BAE Systems (BAES) SWOT Analysis / TOWS Matrix / MBA Resources
Aerospace & Defense
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for BAE Systems (United Kingdom)
Based on various researches at Oak Spring University , BAE Systems is operating in a macro-environment that has been destablized by – there is backlash against globalization, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, increasing energy prices, there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies,
cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that BAE Systems can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the BAE Systems, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which BAE Systems 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 BAE Systems can be done for the following purposes –
1. Strategic planning of BAE Systems
2. Improving business portfolio management of BAE Systems
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Aerospace & Defense sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of BAE Systems
Strengths of BAE Systems | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of BAE Systems are -
Innovation driven organization
– BAE Systems is one of the most innovative firm in Aerospace & Defense sector.
High switching costs
– The high switching costs that BAE Systems 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.
Low bargaining power of suppliers
– Suppliers of BAE Systems in the Capital Goods sector have low bargaining power. BAE Systems has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps BAE Systems to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of BAE Systems
– The covid-19 pandemic has put organizational resilience at the centre of everthing BAE Systems 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
– BAE Systems has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. BAE Systems 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.
Training and development
– BAE Systems has one of the best training and development program in Capital Goods 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.
Operational resilience
– The operational resilience strategy of BAE Systems comprises – understanding the underlying the factors in the Aerospace & Defense 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.
Superior customer experience
– The customer experience strategy of BAE Systems in Aerospace & Defense industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– BAE Systems 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 Aerospace & Defense industry. The technology infrastructure of United Kingdom 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.
Diverse revenue streams
– BAE Systems is present in almost all the verticals within the Aerospace & Defense industry. This has provided BAE Systems 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.
Cross disciplinary teams
– Horizontal connected teams at the BAE Systems are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Digital Transformation in Aerospace & Defense industry
- digital transformation varies from industry to industry. For BAE Systems digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. BAE Systems 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.
Weaknesses of BAE Systems | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of BAE Systems are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, BAE Systems is slow explore the new channels of communication. These new channels of communication can help BAE Systems to provide better information regarding Aerospace & Defense products and services. It can also build an online community to further reach out to potential customers.
High operating costs
– Compare to the competitors, BAE Systems has high operating costs in the Aerospace & Defense industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract BAE Systems lucrative customers.
Aligning sales with marketing
– From the outside it seems that BAE Systems needs to have more collaboration between its sales team and marketing team. Sales professionals in the Aerospace & Defense industry have deep experience in developing customer relationships. Marketing department at BAE Systems can leverage the sales team experience to cultivate customer relationships as BAE Systems is planning to shift buying processes online.
Skills based hiring in Aerospace & Defense industry
– The stress on hiring functional specialists at BAE Systems 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 BAE Systems supply chain. Even after few cautionary changes, BAE Systems is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left BAE Systems vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of BAE Systems is dominated by functional specialists. It is not different from other players in the Aerospace & Defense industry, but BAE Systems needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help BAE Systems to focus more on services in the Aerospace & Defense industry rather than just following the product oriented approach.
High bargaining power of channel partners in Aerospace & Defense industry
– because of the regulatory requirements in United Kingdom, BAE Systems 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 Aerospace & Defense industry.
Workers concerns about automation
– As automation is fast increasing in the Aerospace & Defense industry, BAE Systems needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Employees’ less understanding of BAE Systems strategy
– From the outside it seems that the employees of BAE Systems 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.
Products dominated business model
– Even though BAE Systems has some of the most successful models in the Aerospace & Defense industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. BAE Systems should strive to include more intangible value offerings along with its core products and services.
Lack of clear differentiation of BAE Systems products
– To increase the profitability and margins on the products, BAE Systems needs to provide more differentiated products than what it is currently offering in the marketplace.
BAE Systems Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of BAE Systems are -
Low interest rates
– Even though inflation is raising its head in most developed economies, BAE Systems can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Manufacturing automation
– BAE Systems can use the latest technology developments to improve its manufacturing and designing process in Aerospace & Defense 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, BAE Systems can use these opportunities to build new business models that can help the communities that BAE Systems operates in. Secondly it can use opportunities from government spending in Aerospace & Defense sector.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Aerospace & Defense industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. BAE Systems 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. BAE Systems 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
– BAE Systems can improve the customer journey of consumers in the Aerospace & Defense 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.
Leveraging digital technologies
– BAE Systems 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Aerospace & Defense industry, but it has also influenced the consumer preferences. BAE Systems can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at BAE Systems 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 Aerospace & Defense industry.
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. BAE Systems 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 BAE Systems 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 BAE Systems 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 BAE Systems to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, BAE Systems is facing challenges because of the dominance of functional experts in the organization. BAE Systems can utilize new technology in the field of Aerospace & Defense industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, BAE Systems 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 BAE Systems 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 BAE Systems External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of BAE Systems are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, BAE Systems may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Aerospace & Defense sector.
High dependence on third party suppliers
– BAE Systems 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Aerospace & Defense industry are lowering. It can presents BAE Systems with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Aerospace & Defense sector.
Stagnating economy with rate increase
– BAE Systems 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 Aerospace & Defense industry.
Environmental challenges
– BAE Systems 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. BAE Systems can take advantage of this fund but it will also bring new competitors in the Aerospace & Defense industry.
Shortening product life cycle
– it is one of the major threat that BAE Systems is facing in Aerospace & Defense sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. BAE Systems will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Easy access to finance
– Easy access to finance in Aerospace & Defense industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. BAE Systems can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. BAE Systems needs to understand the core reasons impacting the Aerospace & Defense industry. This will help it in building a better workplace.
Increasing wage structure of BAE Systems
– 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 BAE Systems.
Regulatory challenges
– BAE Systems 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 Aerospace & Defense industry regulations.
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.
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.
Weighted SWOT Analysis of BAE Systems Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at BAE Systems 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 BAE Systems 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 BAE Systems 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 BAE Systems 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 BAE Systems needs to make to build a sustainable competitive advantage.
