The annual defense budget  of Italy in 2009 stood at US$28.3 billion, which is inclusive of homeland security , defense function  and other non-essential expenditures  of the military. The defense function budget of Italy’s armed forces stood at US$20 billion in 2009, recording a CAGR of 2.59% during the review period. However, this is expected to decline at a CARC of -0.64% during the forecast period, to reach US$18.2 billion by 2015. The total defense budget of Italy is also expected to decline at a CARC of -0.84%, to reach US$25.7 billion by 2015. This decline is due to the austerity measures adopted by all ministries in order to reduce the fiscal debt of the country. Furthermore, total defense expenditure as a percentage of GDP is expected to decrease from an average of 1.3% during the review period to 1.1% by 2015 due to cuts to the budget. The defense function budget is also expected to decline from 0.9% of GDP in 2009 to 0.8% by 2015. Despite this, Italian defense expenditure will continue to be driven by the modernization program of the armed forces and the country’s participation in NATO and UN peacekeeping missions.

This report offers insights into the market opportunities and entry strategies adopted by foreign OEMs (original equipment manufacturers) to gain a market share in the Italian defense industry. In particular, it offers in-depth analysis of the following:

• Market opportunity and attractiveness: detailed analysis of the current industry size and
growth expectations during 2010–2015, including highlights of the key growth stimulators. It also
benchmarks the industry against key global markets and provides detailed understanding of
emerging opportunities in specific areas.
• Procurement dynamics: trend analysis of imports and exports, together with its implications and impact on the Italian defense industry.
• Industry structure: five forces analysis to identify various power centers in the industry and how these are likely to develop in the future.
• Market entry strategy: analysis of possible ways to enter the market, together with detailed descriptions of how existing players have entered the market, including key contracts, alliances, and strategic initiatives.
• Competitive landscape and strategic insights: analysis of competitive landscape of the defense industry in Italy. It provides an overview of key defense companies (both domestic and foreign), together with insights such as key alliances, strategic initiatives, and a brief financial analysis.
• Business environment and country risk: a range of drivers at country level, assessing business environment and country risk. It covers historical and forecast values for a range of indicators, evaluating business confidence, economic performance, infrastructure quality and availability, labor force, demographics, and political and social risk.

TABLE OF CONTENTS

1 Introduction
1.1 About this Report
1.2 Definitions
1.3 Methodology
1.3.1 Secondary research
1.3.2 Primary research
1.3.3 Conventions

2 Executive Summary

3 Market Attractiveness and Emerging Opportunities
3.1 Defense Market Size and Forecast
3.1.1 Italy’s annual defense expenditure to reach US$25.7 billion by 2015
3.1.2 Modernization of armed forces and participation in international peacekeeping missions are major drivers of defense expenditure
3.1.3 Defense expenditure as a percentage of GDP expected to decline to 1.1% of GDP by 2015
3.2 Analysis of Defense Budget Allocation
3.2.1 Capital expenditure allocation to increase during the forecast period
3.2.2 A cumulative US$24 billion expected to be spent on military procurements during the forecast period
3.2.3 Army receives the majority of defense function budget
3.2.4 Army expenditure expected to reach US$6.8 billion by 2015
3.2.5 Cumulative navy expenditure expected to reach US20.6 billion during the forecast period
3.2.6 Air force expenditure expected to grow at a CAGR of 0.30% during the forecast period
3.2.7 Common services expenditure expected to decline to US$3.6 billion by 2015
3.3 Homeland Security Market Size and Forecast
3.3.1 Homeland security expenditure expected to reach US$6.8 billion by 2015
3.3.2 Terrorist threats, Mafia wars and internal insurgent organizations expected to increase homeland security expenditure
3.3.3 Italy is at “some risk” of terrorism
3.3.4 Italy has a score of 0.2 on the ICD Research Intelligence Terrorism Index
3.3.5 Iraq, Pakistan and Afghanistan are the most terror-prone countries in the world
3.4 Benchmarking with Key Global Markets
3.4.1 Italy has one of the largest defense industries in the world
3.4.2 Italy has the tenth largest defense budget in the world
3.4.3 France allocates a greater percentage of GDP for defense than Italy
3.4.4 Italy ranked seventh among top arms exporting countries over the review period
3.5 Market Opportunities: Key Trends and Growth Stimulators
3.5.1 C4-ISTAR systems to witness a stable demand in the forecast period
3.5.2 Italy to spend on joint development projects for missile defense systems
3.5.3 Advance weapon systems and armory required for various peacekeeping initiatives
3.5.4 Air force to develop, modernize and acquire new fighter, patrol and training aircraft
3.5.5 Navy is to be upgraded with submarines, frigates and aircraft carriers
3.5.6 The mobility of land forces to be improved to enhance efficiency for international missions

