Saab’s business model is adapted to the product area, system complexity, customer group and geographical market.
Complex Defence Orders
In complex defence orders, Saab directly supplies the customer. These comprehensive solutions, often comprising training, maintenance, support and service, are designed to maintain functionality and cost efficiency over the product’s entire life cycle. Deliveries can continue for several years after development. These systems are configured and designed based on each customer’s specific needs and therefore often have a large share of customer-financed development. In addition, complex defence orders usually entail some form of industrial co-operation. One example is the development and delivery of Gripen.
Saab can also serve as a subcontractor to a partner with primary contact with the end customer, e.g., when supplying subsystems. Several of Saab’s systems, e.g., command and control systems, are platform dependent and can be integrated with Saab’s or other companies’ products and systems. Another reason to be a subcontractor can be that cost or other factors make it an effective strategy to build a presence in a market.
Maintenance, support and training can also be sold separately, outside large defence orders. Consumables and spare parts also fall into this category. These products and solutions are usually sold directly to the customer. Some products and services are delivered the same day an order is placed, while others have a lead time of over a year. These orders involve less customer-financed development than complex systems. Examples include most of Saab’s civilian offering as well as products sold in large volumes, such as ammunition.
Saab’s sales model is divided into three main parts: sales of products and spare parts, service assignments and long-term customer contracts. In addition, Saab generates a small share of royalties. Long-term customer contracts account for about 60 per cent of sales, but since Saab’s business areas are divided by product and market offering, the distribution differs by business area. Aeronautics is dominated by long-term customer contracts, while Support and Services and Combitech have a higher share of service assignments. Due to the nature of the sales, income and cash flow fluctuate over the course of the year.
Long-term customer contracts comprise the development and manufacture of complex systems. One example is FMV’s order for the development and modification of Gripen E, which Saab
will work on until 2026. Long-term contracts are continually recognised in revenue, meaning that income and expenses associated with the project are recognised at the rate of completion in the project. Cash flows from these contracts depend on the timing of deliveries and milestone payments
during the order period.
Service assignments consist of consulting and support services. Examples include training and ongoing maintenance associated with previous deliveries. Sales from service assignments on cur-
rent account is recognised when the services are rendered, while service assignments as part of fixed-price contracts are recognised according to the same principles as long-term customer contracts.
The third part of Saab’s sales model is the sale of products and spare parts that Saab manufactures and stocks or purchases on behalf of customers. Sales is recognised in profit or loss when ownership has been transferred to the buyer.
Last updated: 09 August 2013 • 10:09