Air New Zealand (AIZ) SWOT Analysis / TOWS Matrix / MBA Resources
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Air New Zealand (Australia)
Based on various researches at Oak Spring University , Air New Zealand is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions,
challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Air New Zealand can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Air New Zealand, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Air New Zealand 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 Air New Zealand can be done for the following purposes –
1. Strategic planning of Air New Zealand
2. Improving business portfolio management of Air New Zealand
3. Assessing feasibility of the new initiative in Australia
4. Making a sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Air New Zealand
Strengths of Air New Zealand | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Air New Zealand are -
Low bargaining power of suppliers
– Suppliers of Air New Zealand in the sector have low bargaining power. Air New Zealand has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Air New Zealand to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in industry
- digital transformation varies from industry to industry. For Air New Zealand digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Air New Zealand 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.
Superior customer experience
– The customer experience strategy of Air New Zealand in industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Strong track record of project management in the industry
– Air New Zealand is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Air New Zealand is one of the most innovative firm in sector.
Analytics focus
– Air New Zealand 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 of Australia 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.
Cross disciplinary teams
– Horizontal connected teams at the Air New Zealand 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.
High switching costs
– The high switching costs that Air New Zealand 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
– Air New Zealand is one of the leading players in the industry in Australia. Over the years it has not only transformed the business landscape in the industry in Australia but also across the existing markets. The ability to lead change has enabled Air New Zealand 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 of Air New Zealand 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.
Sustainable margins compare to other players in industry
– Air New Zealand has clearly differentiated products in the market place. This has enabled Air New Zealand to fetch slight price premium compare to the competitors in the industry. The sustainable margins have also helped Air New Zealand to invest into research and development (R&D) and innovation.
High brand equity
– Air New Zealand has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Air New Zealand to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of Air New Zealand | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Air New Zealand are -
Lack of clear differentiation of Air New Zealand products
– To increase the profitability and margins on the products, Air New Zealand needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring in industry
– The stress on hiring functional specialists at Air New Zealand 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.
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 Air New Zealand supply chain. Even after few cautionary changes, Air New Zealand is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Air New Zealand vulnerable to further global disruptions in South East Asia.
Slow decision making process
– As mentioned earlier in the report, Air New Zealand 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. Air New Zealand 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.
High cash cycle compare to competitors
Air New Zealand 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.
Interest costs
– Compare to the competition, Air New Zealand 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.
Workers concerns about automation
– As automation is fast increasing in the industry, Air New Zealand 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 in industry
– because of the regulatory requirements in Australia, Air New Zealand 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.
Aligning sales with marketing
– From the outside it seems that Air New Zealand 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 at Air New Zealand can leverage the sales team experience to cultivate customer relationships as Air New Zealand is planning to shift buying processes online.
Employees’ less understanding of Air New Zealand strategy
– From the outside it seems that the employees of Air New Zealand 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Air New Zealand is slow explore the new channels of communication. These new channels of communication can help Air New Zealand to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Air New Zealand Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Air New Zealand are -
Leveraging digital technologies
– Air New Zealand 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.
Using analytics as competitive advantage
– Air New Zealand has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in sector. This continuous investment in analytics has enabled Air New Zealand to build a competitive advantage using analytics. The analytics driven competitive advantage can help Air New Zealand 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, Air New Zealand can use these opportunities to build new business models that can help the communities that Air New Zealand operates in. Secondly it can use opportunities from government spending in sector.
Manufacturing automation
– Air New Zealand can use the latest technology developments to improve its manufacturing and designing process in sector. 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.
Developing new processes and practices
– Air New Zealand can develop new processes and procedures in 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Air New Zealand 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. Air New Zealand 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.
Creating value in data economy
– The success of analytics program of Air New Zealand has opened avenues for new revenue streams for the organization in industry. This can help Air New Zealand to build a more holistic ecosystem for Air New Zealand products in the industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for Air New Zealand 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.
Loyalty marketing
– Air New Zealand 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.
Better consumer reach
– The expansion of the 5G network will help Air New Zealand to increase its market reach. Air New Zealand 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.
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. Air New Zealand can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Air New Zealand 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, Air New Zealand 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 Air New Zealand to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Air New Zealand External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Air New Zealand are -
Technology acceleration in Forth Industrial Revolution
– Air New Zealand has witnessed rapid integration of technology during Covid-19 in the industry. As one of the leading players in the industry, Air New Zealand needs to keep up with the evolution of technology in the 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.
Regulatory challenges
– Air New Zealand 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 industry regulations.
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 Air New Zealand in the sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Air New Zealand 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.
Shortening product life cycle
– it is one of the major threat that Air New Zealand is facing in sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Air New Zealand may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of sector.
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. Air New Zealand needs to understand the core reasons impacting the industry. This will help it in building a better workplace.
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.
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 Air New Zealand 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.
Consumer confidence and its impact on Air New Zealand 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 industry and other sectors.
Easy access to finance
– Easy access to finance in industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Air New Zealand can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Air New Zealand in industry. The 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.
Weighted SWOT Analysis of Air New Zealand Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Air New Zealand 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 Air New Zealand 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 Air New Zealand 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 Air New Zealand 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 Air New Zealand needs to make to build a sustainable competitive advantage.