Northrop Grumman Corporation, a security company, provides systems, products, and solutions in autonomous systems, cyber, strike, logistics and modernization, and command, control, communications, computers, intelligence, surveillance, and reconnaissance (C4ISR) to government and commercial customers worldwide. It has three segments: Aerospace Systems, Mission Systems, and Technology Services. The Aerospace Systems segment designs, develops, integrates, and produces manned aircraft, autonomous systems, spacecraft, high-energy laser systems, microelectronics, and other systems/subsystems. This segment sells its products primarily to Department of Defense (DoD) and other government agencies for use in various areas, including intelligence, surveillance, and reconnaissance; strike operations; communications; earth observation; and space science and exploration. The Mission Systems segment provides mission solutions and multifunction systems, including C4ISR systems; radar, electro-optical/infrared, and acoustic sensors; electronic warfare systems; cyber solutions; space systems; intelligence processing systems; air and missile defense integration; navigation; and shipboard missile and encapsulated payload launch systems for DoD, intelligence community, international, federal, civil, and commercial customers. The Technology Services segment provides software and system sustainment, advanced training, and integrated logistics support solutions, as well as engages in modernization of platforms and associated subsystems. The company was founded in 1939 and is based in Falls Church, Virginia.
Business Analysis of Northrop Grumman
The Aerospace and Defense Sector is witnessing a major shakeup, new age business models in the industry are transforming both customers and businesses. Faced with this uncertainity, companies are investing resources to transform their business. An in-depth business analysis is a valuable resource to identify and articulate the need for a business model change. At R&P Research we believe, the starting point for a business analysis is Benchmarking. Business benchmarking can be done at various levels: 1) Industry Benchmarking 2) Peer Benchmarking 3) Disruptors Benchmarking. In this report, we share the snapshot of how Northrop Grumman compares against the industry on the major performance indicators. This analysis, along with peer group/disruptors benchmarking and revenue model understanding can help identify growth and cost optimization opportunities to maximize the value delivered by Northrop Grumman to its stakeholders. R&P Research Industry Intelligence Platform provides historical data for last 15 years with an easy to use benchmarking interface for an in-depth comparative business analysis.
Here is the performance snapshot of Northrop Grumman with an interactive chart.
- Revenue Growth: Northrop Grumman reported a revenue growth of 4.2% year-on-year during 2016. Aerospace Products, Parts, Systems and Services Industry grew at 0.8% in the same period
- COGS share of Revenues: As a percentage of revenue, Northrop Grumman spent 76.4% of its total revenues on COGS. Aerospace Products, Parts, Systems and Services industry average (COGS share of revenue) in the same period was 78.4%
- R&D share of Revenues: Northrop Grumman R&D share of Revenues details are not available because either company does not share the data or we do not have it
- SG&A share of Revenues: As a percentage of revenue, Northrop Grumman spent 10.5% of its total revenues on Sales, Marketing, and General Administration (SG&A). Aerospace Products, Parts, Systems and Services industry average SG&A spending in the same period was 8.3%
- Inventory share of Revenues: As a percentage of revenue, Northrop Grumman spent 3.3% of its total revenues on Inventories. Aerospace Products, Parts, Systems and Services industry average Inventory spending in the same period was 25.0%
- Accounts Payable share of Revenues: As a percentage of revenue, Northrop Grumman invested 6.3% of its total revenues on Accounts Payable (A/P) Aerospace Products, Parts, Systems and Services industry average Accounts Payable investment in the same period was 10.1%
- Accounts Receivable share of Revenues: As a percentage of revenue, Northrop Grumman invested 13.5% of its total revenues on Accounts Receivable (A/R). Aerospace Products, Parts, Systems and Services industry average Accounts Receivable investment in the same period was 18.0%
- PP&E share of Revenues: As a percentage of revenue, Northrop Grumman invested 14.6% of its total revenues on Property, Plants, and Equipments (PP&E). Aerospace Products, Parts, Systems and Services industry average PPE investment in the same period was 15.2%
- Intangibles share of Revenues: As a percentage of revenue, Northrop Grumman invested 50.8% of its total revenues on Intangibles. Aerospace Products, Parts, Systems and Services industry average Intangibles investment in the same period was 39.7%
- Net Margins: Northrop Grumman Net Margins in the year 2016 were 9.0%. Aerospace Products, Parts, Systems and Services industry average Net Margins in the same period were 7.2%
Sector and Industry Association of Northrop Grumman
For the purpose of performance benchmarking of a company with a sector or industry average, R&P Research associates every company with one sector and one industry. An industry consists of companies with related/similar business models. A sector comprises of a group of related/similar industries. For high-level analysis purposes, related/similar sectors are grouped into sector groups.
Northrop Grumman is associated with Industrials Sector Group, Aerospace and Defense Sector, and Aerospace Products, Parts, Systems and Services Industry.
Aerospace and Defense sector is comprised of the following industries: Aerospace Products, Parts, Systems and Services; Military and Defense. The definitions for each of the industries is as follows:
- Aerospace Products, Parts, Systems and Services industry includes manufacturers, assemblers, distributors and service providers of aerospace and aircraft parts primarily used in the commercial or private air transport.
- Military and Defense industry includes producers of components and equipment for the defense industry, including military aircraft, radar equipment and weapons, drones, space and security systems. Military and Defense companies also offer military shipbuilding, submarines, amphibious assault ships and nuclear services. Arms and weapon companies offering consumer firearms are included in the specialized consumer goods.
Industry Ranking of Northrop Grumman
With $24.5 billion revenues, Northrop Grumman ranked number 4 of all the companies in the US Aerospace Products, Parts, Systems and Services industry. There were a total of 32 public companies in the US Aerospace Products, Parts, Systems and Services industry that had revenues greater than $50 million during 2016.
The top-10 companies in the US Aerospace Products, Parts, Systems and Services industry by revenues during 2016 were:
Business Model Analysis (BMA) Framework
We use the following framework to assess the business model of a company. Business Model Analysis framework can be used by organizations to articulate growth strategies and identify cost optimization opportunities. Technology and consulting companies can use this framework to identify the value drivers and pain points of their targeted customers. Entrepreneurs can use this framework to understand the language of business and identify promising business opportunities. This framework can be used by any professional aspiring to take up a leadership role to better understand the businesses challenges, articulate growth strategy, and monitor the business improvement requirements for the organization.
- Conduct a holistic benchmarking; to identify and target additional sources of value
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