SWOT Analysis / TOWS Matrix for H&E Equipment (United States)
Based on various researches at Oak Spring University , H&E Equipment is operating in a macro-environment that has been destablized by – increasing commodity prices, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, geopolitical disruptions, challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, increasing transportation and logistics costs,
supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that H&E Equipment can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the H&E Equipment, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which H&E Equipment 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 H&E Equipment can be done for the following purposes –
1. Strategic planning of H&E Equipment
2. Improving business portfolio management of H&E Equipment
3. Assessing feasibility of the new initiative in United States
4. Making a Rental & Leasing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of H&E Equipment
Strengths of H&E Equipment | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of H&E Equipment are -
Training and development
– H&E Equipment has one of the best training and development program in Services 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)
– H&E Equipment has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – H&E Equipment staying ahead in the Rental & Leasing industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Rental & Leasing industry
– H&E Equipment has clearly differentiated products in the market place. This has enabled H&E Equipment to fetch slight price premium compare to the competitors in the Rental & Leasing industry. The sustainable margins have also helped H&E Equipment to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of H&E Equipment in the Services sector have low bargaining power. H&E Equipment has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps H&E Equipment to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– H&E Equipment has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Rental & Leasing industry. Secondly the value chain collaborators of H&E Equipment have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– H&E Equipment has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled H&E Equipment to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of H&E Equipment
– The covid-19 pandemic has put organizational resilience at the centre of everthing H&E Equipment does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy of H&E Equipment comprises – understanding the underlying the factors in the Rental & Leasing 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.
Learning organization
- H&E Equipment is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at H&E Equipment is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at H&E Equipment emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that H&E Equipment 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.
Diverse revenue streams
– H&E Equipment is present in almost all the verticals within the Rental & Leasing industry. This has provided H&E Equipment 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.
Superior customer experience
– The customer experience strategy of H&E Equipment in Rental & Leasing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of H&E Equipment | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of H&E Equipment are -
Employees’ less understanding of H&E Equipment strategy
– From the outside it seems that the employees of H&E Equipment 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.
Ability to respond to the competition
– As the decision making is very deliberative at H&E Equipment, in the dynamic environment of Rental & Leasing industry it has struggled to respond to the nimble upstart competition. H&E Equipment has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, H&E Equipment 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 Rental & Leasing industry using digital technology.
Aligning sales with marketing
– From the outside it seems that H&E Equipment needs to have more collaboration between its sales team and marketing team. Sales professionals in the Rental & Leasing industry have deep experience in developing customer relationships. Marketing department at H&E Equipment can leverage the sales team experience to cultivate customer relationships as H&E Equipment is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee of H&E Equipment is just above the Rental & Leasing 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.
High cash cycle compare to competitors
H&E Equipment has a high cash cycle compare to other players in the Rental & Leasing industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Skills based hiring in Rental & Leasing industry
– The stress on hiring functional specialists at H&E Equipment 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, H&E Equipment 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.
High operating costs
– Compare to the competitors, H&E Equipment has high operating costs in the Rental & Leasing industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract H&E Equipment lucrative customers.
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 H&E Equipment supply chain. Even after few cautionary changes, H&E Equipment is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left H&E Equipment vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of H&E Equipment is dominated by functional specialists. It is not different from other players in the Rental & Leasing industry, but H&E Equipment needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help H&E Equipment to focus more on services in the Rental & Leasing industry rather than just following the product oriented approach.
H&E Equipment Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of H&E Equipment are -
Learning at scale
– Online learning technologies has now opened space for H&E Equipment 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, H&E Equipment 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.
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 H&E Equipment 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, H&E Equipment can use these opportunities to build new business models that can help the communities that H&E Equipment operates in. Secondly it can use opportunities from government spending in Rental & Leasing sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for H&E Equipment in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Rental & Leasing industry, and it will provide faster access to the consumers.
Better consumer reach
– The expansion of the 5G network will help H&E Equipment to increase its market reach. H&E Equipment will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Loyalty marketing
– H&E Equipment 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Rental & Leasing industry, but it has also influenced the consumer preferences. H&E Equipment can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, H&E Equipment 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 H&E Equipment to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– H&E Equipment can improve the customer journey of consumers in the Rental & Leasing 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.
Creating value in data economy
– The success of analytics program of H&E Equipment has opened avenues for new revenue streams for the organization in Rental & Leasing industry. This can help H&E Equipment to build a more holistic ecosystem for H&E Equipment products in the Rental & Leasing industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Rental & Leasing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. H&E Equipment can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. H&E Equipment can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Manufacturing automation
– H&E Equipment can use the latest technology developments to improve its manufacturing and designing process in Rental & Leasing 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.
Threats H&E Equipment External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of H&E Equipment are -
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 H&E Equipment in the Rental & Leasing sector and impact the bottomline of the organization.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of H&E Equipment business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that H&E Equipment is facing in Rental & Leasing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– H&E Equipment 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 Rental & Leasing industry.
Consumer confidence and its impact on H&E Equipment demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Rental & Leasing industry and other sectors.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for H&E Equipment in Rental & Leasing industry. The Rental & Leasing 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.
High dependence on third party suppliers
– H&E Equipment 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. H&E Equipment 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.
Environmental challenges
– H&E Equipment needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. H&E Equipment can take advantage of this fund but it will also bring new competitors in the Rental & Leasing industry.
Regulatory challenges
– H&E Equipment 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 Rental & Leasing industry regulations.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Rental & Leasing industry are lowering. It can presents H&E Equipment with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Rental & Leasing sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, H&E Equipment 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 H&E Equipment prominent markets.
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.
Weighted SWOT Analysis of H&E Equipment Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at H&E Equipment 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 H&E Equipment 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 H&E Equipment 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 H&E Equipment 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 H&E Equipment needs to make to build a sustainable competitive advantage.