Raytheon Technologies Corporation: Porter’s Five Forces Analysis

Raytheon Technologies Corporation is an American company that operates in the aerospace defense information security industry. The firm manufactures defense and aerospace equipment and provides intelligence services. It has four main businesses: Collins Aerospace, Pratt & Whitney, Raytheon Intelligence & Space, and Raytheon Missiles & Defense (Raytheon Technologies). Collins Aerospace offers avionics, mission, interiors systems, and power and control systems to customers. Pratt & Whitney designs and manufactures auxiliary power systems and aircraft engines and services them. Raytheon Intelligence & Space offers cyber services, sensors, and software solutions. Raytheon Missiles & Defense produces radars, air and missile systems, command and control systems, and precision weapons. The target customers for the products and services are in the military, aviation, and commercial sectors.

Raytheon Technologies Corporation has a multidivisional organizational structure because it has several business units. The company is headed by a chairman, the Chief Executive Officer (CEO). Presidents assisted by vice presidents oversee operations of each of the company’s four business units (Raytheon Technologies). Other key leadership positions in the company include the chief operating officer, chief financial officer, chief communications officer, chief human resources officer, and chief technology officer. Raytheon Technologies is also a board of directors comprising 14 members who oversee all operations across the company. The organization sources its materials from different suppliers such as Aviomechanika, Kale Pratt&Whitney, and Polskie Zakłady Lotnicze (Raytheon Technologies). The company bases its culture on its values, which include trust, respect, collaboration, innovation, and accountability. For instance, the company upholds the highest level of integrity and embraces diversity. Its key competitors in the industry include Lockheed Martin, Boeing, Northrop Grumman, AIRBUS, and General Dynamics.

Porter’s Five Forces Analysis

Competitive Rivalry in the Market

The aerospace defense information security industry has been growing steadily over the last few decades. The possible contributing factor to this growth is the rise of security threats worldwide. Thus, existing firms and those anticipating joining the industry are focusing on providing products and services to guarantee national security. Raytheon Technologies Corporation’s main competitors in the industry are located in the United States. Lockheed Martin, Boeing, Northrop Grumman, AIRBUS, and General Dynamics are competitors. Raytheon Technologies’ annual revenue will be approximately $64.4 billion in 2021. On the other hand, Lockheed Martin, Boeing, Northrop Grumman, AIRBUS, and General Dynamics generated revenue of about $65.8, $62.3, $35.7, 59.1, and $83.5 billion, respectively (“Raytheon Technologies Competitors or Alternatives”). The competition among players in this industry is intense, eventually lowering prices for products and services. Therefore, the overall profitability recorded in the industry will decrease.

The Threat of Substitute Products and Services

New and substitute products and services in every industry meet similar consumers’ needs in varying ways. They become a significant threat to the industry’s level of profitability. The threat of substitute products and services in the aerospace defense information security industry is considerably high. For instance, services such as Google Drive and Dropbox are key substitutes to storage hardware offered by the industry. Notably, technology and innovation are the main drivers of the industry in which Raytheon technologies operates (Raytheon Technologies). Current and potential competitors focus on using advanced technologies to meet market demand. Other companies outside the industry can offer more sophisticated technologies to provide a unique and different value proposition from offerings in the industry, increasing the threat of substitute products and services.

The Threats of New Entrants in the Industry

New entrants in the aerospace defense information security sector are likely to introduce more innovative and new ways of providing products and services. The outcome would be adopting a lower pricing strategy and providing new value propositions to the clients (Goyal 150). However, threats of new entrants in the industry are low. Starting and operating demands a high capital investment, and only a few firms can afford it. Additionally, through long-term contracts, the provision of products and services to the main customer segment, the defense forces. The quality of products and technology used in the sector is also high (Raytheon Technologies). Therefore, new entrants must offer better products and services at cheaper prices for them to compete with the already established companies such as Raytheon technologies. These factors create barriers and make the industry less attractive to new entrants.

Bargaining Power of Buyers in the Industry

Buyers always want to purchase the best products and services and the lowest prices possible. The major buyers in the aerospace defense information security sector are governments worldwide. Although the major buyers of defense services and equipment, the developed countries, such as the United States, have high bargaining power, the latter for other nations ranges from moderate to low. Goyal indicates that buyers use their bargaining power for high-quality products and services at reduced prices (149). The under-developed and developing countries have limited purchasing capacity and may have insignificant pressure on prices. However, major buyers like the United States can use their power to demand high-quality offerings at lower prices or increase discounts. Therefore, the overall buyer bargaining power in the sector depends on the customer, ranging from high to low.

Bargaining Power of Suppliers in the Industry

The suppliers’ bargaining power in the aerospace defense information security sector is high. Few suppliers dominate the industry, with several players in the United States and other regions. According to Goyal, few suppliers with several clients have higher bargaining power. Companies have to maintain suppliers for a long period to minimize the possibility of compromising the quality of products and services for cheaper supplies. These factors give the suppliers bargaining power when signing contracts with companies such as Raytheon Technologies, which may lower overall profitability in the sector.

The Implication of Porter’s Five Forces To Raytheon Technologies’ Business

Raytheon Technologies strategists can analyze these five competitive forces to understand better the factors that can impact their profitability in the industry. The company can establish sustainable differentiation and acquire or merge with some competitors to increase its market share and competitive advantage over its key rivals. Investing more in research and development to ensure continuous innovation of products and services and using economies of scale can enhance entrance barriers and profitability. Raytheon technologies can address threats of substitute products and services by focusing on meeting the customers’ core needs and increasing their switching costs. The company can lower the bargaining power of all buyers by increasing its customer base and rapidly offering new innovative products and services. The new products will also minimize the chances of the existing customers defecting to the competitors. Further, the firm can focus on establishing and marinating an efficient supply chain comprising multiple quality suppliers to lower the latter’s bargaining power. These approaches will increase Raytheon Technologies’ competitive advantage over its rivals and guarantee high profitability.

Works Cited

Goyal, Anchit. “A Critical Analysis of Porter’s 5 Forces Model of Competitive Advantage”. Journal of Emerging Technologies and Innovative Research, vol. 7, no. 7, 2020, pp. 149-152.

Raytheon Technologies. “Our Businesses”. Rtx.Com.

“Raytheon Technologies Competitors or Alternatives”. Owler www.owler.com.

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