Garuda Indonesia (GIAA) SWOT Analysis / TOWS Matrix / MBA Resources
Airline
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Garuda Indonesia (Indonesia)
Based on various researches at Oak Spring University , Garuda Indonesia is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing, increasing energy prices,
there is backlash against globalization, increasing transportation and logistics costs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Garuda Indonesia can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Garuda Indonesia, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Garuda Indonesia 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 Garuda Indonesia can be done for the following purposes –
1. Strategic planning of Garuda Indonesia
2. Improving business portfolio management of Garuda Indonesia
3. Assessing feasibility of the new initiative in Indonesia
4. Making a Airline sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Garuda Indonesia
Strengths of Garuda Indonesia | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Garuda Indonesia are -
Innovation driven organization
– Garuda Indonesia is one of the most innovative firm in Airline sector.
Analytics focus
– Garuda Indonesia 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 Airline industry. The technology infrastructure of Indonesia is also helping 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 lead change in Airline
– Garuda Indonesia is one of the leading players in the Airline industry in Indonesia. Over the years it has not only transformed the business landscape in the Airline industry in Indonesia but also across the existing markets. The ability to lead change has enabled Garuda Indonesia in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High switching costs
– The high switching costs that Garuda Indonesia 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.
Cross disciplinary teams
– Horizontal connected teams at the Garuda Indonesia 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.
Superior customer experience
– The customer experience strategy of Garuda Indonesia in Airline industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– Garuda Indonesia has one of the best training and development program in Transportation industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Highly skilled collaborators
– Garuda Indonesia has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Airline industry. Secondly the value chain collaborators of Garuda Indonesia have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Garuda Indonesia has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Garuda Indonesia staying ahead in the Airline industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Garuda Indonesia is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Garuda Indonesia is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Garuda Indonesia emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy of Garuda Indonesia comprises – understanding the underlying the factors in the Airline 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.
Sustainable margins compare to other players in Airline industry
– Garuda Indonesia has clearly differentiated products in the market place. This has enabled Garuda Indonesia to fetch slight price premium compare to the competitors in the Airline industry. The sustainable margins have also helped Garuda Indonesia to invest into research and development (R&D) and innovation.
Weaknesses of Garuda Indonesia | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Garuda Indonesia are -
High bargaining power of channel partners in Airline industry
– because of the regulatory requirements in Indonesia, Garuda Indonesia 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 Airline industry.
Capital Spending Reduction
– Even during the low interest decade, Garuda Indonesia has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Airline industry using digital technology.
High cash cycle compare to competitors
Garuda Indonesia has a high cash cycle compare to other players in the Airline industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Interest costs
– Compare to the competition, Garuda Indonesia 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.
Lack of clear differentiation of Garuda Indonesia products
– To increase the profitability and margins on the products, Garuda Indonesia needs to provide more differentiated products than what it is currently offering in the marketplace.
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 Garuda Indonesia supply chain. Even after few cautionary changes, Garuda Indonesia is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Garuda Indonesia vulnerable to further global disruptions in South East Asia.
High dependence on Garuda Indonesia ‘s star products
– The top 2 products and services of Garuda Indonesia still accounts for major business revenue. This dependence on star products in Airline industry has resulted into insufficient focus on developing new products, even though Garuda Indonesia has relatively successful track record of launching new products.
Skills based hiring in Airline industry
– The stress on hiring functional specialists at Garuda Indonesia 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 Garuda Indonesia is dominated by functional specialists. It is not different from other players in the Airline industry, but Garuda Indonesia needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Garuda Indonesia to focus more on services in the Airline industry rather than just following the product oriented approach.
Workers concerns about automation
– As automation is fast increasing in the Airline industry, Garuda Indonesia 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.
Aligning sales with marketing
– From the outside it seems that Garuda Indonesia needs to have more collaboration between its sales team and marketing team. Sales professionals in the Airline industry have deep experience in developing customer relationships. Marketing department at Garuda Indonesia can leverage the sales team experience to cultivate customer relationships as Garuda Indonesia is planning to shift buying processes online.
Garuda Indonesia Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Garuda Indonesia are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Garuda Indonesia 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 Garuda Indonesia to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Use of Bitcoin and other crypto currencies for transactions in Airline industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Garuda Indonesia in the Airline industry. Now Garuda Indonesia can target international markets with far fewer capital restrictions requirements than the existing system.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Garuda Indonesia can use these opportunities to build new business models that can help the communities that Garuda Indonesia operates in. Secondly it can use opportunities from government spending in Airline sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Garuda Indonesia can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Developing new processes and practices
– Garuda Indonesia can develop new processes and procedures in Airline 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.
Leveraging digital technologies
– Garuda Indonesia 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.
Learning at scale
– Online learning technologies has now opened space for Garuda Indonesia to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Airline industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Garuda Indonesia 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. Garuda Indonesia 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
– Garuda Indonesia can improve the customer journey of consumers in the Airline industry by using analytics and artificial intelligence. It 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.
Building a culture of innovation
– managers at Garuda Indonesia 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 Airline industry.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Garuda Indonesia is facing challenges because of the dominance of functional experts in the organization. Garuda Indonesia can utilize new technology in the field of Airline industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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 Garuda Indonesia 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Garuda Indonesia 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 Garuda Indonesia to hire the very best people irrespective of their geographical location.
Threats Garuda Indonesia External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Garuda Indonesia are -
Easy access to finance
– Easy access to finance in Airline industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Garuda Indonesia can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Garuda Indonesia.
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 Garuda Indonesia in the Airline sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Garuda Indonesia in Airline industry. The Airline 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.
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 Garuda Indonesia business can come under increasing regulations regarding data privacy, data security, etc.
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.
Environmental challenges
– Garuda Indonesia 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. Garuda Indonesia can take advantage of this fund but it will also bring new competitors in the Airline industry.
Technology acceleration in Forth Industrial Revolution
– Garuda Indonesia has witnessed rapid integration of technology during Covid-19 in the Airline industry. As one of the leading players in the industry, Garuda Indonesia needs to keep up with the evolution of technology in the Airline 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.
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 wage structure of Garuda Indonesia
– 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 Garuda Indonesia.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Garuda Indonesia may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Airline sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Garuda Indonesia 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 Garuda Indonesia prominent markets.
Shortening product life cycle
– it is one of the major threat that Garuda Indonesia is facing in Airline sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Garuda Indonesia Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Garuda Indonesia 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 Garuda Indonesia 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 Garuda Indonesia 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 Garuda Indonesia 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 Garuda Indonesia needs to make to build a sustainable competitive advantage.