Businessmodel of Parker Hannifin

Customer Segments

Parker has a niche market business model, with a specialized customer segment. The company targets its offerings at firms in the mobile, industrial, and aerospace markets.

Value Proposition

Parker offers two primary value propositions: innovation and brand/status.

The company has a history of innovation. Its breakthroughs include the following:

• Air Saver – A switching valve technology that, when supplied a continuous stream of compressed air, generates pulsed air blow that is only “on” when air is required by the operator. By holding back the supply in between periods of active use, it reduces air consumption by 50%.
• Parker CNG Dispenser – A dispenser that uses a set of protective sensors, hose disconnects, and breakway couplings to prevent the risk of mechanical or user malfunctions. The system is held to a high standard of quality to stop leakage, reduce downtime and provide consistent service.
• Modulated Turbine Clearance Control Valve – The MTCCV controls the tip clearance – the distance between an engine’s rotating blades and the casing. This increases the engine’s efficiency, resulting in extended service life and a reduction in emissions and fuel consumption. The company has established a powerful brand due to its success. It bills itself as the world’s top diversified manufacturer of motion and control technologies and systems. It is a Fortune 250 firm with $11 billion in sales in its 2016 fiscal year. It has increased its annual dividends paid to shareholders for 60 consecutive fiscal years, among the top five longest-running dividend-increase records in the S&P 500 index. It operates in 55 countries on six continents and serves 444,000 clients.

Channels

Parker’s main channels are its direct sales team; its network of over 13,000 authorized distributors worldwide; and ParkerStore Network, a group of independently-owned industrial retail operations with over 3,000 service points globally. The company promotes its offering through its website, social media pages, and participation in expos, symposiums, trade shows, and conferences.

Customer Relationships

Parker’s customer relationship is primarily of a self-service nature. Customers utilize its products while having limited interaction with employees. The company’s website features a “Support” section that includes literature and reference materials, selector guides, product demos and tutorials, software downloads, a CAD center, and a configuration center.

The site also provides a gallery of instructional videos and answers to frequently asked questions. That said, there is a community element in the form of a peer forum and a personal assistance component in the form of phone and e-mail support.

Key Activities

Parker’s business model entails designing, developing, manufacturing, and distributing its products for customers.

Key Partners

Parker’s key partners are the suppliers that provide the raw materials and components it uses to manufacture its products for customers. It also depends on its networks of independent distributors and retailers who sell its products at thousands of locations worldwide.

Key Resources

Parker’s main resources are its human resources. It relies heavily on its research and product development team, which consists of physicists, chemists, and mechanical, electrical, and chemical engineers.

The company also depends significantly on physical resources in the form of 309 manufacturing facilities (most of which it owns) and 88 distribution centers located in 39 U.S. states and 49 other countries. Lastly, it places a great priority on its intellectual property, its patents.

Cost Structure

Parker has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is cost of sales, a variable expense. Other major drivers are in the areas of sales/marketing and administration, both fixed costs.

Revenue Streams

Parker has one revenue stream: revenues it generates from sales of its products to customers. Most of these sales occur through the signing of long-term contracts.