PESTEL analysis on honeywell international inc Essay Example

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Honeywell International 4

PESTEL ANALYSIS ON HONEYWELL INTERNATIONAL INC.

Table of Contents

2Pestel Analysis On Honeywell International Inc.

2PEST ANALYSIS

2Political i.

2Economic ii.

3Technological iii.

3Environmental iv.

4Social v.

4SWOT ANALYSIS

4Strengths i.

4Weakness ii.

5Opportunity iii.

5Threats iv.

6STRATEGIC OPERATION

Pestel Analysis On Honeywell International Inc.

Based in the US, the Honeywell international Inc. deals with diversified business ranging from manufacturing, technology and produces variety of goods from commercial, consumer, aerospace facilities, industrial and engineering. The corporation has a robust customer base and it sell its products from private consumers to blue chip companies. In the weak global economy, it reported a 3 % growth to about $ 37.8 billion in earnings in FNY 2013 (Honeywell Annual Report, 2013). Accomplished through considerable seed planting in global growth, new products and services and process initiatives, this retrospect paper seeks to analyze its macro and microenvironment.

PEST ANALYSIS

  1. Political

The US government has significantly cut its budget in relation to defense. The aerospace segment of the company has been greatly hit by this move. The company will therefore have to extend its sales to other governments to cover for the lost market. However, this does not mean that the company has lost its entire market with the government. In 2014, the government issued the company a contract worth $14.3 million (Honeywell annual report 2014). The contract was to install electronic surveillance systems for the US Navy in alliance with the department of defense. The governmental cut in defense spending is assumed to have affected only the 2014 fiscal year. The company will have to increase its sales to foreign market if this trend continues in the subsequent years 2015 and 2016.

  1. Economic

The company is currently pursuing measures to be positively aligned to future market and consumer demands. As such, it announced a $10 billion investment in its merger and acquisition segment. This spending is equal to 22% of the company’s assets in the year 2013 (Bloomberg News, 2014)
. The company further prospects to double its EPS effective during 2018. The company has recently acquired Russell Thomas Company, a giant in natural gas processing. The acquisition placed Honeywell in a position to enter the natural gas market which is on an upward trend in the US. It also acquired Intermec Company, which deals with radio frequency identification. This acquisition boosted the company’s ACS segment with respect to the increasingly competitive field of information technology. The planned expenditure on M & A still does not affect the expected short-term growth of the other segments and the forecasted 49% EPS growth in 2018 (Bloomberg News 2014).

  1. Technological

Honeywell international offers products that are technologically mature. The use of technology ensures that the company creates a high barrier to entry of the markets by potentially new competitors. The company provides high profile turbocharger engines that guaranteed it a market share of 22.8%, and was ranked third in the same respect, behind BorgWarner, which had a market share of 28.5% and Cummins Inc. (27.3%) (Payri et.al, 2015). A growth of about 2.5% is expected to be witnessed in the turbocharger sector by 2018. This is a reflection that the related technology will have advanced in the same proportion.

  1. Environmental

Honeywell, in collaboration with its suppliers will spend $900 million for development and research, in an attempt to provide eco-friendly commodities (Armbrecht 2012). The products include aerosols, solvents, insulators and refrigerants. From the spending, $300 million will fund the newly launched Geismar operation in Los Angeles, which will manufacture the environmental friendly refrigerants for automobiles (PR Newswire, 2014). The plant is prospected to be fully operant by 2016. Alongside this expenditure, the company has spent a cumulative $350 million over the years of its operation for creation of energy efficient products and reduction of global warming (PR News, 2014).

Honeywell is committed to corporate social responsibility. The company integrates environmental, health and safety considerations in all its operations. This is to ensure that it is socially responsible with regard to its employees, customers, suppliers and the society in general (Levin 2012). In 2012, the company won an award of the most influential and socially responsible company in china. This followed its rebuilding of a school under the Honeywell Hometown Solutions initiative.

SWOT ANALYSIS

  1. Strengths

Honeywell has the capacity to operate amidst tight regulations and has the advantage of large economies of scale. These aspects create barriers of market entry to other interested companies. The company has the benefit of a stable market in the automobile and aerospace sectors (Bogue 2013). The company’s customers are less likely to switch to other companies and their products based on the high costs of switching they would experience.

