Raytheon 2005 Annual Report Download - page 54

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Internationally, the threat of additional terrorist activity, coupled with conventional military threats, has led to a
continued strong market. In some cases, these opportunities span what in the U.S. would be termed defense and
homeland security. Because of the breadth of the Company’s offerings, its systems integration capability, and its strong
legacy in the international market, management believes that the Company is well-positioned for continued success in
that market.
Aircraft Industry Considerations
As the general U.S. economic conditions have improved over the past few years, the general aviation market has been
improving as well. Although still below its peak performance in 2001, the industry’s 2005 performance reflected the
second consecutive year of improvement compared to the industry’s depressed levels of activity in 2002 and 2003.
Raytheon Aircraft Company’s market is also influenced in part by the capital goods sector and the demand for general
aviation products by businesses both domestically and internationally, the U.S. and other governments, as well as high
net worth individuals. Traditionally, the used aircraft market has led the recovery of the new aircraft market by 9-12
months and although worldwide levels of used aircraft available for sale have declined over the last 24 months, a
downturn in economic conditions could slow or delay market demand for used and therefore ultimately new aircraft.
The decline in the worldwide fleet of used aircraft available for sale, especially late model aircraft less than 10 years old,
has resulted in improved pricing and demand of new aircraft and many manufacturers have increased line or production
rates. In order to support a continued recovery of the new aircraft market, however, the current worldwide inventory of
used aircraft available for sale must be maintained or in some cases reduced even further.
Due to the lower levels of used inventory and strong order activity during the second half of 2005, the industry consensus
is that the demand for new aircraft will continue to improve in 2006. Additionally, the introduction of new or upgraded
products is also expected to drive increased market demand for products across the industry.
Company Strategy
Raytheon is focused on four strategic imperatives:
ⳮGrow its position in core defense markets through a focus on key strategic pursuits, Mission Support, technology and
Mission Assurance;
ⳮUse its Strategic Business Areas (“SBAs”) to leverage domain knowledge of core defense markets across the company
to achieve growth and to expand its Mission Systems Integration opportunities;
ⳮEstablish the Beechcraft and Hawker brands as the aircraft industry standard for quality, service and support; and
ⳮBe a customer-focused company based on performance, relationships and solutions.
Mission Support focuses on enabling customer success through total life-cycle support that predicts customer needs,
senses potential problems, and proactively responds with the most appropriate solutions. Mission Assurance is the
commitment to meld the Company’s technologies into the most reliable integrated mission systems in the world to
address urgent defense, security, and aircraft needs.
Raytheon’s four SBAs are Missile Defense, Precision Engagement, Homeland Security and Intelligence, Surveillance and
Reconnaissance, which are critical markets for the Company. Mission Systems Integration (“MSI”) is the integration of
multiple systems (e.g., sensors, C4I, weapons) to deliver a solution to accomplish a specific mission for a customer. MSI
requires a thorough understanding of the mission, the systems being integrated, and the concept of operations.
To establish the Beechcraft and Hawker brands, Raytheon is focusing on upgrading its existing portfolio of general
aviation aircraft, improving cost competitiveness and flexibility, and providing true Mission Assurance to its customers.
To be a customer-focused company, Raytheon believes that it must (1) perform, by making and keeping its promises to
customers, (2) continually listen, anticipate, respond and follow through with its customers, partners and each other, and
(3) develop and provide superior customer solutions.
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