Case 20
Lockheed Martin
Jim Kelly, Eric Ryza, Mark Herman, Norbert Forlemu, Swetha Manimuthu
Texas A&M University
Lockheed Martin takes flight in times of crisis.1
Introduction
It’s a plane. It’s a helicopter. Actually, it’s the Lockheed
Martin F-35 Lightning II, the most capable – and
­expensive – aircraft ever produced. Like a jet that can
also hover, Lockheed’s versatility is its greatest strength
in times of crisis. Along with the escalation of conflicts
in the Middle East and increased support for defense
spending, Lockheed Martin’s stock rose dramatically
from a price per share of $31 in January 2001 to over
$120 in mid-2008.2 However, as of the end of 2011 and
coinciding with the drawdown in Iraq and Afghanistan,
Lockheed’s stock dropped to $80.90. Nevertheless,
Lockheed enjoyed an outstanding return on equity
(ROE) of 112  percent in 2011. With four core business
segments and a worldwide reputation for excellence,
Lockheed appears well positioned to respond to changes
in the market. However, fully 78  percent of Lockheed’s
total sales are from military arms3 and 82 percent of total
sales originate from within the United States. Simply put,
Lockheed’s dependence on U.S. defense spending has the
potential to threaten the firm’s longevity.
Lockheed Martin alone receives over 7  percent of
total U.S. defense spending – that’s one of every fourteen
dollars paid by the Pentagon. Yet in times of economic
crisis, this funding is threatened at all levels and has
resulted in uneven cash flows and company-wide lay-
© Vividfour / Shutterstock.com
offs. Recently, Lockheed downsized its workforce from
146,000 to 123,000,4 reflecting the termination of key
projects and a forecasted reduction in demand for both
existing and new products. The early termination of the
F-22 Raptor project in 2008  illustrates the potentially
devastating effects of government budget constraints
CHE-HITT11E-13-0403-CaseStudy20.indd 259
on the survivability of Lockheed. The F-35 Joint Strike
Fighter currently in development has the potential to
be the largest weapons project ever, with an estimated
$1.51 trillion final tally.5 However, production delays
and the current political climate threaten to affect the
scope of the project dramatically – a project at the core
of Lockheed Martin’s fiscal security.
Further, if Lockheed’s fortunes improve in times of
global unrest, reason suggests that the company suffers
in times of peace and stability. Lockheed’s challenge is
delivering products with a 10- to 20-year development
and production lead time that, ultimately, will be in
uncertain demand (due to the impossible-to-predict
state of flux in terms of world conflict) for customers
with uncertain budgets. Lockheed’s recent exploration
into renewable energy and healthcare solutions adds an
interesting dimension to its portfolio, as both are new
business segments and outside the usual scope of its core
competencies.
Taking Flight
Lockheed started when two brothers, Allan and Malcolm
Loughead (pronounced “lock-heed”), handcrafted their
first wooden planes in southern California in early 1913,
mainly for hobbyists and as a military model. They were
successful until the end of WWI left their business with-
out a market and the company went bankrupt in 1921.
Allan Loughead continued alone, collaborating with
Fred Keeler to form the Lockheed Aircraft Company in
1926. Their first success was the Vega wooden mono-
plane, which made the first nonstop transcontinenal
flight across the United States in 1928. This success
inspired the Detroit Aircraft Corporation (DAC) to
acquire the company in 1929. The new company thrived
259
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 260
through WWII and produced multiple aviation legends
such as the P-38 Lightning Fighter, the U-2 spy plane,
and the SR-71 Blackbird. Lockheed also produced the
XP-80 Shooting Star, the first American jet fighter, in
only eight months.
In the 1960s, Lockheed attempted to enter the com-
mercial jumbo jet market to compete with Boeing’s then
new 747 and the McDonnell-Douglas DC-10. As a late
mover pitted against superior competition, Lockheed
conceded defeat in 1972. On the brink of bankruptcy,
Lockheed remained solvent through a $250 million loan
guarantee from the U.S. government.6 To add insult to
injury, Lockheed’s image was marred in the 1970s by a
major bribery scandal. This scandal led to tougher U.S.
anti-bribery laws and a new process called Total Package
Pricing that is designed to make bidding more trans-
parent and explicit.7 Lockheed came out of the 1970s to
prosper during the 1980s, winning new contracts for the
F-117 stealth fighter and acquiring the division of General
Dynamics responsible for producing the popular F-16.
Merger of Equals
The Martin Company was formed in 1917 by Glenn
Martin who built his first airplane in 1909 and later
merged with the Wright brothers. The company is nota-
ble for producing the first U.S.-constructed bomber,
the B-29, as well as commercial and military flying
boats.8 The company produced missiles, electronics,
and nuclear systems in the 1950s, and, in 1961, it merged
with American Marietta Company, a construction mate-
rials and chemical company. The newly named Martin
Marietta Corporation sold most of its businesses after
incurring excessive debts to defend a hostile takeover, but
in 1992, managed to purchase GE’s aerospace business.
In March 1995, the company merged with Lockheed to
form Lockheed Martin, the largest defense contractor in
the world. This so-called “merger of equals” was hailed
by investors and others as a “rare instance of corporate
synergy”9 as the two companies were competitors, yet
with minimal areas of overlap in specialties and capa-
bilities.
The newly formed Lockheed Martin continued its
expansion in 1996 by acquiring the Loral Corporation
and COMSAT Mobile Communications. Because of
low profits, the company then divested ten of its non-
core technology operations and acquired a 30  percent
stake in Asia Cellular Satellite to build its non-defense
business. Shortly thereafter in 2000, Lockheed Martin
was awarded a $3.97 billion contract by the Pentagon to
develop an anti-missile system as well as a contract to
supply 24 C-130J transports.10
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Part 4: Cases
Lockheed Martin continued to expand by acquir-
ing the government technology services business of
Affiliated Computer Services in 2003, and Sippican,
a naval electronics company, in 2004. In the same
year, it won a seven-year contract to provide infor-
mation technology services to the Social Security
Administration. The company had another suc-
cessful year in 2005 when it was selected alongside
Augusta Westland to build a new fleet of 23 presiden-
tial Marine One helicopters. It also acquired STASYS
Ltd., a U.K.-based network communications company,
and Systex Group, a provider of IT and technical sup-
port services to the U.S. government in the same year.
In 2006, it acquired several businesses including ISX
Corporation, Pacific Architects and Engineers, and
Savi Technology. The company’s Space Systems divi-
sion also won the coveted Orion manned lunar space-
ship contract from the National Aeronautics and Space
Administration (NASA) that year. In 2007, Lockheed
Martin combined its Information Technology and
Global Services division with its Integrated Systems
and Solutions division. Recognizing its limitations,
the company collaborated with rivals Northrop
Grumman and Alliant Techsystems to develop multi-
role weapons for Lockheed’s F-22 Raptor and F-35
Lightning II.11
Despite Lockheed’s efforts to build the capabili-
ties necessary to fulfill its contracts, the F-22 Raptor
was cancelled in late 2008 by the Secretary of Defense,
Robert Gates, due to budget constraints. The F-22
was originally developed to combat Cold War threats
by providing complete air superiority. At a cost of
$354  million per plane,12 however, this technology
and capability was no longer justifiable. In addition,
concerns about the acquisitions process as well as
issues with program development and high costs led
President Obama to cancel the VH-71 presidential
helicopter contract in early 2009. To add to its woes,
the future of the F-35 and Lockheed’s relationships
with eight partner countriesi remains in jeopardy due
to increasing costs and delays.
The Industry: Anything but Stable
Lockheed Martin has four business segments that pri-
marily cater to customers in the defense segment:
Aeronautics, Space Systems, Electronic Systems, and
Information Systems and Global Solutions.13
 Britain, Australia, Italy, Turkey, Norway, Denmark, the Netherlands, and Canada.
i
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 Case 20: Lockheed Martin
Aeronautics
The aircraft industry comprises about 80 percent of the
aeronautics industry. The growth of the airplane industry
began with the Wright brothers’ successful demonstra-
tion of wing dynamics to the American and European
governments. After the successful use of aircraft in WWI,
the U.S. government began to focus on military aircraft.
This transformation led to the emergence and success
of many entrepreneurs in the race for military aircraft
superiority, most notably Boeing, Douglas, Loughead,
and Martin. The conclusion of WWI and subsequent
cancellation of over 90 percent of the defense contracts
eliminated most of the smaller entrepreneurial ventures
in this industry, leaving only the major players that have
since grown to be leaders largely through mergers and
acquisitions.
The aircraft industry consists of aircraft and aircraft
parts for both military and civilian purposes, with air-
craft sales accounting for 65 percent of the industry’s rev-
enues. Currently, Lockheed Martin is the industry leader
for defense aircraft followed by Boeing and Northrop
Grumman Corp.
The commercial aircraft industry tends to follow
economic recessions and booms. On the other hand, the
military aircraft industry is driven by international poli-
cies and conflicts that drive fiscal policies and defense
budgets.
Accounting for 60  percent of revenue, government
defense contracts strongly influence sales in the aero-
nautics industry. The emergence of this industry fol-
lowed two historic incidents: the development of air-
borne missiles during WWII and the “race to space” of
the U.S. and the U.S.S.R. After WWII, most aviation-
focused companies began to develop missile technology.
The growth of this industry closely follows occurrences
of war and major political changes, such as the fall of
the U.S.S.R.
The aeronautics industry has three segments: ballis-
tic missiles, cruise missiles, and space vehicles. Because
of the complexities of hardware and software involved,
this industry is highly collaborative with one contractor
sub-contracting to others.
Until the fall of the Iron Curtain, the market for mis-
siles experienced strong growth. However, after the fall
of the U.S.S.R, the demand for missiles dropped signifi-
cantly as the expected need for both ballistic and aircraft-
fired missiles declined. A major impact in this industry
was the Strategic Arms Reduction Treaty between the
U.S. and U.S.S.R., signed in 1991. According to the treaty,
member nations would discontinue building guided
and ballistic missiles and would destroy 30  percent of
CHE-HITT11E-13-0403-CaseStudy20.indd 261
261
their respective ballistic missile stockpiles. The treaty
was valid for 15 years with clear enforcement periods for
reducing various missiles. This treaty was re-signed in
2010 and further reduced the number of warheads and
launchers in deployment by each country. The industry
experienced a significant growth spurt when the con-
tracts for missiles grew in 2004 in relation to the war
in Afghanistan and Iraq, but this growth slowed in the
second half of the decade.
To ensure survival in the face of decreased business
potential and in response to pressure to decrease costs,
multiple mergers and acquisitions have occurred in the
aeronautics industry. Additionally, multiple collabora-
tive partnerships have been formed in this industry since
the late 1990s as another path for industry participants to
continue operating. The industry largely depends on the
effect international tensions wield on defense spending,
and to a smaller degree, economic conditions.14,15
Space Systems
The space system industry has three segments: space
capsules with rocket boosters, re-entry vehicles, and sat-
ellites. Before the Iron Curtain’s fall, the United States
and the U.S.S.R. were competing on several space mis-
sions – most notably, launching satellites and sending
a person to the moon. This industry grew with govern-
ment spending to launch both communications satel-
lites and the International Space Station into orbit in
the 1990s. Manned missions slowed after the Challenger
and Discovery tragedies. The industry now focuses on
launch vehicles that put satellites into orbit, although this
also leveled off around 2003.16
Electronic Systems
Perhaps surprisingly, the electronic systems segment of
Lockheed Martin accounts for 31 percent of the company’s
total revenue, posting higher net sales, operating profits,
inter-segment revenue, and international sales than the
firm’s other three divisions. Even so, Lockheed manage-
ment felt that splitting the unit into two new divisions –
Missiles and Fire Control (MFC) and Mission Systems
and Training (MST) – would reduce costs and jump start
revenue growth.17 At present, this division provides avi-
onics, training systems, communications systems, engi-
neering support, integration support, and other support
systems for naval, missile, nuclear, and aircraft systems.
Lockheed announced the split would become effective at
the end of 2012.
The electronic systems industry has a clear demar-
cation between government defense projects and com-
mercial projects. The rules that govern the contracts of
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 262
these two sets of customers vary considerably. Federal
contracts involve different processes, accounting proce-
dures, and conformance to several government norms
for the suppliers. Consequently, the cost of executing a
defense contract is substantially higher than that of a
similar commercial contract. Government contractors
have numerous agencies to satisfy, all of whom monitor
the pricing, quality, and performance of the products, in
addition to adherence to the various standards regard-
ing implementation. Contractors are subject to several
audits and are required to disclose their financial infor-
mation in view of the former requirements.
Initially, the defense electronics industry negoti-
ated electronics contracts separately from the larger,
more comprehensive contracts. The average strike
rate (how often a single contractor’s bid is selected)
for companies in this industry remains at 25  percent,
a percentage the U.S. government has historically tar-
geted. However, despite its efforts to reward contracts
among the various contractors equally, some companies
receive a larger share of the pie. These companies hold
a stronghold in the defense market. As with the aero-
nautics industry, at one time there were many primary
and secondary contractors in the electronics industry.
However, with reductions to the defense budget since
1990, this has changed. Significant mergers among the
larger companies put secondary contractors in a pre-
carious situation. This merger activity, a preference for
the larger companies, and government ­policies requir-
ing a smaller and well-diversified contractor base, fur-
ther reduced the number of the companies competing
in this industry. Because of this reduction, the govern-
ment now rewards contracts for whole systems instead
of individual components and sub-systems using a com-
petitive and transparent “request for proposal” bidding
process.
Although investment in property, plant, and equip-
ment required for this industry is low, because of gov-
ernment policies several deterrents for start-ups remain.
Chief among these deterrents are specialized human
resources, continuous facility improvements and cost
reductions, intense national and international competi-
tion, and ongoing technology obsolescence.
Research and development (R&D) is integral to this
industry, with funding for R&D coming explicitly from
the contracts being awarded and government subsi-
dies. This funding was implemented to ensure that a
company could become the sole contractor for a pro-
prietary technology and thereby capitalize on innova-
tion. Despite the goal however, this funding began to
decrease in the 1990s.
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The industry grew in the early 2000s with the U.S.
military initiative to integrate and upgrade its systems
into what it called the Future Combat System. Another
significant contribution to the growth of the industry was
the increase in demand for Global Positioning Systems
(GPS) in both the defense and commercial segments,
with navigation systems first being utilized in a defense
capacity during the Gulf War conflict in 1991. The launch
of the GPS–2RM satellite by Lockheed Martin in 2005
increased the power available for existing signals and
added additional frequencies for military and civilian
GPS use. The third factor contributing to the growth of
the electronics industry is the U.S. Army’s recent devel-
opment of a protection system for Stryker units that
scans for and intercepts anti-tank missiles and grenades.
As with the aeronautics and space systems segments and
despite its growth in the civilian market, this industry is
affected significantly by reductions in defense budgets.
Lockheed Martin is the industry leader for elec-
tronic systems. This is due to additional capabilities
resulting from the merger of Lockheed and Martin and
Martin’s earlier acquisition of the GE Aerospace divi-
sion. Raytheon is the second largest company in this
industry, followed by AlliedSignal’s recent acquisition –
Honeywell. In addition, there are many other compa-
