Honeywell (HONH) SWOT Analysis / TOWS Matrix / MBA Resources
Aerospace & Defense
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Honeywell (United Kingdom)
Based on various researches at Oak Spring University , Honeywell is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, central banks are concerned over increasing inflation, technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, supply chains are disrupted by pandemic ,
there is backlash against globalization, challanges to central banks by blockchain based private currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Honeywell can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Honeywell, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Honeywell operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Honeywell can be done for the following purposes –
1. Strategic planning of Honeywell
2. Improving business portfolio management of Honeywell
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Aerospace & Defense sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Honeywell
Strengths of Honeywell | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Honeywell are -
Ability to lead change in Aerospace & Defense
– Honeywell is one of the leading players in the Aerospace & Defense industry in United Kingdom. Over the years it has not only transformed the business landscape in the Aerospace & Defense industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Honeywell in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Honeywell has one of the best training and development program in Capital Goods industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
High switching costs
– The high switching costs that Honeywell has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Operational resilience
– The operational resilience strategy of Honeywell comprises – understanding the underlying the factors in the Aerospace & Defense industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Organizational Resilience of Honeywell
– The covid-19 pandemic has put organizational resilience at the centre of everthing Honeywell does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Honeywell has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Aerospace & Defense industry. Secondly the value chain collaborators of Honeywell have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Honeywell is present in almost all the verticals within the Aerospace & Defense industry. This has provided Honeywell a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Strong track record of project management in the Aerospace & Defense industry
– Honeywell is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to recruit top talent
– Honeywell is one of the leading players in the Aerospace & Defense industry in United Kingdom. It is in a position to attract the best talent available in United Kingdom. The firm has a robust talent identification program that helps in identifying the brightest.
Innovation driven organization
– Honeywell is one of the most innovative firm in Aerospace & Defense sector.
Effective Research and Development (R&D)
– Honeywell has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Honeywell staying ahead in the Aerospace & Defense industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of Honeywell in Aerospace & Defense industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of Honeywell | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Honeywell are -
Products dominated business model
– Even though Honeywell has some of the most successful models in the Aerospace & Defense industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Honeywell should strive to include more intangible value offerings along with its core products and services.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Honeywell supply chain. Even after few cautionary changes, Honeywell is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Honeywell vulnerable to further global disruptions in South East Asia.
Employees’ less understanding of Honeywell strategy
– From the outside it seems that the employees of Honeywell don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Capital Spending Reduction
– Even during the low interest decade, Honeywell has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Aerospace & Defense industry using digital technology.
Low market penetration in new markets
– Outside its home market of United Kingdom, Honeywell needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
Honeywell has a high cash cycle compare to other players in the Aerospace & Defense industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Increasing silos among functional specialists
– The organizational structure of Honeywell is dominated by functional specialists. It is not different from other players in the Aerospace & Defense industry, but Honeywell needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Honeywell to focus more on services in the Aerospace & Defense industry rather than just following the product oriented approach.
Skills based hiring in Aerospace & Defense industry
– The stress on hiring functional specialists at Honeywell has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Interest costs
– Compare to the competition, Honeywell has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Aligning sales with marketing
– From the outside it seems that Honeywell needs to have more collaboration between its sales team and marketing team. Sales professionals in the Aerospace & Defense industry have deep experience in developing customer relationships. Marketing department at Honeywell can leverage the sales team experience to cultivate customer relationships as Honeywell is planning to shift buying processes online.
Ability to respond to the competition
– As the decision making is very deliberative at Honeywell, in the dynamic environment of Aerospace & Defense industry it has struggled to respond to the nimble upstart competition. Honeywell has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Honeywell Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Honeywell are -
Buying journey improvements
– Honeywell can improve the customer journey of consumers in the Aerospace & Defense industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Honeywell can use these opportunities to build new business models that can help the communities that Honeywell operates in. Secondly it can use opportunities from government spending in Aerospace & Defense sector.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Honeywell is facing challenges because of the dominance of functional experts in the organization. Honeywell can utilize new technology in the field of Aerospace & Defense industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Honeywell can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Honeywell to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of Honeywell has opened avenues for new revenue streams for the organization in Aerospace & Defense industry. This can help Honeywell to build a more holistic ecosystem for Honeywell products in the Aerospace & Defense industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Aerospace & Defense industry, but it has also influenced the consumer preferences. Honeywell can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– Honeywell can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Honeywell in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Aerospace & Defense industry, and it will provide faster access to the consumers.
Using analytics as competitive advantage
– Honeywell has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Aerospace & Defense sector. This continuous investment in analytics has enabled Honeywell to build a competitive advantage using analytics. The analytics driven competitive advantage can help Honeywell to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Honeywell to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Developing new processes and practices
– Honeywell can develop new processes and procedures in Aerospace & Defense industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Use of Bitcoin and other crypto currencies for transactions in Aerospace & Defense industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Honeywell in the Aerospace & Defense industry. Now Honeywell can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Honeywell can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Threats Honeywell External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Honeywell are -
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Honeywell will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Honeywell in Aerospace & Defense industry. The Aerospace & Defense industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Technology acceleration in Forth Industrial Revolution
– Honeywell has witnessed rapid integration of technology during Covid-19 in the Aerospace & Defense industry. As one of the leading players in the industry, Honeywell needs to keep up with the evolution of technology in the Aerospace & Defense sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Honeywell.
Regulatory challenges
– Honeywell needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Aerospace & Defense industry regulations.
Increasing wage structure of Honeywell
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Honeywell.
Stagnating economy with rate increase
– Honeywell can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Aerospace & Defense industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Honeywell may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Aerospace & Defense sector.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Aerospace & Defense industry are lowering. It can presents Honeywell with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Aerospace & Defense sector.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Honeywell in the Aerospace & Defense sector and impact the bottomline of the organization.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Honeywell needs to understand the core reasons impacting the Aerospace & Defense industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Honeywell can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Honeywell prominent markets.
Weighted SWOT Analysis of Honeywell Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Honeywell needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Honeywell is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Honeywell is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Honeywell to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Honeywell needs to make to build a sustainable competitive advantage.