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 – customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, there is backlash against globalization, technology disruption, increasing commodity prices, geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, digital marketing is dominated by two big players Facebook and Google, 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 -

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.

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.

Diverse revenue streams

– AAR is present in almost all the verticals within the Aerospace & Defense industry. This has provided AAR 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.

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.

Ability to recruit top talent

– AAR is one of the leading players in the Aerospace & Defense 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.

Innovation driven organization

– AAR is one of the most innovative firm in Aerospace & Defense sector.

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.

Sustainable margins compare to other players in Aerospace & Defense industry

– AAR has clearly differentiated products in the market place. This has enabled AAR to fetch slight price premium compare to the competitors in the Aerospace & Defense industry. The sustainable margins have also helped AAR to invest into research and development (R&D) and innovation.

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.

Digital Transformation in Aerospace & Defense industry

- digital transformation varies from industry to industry. For AAR digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. AAR 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.

Ability to lead change in Aerospace & Defense

– AAR is one of the leading players in the Aerospace & Defense industry in United States. Over the years it has not only transformed the business landscape in the Aerospace & Defense industry in United States but also across the existing markets. The ability to lead change has enabled AAR in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

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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 -

Need for greater diversity

– AAR 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.

Employees’ less understanding of AAR strategy

– From the outside it seems that the employees of AAR 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.

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.

Increasing silos among functional specialists

– The organizational structure of AAR is dominated by functional specialists. It is not different from other players in the Aerospace & Defense industry, but AAR needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help AAR to focus more on services in the Aerospace & Defense industry rather than just following the product oriented approach.

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.

Aligning sales with marketing

– From the outside it seems that AAR 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 AAR can leverage the sales team experience to cultivate customer relationships as AAR is planning to shift buying processes online.

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.

Products dominated business model

– Even though AAR 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. AAR should strive to include more intangible value offerings along with its core products and services.

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 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.

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.

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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 -

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.

Buying journey improvements

– AAR 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.

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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for AAR 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 AAR to hire the very best people irrespective of their geographical location.

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.

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.

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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects AAR can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

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.

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.

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.

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 AAR 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.

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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 -

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.

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.

Shortening product life cycle

– it is one of the major threat that AAR is facing in Aerospace & Defense sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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.

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.

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.

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.

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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for AAR in Aerospace & Defense industry. The Aerospace & Defense 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.

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.

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.

Consumer confidence and its impact on AAR 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 Aerospace & Defense industry and other sectors.

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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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