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Parker-Hannifin SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a vital strategic planning tool that can be used by Parker-Hannifin managers to do a situational analysis of the company . It is an important technique to evalauate the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Parker-Hannifin is facing in its current business environment.
The Parker-Hannifin is one of the leading organizatations in its industry. Parker-Hannifin maintains its prominent position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis a highly interactive process and requires effective coordination among various departments within the firm such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework helps an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also called SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Parker-Hannifin to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The primary purpose of SWOT matrix is to identify the strategies that a firm can utilize to exploit external opportunities, counter threats, and build on & protect Parker-Hannifin strengths, and eradicate its weaknesses.
Step by Step Guide to Parker-Hannifin SWOT Analysis
Strengths of Parker-Hannifin – Internal Strategic Factors
As one of the leading companies in its industry, Parker-Hannifin has numerous strengths that enable it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Parker-Hannifin are –
- Superb Performance in New Markets – Parker-Hannifin has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
- Strong distribution network – Over the years Parker-Hannifin has built a reliable distribution network that can reach majority of its potential market.
- Highly skilled workforce through successful training and learning programs. Parker-Hannifin is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
- Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
- Strong Free Cash Flow – Parker-Hannifin has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Automation of activities brought consistency of quality to Parker-Hannifin products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Successful track record of developing new products – product innovation.
Weakness of Parker-Hannifin – Internal Strategic Factors
Weakness are the areas where Parker-Hannifin can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Parker-Hannifin needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
- Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the days inventory is high compare to its competitors is that Parker-Hannifin is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
- Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Parker-Hannifin
- The profitability ratio and Net Contribution % of Parker-Hannifin are below the industry average.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
Opportunities for Parker-Hannifin – External Strategic Factors
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Parker-Hannifin to capture new customers and increase its market share.
- New trends in the consumer behavior can open up new market for the Parker-Hannifin . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Parker-Hannifin. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
- Government green drive also opens an opportunity for procurement of Parker-Hannifin products by the state as well as federal government contractors.
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Parker-Hannifin to increase its profitability.
- The market development will lead to dilution of competitor’s advantage and enable Parker-Hannifin to increase its competitiveness compare to the other competitors.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Parker-Hannifin an opportunity to enter a new emerging market.
Threats Parker-Hannifin Facing - External Strategic Factors
- Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
- Liability laws in different countries are different and Parker-Hannifin may be exposed to various liability claims given change in policies in those markets.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Parker-Hannifin in those markets.
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
Limitations of SWOT Analysis for Parker-Hannifin
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.
- Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
- SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
- The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Parker-Hannifin
- SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
- SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.
Weighted SWOT Analysis of Parker-Hannifin
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.
This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Parker-Hannifin managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.
Limitation of Weighted SWOT analysis of Parker-Hannifin
This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.
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SWOT Worksheet & Template
If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.
References / Citations & Bibliography
- M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
- A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
- O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)
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