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 – wage bills are increasing, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs,
there is backlash against globalization, increasing transportation and logistics costs, 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 -
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.
High brand equity
– Parker-Hannifin has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Parker-Hannifin to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Parker-Hannifin has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Parker-Hannifin 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.
Ability to lead change in Misc. Fabricated Products
– Parker-Hannifin is one of the leading players in the Misc. Fabricated Products industry in United States. Over the years it has not only transformed the business landscape in the Misc. Fabricated Products industry in United States but also across the existing markets. The ability to lead change has enabled Parker-Hannifin 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 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.
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.
Superior customer experience
– The customer experience strategy of Parker-Hannifin in Misc. Fabricated Products industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Parker-Hannifin is one of the most innovative firm in Misc. Fabricated Products sector.
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.
Ability to recruit top talent
– Parker-Hannifin is one of the leading players in the Misc. Fabricated Products industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
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.
Digital Transformation in Misc. Fabricated Products industry
- digital transformation varies from industry to industry. For Parker-Hannifin digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Parker-Hannifin 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 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 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.
Low market penetration in new markets
– Outside its home market of United States, Parker-Hannifin needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– Parker-Hannifin 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.
High bargaining power of channel partners in Misc. Fabricated Products industry
– because of the regulatory requirements in United States, Parker-Hannifin 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. Fabricated Products industry.
Increasing silos among functional specialists
– The organizational structure of Parker-Hannifin is dominated by functional specialists. It is not different from other players in the Misc. Fabricated Products industry, but Parker-Hannifin needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Parker-Hannifin to focus more on services in the Misc. Fabricated Products industry rather than just following the product oriented approach.
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.
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.
Capital Spending Reduction
– Even during the low interest decade, Parker-Hannifin 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. Fabricated Products industry using digital technology.
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.
Slow to strategic competitive environment developments
– As Parker-Hannifin is one of the leading players in the Misc. Fabricated Products industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Misc. Fabricated Products industry in last five years.
Interest costs
– Compare to the competition, Parker-Hannifin 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.
Parker-Hannifin Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Parker-Hannifin are -
Building a culture of innovation
– managers at Parker-Hannifin 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. Fabricated Products industry.
Leveraging digital technologies
– Parker-Hannifin 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.
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.
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.
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.
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.
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 Parker-Hannifin 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.
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.
Buying journey improvements
– Parker-Hannifin can improve the customer journey of consumers in the Misc. Fabricated Products 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.
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.
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.
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.
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.
Threats Parker-Hannifin External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Parker-Hannifin are -
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Parker-Hannifin 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. Fabricated Products sector.
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.
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.
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.
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.
Environmental challenges
– Parker-Hannifin 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. Parker-Hannifin can take advantage of this fund but it will also bring new competitors in the Misc. Fabricated Products industry.
Regulatory challenges
– Parker-Hannifin 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. Fabricated Products industry regulations.
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.
Stagnating economy with rate increase
– Parker-Hannifin 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. Fabricated Products industry.
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.
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.
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.