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Factor environment—Private sector play a significant role in the defense industry sector subcontractors and supporting industries. Major private sector involvement in defense institutions and ordnance factories of raw materials, semi-finished products, parts and components. Its world-class expertise and high-tech private sector participation will not only increase India's indigenous defense production capacity.

Demand conditions—Terrorism has sharply cut the defense budget growth and a shorter sales cycle, providing a huge market demand for defense manufacturers. Because India faced nature of the security threats, Homeland Security growth opportunity mainly in the aviation, mass transportation, and maritime security markets.

Related strategy and supporting industries—Defense industry, requires a lot of investment, backed by strong research and development, may be completely dependent under government control, because it's critical. Under the unique industrial policy, large numbers of defense production and infrastructure, including 39 Ordnance Factories, 8 Defence PSUs and 50 Research & Development laboratories was set up in India.(Indian Defence Industry,2012)

Firm strategy, structure, and rivalry—The Indian government decided to open the defense industry in May 2001, private sector participation up to 100% with foreign direct investment allows up to 26% - are subject to licensing. Managing their offset obligations especially due to the restricted FDI limit could be the biggest challenge for foreign companies. However, Indian government under the pressure from the industry bodies and key corporate companies, it is estimated that the FDI limit as part of joint ventures is expected to increase to 49%.( Second Line Of Denfense 2012)

3.3.2 Seeks slice of Asian-Pacific defense industry market

Due to the impact of the current economic crisis, Western countries continue to cut the defense budget, result in further shrink in Western arms market Competition for the arms market in the developing countries, will be more intense, Asia will become a market full of competitors, but this big cake should be shared by Western arms manufacturers and local companies. Currently, BAE Systems occupies a market share of approximately $ 200 million of the defense market in Japan. Britain and Japan are going to develop weapons, after Tokyo named the UK as its first overseas defense trading partner after United States. (Watt 2012) Component of the defense market in South Korea can not be ignored. In the competition with US defense group Lockheed Martin in the upgrade South Korea's F-16 fighter jets contract, BAE finally defeated strong opponents, wins Korean F-16 upgrade contract with $ 1 billion. (Telegraph 2012)

Expansion of emerging markets

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