Air France KLM SA (AFLYY) SWOT Analysis / TOWS Matrix / MBA Resources
Airline
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Air France KLM SA (United States)
Based on various researches at Oak Spring University , Air France KLM SA is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, cloud computing is disrupting traditional business models,
increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, etc
Introduction to SWOT Analysis of Air France KLM SA
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Air France KLM SA can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Air France KLM SA, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Air France KLM SA 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 France KLM SA can be done for the following purposes –
1. Strategic planning of Air France KLM SA
2. Improving business portfolio management of Air France KLM SA
3. Assessing feasibility of the new initiative in United States
4. Making a Airline sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Air France KLM SA
Strengths of Air France KLM SA | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Air France KLM SA are -
High switching costs
– The high switching costs that Air France KLM SA 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.
Operational resilience
– The operational resilience strategy of Air France KLM SA 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
– Air France KLM SA has clearly differentiated products in the market place. This has enabled Air France KLM SA to fetch slight price premium compare to the competitors in the Airline industry. The sustainable margins have also helped Air France KLM SA to invest into research and development (R&D) and innovation.
Innovation driven organization
– Air France KLM SA is one of the most innovative firm in Airline sector.
Ability to lead change in Airline
– Air France KLM SA is one of the leading players in the Airline industry in United States. Over the years it has not only transformed the business landscape in the Airline industry in United States but also across the existing markets. The ability to lead change has enabled Air France KLM SA in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Air France KLM SA 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 United States 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 France KLM SA 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 Air France KLM SA in Airline industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– Air France KLM SA is one of the leading players in the Airline industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Training and development
– Air France KLM SA 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.
High brand equity
– Air France KLM SA has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Air France KLM SA to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management in the Airline industry
– Air France KLM SA is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses of Air France KLM SA | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Air France KLM SA are -
Skills based hiring in Airline industry
– The stress on hiring functional specialists at Air France KLM SA 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.
Capital Spending Reduction
– Even during the low interest decade, Air France KLM SA 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.
Compensation and incentives
– The revenue per employee of Air France KLM SA 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.
Increasing silos among functional specialists
– The organizational structure of Air France KLM SA is dominated by functional specialists. It is not different from other players in the Airline industry, but Air France KLM SA needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Air France KLM SA to focus more on services in the Airline industry rather than just following the product oriented approach.
High dependence on Air France KLM SA ‘s star products
– The top 2 products and services of Air France KLM SA 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 Air France KLM SA has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of United States, Air France KLM SA needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, Air France KLM SA 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 Air France KLM SA lucrative customers.
Products dominated business model
– Even though Air France KLM SA 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. Air France KLM SA should strive to include more intangible value offerings along with its core products and services.
No frontier risks strategy
– From the 10K / annual statement of Air France KLM SA, it seems that company is thinking out the frontier risks that can impact Airline industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Aligning sales with marketing
– From the outside it seems that Air France KLM SA 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 Air France KLM SA can leverage the sales team experience to cultivate customer relationships as Air France KLM SA is planning to shift buying processes online.
Ability to respond to the competition
– As the decision making is very deliberative at Air France KLM SA, in the dynamic environment of Airline industry it has struggled to respond to the nimble upstart competition. Air France KLM SA has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Air France KLM SA Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Air France KLM SA are -
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. Air France KLM SA 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 France KLM SA 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.
Using analytics as competitive advantage
– Air France KLM SA 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 Air France KLM SA to build a competitive advantage using analytics. The analytics driven competitive advantage can help Air France KLM SA to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Air France KLM SA in the Airline industry. Now Air France KLM SA can target international markets with far fewer capital restrictions requirements than the existing system.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Air France KLM SA 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 Air France KLM SA to hire the very best people irrespective of their geographical location.
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 France KLM SA can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Air France KLM SA can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Air France KLM SA 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.
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 France KLM SA 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.
Buying journey improvements
– Air France KLM SA 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.
Loyalty marketing
– Air France KLM SA 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Air France KLM SA 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 France KLM SA to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Air France KLM SA 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.
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 France KLM SA can use these opportunities to build new business models that can help the communities that Air France KLM SA operates in. Secondly it can use opportunities from government spending in Airline sector.
Threats Air France KLM SA External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Air France KLM SA are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Air France KLM SA 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 Air France KLM SA prominent markets.
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. Air France KLM SA 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.
High dependence on third party suppliers
– Air France KLM SA 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.
Stagnating economy with rate increase
– Air France KLM SA 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.
Increasing wage structure of Air France KLM SA
– 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 Air France KLM SA.
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 France KLM SA in the Airline sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Airline industry are lowering. It can presents Air France KLM SA with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Airline sector.
Consumer confidence and its impact on Air France KLM SA 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.
Environmental challenges
– Air France KLM SA 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. Air France KLM SA can take advantage of this fund but it will also bring new competitors in the Airline industry.
Shortening product life cycle
– it is one of the major threat that Air France KLM SA is facing in Airline sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 France KLM SA business can come under increasing regulations regarding data privacy, data security, etc.
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.
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 France KLM SA needs to understand the core reasons impacting the Airline industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Air France KLM SA Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Air France KLM SA 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 France KLM SA 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 France KLM SA 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 France KLM SA 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 France KLM SA needs to make to build a sustainable competitive advantage.