The defence industry can be seen as a set of companies offering products and services specifically designed for military use. Such companies are parties of the defence industry, irrespective of the share of military goods in their sales.

Oligopolistic market

The defence industry meets the characteristics of an oligopolistic market, as there are a few vendors and even fewer buyers, where the state has the central role of the contracting authority and project supervisor.

In an oligopolistic market, the optimal behavior of a company often depends on the behavior of its competitors. Such a market not only raises prices and leads to stagnant performance, but also leads to irregular and volatile demand, which in turn leads to a depletion of national industrial infrastructure and a reduction in skills and capabilities.

Long-term partnership is expected

The defence industry and state as a customer are moving from simple buying-selling transactions to long-term partnerships, where the service plays crucial role in value proposition.

Therefore, more attention is paid to life-cycle management and after-sales services. Asset acquisition is accompanied by contracts / obligations for spare parts, maintenance, upgrades and destruction. In the case of large-scale programs, this is no longer about generating revenue through the transfer of goods, but much of the revenue is generated through services.

Leaning toward value co-creation

Value creation is a continuous process where all parties create common value in the environment in which they exist . The value proposition in defence industry must be valued on the basis of the customer’s value creation.

For a company, providing a service means supporting the customer’s operations with resources and communication so that the customer can create value for themselves.