AAR (AIR) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for AAR (United States)

Based on various researches at Oak Spring University , AAR is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation, wage bills are increasing, increasing transportation and logistics costs, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, technology disruption, talent flight as more people leaving formal jobs, etc

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Introduction to SWOT Analysis of AAR

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that AAR can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the AAR, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which AAR 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of AAR can be done for the following purposes –
1. Strategic planning of AAR
2. Improving business portfolio management of AAR
3. Assessing feasibility of the new initiative in United States
4. Making a Aerospace & Defense sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of AAR

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Strengths of AAR | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of AAR are -

Organizational Resilience of AAR

– The covid-19 pandemic has put organizational resilience at the centre of everthing AAR does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Cross disciplinary teams

– Horizontal connected teams at the AAR 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.

Highly skilled collaborators

– AAR has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Aerospace & Defense industry. Secondly the value chain collaborators of AAR have helped the firm to develop new products and bring them quickly to the marketplace.

Low bargaining power of suppliers

– Suppliers of AAR in the Capital Goods sector have low bargaining power. AAR has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps AAR to manage not only supply disruptions but also source products at highly competitive prices.

High switching costs

– The high switching costs that AAR 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.

Superior customer experience

– The customer experience strategy of AAR in Aerospace & Defense industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Successful track record of launching new products

– AAR has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. AAR 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

– AAR 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 AAR 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.

Strong track record of project management in the Aerospace & Defense industry

– AAR is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Analytics focus

– AAR 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 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.

Learning organization

- AAR 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 AAR is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at AAR emphasize – knowledge, initiative, and innovation.

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Weaknesses of AAR | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of AAR are -

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, AAR is slow explore the new channels of communication. These new channels of communication can help AAR 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 bargaining power of channel partners in Aerospace & Defense industry

– because of the regulatory requirements in United States, AAR 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.

High operating costs

– Compare to the competitors, AAR 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 AAR lucrative customers.

Capital Spending Reduction

– Even during the low interest decade, AAR 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 Aerospace & Defense industry using digital technology.

Slow to strategic competitive environment developments

– As AAR is one of the leading players in the Aerospace & Defense industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Aerospace & Defense industry in last five years.

Slow decision making process

– As mentioned earlier in the report, AAR has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Aerospace & Defense industry over the last five years. AAR 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.

No frontier risks strategy

– From the 10K / annual statement of AAR, it seems that company is thinking out the frontier risks that can impact Aerospace & Defense 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.

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 AAR supply chain. Even after few cautionary changes, AAR is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left AAR vulnerable to further global disruptions in South East Asia.

Interest costs

– Compare to the competition, AAR 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.

Lack of clear differentiation of AAR products

– To increase the profitability and margins on the products, AAR needs to provide more differentiated products than what it is currently offering in the marketplace.

Ability to respond to the competition

– As the decision making is very deliberative at AAR, in the dynamic environment of Aerospace & Defense industry it has struggled to respond to the nimble upstart competition. AAR has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

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AAR Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of AAR are -

Learning at scale

– Online learning technologies has now opened space for AAR 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for AAR in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Aerospace & Defense industry, and it will provide faster access to the consumers.

Use of Bitcoin and other crypto currencies for transactions in Aerospace & Defense industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for AAR in the Aerospace & Defense industry. Now AAR can target international markets with far fewer capital restrictions requirements than the existing system.

Better consumer reach

– The expansion of the 5G network will help AAR to increase its market reach. AAR 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, AAR can use these opportunities to build new business models that can help the communities that AAR operates in. Secondly it can use opportunities from government spending in Aerospace & Defense sector.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, AAR 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 AAR to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

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. AAR can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Using analytics as competitive advantage

– AAR has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Aerospace & Defense sector. This continuous investment in analytics has enabled AAR to build a competitive advantage using analytics. The analytics driven competitive advantage can help AAR to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Loyalty marketing

– AAR 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.

Leveraging digital technologies

– AAR 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.

Developing new processes and practices

– AAR can develop new processes and procedures in Aerospace & Defense 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.

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. AAR 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 AAR 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.

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Threats AAR External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of AAR are -

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 AAR business can come under increasing regulations regarding data privacy, data security, etc.

Technology acceleration in Forth Industrial Revolution

– AAR has witnessed rapid integration of technology during Covid-19 in the Aerospace & Defense industry. As one of the leading players in the industry, AAR needs to keep up with the evolution of technology in the Aerospace & Defense 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.

Environmental challenges

– AAR 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. AAR can take advantage of this fund but it will also bring new competitors in the Aerospace & Defense industry.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Aerospace & Defense industry are lowering. It can presents AAR 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

– AAR 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.

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. AAR needs to understand the core reasons impacting the Aerospace & Defense industry. This will help it in building a better workplace.

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 AAR in the Aerospace & Defense sector and impact the bottomline of the organization.

High dependence on third party suppliers

– AAR 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.

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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, AAR 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.

Regulatory challenges

– AAR 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.

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. AAR can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, AAR 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 AAR prominent markets.

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Weighted SWOT Analysis of AAR Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at AAR 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 AAR 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 AAR 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 AAR 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 AAR needs to make to build a sustainable competitive advantage.

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