Over the last few years, IMI has undergone a process of marketing focus led by Avinoam Zafir, who has served as IMI’s Corporate VP Marketing for the past nine years. From a company that manufactured ammunition primarily, IMI switched to the manufacture of state-of-the-art weapon systems for the modern battlefield.
“We have identified a trend among countries worldwide of switching to high-precision weapons,” says Zafir. “Such weapons make it possible to hit the target with the first shot, thereby denying the enemy the ability to reorganize. This is a substantial operational advantage. The same applies to infantry operations. Some weapons can place a 40mm round into a window from a range of 150 meters with the first shot.”
Along with high-precision weapons, another field on which IMI focuses is ground platforms. IMI’s subsidiary Ashot Ashkelon manufactures the transmission for the Merkava tanks. IMI also developed light combat vehicles for special operations units, including the Wildcat and more recently the CombatGuard – a modular off-road vehicle that may be fitted with a weapon station and an active protection system, among other things.
“We also focus on the field of protection for ground platforms,” explains Zafir. “Over many decades, IMI has been the armor protection house of the IDF: modified Patton tanks, Merkava tanks, we also provide protection in the context of projects overseas, including everything from passive protection made from sheet steel, ceramics and composite materials to active protection. We have a cooperative alliance with Rafael in this field.
“Another field we focus on is warheads. IMI is a national excellence center in the field of warheads for different applications: against bunkers, armored vehicles and personnel targets. We serve as consultants to all the other Israeli industries. One example of our specialized knowledge is the MPR-500 bomb – an air-to-surface bomb weighing 250 kg. Following the Second Lebanon War we identified a phenomenon of unexploded bombs. They took a ‘dumb’ bomb costing US$ 3,000 to 4,000, attached a guidance kit costing US$ 30,000 to 40,000, and the bomb failed to explode on the ground.
“The operational significance of this phenomenon cannot be overstated. You dispatch a fighter aircraft, place the pilots at risk, try to make the most of an intelligence window of opportunity – and the bomb does not work. Either the bomb breaks, the fuse breaks or the bomb fails to detonate. The entire sortie goes down the drain, including the cost of the bomb and the guidance kit. So we came up with a more effective bomb with 98% reliability. Since then, IAF has only purchased this bomb. You can fit it with any guidance kit available in the market. It produces controlled fragmentation of 28,000 tungsten pellets in a manner that minimizes collateral damage. You can use it to knock down a floor in a building, and the next-door building will not be affected in any way.”
What about UAVs and cyber technology?
“We focus on the core activities we had set for ourselves. In UAVs we do not have a relative advantage over other companies. We currently sell artillery systems that include UAVs by a third party. They serve as our sub-contractors, and we are the prime contractor.
“Regarding cyber technology, as far back as 12 years ago I was engaged in a conversation with a major American company when the issue of cyber warfare came up. We did not know what it was back then. They had already invested hundreds of millions in protecting their assets. Today we understand that if you sell a system, you must provide it with adequate protection. It is a necessity and the client expects it. For this reason, we developed an in-house unit that provides such solutions. As far as selling cyber technology systems based on in-house capabilities is concerned – that is not one of our primary activities.”
Along with the product-oriented focusing, IMI also focuses on markets possessing a substantial potential. Zafir explains that these days, the potential is to be found in Europe and Asia. “Some of the countries in Europe acquire resources for symmetrical warfare. South East Asia is also developing,” explains Zafir. “At the same time, there is also a decreasing trend in the defense budget of the USA and you see American industries investing in exports, unlike anything they did a decade ago, and they enlist the government’s support in promoting their business.
“At the technological level, some countries invest in defensive procurement – especially air-defense systems against aircraft and missiles. Over the last decade we have seen more missiles and rockets as the reference threat. This technology has become inexpensive and readily available and provides a long-range threat for a low cost and with almost no risk. Additionally, it is a direct threat to the civilian population.
“Another problem we face in the various markets is our Israeli identity, as we are an Israeli company. Some countries do not like to do business with Israel, even in Europe. In some cases it is a specific issue of the country, in other cases it is the de-legitimization of Israel. There are also countries to which we cannot export. There is nothing new about that – it has been like that for many years. Sometimes the situation becomes more acute, pursuant to confrontations, but it is always there.
“The Israel Ministry of Defense (IMOD) and the Israel Ministry of Foreign Affairs (IMFA) are very helpful. Sometimes they even join us on business trips. In G2G transactions they are at the forefront. In the past we even enlisted the assistance of the President of Israel, who spoke in our favor in a certain country. It is sufficient for the Israeli President to introduce the CEO of IMI – that makes all the difference.
“Another trend involves the clients’ demand for technology to be transferred to them. In order to carry out a project overseas, we face demands for local manufacturing or for the transfer of technology all the way to complete manufacturing in the client’s country. The client wants to have logistic control over the product. We transfer technology to many countries to which we sell our products. At present, we are in the process of establishing three ammunition factories in three different countries. We also have a foot in manufacturing in the USA. Twenty years ago we built a Galil assault rifle plant in Colombia. We also built a tank production line in Turkey. It all depends on what IMOD allows us to do.
“When we want to market a product, two factors will influence the process – the clients and IMOD. The clients will say what they want, and the defense establishment will decide what we may sell. There are systems that only the IDF will be provided with. The decision regarding the development of versions is not made by the marketing people.”
In a reality where defense budgets are shrinking, the defense industries become export-oriented, but they also examine the option of civilianizing their technologies. Defense industries in Israel and around the world have realized that the civilian market is larger than the military market by several orders of magnitude, and that market is nearly free of any regulatory or political restrictions. “As a matter of strategy, we approach the civilian market wherever there is a definite advantage,” says Zafir.
“Twenty years ago IMI tried to become involved in civilian initiatives, like using existing manufacturing facilities to manufacture civilian products, including locks, safes and prefabricated houses. They even wanted to change the company’s name to Israel Industries (II). After a few years, they relinquished the idea. Consequently, today we civilianize technologies very sparingly. For example, small arms ammunition. One third of our sales in that field are to the US civilian market.”
What are your criteria for success?
“First of all, bring home orders,” says Zafir. “I have on my conscience the livelihood of 2,500 households in the primary circle plus thousands more in the secondary circles. Another objective is seeing IMI tapping into new markets and establishing associations with new clients. One of the objectives we set for our marketing people is an increase in new clients or in (the sales of) new products to existing clients. Another challenge, which is by no means less important, is marketing focusing – selecting the right objective. We want to retain our leadership position in the core activities we had set where we have an advantage. In the fields of warheads and rockets we are among the global leaders. That must be retained.”