Understanding Market Segments and Competition in the Private Military Industry

Abstract

This report builds on work completed in 2008 by Professors Nicholas Dew and Bryan Hudgens. It is a product completed in conjunction with their most recent study titled, Market Niches in the Private Military Sector: An Initial Look (Dew & Hudgens, 2009). Last year, both professors sought to help government security communities better understand the evolving private military (PM) sector by describing the demographics of the sector and the capabilities of the industry as a whole. Their 2008 report successfully identified some important characteristics of the industry, such as its history, age, global presence, and each founder's background. However, this report only scratched the surface of the industry and did not provide information about the government-outsourced service market (of which the private military industry is part), industry competition, or the future of the PM industry. Our new study partially answers these questions but also details how the PM sector is segmented and examines what types of rivalries exist within the industry. Through an analysis of a survey instrument distributed between July and September 2009 to senior PM executives, we attempt to explain the complex competitor connections and market relationships within this industry. We believe this work has significant practical merit in supporting the professional acquisition community in the Department of Defense, the Department of State, and other US Government agencies that conduct business with and through the use of PM companies. Given the high levels of public scrutiny of government contracting practices (particularly service contracting), being well informed is "in our view" a decision maker's first priority. Since this industry is relatively new, acquisition professionals do not have the informational benefits of a long history of transactions and market activities (unlike military aircraft acquisition, for example). Therefore, using established survey techniques and statistical methodologies, we will describe in detail the distinct market niches and rivalries in the PM industry.