Paccar SWOT & PESTLE Analysis
ID : 52324653 | Mar 2018COMPANY PROFILE - Paccar
Business Sector : Automobile, Commercial Vehicles and Financial services Information technology
Operating Geography : North America, Global
About Paccar : Paccar was incorporated under the laws of Delaware in 1971 and is the successor to Pacific Car and Foundry Company which was incorporated in Washington in 1924. Paccar is one of the global technology leaders in the design, manufacture and customer support of all the types of truck and this is done under the Kenworth, Peterbilt, and DAF nameplates. PACCAR Global sells the company’s products in more than 100 countries and has more than 23000 employees as of 2016.
Paccar Revenue : $17,033.3 million – FY ending Dec 2016
Competitive Analysis of Paccar
| 1. Geographically diversified business 2. Renowned Brand name 3. Innovative in IT that meets ever-changing market needs 4. Extensive dealer network and skilled workforce. | 1. High debt level and increase in tax rate 2. Effect of recession and decline in revenue |
| 1. Growing demand in developing countries 2. New product and services 3. Expansion and mergers and acquisition: | 1.Increasing cost and fuel price 2.Technological problem 3.Cyclic nature of industry 4. Increasing competition |
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Strength
1. Geographically diversified business: Geographically diverse business and revenue helps the business to shield from shocks in any one part of their business. Companies located in different countries or locations around the world have different characteristics and therefore this helps the company to lower their risk by investing in parts of the world with low correlations. This lowers risk and increases the value of the business over the long-term. Brazil, India, China, and Russia are some of the markets Paccar has recently invested in.
2. Renowned Brand name: Paccar has a strong brand name across various heavy equipment industries. Top-selling brands Kenworth and Peterbilt were awarded for customer satisfaction by global research company J.D. Power and Associates. Various financial services such as financing, leasing and insurance services to both dealer and customer is provided by Paccar Financial Services over 24 countries and this includes a portfolio of around 200000 trucks and trailers.
3. Innovative in IT that meets ever-changing market needs: For better customer service Paccar gives 24 hour a day throughout the year customer call centres and other technology driven systems so as to have control on inventory and also to increase the output rate. PACCAR IT was honoured in the Information Week Elite 100 for the fifteenth consecutive year. The ranking is given to companies with innovative idea in IT that meets ever-changing market needs
4. Extensive dealer network and skilled workforce: Paccar delivers its product and services in more than 100 countries with Asia and United States contributing the major part in generating revenue for the firm. It has almost 1800 dealers in and around the world. Acquisition of DAF and Leyland trucks has strengthened its position globally and the company has more than 17,000 employees as on 2016. The one thing which makes Paccar successful is its extensive dealer network and skilled workforce which are located in almost 2100 locations
Weakness
1. High debt level and increase of tax rate: High debt level over the years does not allow for capital expenditure and hence we can see from the annual report of Paccar that the total revenue had declined considerably as we compare it with the past year data and company debt has also increased though the capital expenditure has not increased proportionately. The owners’ equity has also reduced and the tax rates of Truck industries are increasing year after year.
2. Effect of recession and decline in revenue: The recession highly affected the sales in U.S. which led to 40% drop in total revenue. Paccar has lost some business due to weak oil prices and all the budget-tightening going on in the oil industry, and its revenue has decreased from $ 17,792.8 in 2014 to $ 15,846.6 in 2016. Due to various economic and political factors, Paccar can expect in near future a slight decline in total revenue.
Opportunity
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Threat
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References
1. Paccar Annual report 2016: http://www.paccar.com/media/2583/paccar_2016_annual_report.pdf
2. Relative Strength of Paccarhttps://www.forbes.com/sites/dividendchannel/2015/12/16/relative-strength-alert-for-Paccar
3. Impact of transportation industry in 2030https://www.automotiveworld.com/megatrends-articles/truck-transportation-2030-impacting-commercial-vehicle-industry/
4. Three ways Trump presidency affect auto industry http://wardsauto.com/industry/three-ways-trump-presidency-affect-auto-industry
5. New regulation which will change trucking in 2017https://qualityco.com/how-new-regulations-will-change-trucking-in-2017/
| 1. Trump Presidency can affect auto Industry | 1. Threats from Chinese low cost market 2. Cost of diesel and market fluctuation |
| 1. Safety ratings and low maintenance cost | 1. Gaining momentum of Alternative fuel HD trucks. 2. Implementation of Electronic Log Device (ELD) mandate. |
| 1. Change in tax laws and government regulations | 1. Increasing concern for environment, energy and resource 2. Investing in Sustainable Operations and reducing greenhouse emission |
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Political
1. Trump Presidency can affect auto Industry: The Administration believes NAFTA has encouraged U.S. automobile makers to shift production to Mexico, at the cost of Americans jobs and hitting the U.S. economy. Mexico imports a lot of the parts it uses to manufacture vehicles that are then exported back to the U.S. This tariff policy could have negative consequences on Paccar revenue as the US government are planning to cut corporate tax by 20% to give economic stimulus to US players as the US government is promising to look at federal government gas-emissions regulation for cars and trucks.
Economic
1. Threats from Chinese low cost market: The major factors hindering the growth of the market is Chinese low-cost market that can threaten global players' existence. The main reason why China is giving though competition to Paccar is that the Chinese government is giving support to its local players not in both financial and non-financial way which is helping the local players to establish themselves as cost effective market players. Due to these advantages, they are able to sell products at cheaper rate than Paccar and therefore most of the developing countries in Asia are dependent on these local players for automotive parts. This has also helped Chinese players to improve their geographical presence in this sector in and around the world and giving competition to major international truck selling players
2. Cost of diesel and market fluctuation: As the US and Canadian economies are currently growing at a steady rate which implies that demand for trucks is also rising as more goods need to be transported domestically or across the border. Therefore seasonal demand fluctuations are bottlenecks as the supply and demand ratio changes. This factor speaks for itself. The price of diesel in the USA has been pretty steady therefore one should be prepared to see these diesel costs on an upward trend which causes carrier FSCs (Fuel Surcharges) to rise.
Social
1. Safety ratings and low maintenance cost: Customers now a day want to own such a vehicle whose safety features and ratings are good and also the cost of maintenance of the vehicle is low. These factors are becoming one of the main reasons to prefer one brand over the other irrespective of cost and other features. It should withstand any weather condition and the insurance should be available with good terms. People also buy when economy is good.
Technological
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Legal
This section is available only in the 'Complete Report' on purchase.
Environmental
This section is available only in the 'Complete Report' on purchase.
References
1. Paccar Annual report 2016: http://www.paccar.com/media/2583/paccar_2016_annual_report.pdf
2. Relative Strength of Paccar https://www.forbes.com/sites/dividendchannel/2015/12/16/relative-strength-alert-for- paccar
3. Heavy duty truck market in 2017 to 2021 http://www.prnewswire.com/news-releases/global-heavy-duty-trucks-market-2017-2021-with-daimler-trucks-man-paccar-scania--volvo-trucks-dominating-300506559.html
4. Impact of transportation industry in 2030 https://www.automotiveworld.com/megatrends-articles/truck-transportation-2030-impacting-commercial-vehicle-industry/
5. Three ways Trump presidency affect auto industry http://wardsauto.com/industry/three-ways-trump-presidency-affect-auto-industry
6. New regulation which will change trucking in 2017 https://qualityco.com/how-new-regulations-will-change-trucking-in-2017/
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Paccar SWOT and PESTLE analysis has been conducted by Deepika Talreja and reviewed by senior analysts from Barakaat Consulting.
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