Korean Air Lines Co (3490) SWOT Analysis / TOWS Matrix / MBA Resources
Airline
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Korean Air Lines Co (South Korea)
Based on various researches at Oak Spring University , Korean Air Lines Co is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, central banks are concerned over increasing inflation, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic ,
cloud computing is disrupting traditional business models, technology disruption, etc
Introduction to SWOT Analysis of Korean Air Lines Co
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Korean Air Lines Co can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Korean Air Lines Co, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Korean Air Lines Co 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 Korean Air Lines Co can be done for the following purposes –
1. Strategic planning of Korean Air Lines Co
2. Improving business portfolio management of Korean Air Lines Co
3. Assessing feasibility of the new initiative in South Korea
4. Making a Airline sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Korean Air Lines Co
Strengths of Korean Air Lines Co | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Korean Air Lines Co are -
High brand equity
– Korean Air Lines Co has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Korean Air Lines Co to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Korean Air Lines Co 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 Korean Air Lines Co have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management in the Airline industry
– Korean Air Lines Co is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Korean Air Lines Co
– The covid-19 pandemic has put organizational resilience at the centre of everthing Korean Air Lines Co does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Korean Air Lines Co 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 Korean Air Lines Co is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Korean Air Lines Co emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Korean Air Lines Co in the Transportation sector have low bargaining power. Korean Air Lines Co has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Korean Air Lines Co to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Korean Air Lines Co 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 South Korea 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.
Sustainable margins compare to other players in Airline industry
– Korean Air Lines Co has clearly differentiated products in the market place. This has enabled Korean Air Lines Co to fetch slight price premium compare to the competitors in the Airline industry. The sustainable margins have also helped Korean Air Lines Co to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Korean Air Lines Co 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 Korean Air Lines Co 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.
Training and development
– Korean Air Lines Co 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.
Innovation driven organization
– Korean Air Lines Co is one of the most innovative firm in Airline sector.
Weaknesses of Korean Air Lines Co | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Korean Air Lines Co are -
Employees’ less understanding of Korean Air Lines Co strategy
– From the outside it seems that the employees of Korean Air Lines Co 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.
High operating costs
– Compare to the competitors, Korean Air Lines Co has high operating costs in the Airline industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Korean Air Lines Co lucrative customers.
Low market penetration in new markets
– Outside its home market of South Korea, Korean Air Lines Co needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
Korean Air Lines Co 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.
Need for greater diversity
– Korean Air Lines Co 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.
High dependence on Korean Air Lines Co ‘s star products
– The top 2 products and services of Korean Air Lines Co 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 Korean Air Lines Co has relatively successful track record of launching new products.
Lack of clear differentiation of Korean Air Lines Co products
– To increase the profitability and margins on the products, Korean Air Lines Co needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee of Korean Air Lines Co 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.
Slow to strategic competitive environment developments
– As Korean Air Lines Co is one of the leading players in the Airline industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Airline industry in last five years.
Skills based hiring in Airline industry
– The stress on hiring functional specialists at Korean Air Lines Co 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 Korean Air Lines Co is dominated by functional specialists. It is not different from other players in the Airline industry, but Korean Air Lines Co needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Korean Air Lines Co to focus more on services in the Airline industry rather than just following the product oriented approach.
Korean Air Lines Co Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Korean Air Lines Co 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, Korean Air Lines Co can use these opportunities to build new business models that can help the communities that Korean Air Lines Co operates in. Secondly it can use opportunities from government spending in Airline sector.
Buying journey improvements
– Korean Air Lines Co 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.
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. Korean Air Lines Co can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Korean Air Lines Co has opened avenues for new revenue streams for the organization in Airline industry. This can help Korean Air Lines Co to build a more holistic ecosystem for Korean Air Lines Co products in the Airline industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Korean Air Lines Co in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Airline industry, and it will provide faster access to the consumers.
Leveraging digital technologies
– Korean Air Lines Co 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.
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 Korean Air Lines Co 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.
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 Korean Air Lines Co in the Airline industry. Now Korean Air Lines Co can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Korean Air Lines Co 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Korean Air Lines Co 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
– Korean Air Lines Co 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.
Better consumer reach
– The expansion of the 5G network will help Korean Air Lines Co to increase its market reach. Korean Air Lines Co 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.
Using analytics as competitive advantage
– Korean Air Lines Co 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 Korean Air Lines Co to build a competitive advantage using analytics. The analytics driven competitive advantage can help Korean Air Lines Co to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Korean Air Lines Co External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Korean Air Lines Co are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Airline industry are lowering. It can presents Korean Air Lines Co with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Airline sector.
Environmental challenges
– Korean Air Lines Co 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. Korean Air Lines Co can take advantage of this fund but it will also bring new competitors in the Airline industry.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Korean Air Lines Co 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.
Stagnating economy with rate increase
– Korean Air Lines Co 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 Airline industry.
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 Korean Air Lines Co business can come under increasing regulations regarding data privacy, data security, etc.
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. Korean Air Lines Co can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Korean Air Lines Co in the Airline sector and impact the bottomline of the organization.
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 Korean Air Lines Co.
Regulatory challenges
– Korean Air Lines Co 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 Airline industry regulations.
Increasing wage structure of Korean Air Lines Co
– 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 Korean Air Lines Co.
Consumer confidence and its impact on Korean Air Lines Co 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.
Weighted SWOT Analysis of Korean Air Lines Co Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Korean Air Lines Co 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 Korean Air Lines Co 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 Korean Air Lines Co 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 Korean Air Lines Co 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 Korean Air Lines Co needs to make to build a sustainable competitive advantage.