SWOT Analysis / TOWS Matrix for Herc Holdings (United States)
Based on various researches at Oak Spring University , Herc Holdings is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , there is increasing trade war between United States & China, geopolitical disruptions, technology disruption, increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models,
digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Herc Holdings can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Herc Holdings, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Herc Holdings 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 Herc Holdings can be done for the following purposes –
1. Strategic planning of Herc Holdings
2. Improving business portfolio management of Herc Holdings
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 Herc Holdings
Strengths of Herc Holdings | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Herc Holdings are -
Digital Transformation in Rental & Leasing industry
- digital transformation varies from industry to industry. For Herc Holdings digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Herc Holdings 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.
Highly skilled collaborators
– Herc Holdings 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 Herc Holdings have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Herc Holdings has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Herc Holdings 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
– Herc Holdings has clearly differentiated products in the market place. This has enabled Herc Holdings to fetch slight price premium compare to the competitors in the Rental & Leasing industry. The sustainable margins have also helped Herc Holdings to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Herc Holdings is present in almost all the verticals within the Rental & Leasing industry. This has provided Herc Holdings 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.
Effective Research and Development (R&D)
– Herc Holdings has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Herc Holdings 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.
Analytics focus
– Herc Holdings 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 Rental & Leasing 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.
Organizational Resilience of Herc Holdings
– The covid-19 pandemic has put organizational resilience at the centre of everthing Herc Holdings does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Herc Holdings in Rental & Leasing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– Herc Holdings 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.
Operational resilience
– The operational resilience strategy of Herc Holdings 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.
Successful track record of launching new products
– Herc Holdings has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Herc Holdings 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 Herc Holdings | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Herc Holdings are -
Skills based hiring in Rental & Leasing industry
– The stress on hiring functional specialists at Herc Holdings 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, Herc Holdings 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.
No frontier risks strategy
– From the 10K / annual statement of Herc Holdings, it seems that company is thinking out the frontier risks that can impact Rental & Leasing industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Lack of clear differentiation of Herc Holdings products
– To increase the profitability and margins on the products, Herc Holdings needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ less understanding of Herc Holdings strategy
– From the outside it seems that the employees of Herc Holdings 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.
Low market penetration in new markets
– Outside its home market of United States, Herc Holdings needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
Herc Holdings 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.
Compensation and incentives
– The revenue per employee of Herc Holdings 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.
Need for greater diversity
– Herc Holdings 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, Herc Holdings is slow explore the new channels of communication. These new channels of communication can help Herc Holdings to provide better information regarding Rental & Leasing products and services. It can also build an online community to further reach out to potential customers.
High dependence on Herc Holdings ‘s star products
– The top 2 products and services of Herc Holdings still accounts for major business revenue. This dependence on star products in Rental & Leasing industry has resulted into insufficient focus on developing new products, even though Herc Holdings has relatively successful track record of launching new products.
Herc Holdings Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Herc Holdings are -
Developing new processes and practices
– Herc Holdings can develop new processes and procedures in Rental & Leasing 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Herc Holdings can use these opportunities to build new business models that can help the communities that Herc Holdings operates in. Secondly it can use opportunities from government spending in Rental & Leasing sector.
Better consumer reach
– The expansion of the 5G network will help Herc Holdings to increase its market reach. Herc Holdings 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Herc Holdings 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Herc Holdings 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 Herc Holdings to hire the very best people irrespective of their geographical location.
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. Herc Holdings can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Herc Holdings 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Herc Holdings 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 Herc Holdings to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Herc Holdings in the Rental & Leasing industry. Now Herc Holdings can target international markets with far fewer capital restrictions requirements than the existing system.
Creating value in data economy
– The success of analytics program of Herc Holdings has opened avenues for new revenue streams for the organization in Rental & Leasing industry. This can help Herc Holdings to build a more holistic ecosystem for Herc Holdings products in the Rental & Leasing industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Herc Holdings is facing challenges because of the dominance of functional experts in the organization. Herc Holdings can utilize new technology in the field of Rental & Leasing industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Building a culture of innovation
– managers at Herc Holdings 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 Rental & Leasing industry.
Buying journey improvements
– Herc Holdings 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.
Threats Herc Holdings External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Herc Holdings are -
Consumer confidence and its impact on Herc Holdings 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.
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.
Technology acceleration in Forth Industrial Revolution
– Herc Holdings has witnessed rapid integration of technology during Covid-19 in the Rental & Leasing industry. As one of the leading players in the industry, Herc Holdings 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.
Stagnating economy with rate increase
– Herc Holdings 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.
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 Herc Holdings business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Herc Holdings may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of 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. Herc Holdings can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Herc Holdings 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 Herc Holdings prominent markets.
Increasing wage structure of Herc Holdings
– 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 Herc Holdings.
High dependence on third party suppliers
– Herc Holdings 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Herc Holdings 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.
Regulatory challenges
– Herc Holdings 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.
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 Herc Holdings Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Herc Holdings 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 Herc Holdings 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 Herc Holdings 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 Herc Holdings 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 Herc Holdings needs to make to build a sustainable competitive advantage.