nies with well-diversified business portfolios operating
in this industry.18
Information Systems and Global
Solutions
Information systems and global solutions is the fourth
industry and segment of Lockheed Martin. This business
segment provides management services, information
systems, and technology expertise to a wide variety of
customer segments including biometrics, energy, finan-
cial services, human capital management, healthcare,
transportation, and homeland security. This is a very
competitive industry with large and small cap compa-
nies. With only 2 percent of this division’s revenue origi-
nating from commercial customers in the United States
and 5 percent from international customers, it is obvious
that the purchases by the U.S. government account for
the majority of the segment’s revenues.19
How Lockheed Martin Competes
Lockheed Martin is committed to delivering superior
shareholder returns while pursuing leading sustainability
performance and good citizenship.
– Bob Stevens, CEO20
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 Case 20: Lockheed Martin
Lockheed Martin operates using four principles – Secure,
Extend, Expand, and Enable.
■■ Secure our existing programs by performing with
excellence. Additionally, we must continue to have
candid dialogues with our customers and the highest
degree of transparency on all our programs.
■■ Extend the value of our platforms by shaping follow-
on business and tailoring our existing capabilities for
new applications. We should also continue to seek
and implement innovative business models.
■■ Expand our position within targeted segments with
market-based strategies. This also means more pur-
suits internationally, and greater synergies between
Lockheed Martin products.
■■ Enable meaningful growth through adjacent market
opportunities. We want to focus on markets that will
move the needle for us.21
Conditions in the external environment strongly
influence the strategies Lockheed Martin uses in its
Aeronautics, Space Systems, and Electronics Systems
divisions. In this sense, these divisions have identified the
technologies that will satisfy market demand and then
use its resources, capabilities, and core ­competencies to
satisfy those demands. In contrast, available resources
and their relative uniqueness that are associated with
the firm’s Information Systems and Global Systems seg-
ment strongly influence how this particular segment
competes. More specifically, Lockheed Martin identified
the IT industry to be one in which the firm’s capabilities
and core competencies could be successfully applied in
order to create value for customers. Accordingly, it now
offers technology solutions to the energy, healthcare,
and financial services sectors, among others, – which
is a definitive move away from the U.S. defense budget
(Exhibit 1).
Lockheed Martin provides aircraft and advanced
technology solutions to its customers, primarily the U.S.
government. The firm emphasizes innovation, human
capital, and ethical practices as the foundation for serv-
ing customers’ needs.
Over its life, Lockheed Martin has expanded its busi-
ness operations and now operates well-diversified busi-
ness segments. This diversification helps the firm weather
economic downturns and defense-specific spending
cuts. Diversification for Lockheed has primarily come
through mergers and acquisitions, the most notable of
which was the merger between Lockheed and Martin
in 1995. Also of significant note was the acquisition of
the advanced electronics company, Loral Corporation,
in 1996.22 Lockheed Martin’s business segments share
CHE-HITT11E-13-0403-CaseStudy20.indd 263
263
Exhibit 1  Lockheed Martin Business Segment Basis
Information
Resource Basis Systems and
Global
Solutions
I/O Basis Aeronautics
Space
Systems
Electronics
Systems
Source: Lockheed Martin Corporation. Annual Report. Bethesda, MD: Lockheed
Martin Corporation, 2011. Retrieved 07 Mar 2012. http://www.lockheedmartin.
com/content/dam/lockheed/data/corporate/documents/2011-Annual-report.pdf
capabilities and a culture defined by the executive lead-
ership with a large amount of project-based cooperation
between its aeronautics, space vehicle, and electronics
business divisions.
Lockheed Martin enjoys its position as a leader in
the defense sector; however, U.S. government dependent
businesses do not operate or compete in a risk-free envi-
ronment. Successful performance in this sector involves,
for example, keeping costs at an acceptable level while
adhering to the many rules and regulations governing the
firm’s operations. Lockheed Martin focuses on continued
operational efficiency and cost-controlling measures to
remain attractive to its customers and ­shareholders alike.
In view of this, it works closely with its suppliers, antici-
pating raw material prices and planning accordingly.
It believes that solid execution is important and works
to stay on schedule in development and production,
although this has been a particular point of c­ ontention
in the F-35 program.
Innovation is the key to survival for any technol-
ogy company and is an organizational activity to which
Lockheed Martin devotes considerable resources.
For example, anticipating the growth in demand for
unmanned vehicles and global security services, Lockheed
Martin is now investing heavily in the development of
these types of systems and activities.23 It is attuned to the
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 264
behaviors of its customers and understands that manag-
ing costs is essential to its sustainability in a future with
potential government budget cuts.
In accordance with an interest to continue increas-
ing its revenues and profitability as well, Lockheed
Martin has focused on increasing international sales and
expanding into adjacent markets. For example, the num-
ber of international customers for the F-35 aircraft has
increased from eight to ten with the additions of Israel
and Japan.
Financial Data and
Performance24,25,26,27,28,29,30,31,32
The 1995 combination of Lockheed and Martin resulted
in a firm that was heavily dependent on the U.S. gov-
ernment for revenues. For example, Lockheed attributed
82, 84, and 85  percent of its 2009, 2010, and 2011 total
revenues to products sold specifically to the U.S. gov-
ernment and its military allies (Exhibit 2). Relying on a
single or a small number of customers for the majority
of a firm’s sales (as is the case for Lockheed) creates a
dependence that is undesirable. The net profits of the
company, totaling $2.66  billion in 2011, came from its
four operating segments: Aerospace, Space Systems,
Electronic Systems, and Information Systems and Global
Solutions. Aerospace and Electronic Systems are the two
dominant segments in the Lockheed portfolio, account-
ing for nearly 63 percent of the company’s sales in 2011.
Further, the Space Systems segment’s only customers are
NASA and the U.S. Department of Defense. Some Space
Exhibit 2  Percent of Revenue from U.S. Government Comparison
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Lockheed
Source: 2011 10-K filings of companies listed via www.sec.gov
CHE-HITT11E-13-0403-CaseStudy20.indd 264
Part 4: Cases
System products are sold internationally, but the transfer
is facilitated and regulated by the U.S. government.
Given the aforementioned ties to the U.S. govern-
ment’s funding decisions relative to the firm’s business
segments, some might view Lockheed Martin as a risky
investment. The long period of time that is commonly
required for the firm’s R&D investments to lead to reve-
nue enhancements, coupled with the fact that the markets
for its primary products are constrained by the political
and legal external environment, could lead investors to
believe there is relatively little room for growth in the com-
pany. According to Lockheed’s financials, however, those
investors would be wrong. Largely because of its ability
to innovate and collaborate, Lockheed Martin has been
at the forefront of many technologically significant aero-
space breakthroughs. Its ROE for 2011 of 112.76 percent
exceeds the performances of all of its main competitors,
with the exception of Boeing, which posted a 127.94 per-
cent ROE over the same period. In contrast, Northrop
Grumman, which predominantly manufactures systems
and platforms, such as the E-2 Hawkeye and the Global
Hawk unmanned aerial vehicle used extensively in the
war on terror, earned only a 17.73 percent ROE. Industry
giant General Dynamics was only slightly better for 2011
with a ROE of 19.03 percent (Exhibit 3).
While many investors would be very satisfied by a
firm’s ability to earn a 112.76 percent return on its equity,
analyzing Lockheed’s capital structure yields additional
and important insight about the firm’s overall financial
performance. In this respect, Lockheed Martin earned
only a 5.7 percent profit margin due in large part to its
2011
2010
2009
Boeing Northrop General
Grumman Dynamics
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 Case 20: Lockheed Martin 265

