Meggitt Swot Analysis

Meggitt is an international group which is mainly engaged in equipment for aerospace, military and energy with the leading position in the market. The company was founded in the 1940s, headquartered in Hampshire, the United Kingdom. It employs over 10,000 people across the facilities all over the world. It was listed on the London Stock Exchange in 1947. Meggitt is also one of the FTSE 100 companies.

The company recorded revenue of just over £1.45 billion during the financial year ended 31 December 2011, as compared to £1.16 billion in FY2010. The operating profit and the net profit made an exceptional growth by over 25%.

Strengths

Developing and owning the core intellectual property

Meggitt has spent over 7% of the revenue on the products development continuously per year during the past few years. The proportion of the R&D expenditures to sales was relatively higher than that of the competitors such as Goodrich(4%) and Honeywell (4.9%) in 2011. The company focused on the early constructing relationship with customers, during the technology development progress, to meet the customers' various demands.

Aftermarket revenue stream

Meggitt has set up a successful business model. Since the life cycles of most of the core products is up to 40 years and the 'sole source' contracts, upgrading products, aftersales services, and supplying of the accessories generated steady follow-on aftermarket revenues. The cost of these aftermarket sales was much lower than the cost of the other revenues because the company did not have to spend much on exploiting the market. In fact, Over 45% of the revenues comes from after sales market in 2011 and the profit ratio of the aftermarket sales is much higher than the others.

Strong cash inflow

Meggitt focused on the cash generation, and the total cash inflow from operation reached £395.8 million which was 110% of the net profit in 2011. The sufficient cash provided a strong ability to invest in future acquisition and products development programs. It would also reduce the financial cost of the operation and avoid the capital rupturing risk in the future.

Common ERP system across the whole group

Meggitt has implemented an integrated and common ERP system across the whole group including 15 sites with the top ERP platform: SAP. The ERP system helps Meggitt to improve efficiency, quick decision-making and flexibility. It strengthened the control ability of the overseas sites and factories. The company could easily reallocate the resources among the divisions to maximize the benefit of the whole group.

Low manufacturing strategy

Meggitt initiated a comprehensive transformation across the group which improved efficiency, reduced gross cost, and