IAG (ICAG) SWOT Analysis / TOWS Matrix / MBA Resources
Airline
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for IAG (United Kingdom)
Based on various researches at Oak Spring University , IAG is operating in a macro-environment that has been destablized by – increasing inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, geopolitical disruptions, increasing transportation and logistics costs, central banks are concerned over increasing inflation, increasing household debt because of falling income levels,
there is increasing trade war between United States & China, there is backlash against globalization, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that IAG can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the IAG, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which IAG 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 IAG can be done for the following purposes –
1. Strategic planning of IAG
2. Improving business portfolio management of IAG
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Airline sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of IAG
Strengths of IAG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of IAG are -
Ability to lead change in Airline
– IAG is one of the leading players in the Airline industry in United Kingdom. Over the years it has not only transformed the business landscape in the Airline industry in United Kingdom but also across the existing markets. The ability to lead change has enabled IAG in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– IAG is one of the most innovative firm in Airline sector.
Ability to recruit top talent
– IAG is one of the leading players in the Airline industry in United Kingdom. It is in a position to attract the best talent available in United Kingdom. The firm has a robust talent identification program that helps in identifying the brightest.
Training and development
– IAG 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.
Digital Transformation in Airline industry
- digital transformation varies from industry to industry. For IAG digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. IAG 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.
Organizational Resilience of IAG
– The covid-19 pandemic has put organizational resilience at the centre of everthing IAG does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that IAG 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.
Sustainable margins compare to other players in Airline industry
– IAG has clearly differentiated products in the market place. This has enabled IAG to fetch slight price premium compare to the competitors in the Airline industry. The sustainable margins have also helped IAG to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– IAG 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 IAG have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– IAG has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. IAG 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.
Operational resilience
– The operational resilience strategy of IAG 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.
Diverse revenue streams
– IAG is present in almost all the verticals within the Airline industry. This has provided IAG a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Weaknesses of IAG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of IAG are -
Slow decision making process
– As mentioned earlier in the report, IAG has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Airline industry over the last five years. IAG 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 bargaining power of channel partners in Airline industry
– because of the regulatory requirements in United Kingdom, IAG 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, IAG 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.
Skills based hiring in Airline industry
– The stress on hiring functional specialists at IAG 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.
Interest costs
– Compare to the competition, IAG 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.
Need for greater diversity
– IAG 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.
Aligning sales with marketing
– From the outside it seems that IAG 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 IAG can leverage the sales team experience to cultivate customer relationships as IAG is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee of IAG is just above the Airline industry average. It 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.
High cash cycle compare to competitors
IAG 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.
Products dominated business model
– Even though IAG has some of the most successful models in the Airline industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. IAG should strive to include more intangible value offerings along with its core products and services.
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 IAG supply chain. Even after few cautionary changes, IAG is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left IAG vulnerable to further global disruptions in South East Asia.
IAG Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of IAG are -
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 IAG in the Airline industry. Now IAG 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 Airline industry, but it has also influenced the consumer preferences. IAG 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 IAG 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.
Leveraging digital technologies
– IAG 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, IAG 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, IAG is facing challenges because of the dominance of functional experts in the organization. IAG 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.
Manufacturing automation
– IAG can use the latest technology developments to improve its manufacturing and designing process in Airline 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.
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. IAG can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– IAG has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Airline sector. This continuous investment in analytics has enabled IAG to build a competitive advantage using analytics. The analytics driven competitive advantage can help IAG 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, IAG can use these opportunities to build new business models that can help the communities that IAG operates in. Secondly it can use opportunities from government spending in Airline sector.
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. IAG 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. IAG 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.
Loyalty marketing
– IAG 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects IAG can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats IAG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of IAG are -
Consumer confidence and its impact on IAG 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 Airline industry and other sectors.
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. IAG 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 Airline industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. IAG can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High dependence on third party suppliers
– IAG 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, IAG 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 IAG prominent markets.
Increasing wage structure of IAG
– 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 IAG.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for IAG 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.
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 IAG.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Airline industry are lowering. It can presents IAG with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Airline sector.
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 IAG business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, IAG 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.
Environmental challenges
– IAG 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. IAG can take advantage of this fund but it will also bring new competitors in the Airline industry.
Weighted SWOT Analysis of IAG Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at IAG 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 IAG 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 IAG 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 IAG 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 IAG needs to make to build a sustainable competitive advantage.