Exhibit 3  2011 Return on Equity Comparison
Northrop
Grumman, 17.
General 73%
Dynamics, 19.
03%
Lockheed, 112
.76%
Boeing, 127.9
4%
Source: 2011 10-K filings of companies listed via www.sec.gov
significant debt. Its debt to assets ratio is 645  percent,
giving pause to investors contemplating the possibility of
purchasing stock in Lockheed Martin. Further, because
the U.S. government is its predominant customer, all
requests for proposals are put out to bid in a static fash-
ion. The U.S. government has moved away from award-
ing contracts on a component and sub-system basis, now
preferring to award entire systems to one contractor.
Because cost is a major consideration, the government
specifies the technical requirements but refrains from
dictating production and development techniques. All
bidders are expected to adhere to the technical require-
ments specified. Cost is considered only after a bidder’s
satisfactory compliance to all technical specifications.
Study of firms’ financial situations suggests the pos-
sibility that there are no moderately financed companies
in terms of capital structure within this industry, as both
Lockheed Martin and Boeing are heavily leveraged, while
General Dynamics and Northrop Grumman rely heavily
on equity. The dichotomy between the two approaches
is quite revealing. The two low-leverage companies,
General Dynamics and Northrop Grumman, only have
debt-to-asset ratios of 29.53 and 38.07  percent, respec-
tively, which would be the reason for their “less-than-
spectacular” return on equity.
Leading its competitors in this segment, Lockheed
Martin shows the most stable per share earnings over a
five-year period ending in 2011, ranging from $7.02 to
$7.81 (Exhibit 4). This may be one reason that institu-
tions own 91  percent of the company’s stock. By com-
parison, earnings per share for General Dynamics have
ranged from $5.10 to $6.94 over this period, while the
EPS for Northrop’s stock has varied from $4.12 to $7.52.
Perhaps surprisingly, Boeing’s earnings-per-share have
been the most volatile over this particular five-year
period, ranging from a low of $1.87 diluted EPS in 2009
to a high of $5.33 in 2011.
From an income statement perspective, the size
and scope of Lockheed Martin can be quite difficult
to comprehend fully. Lockheed Martin is a behemoth
of an industry leader with annual revenues in excess
of $40  billion for each of the last five years. The aero-
space segment, only the second largest division in the
company, had revenues in excess of $14 billion for 2011.

