Businessmodel of Lockheed Martin

Customer Segments

Lockheed Martin has a niche market business model, with a specialized customer segment. The company targets its offering at the U.S. government (which accounted for 78% of its business in 2015), but also serves U.S. commercial customers and international military and commercial clients.

Value Proposition

Lockheed Martin offers three primary value propositions: innovation, accessibility, and brand/status.

The company has embraced innovation throughout its history; its milestones include the following:

• The first power-operated revolving gun turret, a key feature in World War II aircraft
• The first FAA-approved flight data recorder, now standard equipment on commercial planes
• The first weather picture taken from space, taken by the TIROS satellite
• The first digital sonar capability, which enhanced undersea warfare capability
• The first passive towed sonar array, which detected submarines
• The first surface-to-surface missile ever fired by the U.S. Army during combat
• The first Littoral Combat Ship, designed to protect U.S. coastal waters The company creates accessibility by providing a wide variety of options. It manufactures products in the aerospace, defense, security, and advanced technology industries. It has acquired numerous firms during its history, which has increased the diversity of its portfolio. Between 2014 and 2016 alone, it purchased Sikorsky Aircraft (a helicopter manufacturer), Systems Made Simple (a health IT solutions provider), Zeta Associates (an information provider for the intelligence community), and Industrial Defender (a cybersecurity solutions provider). Lockheed Martin has also increased access by forming alliances with competitors in order to provide enhanced solutions for its customers.

The company has established a powerful brand due to its success. It is the largest defense contractor in the world, with $46.1 billion in revenues in 2015. It maintains over 98,000 employees working in more than 590 facilities in all 50 U.S. states, as well as at locations in 70 foreign nations. Lastly, it has won many honors, including the prestigious Collier Trophy, which it has received six times.

Channels

Lockheed Martin’s main channel is its business development team. It also sells products through original equipment manufacturers and franchised and authorized distributors. The company promotes its offering through its social media pages and participation in expos, summits, symposiums, trade shows, and conferences.

Customer Relationships

Lockheed Martin’s customer relationship is primarily of a personal assistance nature. Once clients have purchased its product, it provides focused training and logistics support to ensure comfort.

Key Activities

Lockheed Martin’s business model entails designing, developing, and manufacturing its products for its clients.

Key Partners

Lockheed Martin’s key partners are the suppliers that provide the parts for its products. The company seeks suppliers that have proven experience, offer complementary commodities, and have a strong financial position. It maintains Supplier Wire, a portal with helpful resources for these firms.

The company also partners with OEMs and franchised/authorized distributors to sell its products; that said, its agreements are typically long-term, leaving few opportunities for new third parties.

Lastly, the company operates Lockheed Martin Ventures, a program that makes strategic investments in startups that develop cutting-edge technologies in its core markets and in new areas. The partners receive access to its engineering staff, technologies, and business relationships.

Key Resources

Lockheed Martin’s main resources are its human resources, particularly the engineering employees who design and develop its products.

The company also has important physical resources in the form of manufacturing plants, warehouses, laboratories, service centers, and other facilities in 590+ locations, mostly in the U.S. Lastly, it places a high priority on IP and owns numerous patents.

Cost Structure

Lockheed Martin has a value-driven structure, aiming to provide a premium proposition through frequent product improvements.

Its biggest cost driver is cost of products, a variable expense. Other major drivers are cost of services, a variable expense, and R&D costs, a fixed expense.

Revenue Streams

Lockheed Martin has two revenue streams:  product sales, which accounted for 78% of its revenues in 2015, and service sales, which accounted for 22% that year.