Preparing for China's Entry to the WTO: China's Airline Industry SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Global Business
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Preparing for China's Entry to the WTO: China's Airline Industry
On April 27, 2001, the Civil Aviation Administration of China (CAAC) announced the merger of nine airlines under its direct administration into three giants known as China Southern Airlines Group, China Eastern Airlines Group, and Air China Group. By consolidating the airline industry in China, the CAAC intends to help the domestic airlines to gain competitiveness toward an open market in preparation for China's imminent entry to the WTO. This case examines the WTO's impact on China's airline industry and the appropriateness of the CAAC's decision to reform China's airline industry through consolidation.
Swot Analysis of "Preparing for China's Entry to the WTO: China's Airline Industry" written by Zhigang Tao, Sang Xu, Pauline Ng includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that China's Caac facing as an external strategic factors. Some of the topics covered in Preparing for China's Entry to the WTO: China's Airline Industry case study are - Strategic Management Strategies, Mergers & acquisitions and Global Business.
Some of the macro environment factors that can be used to understand the Preparing for China's Entry to the WTO: China's Airline Industry casestudy better are - – cloud computing is disrupting traditional business models, increasing commodity prices, increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs,
competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of Preparing for China's Entry to the WTO: China's Airline Industry
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Preparing for China's Entry to the WTO: China's Airline Industry case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the China's Caac, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which China's Caac 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 Preparing for China's Entry to the WTO: China's Airline Industry can be done for the following purposes –
1. Strategic planning using facts provided in Preparing for China's Entry to the WTO: China's Airline Industry case study
2. Improving business portfolio management of China's Caac
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of China's Caac
Strengths Preparing for China's Entry to the WTO: China's Airline Industry | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of China's Caac in Preparing for China's Entry to the WTO: China's Airline Industry Harvard Business Review case study are -
Sustainable margins compare to other players in Global Business industry
– Preparing for China's Entry to the WTO: China's Airline Industry firm has clearly differentiated products in the market place. This has enabled China's Caac to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped China's Caac to invest into research and development (R&D) and innovation.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For China's Caac digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. China's Caac 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
– China's Caac is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High switching costs
– The high switching costs that China's Caac 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.
Ability to lead change in Global Business field
– China's Caac 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 China's Caac in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy in the Preparing for China's Entry to the WTO: China's Airline Industry 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.
High brand equity
– China's Caac has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled China's Caac to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– China's Caac has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Preparing for China's Entry to the WTO: China's Airline Industry HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of China's Caac
– The covid-19 pandemic has put organizational resilience at the centre of everthing that China's Caac does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of China's Caac in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– China's Caac is one of the most innovative firm in sector. Manager in Preparing for China's Entry to the WTO: China's Airline Industry Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Diverse revenue streams
– China's Caac is present in almost all the verticals within the industry. This has provided firm in Preparing for China's Entry to the WTO: China's Airline Industry case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Weaknesses Preparing for China's Entry to the WTO: China's Airline Industry | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Preparing for China's Entry to the WTO: China's Airline Industry are -
No frontier risks strategy
– After analyzing the HBR case study Preparing for China's Entry to the WTO: China's Airline Industry, it seems that company is thinking about the frontier risks that can impact Global Business strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Need for greater diversity
– China's Caac has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High bargaining power of channel partners
– Because of the regulatory requirements, Zhigang Tao, Sang Xu, Pauline Ng suggests that, China's Caac is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Increasing silos among functional specialists
– The organizational structure of China's Caac is dominated by functional specialists. It is not different from other players in the Global Business segment. China's Caac needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help China's Caac to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though China's Caac has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Preparing for China's Entry to the WTO: China's Airline Industry should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Preparing for China's Entry to the WTO: China's Airline Industry, is just above the industry average. China's Caac 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.
Low market penetration in new markets
– Outside its home market of China's Caac, firm in the HBR case study Preparing for China's Entry to the WTO: China's Airline Industry needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, firm in the HBR case study Preparing for China's Entry to the WTO: China's Airline Industry 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 China's Caac 's lucrative customers.
Slow decision making process
– As mentioned earlier in the report, China's Caac 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. China's Caac 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.
Aligning sales with marketing
– It come across in the case study Preparing for China's Entry to the WTO: China's Airline Industry 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 Preparing for China's Entry to the WTO: China's Airline Industry can leverage the sales team experience to cultivate customer relationships as China's Caac is planning to shift buying processes online.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of China's Caac supply chain. Even after few cautionary changes mentioned in the HBR case study - Preparing for China's Entry to the WTO: China's Airline Industry, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left China's Caac vulnerable to further global disruptions in South East Asia.
Opportunities Preparing for China's Entry to the WTO: China's Airline Industry | 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 Preparing for China's Entry to the WTO: China's Airline Industry are -
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. China's Caac can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– China's Caac 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 Preparing for China's Entry to the WTO: China's Airline Industry - to build a competitive advantage using analytics. The analytics driven competitive advantage can help China's Caac to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, China's Caac can use these opportunities to build new business models that can help the communities that China's Caac operates in. Secondly it can use opportunities from government spending in Global Business sector.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. China's Caac 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. China's Caac 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.
Building a culture of innovation
– managers at China's Caac 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 Global Business segment.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects China's Caac can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help China's Caac to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, China's Caac 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, Preparing for China's Entry to the WTO: China's Airline Industry, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. China's Caac can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Better consumer reach
– The expansion of the 5G network will help China's Caac to increase its market reach. China's Caac will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Loyalty marketing
– China's Caac 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 China's Caac in the consumer business. Now China's Caac can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– China's Caac 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.
Threats Preparing for China's Entry to the WTO: China's Airline Industry External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Preparing for China's Entry to the WTO: China's Airline Industry are -
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. China's Caac can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High dependence on third party suppliers
– China's Caac high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Stagnating economy with rate increase
– China's Caac 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.
Regulatory challenges
– China's Caac 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 Global Business industry regulations.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Consumer confidence and its impact on China's Caac 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.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for China's Caac in the Global Business sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, China's Caac can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Preparing for China's Entry to the WTO: China's Airline Industry .
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Technology acceleration in Forth Industrial Revolution
– China's Caac has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, China's Caac needs to keep up with the evolution of technology in the Global Business 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for China's Caac in the Global Business industry. The Global Business 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.
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. China's Caac needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents China's Caac with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of Preparing for China's Entry to the WTO: China's Airline Industry 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 Preparing for China's Entry to the WTO: China's Airline Industry 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 Preparing for China's Entry to the WTO: China's Airline Industry 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 Preparing for China's Entry to the WTO: China's Airline Industry 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 Preparing for China's Entry to the WTO: China's Airline Industry 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 China's Caac needs to make to build a sustainable competitive advantage.
