Porter’s Five Forces Analysis of Honeywell
Key Facts
| Name | Honeywell International Inc. |
| Industry | Engineering, Manufacturing – Industrial Software |
| Founded | 1927 |
| Headquarters | Charlotte, North Carolina, United States |
| CEOs | Darius Adamczyk |
| Revenues | US $34.392billion(audited) in 2021
US $35.466 billion(unaudited) in 2022 |
| Profit | US $5.542 billion(audited) in 2021
US $4.967 billion(unaudited) in 2022 |
| Competitors | Siemens, ITT Corporation, General Electric, Northrop Grumman |
Company Overview
The company is engaged in inventing and manufacturing products in order to solve difficulties that are connected to global tendencies including example security, energy and safety. The company is mainly operating in providing solutions to the aerospace and transportation business including sensing solutions to energy efficient alternatives. The company made an annual revenue and net profit of US $34.392 billion and US $5.542 billion, respectively in 2021. The market value of the company amounted to US $130.67 billion in 2021. The total assets of the company amounted to US $64.47 billion, in 2021 and US$ 62.27 in FY 2022.The company Honeywell ranked 185thposition by Forbes Global 2000 in 2022 while Fortune 500 ranked the company on 105th number as of January 2023.
In 2021, the company had workforce of approximately 100,000 people
Today we are going over Porter’s Five Forces of Honeywell
Porter’s Five Forces Analysis of Honeywell
Honeywell Rivalry within the Industry
- Honeywell Business Segments and Revenues:The Company is serving various industries including Industrial Software, Aerospace and Travel Solutions, Building Technologies, Energy, Healthcare, Life Sciences, Logistics and Warehouse, Retail and Utilities. The main revenue reportable segments are :
Aerospace:This segment made revenue of US $11.02 billion with a net profit of US $3.051 in FY 2021 while revenues are US$ 11.82 billion in FY 2022.
Performance Materials and Technologies:This segment made revenue of US $10.013 billion and net profit of US $2.120 billion in FY 2021 while the revenues are US$ 10.72 billion in FY 2022.
- Honeywell Building Technologies:This segment of Honeywell Building Technologies made annual revenue and a net profit of US $5.539 billion and US $1.238 billion, while the revenues are US$ 6.0 billion in FY 2021.
Safety and Productivity Solutions:Segment of Safety and Productivity Solutions made revenue and net profit of US $ 7.81 billion and 1.029 billion, respectively in 2021 while the revenues are US$ 6.90 in FY 2022.
- Honeywell Global Operations Year 2021 and 2022:
The main regions in which the company is operating are Africa, Asia Pacific, Europe, Latin America, Middle East, and North America. In 2021 about US $ 3.922 billion of total sales were made from the U.S. government.
The company made sales of approximately US $20.7 billion and US $6.8 billion in the United States and Europe, respectively in 2021.
The company’s segment of aerospace had assets in total of approximately US $11.5 billion in value, in 2021.
- Siemens made an annual revenue and net profit of € 71.977 billion and € 3.723 billion, respectively in 2022 and gave a stiff competition to the company. The market value of the company amounted to US $102.3 billion in 2021.The total assets of the company amounted to € 151.502 billion, in 2022
Major sales of the company is generated from the following regions; Australia, United States, Europe, Asia, Africa and Middle East
In 2022, there was a rise in orders by 25% amounting to € 89 billion and revenue increased by 16%, amounting to approximately € 72 billion. Also profit from industrial business was 38%, including 16.2% of profit margin.
In 2022, the company had a workforce of 311,000 people.
- General Electric made an annual revenue and net profit of US $76.555 billion and US $225 million, in 2022 and gave a stiff competition to the company. The market value of the company amounted to US $98.13 billion in 2021. The total assets of the company amounted to US $187.788 billion, in 2022.
In 2022, the company’s segment of Aerospace made revenue of US $26.050 billion, Renewable Energy made revenue of US $12.977 billion, Power made revenue of US $ 16.262 billion and HealthCare made revenue of US $18.461 billion. Corporate revenue was US $2.806 billion.
In 2022, revenue and profit from segments increased by 22% and 66% respectively, as compared to 2021. Major sales of the company is generated from the following regions; United States, Europe, Asia, Africa and Middle East.
The company has network of distribution, in more than 170 countries with a workforce of 172,000 people as of FY 2022.
Honeywell Threat of New Entrants
- Government Regulations: There are allot of laws currently required to be fulfilled in order to enter the market, acting as strong barrier to entry specially in Aerospace Industry or services related to censors and security the requirements for licenses, local laws, governmental rules and regulations are barrier for new entrants.
