Flowserve (FLS) SWOT Analysis / TOWS Matrix / MBA Resources
Misc. Capital Goods
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Flowserve (United States)
Based on various researches at Oak Spring University , Flowserve is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies, wage bills are increasing, increasing transportation and logistics costs, increasing household debt because of falling income levels,
increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Flowserve can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Flowserve, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Flowserve 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 Flowserve can be done for the following purposes –
1. Strategic planning of Flowserve
2. Improving business portfolio management of Flowserve
3. Assessing feasibility of the new initiative in United States
4. Making a Misc. Capital Goods sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Flowserve
Strengths of Flowserve | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Flowserve are -
Successful track record of launching new products
– Flowserve has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Flowserve has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Analytics focus
– Flowserve is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Misc. Capital Goods industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Sustainable margins compare to other players in Misc. Capital Goods industry
– Flowserve has clearly differentiated products in the market place. This has enabled Flowserve to fetch slight price premium compare to the competitors in the Misc. Capital Goods industry. The sustainable margins have also helped Flowserve to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Flowserve in the Capital Goods sector have low bargaining power. Flowserve has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Flowserve to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management in the Misc. Capital Goods industry
– Flowserve is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Flowserve
– The covid-19 pandemic has put organizational resilience at the centre of everthing Flowserve does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– Flowserve 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.
Effective Research and Development (R&D)
– Flowserve has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Flowserve staying ahead in the Misc. Capital Goods industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– Flowserve is one of the most innovative firm in Misc. Capital Goods sector.
Operational resilience
– The operational resilience strategy of Flowserve comprises – understanding the underlying the factors in the Misc. Capital Goods 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.
Superior customer experience
– The customer experience strategy of Flowserve in Misc. Capital Goods industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Digital Transformation in Misc. Capital Goods industry
- digital transformation varies from industry to industry. For Flowserve digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Flowserve has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Weaknesses of Flowserve | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Flowserve are -
Products dominated business model
– Even though Flowserve has some of the most successful models in the Misc. Capital Goods industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Flowserve should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, Flowserve has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Misc. Capital Goods industry over the last five years. Flowserve even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Capital Spending Reduction
– Even during the low interest decade, Flowserve 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 Misc. Capital Goods industry using digital technology.
High dependence on Flowserve ‘s star products
– The top 2 products and services of Flowserve still accounts for major business revenue. This dependence on star products in Misc. Capital Goods industry has resulted into insufficient focus on developing new products, even though Flowserve has relatively successful track record of launching new products.
High bargaining power of channel partners in Misc. Capital Goods industry
– because of the regulatory requirements in United States, Flowserve is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Misc. Capital Goods industry.
High cash cycle compare to competitors
Flowserve has a high cash cycle compare to other players in the Misc. Capital Goods industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Need for greater diversity
– Flowserve has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Flowserve is slow explore the new channels of communication. These new channels of communication can help Flowserve to provide better information regarding Misc. Capital Goods products and services. It can also build an online community to further reach out to potential customers.
Low market penetration in new markets
– Outside its home market of United States, Flowserve needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Aligning sales with marketing
– From the outside it seems that Flowserve needs to have more collaboration between its sales team and marketing team. Sales professionals in the Misc. Capital Goods industry have deep experience in developing customer relationships. Marketing department at Flowserve can leverage the sales team experience to cultivate customer relationships as Flowserve is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee of Flowserve is just above the Misc. Capital Goods industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Flowserve Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Flowserve are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Flowserve 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Flowserve can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Flowserve 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Flowserve in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Misc. Capital Goods industry, and it will provide faster access to the consumers.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Flowserve is facing challenges because of the dominance of functional experts in the organization. Flowserve can utilize new technology in the field of Misc. Capital Goods industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Learning at scale
– Online learning technologies has now opened space for Flowserve to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Flowserve 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 Flowserve to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Loyalty marketing
– Flowserve has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Manufacturing automation
– Flowserve can use the latest technology developments to improve its manufacturing and designing process in Misc. Capital Goods sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Flowserve can use these opportunities to build new business models that can help the communities that Flowserve operates in. Secondly it can use opportunities from government spending in Misc. Capital Goods sector.
Building a culture of innovation
– managers at Flowserve can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Misc. Capital Goods industry.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Flowserve can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Flowserve to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Flowserve to hire the very best people irrespective of their geographical location.
Threats Flowserve External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Flowserve are -
Regulatory challenges
– Flowserve 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 Misc. Capital Goods industry regulations.
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. Flowserve needs to understand the core reasons impacting the Misc. Capital Goods industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Flowserve is facing in Misc. Capital Goods sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Increasing wage structure of Flowserve
– 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 Flowserve.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
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 Flowserve.
Stagnating economy with rate increase
– Flowserve 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 Misc. Capital Goods industry.
High dependence on third party suppliers
– Flowserve high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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. Flowserve 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Flowserve may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Misc. Capital Goods sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Flowserve in Misc. Capital Goods industry. The Misc. Capital Goods 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
– Flowserve has witnessed rapid integration of technology during Covid-19 in the Misc. Capital Goods industry. As one of the leading players in the industry, Flowserve needs to keep up with the evolution of technology in the Misc. Capital Goods 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.
Weighted SWOT Analysis of Flowserve Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Flowserve 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 Flowserve 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 Flowserve 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 Flowserve 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 Flowserve needs to make to build a sustainable competitive advantage.