Parker-Hannifin (PH) SWOT Analysis / TOWS Matrix / MBA Resources
Misc. Fabricated Products
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Parker-Hannifin (United States)
Based on various researches at Oak Spring University , Parker-Hannifin is operating in a macro-environment that has been destablized by – increasing energy prices, wage bills are increasing, technology disruption, there is backlash against globalization, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies,
cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Parker-Hannifin can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Parker-Hannifin, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Parker-Hannifin 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 Parker-Hannifin can be done for the following purposes –
1. Strategic planning of Parker-Hannifin
2. Improving business portfolio management of Parker-Hannifin
3. Assessing feasibility of the new initiative in United States
4. Making a Misc. Fabricated Products sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Parker-Hannifin
Strengths of Parker-Hannifin | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Parker-Hannifin are -
Innovation driven organization
– Parker-Hannifin is one of the most innovative firm in Misc. Fabricated Products sector.
Low bargaining power of suppliers
– Suppliers of Parker-Hannifin in the Basic Materials sector have low bargaining power. Parker-Hannifin has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Parker-Hannifin to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Parker-Hannifin has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Misc. Fabricated Products industry. Secondly the value chain collaborators of Parker-Hannifin have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– Parker-Hannifin has one of the best training and development program in Basic Materials 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.
Learning organization
- Parker-Hannifin 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 Parker-Hannifin is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Parker-Hannifin emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Parker-Hannifin has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Parker-Hannifin staying ahead in the Misc. Fabricated Products industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy of Parker-Hannifin comprises – understanding the underlying the factors in the Misc. Fabricated Products 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.
Strong track record of project management in the Misc. Fabricated Products industry
– Parker-Hannifin 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 Parker-Hannifin
– The covid-19 pandemic has put organizational resilience at the centre of everthing Parker-Hannifin does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Parker-Hannifin is present in almost all the verticals within the Misc. Fabricated Products industry. This has provided Parker-Hannifin 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.
Sustainable margins compare to other players in Misc. Fabricated Products industry
– Parker-Hannifin has clearly differentiated products in the market place. This has enabled Parker-Hannifin to fetch slight price premium compare to the competitors in the Misc. Fabricated Products industry. The sustainable margins have also helped Parker-Hannifin to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Parker-Hannifin 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.
Weaknesses of Parker-Hannifin | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Parker-Hannifin are -
High dependence on Parker-Hannifin ‘s star products
– The top 2 products and services of Parker-Hannifin still accounts for major business revenue. This dependence on star products in Misc. Fabricated Products industry has resulted into insufficient focus on developing new products, even though Parker-Hannifin has relatively successful track record of launching new products.
Lack of clear differentiation of Parker-Hannifin products
– To increase the profitability and margins on the products, Parker-Hannifin needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
Parker-Hannifin has a high cash cycle compare to other players in the Misc. Fabricated Products industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Aligning sales with marketing
– From the outside it seems that Parker-Hannifin needs to have more collaboration between its sales team and marketing team. Sales professionals in the Misc. Fabricated Products industry have deep experience in developing customer relationships. Marketing department at Parker-Hannifin can leverage the sales team experience to cultivate customer relationships as Parker-Hannifin is planning to shift buying processes online.
Employees’ less understanding of Parker-Hannifin strategy
– From the outside it seems that the employees of Parker-Hannifin 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.
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 Parker-Hannifin supply chain. Even after few cautionary changes, Parker-Hannifin is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Parker-Hannifin vulnerable to further global disruptions in South East Asia.
Slow decision making process
– As mentioned earlier in the report, Parker-Hannifin 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. Fabricated Products industry over the last five years. Parker-Hannifin 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.
Products dominated business model
– Even though Parker-Hannifin has some of the most successful models in the Misc. Fabricated Products industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Parker-Hannifin should strive to include more intangible value offerings along with its core products and services.
Skills based hiring in Misc. Fabricated Products industry
– The stress on hiring functional specialists at Parker-Hannifin 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.
High operating costs
– Compare to the competitors, Parker-Hannifin has high operating costs in the Misc. Fabricated Products industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Parker-Hannifin lucrative customers.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Parker-Hannifin is slow explore the new channels of communication. These new channels of communication can help Parker-Hannifin to provide better information regarding Misc. Fabricated Products products and services. It can also build an online community to further reach out to potential customers.
Parker-Hannifin Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Parker-Hannifin are -
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. Parker-Hannifin 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 Misc. Fabricated Products industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Parker-Hannifin 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. Parker-Hannifin 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.
Better consumer reach
– The expansion of the 5G network will help Parker-Hannifin to increase its market reach. Parker-Hannifin 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Parker-Hannifin 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Parker-Hannifin can use these opportunities to build new business models that can help the communities that Parker-Hannifin operates in. Secondly it can use opportunities from government spending in Misc. Fabricated Products sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Parker-Hannifin can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Use of Bitcoin and other crypto currencies for transactions in Misc. Fabricated Products industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Parker-Hannifin in the Misc. Fabricated Products industry. Now Parker-Hannifin can target international markets with far fewer capital restrictions requirements than the existing system.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Parker-Hannifin 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 Parker-Hannifin to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for Parker-Hannifin 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.
Developing new processes and practices
– Parker-Hannifin can develop new processes and procedures in Misc. Fabricated Products 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Parker-Hannifin is facing challenges because of the dominance of functional experts in the organization. Parker-Hannifin can utilize new technology in the field of Misc. Fabricated Products industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Parker-Hannifin 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. Fabricated Products industry, and it will provide faster access to the consumers.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Misc. Fabricated Products industry, but it has also influenced the consumer preferences. Parker-Hannifin can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Parker-Hannifin External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Parker-Hannifin are -
Shortening product life cycle
– it is one of the major threat that Parker-Hannifin is facing in Misc. Fabricated Products sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Parker-Hannifin 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.
Technology acceleration in Forth Industrial Revolution
– Parker-Hannifin has witnessed rapid integration of technology during Covid-19 in the Misc. Fabricated Products industry. As one of the leading players in the industry, Parker-Hannifin needs to keep up with the evolution of technology in the Misc. Fabricated Products 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 Parker-Hannifin.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Misc. Fabricated Products industry are lowering. It can presents Parker-Hannifin with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Misc. Fabricated Products sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Parker-Hannifin in Misc. Fabricated Products industry. The Misc. Fabricated Products 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 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. Parker-Hannifin needs to understand the core reasons impacting the Misc. Fabricated Products industry. This will help it in building a better workplace.
Easy access to finance
– Easy access to finance in Misc. Fabricated Products industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Parker-Hannifin can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Parker-Hannifin 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.
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.
Consumer confidence and its impact on Parker-Hannifin 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 Misc. Fabricated Products industry and other sectors.
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 Parker-Hannifin in the Misc. Fabricated Products sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Parker-Hannifin 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 Parker-Hannifin prominent markets.
Weighted SWOT Analysis of Parker-Hannifin Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Parker-Hannifin 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 Parker-Hannifin 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 Parker-Hannifin 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 Parker-Hannifin 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 Parker-Hannifin needs to make to build a sustainable competitive advantage.