American Airlines (B): Compensation and Cost Reduction SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of American Airlines (B): Compensation and Cost Reduction
American Airlines' strategy in the 1990s calls for continued growth, improvements in customer service, and cost reduction. Central to cost reduction efforts is the need to contain labor costs. After having signed a very expensive new contract with its pilots' union in early 1991, American is now faced with the challenge of increasing productivity and controlling costs for its other employee groups.
Swot Analysis of "American Airlines (B): Compensation and Cost Reduction" written by Gary W. Loveman includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Reduction American facing as an external strategic factors. Some of the topics covered in American Airlines (B): Compensation and Cost Reduction case study are - Strategic Management Strategies, Costs, Labor, Negotiations and Strategy & Execution.
Some of the macro environment factors that can be used to understand the American Airlines (B): Compensation and Cost Reduction casestudy better are - – increasing household debt because of falling income levels, increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%,
central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of American Airlines (B): Compensation and Cost Reduction
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in American Airlines (B): Compensation and Cost Reduction case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Reduction American, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Reduction American operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of American Airlines (B): Compensation and Cost Reduction can be done for the following purposes –
1. Strategic planning using facts provided in American Airlines (B): Compensation and Cost Reduction case study
2. Improving business portfolio management of Reduction American
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Reduction American
Strengths American Airlines (B): Compensation and Cost Reduction | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Reduction American in American Airlines (B): Compensation and Cost Reduction Harvard Business Review case study are -
Ability to recruit top talent
– Reduction American is one of the leading recruiters in the industry. Managers in the American Airlines (B): Compensation and Cost Reduction are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Cross disciplinary teams
– Horizontal connected teams at the Reduction American are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Reduction American digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Reduction American has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Strong track record of project management
– Reduction American is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the American Airlines (B): Compensation and Cost Reduction Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Training and development
– Reduction American has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in American Airlines (B): Compensation and Cost Reduction Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Ability to lead change in Strategy & Execution field
– Reduction American is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Reduction American in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Reduction American has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Reduction American to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Reduction American
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Reduction American does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Reduction American has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Superior customer experience
– The customer experience strategy of Reduction American in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– Reduction American is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Gary W. Loveman can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Weaknesses American Airlines (B): Compensation and Cost Reduction | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of American Airlines (B): Compensation and Cost Reduction are -
Skills based hiring
– The stress on hiring functional specialists at Reduction American has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Increasing silos among functional specialists
– The organizational structure of Reduction American is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Reduction American needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Reduction American to focus more on services rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, firm in the HBR case study American Airlines (B): Compensation and Cost Reduction has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Reduction American 's lucrative customers.
Aligning sales with marketing
– It come across in the case study American Airlines (B): Compensation and Cost Reduction that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case American Airlines (B): Compensation and Cost Reduction can leverage the sales team experience to cultivate customer relationships as Reduction American is planning to shift buying processes online.
Slow decision making process
– As mentioned earlier in the report, Reduction American has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Reduction American even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study American Airlines (B): Compensation and Cost Reduction, is just above the industry average. Reduction American needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study American Airlines (B): Compensation and Cost Reduction, in the dynamic environment Reduction American has struggled to respond to the nimble upstart competition. Reduction American has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Workers concerns about automation
– As automation is fast increasing in the segment, Reduction American needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study American Airlines (B): Compensation and Cost Reduction, it seems that the employees of Reduction American don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Lack of clear differentiation of Reduction American products
– To increase the profitability and margins on the products, Reduction American needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
Reduction American has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Opportunities American Airlines (B): Compensation and Cost Reduction | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study American Airlines (B): Compensation and Cost Reduction are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Reduction American can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, American Airlines (B): Compensation and Cost Reduction, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Reduction American can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Reduction American can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Reduction American can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Creating value in data economy
– The success of analytics program of Reduction American has opened avenues for new revenue streams for the organization in the industry. This can help Reduction American to build a more holistic ecosystem as suggested in the American Airlines (B): Compensation and Cost Reduction case study. Reduction American can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Leveraging digital technologies
– Reduction American can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Building a culture of innovation
– managers at Reduction American can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Low interest rates
– Even though inflation is raising its head in most developed economies, Reduction American can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Using analytics as competitive advantage
– Reduction American has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study American Airlines (B): Compensation and Cost Reduction - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Reduction American to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Reduction American can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Reduction American can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Buying journey improvements
– Reduction American can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. American Airlines (B): Compensation and Cost Reduction suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Loyalty marketing
– Reduction American has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Reduction American in the consumer business. Now Reduction American can target international markets with far fewer capital restrictions requirements than the existing system.
Threats American Airlines (B): Compensation and Cost Reduction External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study American Airlines (B): Compensation and Cost Reduction are -
Consumer confidence and its impact on Reduction American demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Environmental challenges
– Reduction American needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Reduction American can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Reduction American will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Shortening product life cycle
– it is one of the major threat that Reduction American is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Reduction American in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Stagnating economy with rate increase
– Reduction American can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Technology acceleration in Forth Industrial Revolution
– Reduction American has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Reduction American needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Reduction American business can come under increasing regulations regarding data privacy, data security, etc.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Reduction American can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Reduction American needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Reduction American.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Reduction American needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study American Airlines (B): Compensation and Cost Reduction, Reduction American may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Weighted SWOT Analysis of American Airlines (B): Compensation and Cost Reduction Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study American Airlines (B): Compensation and Cost Reduction needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study American Airlines (B): Compensation and Cost Reduction is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study American Airlines (B): Compensation and Cost Reduction is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of American Airlines (B): Compensation and Cost Reduction is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Reduction American needs to make to build a sustainable competitive advantage.