Exhibit 4  Net Earnings per Share (Diluted) Comparison

9
8
7
6
5
4
3
2
1
0
2011 2010 2009 2008 2007

Lockheed Boeing
Northrop Grumman General Dynamics

Source: 2011 10-K filings of companies listed via www.sec.gov

CHE-HITT11E-13-0403-CaseStudy20.indd 265 10/22/13 3:09 PM

 266
For a company such as Lockheed Martin, the backlog
of orders is an indicator of a firm’s health that investors
examine. Lockheed had a tremendous backlog of orders
in excess of $30.5 billion for 2011, up $3 billion from the
previous year. This backlog compared favorably with
those of its competitors. Boeing had a reported back-
log of $24.1 billion, down from $25.1 billion in 2010, and
Northrop Grumman and General Dynamics’ Combat
Systems division had a $19.2 and $11.4 billion backlog by
comparison. This bodes well for Lockheed, as the major-
ity of its backlog cannot be attributed to any one system.
The F-35 program accounts for a significant percentage
of the firm’s backlog, but the C-130, F-16, and C-5 all
have plenty of demand in waiting for the next several
years (Exhibit 5).
With the high hopes of Lockheed for the program and
the commitment from the U.S. government and some of
its allies, the F-35 project is likely to be a long-lived pro-
gram that sustains the company for decades to come. In
fact, according to the Lockheed company analysis gath-
ered from Business Source Complete, the program could
generate revenues in excess of $1  trillion over the next
several decades. Despite having been in production for
several decades, several of the legacy programs includ-
ing, for example, the F-16, still provide excellent returns
for the firm. The C-130 program, along with all of the
variant types manufactured, is seen on nearly every U.S.
military installation and fulfills multiple roles for the dif-
ferent branches of the service. Additionally, the longer-
lived programs, again referring to the F-16, commonly
experience customers in addition to the U.S. government
deciding to buy the firm’s products. For example, given
its performance capabilities, governments representing
Exhibit 5  Order Backlog Comparison (in millions)
35000
30000
25000
20000
15000
10000
5000
0
Lockheed
Aerospace
Source: 2011 10-K filings of companies listed via www.sec.gov
CHE-HITT11E-13-0403-CaseStudy20.indd 266
Part 4: Cases
Taiwan, India, and the United Arab Emirates have also
purchased the F-16 over the last decade. Customers pur-
chase products such as the F-16 primarily to upgrade the
quality and capabilities of their fleets.
As a final analysis, the compounded annual growth
rate (CAGR) was calculated for Lockheed and its pri-
mary rivals. The industry did not fare well during the
2007 to 2011 period. The stock market’s general decline
in 2008 and 2009 accounts for some of these outcomes
in terms of growth rates. On the other hand, final calcu-
lations place Lockheed’s CAGR at −6.37  percent, best-
ing the −7.14  percent of Northrop Grumman and the
−7.12 percent of General Dynamics by 80 basis points or
so, but falling behind Boeing’s −4.30 percent CAGR for
the same five year stretch (Exhibit 6).
The interaction between the competitors in this
industry is unique. Even with intense competition
on certain fronts, many contract-based partnerships
between companies exist.
The F-22 is the product of one such partnership
among Lockheed Martin, Pratt and Whitney, and Boeing.
Boeing was responsible for the wings, aft fuselage, avion-
ics integration, life support system, training system, fire
protection system, and 70  percent of the mission soft-
ware. Pratt and Whitney supplied the two engines, and
Lockheed Martin was responsible for program manage-
ment and the remainder of the aircraft’s components.
The F-22 was launched in 2007 in a ceremony hosted by
all three companies.33
These partnerships have become common in the
industry, particularly with companies pursuing simi-
lar projects and products. Typically, these partnerships
exist so each firm can use its core competencies to
2011
2010
2009
Boeing Northrop General
Military Grumman Dynamics
Aircraft Aerospace Combat
Systems Systems
10/22/13 3:09 PM
 Case 20: Lockheed Martin
contribute to the mission specified within each indi-
vidual project.
Ethics
The very nature of being a defense contractor means
that the market is very narrow and a competitor’s gain
is another firm’s loss. There have been several very high
profile examples of corporate espionage, scheming, and
illegal activities such as bribes throughout the history of
the industry as firms vie for competitive advantage.
Lockheed itself was embroiled in scandal in the 1970s
after paying several bribes to foreign officials and politi-
cal organizations in exchange for receiving several aero-
space contracts. This scandal tarnished the image of the
company, which had been known at that time more for
financial troubles than for innovation.34
Another instance involved an engineer from Boeing
who Lockheed hired in 2005. The two firms were bat-
tling for a multibillion-dollar long-term contract to
produce long-range missiles for the U.S. defense depart-
ment. The engineer Lockheed hired brought with him
over 25,000  pages of documents relating to the proj-
ect in contention. Boeing initially brought the issue to
light by saying there were only seven pages, but as the
investigation into possible wrongdoing expanded, com-
plete records in excess of 25,000  pages referring to the
Lockheed bid, all of which were confidential, proprietary
information, were found.35
Over the last few decades however, Lockheed has
re-engineered itself into a competitive juggernaut of
defense and has developed a reputation for ethical and
transparent dealings. Lockheed’s strategic leaders are
Exhibit 6  Compounded Annual Growth Rate Comparison,
2007 – 2011
Lockheed,
Northrop
Grumman, –6.37%
–7.14%
Boeing,
General –4.30%
Dynamics,
–7.12%
Source: 2011 10-K filings of companies listed via www.sec.gov
CHE-HITT11E-13-0403-CaseStudy20.indd 267
267
working diligently to create a culture of accountability,
ethical standards, and transparency. This direction has
permeated the organization, and the company seems to
be a beacon for the industry. As an example of the hon-
esty and accountability of the firm, former CEO Robert
Stevens took full responsibility for the cost overruns and
production and development issues of the famed F-35
joint strike fighter program.36 The program director, Dan
Crowley, had come under scrutiny for the issues with the
program, but Stevens stepped up and took full account-
ability, giving Crowley a vote of confidence rather than
using him as a scapegoat.
The Pilots
Our business is built on integrity, and we will not risk com-
promising it.
– Bob Stevens, CEO37
Lockheed Martin is a large corporation by any reason-
able measure. Of course, talented and effective strategic
leaders are foundational to efforts for this firm to achieve
strategic competitiveness and earn above-average returns.
Overall, Lockheed Martin appears to have a top manage-
ment team in place with the potential to help the firm suc-
cessfully deal with the industry’s challenges as well as the
firm’s challenges. Nonetheless, recent l­eadership-related
upheavals have occurred within the firm.
Following the traditional patterns of large cap, mul-
tinational corporations, Lockheed coupled the role of
Chairman of the Board and CEO and, from 2004 until
his retirement as CEO in early 2013, had entrusted
the firm’s direction and welfare to Robert J. Stevens.38
Stevens’ Lockheed career started in 1993 and, based on
Stevens’ career trajectory at the nation’s largest defense
contractor and the firm’s performance, it seems appro-
priate to give Stevens some credit for Lockheed’s suc-
cess. During his tenure at the helm, the corporation
was awarded several billion-dollar government con-
tracts, including the F-22 Raptor and the F-35 Lightning
Stealth fighter programs and, along with the entire man-
agement team, he maintained Lockheed’s position as a
top defense contractor.
Simultaneous to Stevens’ retirement announcement
in April 2012 was the announcement of his successor –
the then current Vice Chairman, President, and COO,
Chris Kubasik. However, with less than 60  days before
taking the post, Kubasik was forced to resign “after an
internal ethics (investigation) found that he had a per-
sonal relationship with a subordinate that violated the
company’s code of ethics.”39 The board immediately
promoted Marillyn A. Hewson, Executive VP of the
10/22/13 3:09 PM
 268 Part 4: Cases