4 Defense Procurement Market Dynamics
4.1 Import Market Dynamics
4.1.1 Defense imports not expected to grow significantly in the forecast period
4.1.2 European countries enter the Italian defense market, which was previously dominated by the US
4.1.3 Artillery, missiles, engines and sensors are the main import categories
4.2 Export Market Dynamics
4.2.1 Defense exports declined in the review period due to global economic crisis
4.2.2 South American and European countries are the major arms importers of Italian defense products
4.2.3 Italy has multiple defense trading partners
4.2.4 Aircraft, sensors, ships and missiles account for majority of exports

5 Industry Dynamics
5.1 Five Forces Analysis
5.1.1 Bargaining power of supplier: low to medium
5.1.2 Bargaining power of buyer: medium
5.1.3 Barrier to entry: medium to high
5.1.4 Intensity of rivalry: low to high
5.1.5 Threat of substitution: low to high

6 Market Entry Strategy
6.1 Market Regulation
6.1.1 Offset policy aids development of domestic defense industry
6.1.2 Defense sector is not open for foreign investors in the interest of national security
6.2 Market Entry Route
6.2.1 Technology transfer provides good market entry opportunities
6.2.2 Research and development collaborations offer market access
6.2.3 Joint ventures, partnerships and licensing agreements open new market entry strategy choices
6.3 Key Challenges
6.3.1 Defense budget cuts across Europe challenge domestic defense companies
6.3.2 Policy to buy European equipment discourages non-European defense suppliers

7 Competitive Landscape and Strategic Insights
7.1 Competitive Landscape Overview
7.2 Key Domestic Companies
7.2.1 Finmeccanica: overview
7.2.2 Finmeccanica: products and services
7.2.3 Finmeccanica: recent contracts and strategic initiatives
7.2.4 Finmeccanica: alliances
7.2.5 Finmeccanica SpA: recent contract wins
7.2.6 Finmeccanica: financial analysis
7.2.7 AgustaWestland: overview
7.2.8 AgustaWestland: products and services
7.2.9 AugustaWestland: recent announcements and strategic initiatives
7.2.10 AugustaWestland: alliances
7.2.11 AugustaWestland: recent contract wins
7.2.12 AugustaWestland: financial analysis
7.2.13 Alenia Aermacchi: overview
7.2.14 Alenia Aermacchi: products and services
7.2.15 Alenia Aermacchi: recent announcements and strategic initiatives
7.2.16 Alenia Aermacchi: alliances
7.2.17 Alenia Aermacchi: recent contract wins
7.2.18 Alenia Aermacchi: financial analysis
7.2.19 Alenia Aeronautica: overview
7.2.20 Alenia Aeronautica: products and services
7.2.21 Alenia Aeronautica: recent announcements and strategic initiatives
7.2.22 Alenia Aeronautica: alliances
7.2.23 Alenia Aeronautica: recent contract wins
7.2.24 Alenia Aeronautica: financial analysis
7.2.25 Simmel Difesa: overview
7.2.26 Simmel Difesa: products and services
7.2.27 Simmel Difesa: recent announcements and strategic initiatives
7.2.28 Simmel Difesa: alliances
7.2.29 Simmel Difesa: recent contract wins
7.2.30 Simmel Difesa: financial analysis
7.2.31 Selex Galileo: overview
7.2.32 Selex Galileo: products and services
7.2.33 Selex Galileo: recent announcements and strategic initiatives
7.2.34 Selex Galileo: alliances
7.2.35 Selex Galileo: recent contract wins
7.2.36 Selex Galileo: financial analysis
7.2.37 Selex Sistemi Integrati: overview
7.2.38 Selex Sistemi Integrati: products and services
7.2.39 Selex Sistemi Integrati: recent announcements and strategic initiatives
7.2.40 Selex Sistemi Integrati: alliances
7.2.41 Selex Sistemi Integrati: recent contract wins
7.2.42 Selex Sistemi Integrati: financial analysis
7.2.43 Oto Melara: overview
7.2.44 Oto Melara: products and services
7.2.45 Oto Melara: recent announcements and strategic initiatives
7.2.46 Oto Melara: alliances
7.2.47 Oto Melara: recent contract wins
7.2.48 Oto Melara: financial analysis
7.2.49 Fincantieri: overview
7.2.50 Fincantieri: defense products
7.2.51 Fincantieri: recent announcements and strategic initiatives
7.2.52 Fincantieri: alliances
7.2.53 Fincantieri: recent contract wins
7.2.54 Fincantieri: financial analysis
7.2.55 MBDA: overview
7.2.56 MBDA: defense products
7.2.57 MBDA: recent announcements and strategic initiatives
7.2.58 MBDA: alliances
7.2.59 MBDA: recent contract wins
7.2.60 MBDA: financial analysis
7.2.61 WASS: overview
7.2.62 WASS: products and services
7.2.63 WASS: recent announcements and strategic initiatives
7.2.64 WASS: alliances
7.2.65 WASS: recent contract wins
7.2.66 WASS: financial analysis
7.3 Key Private Companies
7.3.1 Elettronica: overview
7.3.2 Elettronica: products and services
7.3.3 Elettronica: recent announcements and strategic initiatives
7.3.4 Elettronica: alliances
7.3.5 Elettronica: recent contract wins
7.3.6 Elettronica: financial analysis

