The French Defense Industry: Market Opportunities and Entry Strategies, Analyses and Forecasts to 2017

Product Synopsis

This report is the result of ICD Research / Strategic Defence Intelligence’s extensive market and company research covering the French defense industry. It provides detailed analysis of both historic and forecast defense industry values including key growth stimulators, analysis of the leading companies in the industry, and key news..

Introduction and Landscape

Why was the report written?
The French defense Industry Market Opportunities and Entry Strategies, Analyses and Forecasts to 2017 offers the reader aninsight into the market opportunities and entry strategies adopted by foreign original equipment manufacturers (OEMs) to gain market share in the French defense industry.

What is the current market landscape and what is changing?
France has the world’s third-largest defense expenditure, and, during the review period, the defense budget recorded a CAGR of -0.52%. Expenditure is primarily driven by potential terrorist threats, participation in peacekeeping initiatives and efforts to modernize the country’s defense forces with advanced technology equipment. The defense budget, which stood at 1.91% of GDP in 2012, is expected to increase to 1.92% of GDP by 2017, as a consequence of GDP growth in the economy. During the review period, the average capital expenditure allocation stood at 40% of the total defense budget, and this is expected to increase to an average of 42% during the forecast period. The common services of defense, such as healthcare expenses, are expected to receive the highest allocation of the French defense budget, at 52%, throughout the forecast period.

What are the key drivers behind recent market changes?
The French defense budget is currently driven by efforts to modernize the army, threats from terrorist organizations, and active participation in peacekeeping missions. . France perceives global terrorism as a threat to its national security, and is concerned that it may be a potential target for Islamic extremist organizations. The country is an active participant in international peacekeeping operations, and is a permanent member of the UN Security Council.

What makes this report unique and essential to read?
The French defense Industry Market Opportunities and Entry Strategies, Analyses and Forecasts to 2017provides detailed analysis of the current industry size and growth expectations from 2013 to 2017, including highlights of key growth stimulators. It also benchmarks the industry against key global markets and provides a detailed understanding of emerging opportunities in specific areas.

Key Features and Benefits

The report provides detailed analysis of the current industry size and growth expectations from 2013 to 2017, including highlights of key growth stimulators. It also benchmarks the industry against key global markets and provides a detailed understanding of emerging opportunities in specific areas.

The report includes trend analysis of imports and exports, together with their implications and impact on the French defense industry.

The report covers five forces analysis to identify various power centers in the industry and how these are expected to develop in the future.

The report allows readers to identify possible ways to enter the market, together with detailed descriptions of how existing companies have entered the market, including key contracts, alliances and strategic initiatives.

The report helps the reader to understand the competitive landscape of the defense industry in France. It provides an overview of key defense companies, both domestic and foreign, together with insights such as key alliances, strategic initiatives and a brief financial analysis.

Key Market Issues

France imports 30%, of which 20% is procured from other European countries such as Italy and Austria. The country imports advanced technology equipment such as sensors, engines and artillery and engages in technology transfers. Historically, the US was the largest supplier of arms to France; however the country has recently begun to import from European countries such as Italy, Austria and Germany.

France has no offset obligations for defense imports and follows a restrictive foreign investment policy, which does not allow the foreign acquisition of domestic defense companies without governmental approval. The French foreign direct investment (FDI) policy restricts investment in the defense sector, as prior approval from the French government is required for such an investment. This restrictive foreign investment policy, coupled with a preference for domestically produced defense equipment, ensures that the domestic defense industry is protected from the potential competition of global companies.

France has announced the implementation of defense budget reductions in order to reduce the country’s fiscal deficit. The majority of the defense products manufacturedby the domestic defense industry are procured by the government;therefore the proposed reductions will have an adverse impact on the domestic defense industry, which will be forced to venture into foreign defense markets. The foreign defense companies that cater to French defense requirements are challenged by both the strict limits on foreign investment policy, and a defense policy that prioritizes domestically manufactured goods.

Key Highlights

During the review period, French defense expenditure declined at a CAGR of -0.52% and in 2011, valued at US$50.36 billion. The military modernization plans outlined in the French white paper on defense and national security, coupled with perceived terrorist threats and France’s status as the United Nations Security Council’s second-largest contributor to UN peacekeeping missions, stimulated defense expenditure during the review period. Such factors are expected to continue to fuel defense expenditure during the forecast period.

French homeland security expenditure is primarily driven by the perceived threat of terrorist attacks. Recent attacks include a false bomb alert at the Eiffel Tower in Paris and the kidnapping of five French workers and two of their African colleagues in Niger. In May 2005, Al-Qaedadeclared France an enemy, and a recent senate vote to ban Islamic clothing in the country is expected to cause social unrest. In addition, the French intelligence services have previously identified intelligence regarding possible terrorist attacks on the Parisian transport system. The French homeland security expenditure stood at US$22.6 billion in 2008 and grew at a CAGR of 6.76% to reach US$23.98 billion in 2010.

French defense equipment imports are commonly made in order to acquire technology that domestic defense companies do not possess. The country imports through foreign military sales or direct commercial sales with technology transfers, in order to ensure the domestic production, repair, and maintenance of equipment. In addition, France has also participated in a number of joint development programs involving many countries, which increase the scale of production and offer shared development costs. Therefore, collaboration with France on equipment development is another promising entry route.