Even Honeywell is serving the U.S. government, the company is subject to the government audits and subjective of any contractual termination from the U.S. government.
The US Defense department and other departments are Honeywell’s customer, only from the U.S. Defense department Honeywell earned 2.88 billion in FY 2022,while US$ 3.29 billion in FY 2021 and US$ 3.66 billion in FY 2020
- Economies of Scale:The existing giants like Honeywell, General Electric etc. have economies of scale i.e. there average cost is lower due to production of items in large quantities leading to lower cost. New entrants will therefore be unable to compete due to high cost.
Only the Honey well’s Property, Plant and Equipment cost US$ 5.47 billion while the intangible assets cost US$ 3.2 billion in FY 2022.
Honeywell Bargaining Power of Suppliers
- Suppliers Diversity, Inclusion and Collaboration: TheCompany maintains its collaborations with suppliers by proactively and continuously partnering with advocacy organizations to connect with small or diverse suppliers.
Honeywell gave special attention to the minority owned business, woman owned, veteran and LGBT business enterprises
- Supplier Code of Conduct and Guidance: The Honeywell provides special guidance for it’s supplier for integrity and quality assurance in it’s final products and services. Some of the codes are Supplier Code of Conduct, California Transparency in Supply Chain Act Disclosure and Supplemental Provisions under U.S. Government Grants.
- Supply Chain Constraints Ukraine Russia Invasion: In the recovery period of COVID-19 another incident of Russia-Ukraine invasion resulted Honeywell’s operations to be ceased in Russia which created different disruptions in the supply chain. Current Economic crises and inflation also disrupted the supply chain cycles which may result in high supplier bargain power.
Honeywell Bargaining Power of Buyers
- Global Presence and Large Customer Base:Due to increasing number of buyers, their power to bargain is low in the market. Since the company carries its operations in 80 countries, having approximately 750 sites worldwide, leading to loads of customers for the company.
- Company Sponsored Research & Development Projects-Customer Contracts :
The company sponsored some research and development projects with it’s customers which are reimbursable to the company back. The company spent US$ 1.47 million in FY 2022, US$ 1.33 million in FY 2021 and US$ 1.33 million in FY 2020.
The revenues realized from such research contracts are US$ 1.33 million in FY 2022, US$ 1.28 in FY 2021 and US$ 1.2 million in FY 2020 respectively.
Honeywell Threat of Substitute Products or Services
- Diversified& Technological Advanced Pool of Services: Due to the specialized nature of services and products offered by Honeywell which are specifically industry focused and technological advanced mitigate the threat of substitution.
- Present in Diversified Industries:Moreover the threat of substitution is neutralized when the company Honeywell is serving a very large pool of industries at the same time.
- Global Economic Conditions and Geopolitical Tensions: The current economic scenario and latest fight of U.S. and China for specialized minerals and raw materials for AI and other related services and equipment production is taking the world to another dimension.
With the current economic situation and Russia-Ukraine invasion will also impact the global requirement of products and services will be slow down.The declared inflation rate by European Central Bank in 8.4% in FY 2022 which was 2.6% in 2021.
References
- Forbes Global list 2000| Available at Forbes
- Basic information about Honeywell| Available at Forbes
- Honeywell’s net sales from FY 2018 to FY 2021, by region(Feb 21, 2022)| Available at Statista
- Honeywell’s total assets in FY 2021, by segment(Oct 7, 2022)| Available at Statista
- Honeywell UOP’s revenue from FY 2012 to FY 2021(Jan 31, 2023)| Available at Statista
- Honeywell’s total assets from FY 2011 to FY 2021(Oct 7, 2022)| Available at Statista
- Honeywell’s net sales from FY 2018 to FY 2021, by segment(Feb 21, 2022)| Available at Statista
- Honeywell’s net sales from FY 2011 to FY 2021(Feb 21, 2022)| Available at Statista
- Honeywell – statistics & facts(Jan 06, 2023) | Available at Statista
- Honeywell Annual financial Statements 2021| Available at Honeywell
- Honeywell Quarterly financial Statements 2022| Available at Honeywell
- General Electric Annual financial Statements 2022| Available at General Electric
- Global aerospace forging market size from 2019 to 2027(Oct19 2021)| Available at Statista
- Siemens Annual financial Statements 2021| Available at Siemens
- Siemens Quarterly financial Statements 2022| Available at Siemens
- Honey well ,About
- Honeywell, Supplier Diversity
- Honeywell, Supplier Code of Business Conduct .Available at Honeywell
- European Central Bank (February 24, 2023), One year since Russia’s invasion of Ukraine-the effects on euro area inflation. Available at European Central Bank
