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 – cloud computing is disrupting traditional business models, there is backlash against globalization, supply chains are disrupted by pandemic , wage bills are increasing, talent flight as more people leaving formal jobs, increasing transportation and logistics costs, technology disruption,
there is increasing trade war between United States & China, 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.
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.
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.
Innovation driven organization
– H&E Equipment is one of the most innovative firm in Rental & Leasing sector.
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.
Cross disciplinary teams
– Horizontal connected teams at the H&E Equipment are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
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.
Ability to lead change in Rental & Leasing
– H&E Equipment is one of the leading players in the Rental & Leasing industry in United States. Over the years it has not only transformed the business landscape in the Rental & Leasing industry in United States but also across the existing markets. The ability to lead change has enabled H&E Equipment in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
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.
Successful track record of launching new products
– H&E Equipment has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. H&E Equipment 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.
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 -
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 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.
Slow to strategic competitive environment developments
– As H&E Equipment is one of the leading players in the Rental & Leasing industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Rental & Leasing industry in last five years.
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.
Workers concerns about automation
– As automation is fast increasing in the Rental & Leasing industry, H&E Equipment needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Need for greater diversity
– H&E Equipment 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, H&E Equipment is slow explore the new channels of communication. These new channels of communication can help H&E Equipment to provide better information regarding Rental & Leasing 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, H&E Equipment needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
Products dominated business model
– Even though H&E Equipment has some of the most successful models in the Rental & Leasing industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. H&E Equipment should strive to include more intangible value offerings along with its core products and services.
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 -
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.
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.
Leveraging digital technologies
– H&E Equipment 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.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects H&E Equipment can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
Use of Bitcoin and other crypto currencies for transactions in Rental & Leasing industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for H&E Equipment in the Rental & Leasing industry. Now H&E Equipment 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, 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.
Using analytics as competitive advantage
– H&E Equipment has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Rental & Leasing sector. This continuous investment in analytics has enabled H&E Equipment to build a competitive advantage using analytics. The analytics driven competitive advantage can help H&E Equipment to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. H&E Equipment can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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.
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 -
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.
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.
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.
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.
Easy access to finance
– Easy access to finance in Rental & Leasing industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. H&E Equipment can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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 H&E Equipment.
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.
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.
Technology acceleration in Forth Industrial Revolution
– H&E Equipment has witnessed rapid integration of technology during Covid-19 in the Rental & Leasing industry. As one of the leading players in the industry, H&E Equipment needs to keep up with the evolution of technology in the Rental & Leasing 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.
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.
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.
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.
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.