Electronics Systems division, to assume Kubasik’s posi- Chain of Command

tions (in addition to her own) – including the early
2013 promotion to CEO. At the same time, Lockheed
announced that Stevens would assume the position of
Board Executive Chairman until the end of 2013 “to
facilitate a smooth CEO transition.”40
The Lockheed Martin Board of Directors includes
some individuals who are well known and experienced.
For example, three board members – Admiral (ret.) James
Ellis, General (ret.) Joseph Ralston, and Admiral (ret.)
James Loy – all served in distinguished positions in the
Navy, Army, and Coast Guard, respectively. Additionally,
all three had impressive and successful careers with orga-
nizations such as the Cohen Group and the Institute of
Nuclear Power Operations. These individuals are key
members of the board, largely because of their insights
about the defense community and their contacts within
that community (see Exhibit 7).
Developing a strong managerial succession plan with
respect to the firm’s top management team is an impor-
tant activity within Lockheed Martin. Lockheed’s plan
likely made it possible and even desirable for the firm
to announce simultaneously Stevens’ retirement and
Kubasik’s selection as his replacement. Subsequently,
given the reported improper relationship with which
Kubasik was involved, Lockheed relied on its suc-
cession plan to select Marillyn Hewson as the firm’s
new CEO.
STRATEGIC CHALLENGES
Declining Federal Defense Budget
The U.S. military spending as a percentage of GDP is
expected to decline to an average of 4.0  percent over the

Exhibit 7  Lockheed Martin Board Members

Gen.
J
Josephh
Ralston
R n
Adm. Adm.
James James
Ellis Loy

Nolan Thomas
Archibald Falk

Robert
Stevens
C
Chairman an
nd
and
CEO
Douglas
Anne McCork-
Stevens indale

David Gw
wendolyn
Gwendolyn
Burrittt King
R d
Rosalind
B
Brewer r

Source: Lockheed Martin: Who We Are. http://www.lockheedmartin.com/us/who-we-are/corporate-governance/board.html

CHE-HITT11E-13-0403-CaseStudy20.indd 268 10/22/13 3:09 PM

 Case 20: Lockheed Martin
next five years (2012-2016), down from 4.6 percent during
the past five years (2007-2011).41
As a leader in the military aircraft segment, Lockheed’s
largest customer is the U.S. government, comprising
82 percent of 2011 sales.42 Therefore, an uncertain future
for the U.S. government’s defense budget poses a unique
challenge with regard to investing in and growing
the business. This is especially challenging given long-
term projects such as the F-35, a product that has been in
development since 1994. This project alone has required
over a decade of development and it will be several more
years before customers receive their first orders.43 Despite
a temporary respite from worry when, in December 2011,
Congress agreed to finance all U.S. government activities
through September 30, 2012,44 Lockheed’s management
team receives little relief from having to attempt to pre-
dict the future to make decisions about the firm’s strate-
gies as well as their implementation.
At the top of Lockheed’s financial worries list is the
Budget Control Act of 2011. This act can trigger auto-
matic reductions in defense spending in January 2013 if
Congress and the administration fail to reach a budget
agreement.45 As stated in Lockheed’s 2011 annual report,
“the resulting automatic across-the-board budget cuts in
sequestration would have significant consequences to
our business and industry.”46 While Lockheed is diver-
sified to some degree, this diversification cannot fully
mitigate the impact of budget reductions resulting from
sequestration. The termination of large U.S. defense
contracts would adversely affect its business and future
financial performance.47 Also on Lockheed’s list of con-
cerns are the steps being taken by the U.S. government
to reduce its global commitments – as exemplified by its
withdrawal from Iraq – this may further reduce the need
for defense spending.
International Market Risks
Lockheed’s international customers comprised 17  per-
cent of 2011 net sales, and the firm plans to grow its inter-
national sales over the next several years48 despite the fact
that the unpredictable nature of the international market
segment poses even more challenges than Lockheed’s
domestic market “due to the potential for greater vola-
tility in foreign economic and political environments.”49
Because of the ongoing global economic recession, for-
eign governments, especially those in European coun-
tries, have proposed a variety of budget cuts and auster-
ity measures that may result in defense budget reduc-
tions. Dealing in foreign markets also exposes the firm
to currency exchange risks since a weakening foreign
CHE-HITT11E-13-0403-CaseStudy20.indd 269
269
currency can adversely impact profits when converted
into U.S. dollars.
Exporting to foreign countries, especially in the
defense market, requires adherence to stringent export
control policies. If a violation were to occur, the respon-
sible business unit – or potentially Lockheed Martin as
a whole – may be restricted from exporting products
for a period of time. Other penalties could occur from
not complying with industrial cooperation regulations
as part of international business contracts. These offset
contract agreements could potentially include meeting
in-country purchase and manufacturing levels, some-
times for several years.50 Some opponents of this sys-
tem argue that contract offsets are borderline bribes
that promote corruption in foreign countries due to the
lack of transparency, especially in the defense market
where secrecy is mandated for national security reasons.
“The U.S. Department of Commerce Trade Promotion
Coordinating Committee Report of March 2000 claimed
that the defense sector accounted for 50  percent of all
bribery allegations over 1994-1999.”51 Nearly 130 different
countries are estimated to use offset agreements, and the
value of offsets has been increasing as a percentage of the
main contract value.52
Regulation of the Defense Market
The defense market customer base is severely limited
due to constraints imposed by the U.S. government.
All U.S. firms selling products internationally deal with
trade embargos and restrictions with certain countries;
however, additional scrutiny applies to the defense mar-
ket because of concerns over national security as dic-
tated by the International Traffic in Arms Regulations
(ITAR). “ITAR relates to Section 38 of the U.S.A.’s Arms
Export Control Act (22 U.S.C. 2778), which autho-
rizes the President to control the export and import
of defense articles and defense services.”53 In addition
to the cost of the lengthy contract approval process
because of ITAR, these regulations may deter foreign
countries from accepting bids from U.S. companies
such as Lockheed. In April 2011, India excluded Boeing
and Lockheed from bidding on its $11B defense proj-
ect for a new fighter jet. Many speculated this was due
to growing restrictions on U.S. export policies related
to ITAR.54 Even close U.S. allies such as the United
Kingdom are becoming frustrated with the lengthy pro-
cess ITAR imposes. However, conditions are improv-
ing with regard to a more efficient approval process for
the United States’ closest allies. “In 2004 the process-
ing time for all U.K.-related ITAR licenses was 22 days,
compared to 42 days a few years ago.”55
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 270 Part 4: Cases

