The Global Defence Industry's new Complexities

Following on from our previous newsletter, we present a McKinsey & Co article  exploring the new economic and managerial challenges that confront defines ministries and industry contractors on a shifting global-security landscape The United States is winding down two wars, NATO is slashing budgets, and violent conflicts continue to erupt in Africa, the Middle East, and beyond.  “Strategy, scenarios, and the global shift in defines power” examines the choices that can help defense organizations follow the movement of global wealth and defense spending from West to East.


The McKinsey authors offer a perspective on how strategists in defines organisations and aerospace and defines companies should approach this challenge. They describe how the profound shift in economic power since the end of the Cold War has already reshaped the world’s strategic landscape, including the distribution of global defines spending. The potential evolution of these economic dynamics is fundamental to strategy. Predicting their future is, of course, impossible. Instead, we offer something more modest and practical: a new approach to scenario planning that is rooted in a deep understanding of global economics. Such an understanding reveals the potential for expected scale and pace in the shift of spending from the United States and its treaty allies to emerging economies. The graphic below illustrates shifts in the world's economic centre of gravity AD1 – 2025.


A SIPRI ( Stockholm International Peace Research Institute) Fact Sheet states that Global military expenditure fell in 2012, to $1753 billion, equivalent to 2.5 per cent of global gross domestic product (GDP). Although the fall was only 0.5 per cent in real terms, this was the first decrease since 1998. The small overall reduction is the result of falls in the West—spending fell in North America, in most of Western and Central Europe and in Australia—that were only partly offset by increases in much of the developing world and in East-ern Europe, especially Russia. This may indicate the beginning of a shift in the balance of world military spending away from the West, although it still accounts for a clear majority of global military spending.

This SIPRI Document can be accessed at: