Selling to Governmental Agencies
Selling to Governmental Agencies
South Korea has decided to delay a multibillion dollar fighter-jet deal because the F-15 jet being developed by Boeing did not meet its need to counter a nuclear missile threat from North Korea. The F-15 is competing with the F-35 Joint Strike Fighter being developed by Lockheed Martin. An Article in the Wall Street Journal States “The decision gives Lockheed and its partners in the F-35 Joint Strike Fighter project more time to cut their jets cost and rebid for the contract, which has been contested for nine years and is one of the biggest fighter-jet contracts now open.”
Although the language in the article presents these Fighter sales to South Korea seem simple, the reality is very different. The textbook states “The governments of other countries are also huge customers for marketers and marketing to government agencies can be complex since they often have strict purchasing policies and regulations.” One reason is that even when the U.S. is willing to share military technology with friendly nations, the U.S. is often constrained in what it can sell overseas by regional political concerns. For instance, Washington has long been a leading supplier of weapons to the Kingdom of Saudi Arabia, but it draws the line at capabilities that might pose a threat to the survival of Israel. Arms sold to foreign countries by U.S companies cannot have the capability of harming Israel or the U.S.
Overseas buyers of major combat systems have become very demanding about what terms they will accept to sign a contract. It is not uncommon for countries to demand that half of the value or more in a transaction be covered by “offsets” to local industry. French aerospace firm Dassault has been wrangling with the government of India since January of 2012 over how to structure offsets for a major fighter sale designed to bolster Indias