Research Proposal: Management Policy and Strategy

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Parker Hannifin

Strategic Management Plan for Parker Hannifin Corporation

Parker Hannifin's growth and success has, since the company's beginning, largely been driven by its acquisitions, and the current global economic situation presents an opportune time to continue this strategy. Maintaining its current solid base of operations in the aerospace industry through ongoing military contracts and its firm position as a leader of hydraulic and fluid control systems to civilian firms and endeavors will provide adequate capital and security for new acquisition ventures, and the general devaluation of most firms as the world's economy is still slowly climbing out of a recession will allow Parker Hannifin Corporation to acquire smaller firms at a discount, expanding its worldwide operations and posing itself for even faster growth once the economy recovers and demand increases.

Company Background

In 1918, Parker Appliance Company opened its doors as a manufacturer of brakes for automobiles, of which over one million were produced in Detroit and other automotive industrial centers that year (St. James Press 2000). Art Parker had invented a pneumatic brake booster, which led to the founding of his company and a modest entrance into the automotive market. Since that time, Parker and its acquisitions (the first of which, Hannifin, came in 1957) has remained focused on motion-control systems, though its operations have branched out to include projects in eight broad technology fields: Fluid Connectors, Instrumentation, Filtration, Hydraulics, Automation, Climate & Industrial Controls, Sealing and Shielding, and Aerospace (St. James Press 2000).

In 1924, Parker entered the aviation industry, securing lifelong contracts with Douglas Aircraft Company (later McDonnell-Douglas, now merged with Boeing) and Robert Gross of Lockheed, establishing a firm hold in the aerospace industry while the field was still in its infancy (St. James Press 2000). World War II saw the massive expansion of operations and profits, and new management following Parker's death at the end of the war led to new management and the environment of acquisition that has marked the company to this day (St. James Press 2000). The company's customers are manufacturing firms in a variety of industries, and the broad reach of the company's technologies and innovations has been a large part of the successful growth strategy it has employed.

Mission Statement and Vision Statement

Though the company does not publish a specific mission or value statement, a statement to investors can be construed as such: "Parker is committed to delivering value to our shareholders only in a manner that secures the trust and respect of all of our investors, customers and employees and the communities where we operate" (Washkewicz 2009). Essentially, the company's mission is to remain the world's largest producer and innovator of motion and control technologies, and by maintaining high ethical and quality standards the company has been able to consistently maintain and enlarge this position through global confidence in the firm's products and actions. Its growth operations would be severely hampered, especially internationally, by a lack of confidence or negative views regarding stewardship and ethics.

SWOT Analysis and Goals

SWOT -- a simple acronym standing for Strengths, Weaknesses, Opportunities, and Threats -- analysis is one of the most commonly used intellectual tools by many businesses. Incredibly simple and straightforward in both its design and its revelations, it is one of the most useful first steps used by management in developing a specific strategy. It can help determine market needs, can be used to show relative position to competitors, and essentially gives a basic picture of the company's health and potential (AIT 2008). It does make certain basic assumptions, including some prediction of future events based on current situations and past patterns, but if properly formed these assumptions are not detrimental to the process.

Internal Analysis

The strengths and weaknesses referred to in the SWOT acronym are internal features of the company. Parker Hannifin's great strengths are its size, both in diversity of operations and in market share, which have allowed it to weather several financial storms including the current recession (St. James Press 2000; Yahoo Finance 2010). Some of Parker Hannifin's operations, however, have suffered more than others during the downturn; the same broadness of enterprise that has served as a strength can -- and has -- turned into a weakness through the corporation's carrying of non-essential and non-profitable elements through the economic downturn (PR Web 2010). Parker Hannifin has already begun to shed some of these operations to distributors, streamlining its still expansive industry net (PR Web 2010).

In the next three years, Parker Hannifin should continue to shed its least profitable enterprises while acquiring direct competitors where possible. In the first year, a review of all eight technology sectors of the company should be conducted. Goals are complete analysis of expenditures and profits in each sector, market analysis and future predictions of growth potential, and a review of manufacturing and distribution processes; acquisition processes in identified areas should also begin as soon as possible. The second year should see action taking place in these areas, with each sector being streamlined towards its most profitable endeavors with the most growth potential. Profit margins should be seen to increase as a result. The third year should see the completion of a major acquisition period, while at the same the streamlining of actual operations should be completed.

External Analysis

Just as the strengths and weaknesses are internal components of a SWOT Analysis, the opportunities and threats are external market and industry factors. In many cases, these are closely related, and Parker Hannifin's current situation is no exception. That is, it's opportunities and threats would be markedly different if its strengths and weaknesses were not what they are. As it is, Parker Hannifin is well poised to take advantage of struggling companies still emerging from the economic downturn; the general market downturn has not had as large an effect on Parker Hannifin, creating a large opportunity for growth (Yahoo Finance 2010). There is still a threat from innovation driven by small companies, however, which Parker Hannifin must address in it strategy.

Other strategic goals that the company should set for the next three-year period include a larger percentage of market share in their chosen fields of operation, and increased research and development activities to fuel innovation within the company. This will enable the company to take the fullest possible advantage of the current economic opportunities while addressing the firm's most major threat through pre-emptive innovations and progress. Market share increases should be seen from acquisitions beginning in the first year, as well as expanded marketing efforts in the second year as industry growth returns following the recession, both of which should increase in the third year. Funding for research development secured in the first year should begin delivering products in the second year, with market availability by year three.

SWOT Outcomes

The SWOT analysis reveals that Parker Hannifin could increase its profitability through an increase of market share quite easily, if it can honestly and efficiently deal with the company's less-profitable operations and lagging innovation compared to some smaller rivals. This can easily be incorporated into the company's existing growth strategy of acquisition, which can not only allow Parker Hannifin to acquire innovations and increase market share through its subsuming of the competition, but will provide greater capital resources to drive internal innovations, operations growth, and marketing ventures as needed. This will also, of course, lead to a greater market share for the company, ensuring Parker Hannifin's existence as the global leader of motion control industries.

Long-Term Objectives

The long-term objectives of the strategic plan outlined above including a streamlining of the specific operations and industries in which Parker Hannifin is involved, along with a growth in both innovation and market share of these industries and operations. This has long been the company's operating strategy; it's growth has been primarily driven by acquisitions since Parker first acquired Hannifin in 1957 (St. James Press 2000). The company has gone through periods of expanding the scope of its operations at several points in its history as well, but this is counter to the long-term strategy advised for the company in its current situation.

Strategy Analysis and Choice

The grand strategy of this business is already largely in place; Parker Hannifin should expand its market share and retain -- and increase -- it's leadership in its areas of operation through a strong commitment to delivering high quality and innovative products to its consumers in an ethically sound and community-supportive manner (Washkewicz 2009). This matches the company's long-standing theory of business as evidenced from its operating procedures and its statements to investors, supplies a strong strategic focus, and is also indicated by a SWOT analysis, all of which leads to the support of this grand strategy for the company's future and continued success (Knight 2004). With minimal change to its grand strategy, the company can remain on track for strategic growth.

The generic strategy that the company already engages in, and should continue to engage in for continued growth and market domination, is… [END OF PREVIEW]

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