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 inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google,
increasing commodity prices, 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 -
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.
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.
Analytics focus
– Parker-Hannifin 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 Misc. Fabricated Products 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.
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.
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.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Parker-Hannifin 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.
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.
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.
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.
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.
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 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.
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.
No frontier risks strategy
– From the 10K / annual statement of Parker-Hannifin, it seems that company is thinking out the frontier risks that can impact Misc. Fabricated Products 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.
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.
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.
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.
Workers concerns about automation
– As automation is fast increasing in the Misc. Fabricated Products industry, Parker-Hannifin 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.
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.
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.
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.
Parker-Hannifin Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Parker-Hannifin are -
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.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Parker-Hannifin 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 Parker-Hannifin to hire the very best people irrespective of their geographical location.
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.
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.
Loyalty marketing
– Parker-Hannifin 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.
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.
Using analytics as competitive advantage
– Parker-Hannifin has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Misc. Fabricated Products sector. This continuous investment in analytics has enabled Parker-Hannifin to build a competitive advantage using analytics. The analytics driven competitive advantage can help Parker-Hannifin to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Creating value in data economy
– The success of analytics program of Parker-Hannifin has opened avenues for new revenue streams for the organization in Misc. Fabricated Products industry. This can help Parker-Hannifin to build a more holistic ecosystem for Parker-Hannifin products in the Misc. Fabricated Products industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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.
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.
Threats Parker-Hannifin External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Parker-Hannifin are -
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.
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.
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.
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.
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
– 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.
Increasing wage structure of Parker-Hannifin
– 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 Parker-Hannifin.
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.
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.
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.
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.
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.
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.
