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 - – increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , there is increasing trade war between United States & China, wage bills are increasing, increasing commodity prices, cloud computing is disrupting traditional business models, there is backlash against globalization,
increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, 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 -
Effective Research and Development (R&D)
– China's Caac has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Preparing for China's Entry to the WTO: China's Airline Industry - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– China's Caac 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 Zhigang Tao, Sang Xu, Pauline Ng 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.
Ability to recruit top talent
– China's Caac is one of the leading recruiters in the industry. Managers in the Preparing for China's Entry to the WTO: China's Airline Industry are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
Successful track record of launching new products
– China's Caac has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. China's Caac has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
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.
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.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the China's Caac 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.
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 -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Preparing for China's Entry to the WTO: China's Airline Industry, in the dynamic environment China's Caac has struggled to respond to the nimble upstart competition. China's Caac has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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 dependence on star products
– The top 2 products and services of the firm as mentioned in the Preparing for China's Entry to the WTO: China's Airline Industry HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though China's Caac has relatively successful track record of launching new products.
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.
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.
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.
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.
Workers concerns about automation
– As automation is fast increasing in the segment, China's Caac 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.
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.
Interest costs
– Compare to the competition, China's Caac has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, China's Caac is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Preparing for China's Entry to the WTO: China's Airline Industry can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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 -
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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for China's Caac in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
Redefining models of collaboration and team work
– As explained in the weaknesses section, China's Caac is facing challenges because of the dominance of functional experts in the organization. Preparing for China's Entry to the WTO: China's Airline Industry case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Creating value in data economy
– The success of analytics program of China's Caac has opened avenues for new revenue streams for the organization in the industry. This can help China's Caac to build a more holistic ecosystem as suggested in the Preparing for China's Entry to the WTO: China's Airline Industry case study. China's Caac can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
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.
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.
Developing new processes and practices
– China's Caac can develop new processes and procedures in Global Business industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
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.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for China's Caac to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for China's Caac to hire the very best people irrespective of their geographical location.
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 -
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.
Increasing wage structure of China's Caac
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of China's Caac.
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.
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 China's Caac business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.
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 .
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.
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.
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.
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.
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.
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.
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.