8 Business Environment and Country Risk
8.1 Business Confidence
8.1.1 Market Capitalization Trend - The Borsa Italiana Stock Exchange, Italy
8.1.2 FDI inflows by sector
8.2 Economic Performance
8.2.1 GDP at constant prices
8.2.2 GDP per capita at constant prices
8.2.3 GDP at current prices
8.2.4 GDP per capita at current prices
8.2.5 GDP by key sectors
8.2.6 Agriculture net output at current prices (Euro)
8.2.7 Agriculture net output at current prices (US dollar)
8.2.8 Agriculture net output at current prices as percentage of GDP
8.2.9 Manufacturing net output at current prices (Euro)
8.2.10 Manufacturing net output at current prices (US dollar)
8.2.11 Manufacturing net output at current prices as a percentage of GDP
8.2.12 Mining, manufacturing and utilities net output at current prices (Euro)
8.2.13 Mining, manufacturing and utilities net output at current prices (US Dollars)
8.2.14 Mining, manufacturing and utilities net output at current prices, as a percentage of GDP
8.2.15 Construction net output at current prices (Euro)
8.2.16 Construction net output at current prices (US dollar)
8.2.17 Construction net output at current prices as a percentage of GDP
8.2.18 Crude steel production
8.2.19 Crude oil consumption
8.2.20 Inflation rate
8.2.21 Trade balance as a percentage of GDP
8.2.22 Exports as a percentage of GDP
8.2.23 Imports as a percentage of GDP
8.2.24 Exports growth
8.2.25 Imports growth
8.2.26 Annual average exchange rate US$–EUR
8.2.27 End of period exchange rate US$–EUR
8.3 Infrastructure Quality and Availability
8.3.1 Total airports and ports
8.3.2 Railways and highways
8.3.3 Passenger vehicle production volume
8.3.4 Commercial vehicle production volume
8.3.5 Automotive components export trend
8.3.6 Automotive components import trend
8.3.7 Passenger car penetration
8.3.8 Total installed capacity for electricity generation
8.3.9 Installed capacity for the generation of conventional thermal electricity
8.3.10 Electricity production
8.3.11 Installed capacity for the generation of hydro-electricity
8.3.12 Installed capacity for the generation of renewable electricity
8.3.13 Electricity consumption
8.3.14 Electricity exports
8.3.15 Electricity imports
8.3.16 Healthcare expenditure
8.3.17 Healthcare expenditure as a percentage of GDP
8.3.18 Healthcare expenditure per capita
8.3.19 Research and development expenditure as a percentage of GDP
8.3.20 Total internet subscriptions
8.3.21 Broadband internet subscriptions
8.3.22 Personal computer penetration
8.3.23 Mobile phone penetration rate
8.4 Labor Force
8.4.1 Labor force
8.4.2 Unemployment rate
8.5 Demographics
8.5.1 Annual disposable income
8.5.2 Annual per capita disposable income
8.5.3 Annual consumer expenditure on food
8.5.4 Annual per capita consumer expenditure on food
8.5.5 Urban and rural population
8.5.6 Female percentage of population
8.5.7 Male percentage of population
8.5.8 Mean age of population
8.5.9 Median age of population
8.5.10 Population density
8.5.11 Age distribution - total population
8.5.12 Age distribution - male population
8.5.13 Age distribution - female population
8.5.14 Number of households
8.6 Political and Social Risk
8.6.1 Political stability
8.6.2 Terrorism index
8.6.3 Transparency index

9 Appendix