Working in the field of high technologies, it is not enough to reach a certain level - we create a system of continuous innovations. It is not enough for us to be a national leader - we want to act globally. A large number of industries today is not an advantage - a portfolio of "smart" products is needed.
Therefore, having completed collection and consolidation of disparate industrial assets in 2014, State Corporation Rostec moved to the stage of active growth which required actualization of the Development Strategy.
The main task of the Corporation at the stage of active growth is to reach the scale of the leading global competitors. Going out to the scale is not only a matter of competitiveness but also the task of preserving Russia as a world technological leader.
Main results of the first stage of implementation of the Development Strategy of State Corporation Rostec
The Development Strategy until 2020 (strategy-2020) adopted in 2011 presupposed preparation for the growth of the corporation's business at the first stage (2011-2014) and revenue growth of 14% at the second stage (2015-2017).
During 2011-2014, all the main activities planned by strategy-2020 have been implemented:
- The main stage of consolidation of assets and formation of the main holding companies and infrastructure subsidiaries of the Corporation is completed, management and corporate contours are built up.
- Non-core assets are identified and partially realized.
- The Foundation for Innovative and Investment Development of the Corporation is formed, and its filling with cash started.
- By the end of 2014, more than 92% of FSUE have been corporatized.
- Implementation of the project to introduce IFRS has started.
- Development strategies and medium-term programs of activities of the majority of the holding companies of the Corporation have been developed and approved.
According to the decision of the Corporation's Supervisory Board, an updated Development Strategy of State Corporation Rostec for 2025 (Strategy-2025) was developed to move to the stage of active growth under current conditions.
To determine the market segments promising for the Corporation, a survey of 288 product segments combined into 12 market directions was conducted.
Main elements of Strategy-2025
The average annual 17% ruble growth until 2025 to reach the scale of global players.
The main strategic goal of the Corporation is to reach the scale of the leading global competitors. The importance of reaching the scale of global competitors is due not only to considerations of increasing competitiveness through increased availability of capital, economies of scale and access to markets but also to considerations of the Corporation's survival. Analysis of historical mergers and acquisitions showed that multi-purpose industrial holdings that had not reach the required scale were either absorbed or turned into niche players. In addition, the Corporation's unchanging goal is the unconditional fulfillment of the state defense order as well as the preservation and strengthening of the Russian Federation positions in the world market of armaments and military equipment due to production of high-quality weapons and military equipment superior in their characteristics to world analogues.
Achieving the Corporation's main strategic goal will depend on its ability to ensure an annual ruble revenue growth of 17% due to the Corporation's share in the current markets and the emergence of new fast-growing segments. It is expected that the Corporation's key markets in 2025 will be the markets for weapons, telecoms, aircraft components and their software, helicopters and their software, medium and heavy trucks, radio electronics, security, medical equipment and pharmaceuticals, materials and chemistry, IT, automation and robotics. A significant portion of the Corporation's revenue will be provided by entering the fast-growing segments in which the Corporation has not yet been present, including civil telecommunications equipment, new generation telecommunication networks, EPCM, cybersecurity, organic light-emitting diodes, etc.
Focus of "smart" civilian products on fast-growing global markets.
Achieving the Corporation's ambitious goal for revenue growth to the level of world rivals is impossible without diversifying a product portfolio and entering new fast-growing segments.
Most of the Corporation's traditional markets have reached maturity and demonstrate low growth rates (on average ~ 5% per year in dollars) which can not become a driver of aggressive revenue growth. As a driver of revenue growth, it is proposed to consider fast-growing markets for "smart" products an average growth rate of which is almost twice as high as the growth rate of traditional markets (~ 11% per year in dollars). Given the limited capacity of the domestic Russian market, the main emphasis should be put on the export of the Corporation's products in which case the EurAsEC market can be used as a springboard for global expansion.
3. Operational Efficiency
Increase of operational efficiency, release of internal reserves, to finance growth and improve product competitiveness.
Achieving the goals for aggressive growth in world markets will require large-scale investments in the amount of several trillion rubles. Financing of such an investment program while maintaining the current level of operational efficiency indicators will be impossible. However, achieving the world average level of marginality by EBITDA by 2020 and the level of the best quarter by analogy till 2025 will allow the Corporation to finance the investment program without attracting financial resources from the state.
Achieving the target level of operational efficiency indicators and ensuring the competitiveness of products will require creation of a world-class production system that will ensure, including:
Development and manufacture of products according to customers' requirements;
Execution of orders on time, despite reduction in the stock of free capacities;
Increased transparency of the production system to more accurately assess the value of holding companies / assets and attract strategic investors.
Construction of a world-class production management system implies optimization of all processes, including planning, logistics, procurement, production and others, construction of an effective organizational structure, creation of a working system of staff motivation and flexible systems for data collection and cost accounting.
Establishment of Partnerships and attraction of "smart" capital for obtaining additional financing, increasing operational efficiency and entering new markets.
The best international experience shows that the successful largest players in the markets of the Corporation's presence develop in partnerships. Partnership-based development contributes to attracting additional investment, acquiring necessary competencies (both technological and managerial) and increasing access to markets.
Formation of partnerships is possible both at the level of the whole Corporation and within the framework of industry complexes or individual holding companies, or enterprises.
5. Implementation Mechanism
The mechanism to implement Strategy-2025 is based on two key elements:
Strategic initiatives covering all aspects of business. Implementation of strategic initiatives will make transformation of the business required for implementation of Strategy-2025.
Cascading of Strategy-2025 to the sectoral clusters' strategies and strategies of individual supporting functions.
Key Strategic Initiatives
- Increased investment attractiveness of assets and search for strategic partners.
- Formation of an effective sales system.
- Development of product portfolio and priority R&D projects.
- Construction of a world-class manufacturing system.
- Increased efficiency of managing capital projects.
- Formation of an effective investment procedure and a pool of investment projects.
- Formation of a mechanism for redistributing resources among clusters and HC.
Results to be achieved in 2025
- Enter the top ten of the world's largest industrial corporations in terms of revenue.
- Growth in the share of civilian products in revenues above 50%.
- Financing of the investment program at own expense and at the expense of attracted funds.
- Increase of productivity of labor to the level of the best quarter of world players.