STRATEGIES
©2015 Parker Hannifin Corporation
• Simplification
  1. Key areas of focus include reducing revenue profile complexity, optimizing organization structure and processes, consolidating divisions and reducing bureaucracy. Simplification will increase speed, reduce costs and enable growth.


• Lean Enterprise

  1. In recent years, Parker has made a great effort to implement lean principles across manufacturing. Parker is expanding lean throughout the enterprise to non-manufacturing areas to further reduce costs and increase productivity and profitability.


• Strategic Supply Chain

  1. Parker has built a competitive advantage through best-in-class supply chain management, leveraging purchasing power to buy at the best value. The company strives to maintain a fully integrated supply chain, and continues to reduce the number of suppliers to cultivate high-value relationships with key partners.

• Year-over-Year Growth
  1. Year-over-year growth in four key financial metrics is correlated to driving total shareholder return. Earnings per share (EPS) and earnings before interest and taxes (EBIT) are the relevant corporate measures. Cash flow and division net earnings (DNE) are the relevant division measures.


• 17% Operating Income
  1. Aligned with the company’s goal of ranking among the best of its proxy peers, Parker aims to achieve 17% operating income margin.

• 21.4% RONA
  1. Parker’s return on net assets (RONA) plan is a unique annual incentive available to team members that drives sales growth, profit and the appropriate management of assets. Achieving 21.4% RONA at the divisions will generate 17% ROIC as a company.

MEASURES
• Top Quartile Diversified Industrial
  1. Parker’s primary goal is to rank among the top 25% of its proxy peers across a range of financial measures.

• 17% ROIC
  1. After-tax return on invested capital (ROIC) is a metric used at the corporate level to determine how efficiently Parker is allocating invested capital to generate income, and is strongly correlated to total shareholder return.

• Value Pricing

  1. Pricing has a powerful effect on every company’s long-term growth. Utilizing an industry-leading approach to pricing, Parker is able to provide customers high-quality products and systems at the best price based on the demonstrated value being created.