Although Lockheed Martin is highly experienced in the
defense industry, it has violated ITAR policies in the past:
In 2008, the Department of State charged Lockheed Martin
with violations of the Arms Export Control Act and the
ITAR for providing classified and unclassified technical
data related to the sales of Hellfire missiles to the United
Arab Emirates in 2003 through 2004.56
The outcome of these allegations resulted in Lockheed
paying a $4 million civil fine. Despite this past violation,
Lockheed’s code of ethics clearly states its intentions to
comply with the laws and regulations that govern its
­businesses.57
Controlling Costs
Perhaps the most pressing challenge facing Lockheed
Martin is its failure to control costs, specifically within
the F-35 program. Lockheed has succeeded in produc-
ing a unique product for a discerning set of customers;
however, it has failed to maintain an acceptable cost
for the F-35, as evidenced by continually rising pro-
gram costs estimated at 1.51  trillion.58 As a multi-role
fighter with three distinct variants, the F-35 is slated to
replace legacy fighters such as the F-16, F-18, A-10, and
now fill the role of the forlorn F-22. Thus, the versatil-
ity demanded of the F-35 has carried significant costs.
Lockheed Martin obviously underestimated the cost to
develop such an aircraft and is struggling to provide
the features required at an acceptable cost. As a result,
a number of partner countries have expressed concern
over the per-unit cost of the F-35 and have threatened to
cancel or reduce their contracts unless Lockheed meets
certain milestones. Italy has already reduced its orders
for the F-35 from an initial 131 to 90, largely due to aus-
terity measures in the country, but also due to concerns
about increasing costs.59 With every cost revision of
the F-35, Lockheed Martin must justify an increase in
contract value to its customers.60 Lockheed’s inability
to control costs with the F-35 program may hinder its
ability to earn customers’ trust with respect to price and
time estimates for its other products.
The delays and cost overruns have plagued the air-
craft industry as a whole, and this is especially true with
tactical aircraft. Since the first plane produced by the
Wright brothers, the costs to produce increasingly com-
plex airplanes has increased exponentially. “By 2054, if
that rate continues, the cost of a single combat airplane
will equal the entire projected defense budget.”61 In fact,
former Lockheed CEO Norman Augustine joked that
the Navy and Air Force would have to share the jet for
three and one-half days each per week62 and provided a
chart to show the exponential increase in costs over time.
Many countries have considered prolonging or increas-
ing the use of the F-16 as a low-cost, combat-proven
alternative if the F-35 delays and increasing costs con-
tinue. Thus, as Lockheed Martin looks to the future, it
faces challenges with respect to its current operations as
well as a host of challenging decisions about how to best
position the firm to succeed in the years to come.

Notes
1. Hoover’s Online. Lockheed Martin
Corporation Profile. Retrieved 28 Feb 2012
from Hoover’s Online.
2. “This Defense Company Has 24% Upside –
Even with the Pentagon’s Spending Cuts.”
Money Morning. Retrieved 08 Feb 2012.
http://moneymorning.com/2012/02/08/
this-defense-company-has-24-upside-even-
with-the-pentagons-spending-cuts/
3. “The SIPRI Top 100 Arms-producing and
Military Services Companies, 2010.” www.sipri.
org. Retrieved 03 Mar 2012. http://www.sipri.
org/research/armaments/production/Top100
4. “Absolute Freedom.” Lockheed Martin.
Supporting the Warfighter. 22 Feb
2012. Retrieved 24 Mar 2012. http://
www.lockheedmartin.com/us/news/
speeches/022212-hewson.html
5. “Lockheed F-35 Cost Estimate by U.S.
Increases 9% in Year.” Bloomberg.
30 Mar 2012. Retrieved 03 Apr 2012.
http://www.bloomberg.com/news/2012-
03-30/lockheed-f-35-fighter-estimate-
increased-9-in-a-year-u-s-says.html
6. Terris, Daniel. Ethics at Work: Creating Virtue
in an American Corporation. Waltham, MA:
Brandeis UP, 2005.
7. Ibid.
8. Hoover’s Online. Lockheed Martin
Corporation Profile. op cit.
9. Terris, Daniel. Ethics at Work: Creating
Virtue in an American Corporation.
Waltham, MA: Brandeis UP, 2005. p. 69.
10. Hoover’s Online. Lockheed Martin
Corporation Profile. op cit.
11. Ibid.
12. “Catch F-22 for Obama.” The Christian
Science Monitor. The Christian Science
Monitor, 04 Mar 2009. Retrieved 08
Mar 2012. http://www.csmonitor.
com/Commentary/the-monitors-
view/2009/0304/p08s01-comv.html
13. Lockheed Martin Corporation. Annual
Report. Bethesda, MD: Lockheed Martin
Corporation, 2011. Retrieved 07 Mar
2012. http://www.lockheedmartin.com/
content/dam/lockheed/data/corporate/
documents/2011-Annual-report.pdf
14. “Aircraft.” Encyclopedia of American
Industries, Online Edition. Gale, 2011.
(SICs: 3721)
15. “Manufacturers of Guided Missiles and Space
Vehicles.” Encyclopedia of American Industries,
Online Edition. Gale, 2012. (SICs: 3761)
16. Ibid.
17. Fryer-Biggs, Zachary. “Lockheed Martin
Announces Split of Electronic Systems
Division.” DefenseNews. 8 Oct 2012.
Retrieved 19 Mar 2013. http://www.
defensenews.com/article/20121008/
DEFREG02/310080003/Lockheed-Martin-
Announces-Split-Electronic-Systems-
Division

