provides a range of services and products, including heavy manufacturing equipment for commercial nuclear power facilities and the operation, management, and cleanup of environmental hazard sites.

Value Propositions

Huntington Ingalls provides value to its customers in the following ways:

• Its industry standing and reputation, with the Company established as the leading military shipbuilding company in the US, with its name associated with quality and reliability as a preferred contractor for the US military, notably the US Navy and US Coast Guard;
• Its intellectual properties, with the Company owning and implementing a number of proprietary technologies that are utilised in the Company’s ships, ensuring that its provides products and services that cannot be obtained from other providers;
• Its state-of-the-art shipbuilding facilities, with the Company operating several cutting edge naval shipyards across the US, with the capability of developing and building a number of different classes of ships for military and non-military uses; and
• Its industry expertise and experience, with the Company employing highly-trained, specialist shipbuilding design and manufacturing personnel across its two operating segments, as well as a team of experienced industry executives. ### Channels

Huntington Ingalls operates a website at www.huntingtoningalls.com, through which it provides information on its operations, and recent activities. The complex nature of the Company’s operations does not allow for it to operate an online sales channel or customer portal.

Huntington Ingalls serves its customers through dedicated, design, sales and service teams. This includes specialist design teams, with the Company operating as a design agent for and one of only two companies that constructs the DDG-51 Arleigh Burke-class guided missile destroyers. Huntington Ingalls operates several shipbuilding sites across the US, including a key facility in Pascagoula, Mississippi. These sites offer various manufacturing capabilities to customers, with its key Mississippi site including a 660-ton gantry crane and a Land Based Test Facility.

The Company additionally provides fleet support and life cycle services, including depot maintenance, modernisation, repairs, logistics and technical support, and planning yard services for naval and commercial vessels through its AMSEC and CMSD subsidiaries. These services are provided primarily through the Company’s own ship repair facilities in Newport News, Virginia, and San Diego, California, which are near the US Navy’s largest homeports of Norfolk, Virginia, and San Diego, respectively.

Customer Relationships

Huntington Ingalls does not provide any products or services to customers on a self-service basis. The Company, instead, works closely with its clients, notably branches of the US military, to develop, manufacture, and deliver complex shipbuilding projects. The complexity of these projects require, as well as the large sums of money involved, require that the Company consult extensively with clients in order to agree upon designs, budget, and deliverables.

As Huntington Ingalls principally serves the US Military, the Company has established a close and longstanding relationship with the US Government and several of its agencies, maintaining constant contact with federal and military officials with regard to its various projects. The Company also provides support to its commercial customers, who are also typically provided their own account management teams or executives. Customers are also able to make more general enquiries by contacting the Company’s sales and support personnel over the phone or via an online contact form.

Huntington Ingalls additionally operates a several social media accounts – including with Facebook, Twitter, Instagram, YouTube, and LinkedIn – through which it is able to interact directly with potential and existing customers.

Key Activities

Huntington Ingalls is engaged in the design, construction, overhaul, and repairs of ships, primarily for the US Navy and the US Coast Guard. The Company is also a designer, builder and refueler of nuclear powered aircraft carriers, a builder of amphibious assault and expeditionary warfare ships, and the only builder of National Security Cutters for the US Coast Guard.

The Company shipbuilding business is conducted via subsidiary company Huntington Ingalls Inc, which itself is aligned into two reportable business segments: Ingalls Shipbuilding, which includes the Company’s non-nuclear ship design, construction, repair and maintenance businesses; and Newport News Shipbuilding, which includes the Company’s nuclear ship design, construction, overhaul, refueling, and repair and maintenance businesses. The Company also provides other products and services, including production of heavy manufacturing equipment for commercial nuclear power facilities and the operation, management, and cleanup of environmental hazard sites.

Key Partners

Huntington Ingalls works closely with a range of companies and organisations in the manufacture of its ships and the provision of its services. Due to the Company’s close relationship with the US Government, its partners typically require stringent regulatory approvals. Huntington Ingalls’s partners can be categorised broadly as:

• Supplier and Procurement Partners, including suppliers of materials, equipment and tools that are used in the manufacture and servicing of the Company’s ships;
• Service and Vendor Partners, comprising providers or various services and technologies, as well as companies to which certain non-technical functions can be outsourced;
• Joint Venture Partners, comprising various manufacturing and technology companies with which the Company jointly provides products and services through mutually owned entities; and
• Strategic and Alliance Partners, comprising a range of companies from multiple sectors, with which the Company maintains close relationships and collaborates on joint projects. Huntington Ingalls has launched a number of partnerships in recent years. This includes a partnership with Westinghouse to work on power plant projects in Georgia and South Carolina, and a tie-up with Old Dominion University to create engineering programs for its workers.

Key Resources

Huntington Ingalls’s key resources are its intellectual properties and technologies, its raw materials and supply chain, its shipbuilding and repair facilities, its partnerships, and its personnel.

Huntington Ingalls owns and licenses a large portfolio of proprietary intellectual property, including a number of patents. Searches of records published by the US Patent and Trademark Office identified a number of patents filed in the name of Huntington Ingalls, including applications entitled ‘Tuned rolling wave energy extractor’, ‘Tuned rolling wave energy extractor’ and ‘Portable lifting rig’.

Huntington Ingalls also owns a number of physical properties across the US that are key to its operations. This notably includes its various shipyards and repair facilities.

Cost Structure

Huntington Ingalls incurs costs in relation to the development of its technologies, the procurement of materials and supplies, the manufacture of its ships, the management of its partnerships, and the retention of its personnel.

In 2015 Huntington Ingalls recorded total cost of product sales and service revenues in the amount of $5.52 billion. The Company also accrued general and administrative costs totalling $669 million, which included the Company’s research and development costs.

Revenue Streams

Huntington Ingalls generates revenue through the manufacture and sales of ships. The majority of the Company’s revenue is derived from long-term US Government contracts for design, production, and support activities, in particular serving the US Navy and US Coast Guard. In addition to its core shipbuilding activities, Huntington Ingalls generates a small portion of its revenue through the provision of products and services to commercial clients, including the manufacture of industrial equipment and certain energy-related services.

In 2015 Huntington Ingalls generated total service and product revenue in the amount of $7.02 billion, up slightly on the $6.96 billion recorded by the Company in 2014. The Company’s Newport News Shipbuilding segment accounted for the majority of the Company’s revenue for the year, alone recording revenue of $4.70 billion.