• News
  • Rafael seeks partnerships for export success

Rafael seeks partnerships for export success

When Lova Drori asks new employees in his marketing department which point should be emphasised in Rafael Advanced Defense Systems export sales campaigns, he often gets the wrong answer.

The replies typically fall into three categories, each equally incorrect, says Drori, Rafael's executive vice-president for marketing.

Some answer that it should be Rafael's technological edge, pointing at Israel's state-owned armaments development agency employing roughly 3,000 science graduates. Others cite the fact that most of Rafael's products are battle-tested in Israel defence force operations, such as Operation Cast Lead that began in late 2008. Finally, some point to the relative affordability of Israeli defence kit, at least when compared with European or US equipment made by larger companies burdened with higher overhead costs.

 © Rafael
The Python family of missiles has passed through five generations

Although each of those answers is grounded in fact, according to Drori, they are wrong from a strategic standpoint.

As Rafael builds its strategy for the export sales, the marketing staff for Israel's principal armourer must always keep in mind who decides to buy weapons in foreign governments, Drori says. He points out that each of the three typical answers assumes the decision-maker is a military official. Most often, however, the contract is decided not by the end-user, but by the country's political leadership.

Even for the most budget-conscious politician, Drori explains, touting Rafael's price advantage of, say 5-7%, can backfire as a sales strategy. If soldiers' lives are lost in an accident or because they face superior equipment, the politician will be blamed by the public for risking lives to save 7%, Drori says.

Rafael relies on a different sales pitch. Drori emphasises three major points, all linked by the common theme of creating partnerships with its customers' local industry. Rafael seeks to create local jobs, transfer technology needed to upgrade and maintain the equipment and, finally, leverage in local industry's participation during the sales campaign.

It is a familiar theme, not just for Rafael, but among most defence companies seeking to make headway in the export market. But the Israeli company is achieving notable results. Last year, sales jumped 16% from the previous orders while its order backlog climbed nearly 30%. The financial improvement is expected to continue this year. "This year net profit will be by far higher than any previous year," Drori says.

Even in the global arms market, it is not always enough to have the right system. Knowing how to sell it is crucial, especially for a state-owned Israeli company that relies on exports for most of its $3.2 billion order backlog.

Exports provide the financial foundation for Rafael to meet its official obligation to supply whatever is demanded of them by the Israeli defence forces, a point that underscores the importance of the company's sales strategy.

Rafael's products span a broad range of technology, including missiles, munitions, electro-optics, electronic warfare and communications networks. Although some products remain secretly in service only within Israel, much is for sale on the export market.

Foreign sales will continue to figure prominently in the company's sales strategy. One of the most significant new contracts the company is seeking could be worth billions of dollars. The US Air Force plans to re-compete the advanced targeting pod contract originally won by Lockheed Martin.

Rafael's 14-year partnership with Northrop Grumman has already put the third-generation Litening AT pod on at least four USAF aircraft, including the Fairchild A-10 and Lockheed Martin F-16. Rafael is now fielding the fourth-generation Litening C4 pod, which will compete for the USAF contract as well as other export deals.

Keeping track of Rafael's order logs is difficult, as many of its customers prefer to remain anonymous. Like many Israel companies, Rafael faces the added sales pressure of having its military products boycotted in several countries, especially the current big spenders in the Middle East.

Israeli companies have achieved more visible success in India, but even there Rafael prefers to keep a low profile. An exception is Rafael's attendance at India's AeroExpo, where last year it featured a Bollywood-themed marketing video that became a viral hit on YouTube. However, even if the marketing campaigns are highly visible, the record of sales contracts often are not.

"We let our customers decide whether they want to acknowledge our contracts," Drori says. "We never expose decisions without their approval."

Rafael's recent success in the foreign market is owed to a unique mix of circumstances. Israel's experience in warfare since the mid-1980s has driven its native industrial base to invest heavily in new weapons optimised for fighting insurgents and terrorist groups.

Like its domestic competitors, Rafael has developed products that are now in the sweet spot of the global arms market. This technology is heavily focused on networks, situational awareness and precision.

If any Rafael programme is responsible for driving the company's growth spurt, it is the Spike missile. This family of missiles was conceived in the aftermath of the Cold War as a replacement for a global stockpile of hundreds of thousands of anti-tank missiles.

The requirement for a TOW missile replacement may have disappointed the expectations of Rafael's marketeers. But any concerns by the end of the 1990s about the Spike programme's solvency were quickly displaced as a new threat arrived at the start of the new century.

Even if Western militaries no longer concerned themselves with stopping Soviet tanks, they required a new weapon to hit the moving pick-up trucks favoured by their new common enemy. The weapon also needed new levels of precision to minimise civilian casualties in an urban battlespace.

The Spike thus evolved from primarily a tank-killing missile launched by dismounted infantry to a multipurpose system fired from the ground or the air. Variants include a 13.5kg (30lb) ground-launched Spike-LR, 34kg Spike-ER and the new 70kg Spike-NLOS. A total of 18 customers now include at least one version of the Spike in their weapons inventories.

 © Rafael
The Spike has driven growth at Rafael

The Python family of missiles has passed through five generations, including the first two versions that were named Shafrir. With the Python 5 in production for several years, speculation has focused on the next evolution of Rafael's premier air-to-air missile.

Rafael executives have not broken their silence about future development plans for the Python family. However, the company's leadership is publicly reluctant to advocate the case for developing a next-generation air-to-air missile. The US Air Force, meanwhile, is in the early stages of developing a replacement for the Raytheon AIM-120D AMRAAM advanced medium range air-to-air missile.

A more popular missile product to sell in the current environment is surface-to-air missiles, which are defensive in nature and in high demand, Drori says. Rafael has converted the Python 4 and perhaps the Python 5 to be launched from the ground at aerial targets with the company's Spyder air defence system.

In partnership with Raytheon, Rafael is also developing the next generation of surface-to-air missiles with the Stunner, a two-stage interceptor with a distinctive dolphin nose. Company officials have acknowledged internal discussions are focused on converting the Stunner and its dual-mode seeker into a medium-range air-to-air missile.

Meanwhile, the surface-launched Stunner is scheduled to become operational in Israel's David Sling missile defence system in 2012.

Related Content