The aerospace and defense industry consists of several component segments: aircraft and aircraft parts manufacturers, weapons and intelligence systems manufacturers, satellite manufacturers and launch vehicle manufacturers.
All segments of this industry are capital intensive. Designing complicated new products or systems requires long lead times. Production requires a high degree of coordination of capital, manufacturing equipment, skilled personnel, materials and parts. Much of the pre-assembly work is provided by subcontractors. Negotiations with subcontractors and buyers are quite complex. Some of the technologies used in this industry changes very quickly.
Aircraft manufacturers are dominated by manufacturers of large commercial aircraft and military aircraft. Demand for commercial aircraft is tied to the current and projected needs of commercial passenger airline companies.
Demand is also volatile for military aircraft, weapons and intelligence systems manufacturers, due to complexities of long-range national defense planning and budget formulation, the political climate of the U.S. Congress and a highly competitive international market.
Communications and remote sensing satellites are used for military, commercial and scientific purposes. Launch vehicles must be used to deploy satellites in to orbit. This industry is particularly vulnerable to launch failures and other problems that cannot be corrected from the ground.
Source: William and Joan Schreyer Business Library. Penn State University 2007