  1. Weakness

The company has acquired other companies in the past that have high environmental liabilities. This is in relation to asbestos, which has a high impact on global warming (Harremoes 2013). The company has set aside $400 million for clearing the asbestos claims. The main problem is that it is not clear, for the company what amount of liabilities it will bear when all the claims in it acquisitions have been filed. This weakness may lead to high spending on the asbestos issue by 2018.

  1. Opportunity

The company has a high liquidity of more than $6.4 billion in terms of cash and equivalents of cash (Anderson 2013). The excellent liquidity offers the company opportunity for diversification, revenue growth and a source of funds for mergers and acquisitions. The mergers and acquisitions are expected to raise the company’s revenue from $39 billion in 2013 to $59 billion in 2018. Following a 13% increase in sales volume to Asia, Honeywell has a promising opportunity to thrive in emerging economies in the global market. In the same respect, construction, energy and automotive markets are expected to grow in high levels in the future.

The price of raw materials is on an upward trend. This has resulted to a pressure in the pricing of the company’s products. The PMT and transportation segments prices of raw materials are highly unpredictable. The materials include raw chemicals and steel respectively (D’Costa 2013). The company has launched financial instruments for controlling such prices prior to 2012 and should continue doing so presently and in future. With regard to product pricing, customers are pushing the company to lower the prices of some products especially refrigerants. To overcome the threat, the company has produced exclusively superior products like the high profile HFO-1234yf refrigerant, which has been ranked highly in terms of its low effect on global warming.

STRATEGIC OPERATION

The company is conforming to environmental friendliness as the main tool for enhancing its business and sustaining its competitive edge among its various competitors. Production of environmentally friendly refrigerants is in line with customer demands and strict environmental regulations. The strategies employed in eco-friendliness are reduction of packaging and hazardous materials, using recycled and renewable materials in production, reusing and recycling, reduced waste production and energy efficiency in production, manufacturing and distribution. Additionally, the company is boosting its aerospace segment to align it with the expected growth in demand for aircrafts as the global passenger traffic is growing rapidly.

In relation to its merger and acquisition segment, the $10 billion expenditure will be conducted in various $1 billion digestible units. This will ensure that the company has ample time for adjustment. The company has also employed a strategy of selling its dysfunctional materials and replacing them with updated ones.

Reference List

Anderson, D. Honeywell 2013 annual report (January 23, 2013).

Armbrecht Jr, F. M. (2012). Industrial Research Institute’s 3rd Annual R&D Leaderboard: R&D Spending by the Top 1O0 US Technology Investors in 2000. Research-Technology Management, 45(1), 21.

Black, Thomas. «Honeywell’s five-year M&A spending to double to $10 billion.» Bloomberg News, March 5, 2014.

Bogue, R. (2013). Recent developments in MEMS sensors: A review of applications, markets and technologies. Sensor Review, 33(4), 300-304.

D’Costa, A. (2013). The Global Restructuring of the Steel Industry: Innovations, institutions and industrial change. Routledge.

Harremoës, P., Gee, D., MacGarvin, M., Stirling, A., Keys, J., Wynne, B., & Vaz, S. G. (2013). The precautionary principle in the 20th century: Late lessons from early warnings. Routledge.

Levin, B. (2012). Made in the USA: Corporate Responsibility and Collective Identity in the American Automotive Industry. Boston College Law Review, 53(3), 821.

Payri, F., Luján, J. M., Guardiola, C., & Pla, B. (2015). A challenging future for the IC engine: new technologies and the control role. Oil & Gas Science and Technology–Revue d’IFP Energies nouvelles, 70(1), 15-30.

PR Newswire. «European Commission’s Top Scientific Body Concludes that Honeywell’s Low-Global-Warming Refrigerant is Safe for Use in Automobiles.» PR Newswire March 17, 2014

Thomas, R. H. P., Robinson, R. P., Singh, R. R., & Wilson, D. P. (2013). U.S. Patent No. 6,516,837. Washington, DC: U.S. Patent and Trademark Office.