CHE-HITT11E-13-0403-CaseStudy20.indd 270 10/22/13 3:09 PM

 Case 20: Lockheed Martin
18. “Search, Detection, Navigation, Guidance,
Aeronautical, and Nautical Systems and
Instruments.” Encyclopedia of American
Industries, Online Edition. Gale, 2011. (SICs: 3812)
19. Lockheed Martin Corporation. Annual
Report. op cit.
20. “Absolute Freedom.” Lockheed Martin ·
Our Leadership Commits. Retrieved 24 Feb
2012. http://www.lockheedmartin.com/
us/who-we-are/sustainability/leadership-
commitment.html
21. Lockheed Martin Corporation. Annual
Report. op cit.
22. Hoover’s Online. Lockheed Martin
Corporation Profile. op cit.
23. “Lockheed Martin Corporation, Company
Profile.” op cit.
24. “Lockheed Martin Corporation
2009 Form 10-K.” U.S. Securities and
Exchange Commission (Home Page).
25 Feb. 2010. Retrieved 8 Apr 2012.
http://www.sec.gov/Archives/edgar/
data/936468/000119312510040520/d10k.htm
25. Lockheed Martin Corporation. Annual
Report. op cit.
26. “Lockheed Martin Corporation, Company
Profile.” op cit.
27. “Northrop Grumman Corporation
2009 Form 10-K.” U.S. Securities and
Exchange Commission (Home Page).
09 Feb 2010. Retrieved 08 Apr 2012.
http://www.sec.gov/Archives/edgar/
data/1133421/000095012310010126/
v54508e10vk.htm
28. “Northrop Grumman Corporation
2011 Form 10-K.” U.S. Securities and
Exchange Commission (Home Page).
08 Feb 2012. Retrieved 08 Mar 2012.
http://www.sec.gov/Archives/edgar/
data/1133421/000119312512045323/
d250683d10k.htm
29. “The Boeing Company 2009 Form 10-K.”
U.S. Securities and Exchange Commission
(Home Page). 08 Feb 2010. Retrieved 08 Apr
2012. http://www.sec.gov/Archives/edgar/
data/12927/000119312510024406/d10k.htm
30. “The Boeing Company 2011 Form 10-K.”
U.S. Securities and Exchange Commission
(Home Page). 09 Feb 2012. Retrieved 08
Mar 2012. http://www.sec.gov/Archives/
edgar/data/12927/000119312512048565/
d255574d10k.htm
31. “General Dynamics 2009 Form 10-K.” U.S.
Securities and Exchange Commission
(Home Page). 19 Feb 2010. Retrieved 08 Apr
2012. http://www.sec.gov/Archives/edgar/
data/40533/000119312510034883/0001193125-
10-034883-index.htm
CHE-HITT11E-13-0403-CaseStudy20.indd 271
32. “General Dynamics 2011 Form 10-K.” U.S.
Securities and Exchange Commission
(Home Page). 17 Feb 2012. Retrieved 8
Apr 2012. http://www.sec.gov/Archives/
edgar/data/40533/000119312512066385/
d271667d10k.htm
33. “History - F22 Raptor.” Boeing. Retrieved 10
Mar 2012. http://www.boeing.com/history/
boeing/f22.html
34. “SCANDALS: Lockheed’s Defiance: A Right
to Bribe?” Time Magazine U.S. 18 Aug 1975.
Retrieved 24 Mar 2012. http://www.time.
com/time/magazine/article/0,9171,917751,00.
html
35. Bowermaster, David. “Boeing Probe
Intensifies over Secret Lockheed Papers.”
The Seattle Times. 09 Jan 2005. Retrieved 1
Apr 2012. http://seattletimes.nwsource.com/
html/businesstechnology/2002146025_
boeinglockheed09.html
36. Butler, Amy. “Lockheed CEO Stands By
Company Leadership” Aviation Week. 04 Mar
2010. Retrieved 15 Mar 2012. http://
www.aviationweek.com/aw/generic/story_
generic.jsp?channel=aerospacedaily&id=
news/asd/2010/03/05/04.xml&headline=
Lockheed%20CEO%20Stands%20By%20
Company%20JSF%20Leadership
37. “Absolute Freedom.” op cit.
38. “CEO Profile of Robert Stevens.” Forbes.
Retrieved 12 Apr 2012. http:// people.forbes.
com/profile/robert-j-stevens/49897
39. “Christopher Kubasik, Lockheed Exec
Ousted Over Inappropriate Relationship,
To Receive $3.5 Million.” Huff Post Business.
12 Nov 2012. Retrieved 16 Mar 2013. http://
www.huffingtonpost.com/2012/11/12/
christopher-kubasik-separation-
package_n_2117840.html
40. “Lockheed Martin Board Elects Marillyn
Hewson CEO & President and Member of
the Board.” Lockheed Martin, Press Releases,
2012, November. 9 Nov 2012. Retrieved 16
Mar 2013. http://www.lockheedmartin.
com/us/news/press-releases/2012/
november/110912-corp-leadership.html
41. “The U.S. Defense Market 2012-2016: Market
Opportunities & Challenges.” ICD Research.
29 Feb 2012. Retrieved 7 Mar 2012. http://
defense-update.com/20120229_the-u-
s-defense-market-2012-2016-market-
opportunities-challenges.html
42. Lockheed Martin Corporation. Annual
Report. op cit.
43. “Lockheed F-35 Cost Estimate by U.S.
Increases 9% in Year.” Bloomberg. 30
Mar 2012. Retrieved 3 Apr 2012. http://
www.bloomberg.com/news/2012-03-30/
271
lockheed-f-35-fighter-estimate-increased-9-
in-a-year-u-s-says.html
44. Lockheed Martin Corporation. Annual
Report. op cit.
45. Ibid, p.9.
46. Ibid, p.9.
47. Ibid, p.9.
48. Ibid, p.11.
49. Ibid, p.11
50. Ibid, p.11.
51. “Defense Offsets, Addressing the Risk
of Corruption & Raising Transparency.”
Transparency International. Apr 2010.
p. 14. Retrieved 11 Mar 2012. http://
www.acrc.org.ua/assets/files/zvity_
ta_doslidzhennya/TI_Defence_Offset_
Report_20101.pdf
52. Ibid.
53. “UK Warns U.S.A. Over ITAR Arms
Restrictions.” Defense Industry Daily.
1 Dec 2005. Retrieved 17 Apr 2012. http://
www.defenseindustrydaily.com/uk-warns-
usa-over-itar-arms-restrictions-01549/
54. “U.S. Industry Loses Big in India: Is ITAR
to Blame?” National Defense Industry
Association blog. 28 Apr 2011. Retrieved 1
Apr 2012. http://www.freerepublic.com/
focus/f-news/2712314/posts
55. “UK Warns U.S.A. Over ITAR Arms
Restrictions.” op cit.
56. “Navigating ITAR Compliance.” Melbourne
Legal Team. Retrieved 13 Apr 2012. http://
www.melbournelegalteam.com/itar-
compliance.html
57. “Setting the Standard, Code of Ethics
and Business Conduct.” Lockheed Martin.
September 2011. Retrieved 12 Apr 2012.
http://www.lockheedmartin.com/content/
dam/lockheed/data/corporate/documents/
setting-the-standard.pdf
58. “Lockheed F-35 Cost Estimate by U.S.
Increases 9% in Year.” op cit.
59. “Italy to Cut F-35 Fighter Jet Orders as
Part of Defense Revamp.” Bloomberg
BusinessWeek. 16 Feb 2012. Retrieved 16
Apr 2012. http://www.businessweek.com/
news/2012-02-16/italy-to-cut-f-35-fighter-jet-
orders-as-part-of-defense-revamp.html
60. Lockheed Martin Corporation. Annual
Report. op cit.
61. Kotter, J. “Leading change: Why
transformation efforts fail.” Harvard Business
Review (Vol. 73, p. 175). 1995, Boston, MA:
Harvard Business School Publication Corp.
62. “The cost of weapons: Defence spending
in a time of austerity.” The Economist. 26
Aug 2010. Retrieved 17 Mar 2013. http://
www.economist.com/node/16886851
10/22/13 3:09 PM