Allegiant (ALGT) SWOT Analysis / TOWS Matrix / MBA Resources
Airline
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Allegiant (United States)
Based on various researches at Oak Spring University , Allegiant is operating in a macro-environment that has been destablized by – there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google,
supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Allegiant can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Allegiant, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Allegiant 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 Allegiant can be done for the following purposes –
1. Strategic planning of Allegiant
2. Improving business portfolio management of Allegiant
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 Allegiant
Strengths of Allegiant | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Allegiant are -
Cross disciplinary teams
– Horizontal connected teams at the Allegiant 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.
Low bargaining power of suppliers
– Suppliers of Allegiant in the Transportation sector have low bargaining power. Allegiant has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Allegiant to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Airline industry
– Allegiant has clearly differentiated products in the market place. This has enabled Allegiant to fetch slight price premium compare to the competitors in the Airline industry. The sustainable margins have also helped Allegiant to invest into research and development (R&D) and innovation.
Organizational Resilience of Allegiant
– The covid-19 pandemic has put organizational resilience at the centre of everthing Allegiant does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Allegiant has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Allegiant staying ahead in the Airline industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Allegiant 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 Allegiant is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Allegiant emphasize – knowledge, initiative, and innovation.
Analytics focus
– Allegiant 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.
Diverse revenue streams
– Allegiant is present in almost all the verticals within the Airline industry. This has provided Allegiant 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.
Ability to recruit top talent
– Allegiant 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
– Allegiant 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.
Successful track record of launching new products
– Allegiant has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Allegiant 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.
Highly skilled collaborators
– Allegiant 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 Allegiant have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of Allegiant | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Allegiant are -
High cash cycle compare to competitors
Allegiant 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.
High operating costs
– Compare to the competitors, Allegiant 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 Allegiant lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Allegiant 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. Allegiant 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 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 Allegiant supply chain. Even after few cautionary changes, Allegiant is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Allegiant vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee of Allegiant 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.
Skills based hiring in Airline industry
– The stress on hiring functional specialists at Allegiant 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Allegiant is slow explore the new channels of communication. These new channels of communication can help Allegiant to provide better information regarding Airline products and services. It can also build an online community to further reach out to potential customers.
Interest costs
– Compare to the competition, Allegiant 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.
Increasing silos among functional specialists
– The organizational structure of Allegiant is dominated by functional specialists. It is not different from other players in the Airline industry, but Allegiant needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Allegiant to focus more on services in the Airline industry rather than just following the product oriented approach.
Capital Spending Reduction
– Even during the low interest decade, Allegiant 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.
Ability to respond to the competition
– As the decision making is very deliberative at Allegiant, in the dynamic environment of Airline industry it has struggled to respond to the nimble upstart competition. Allegiant has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Allegiant Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Allegiant are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Allegiant 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 Allegiant to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Manufacturing automation
– Allegiant 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. Allegiant can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Buying journey improvements
– Allegiant 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Allegiant 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.
Creating value in data economy
– The success of analytics program of Allegiant has opened avenues for new revenue streams for the organization in Airline industry. This can help Allegiant to build a more holistic ecosystem for Allegiant products in the Airline industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Using analytics as competitive advantage
– Allegiant 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 Allegiant to build a competitive advantage using analytics. The analytics driven competitive advantage can help Allegiant to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, Allegiant 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.
Leveraging digital technologies
– Allegiant 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.
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. Allegiant 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. Allegiant 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.
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 Allegiant in the Airline industry. Now Allegiant 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 Allegiant to increase its market reach. Allegiant 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, Allegiant can use these opportunities to build new business models that can help the communities that Allegiant operates in. Secondly it can use opportunities from government spending in Airline sector.
Threats Allegiant External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Allegiant are -
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.
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 Allegiant business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Allegiant 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.
High dependence on third party suppliers
– Allegiant 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Airline industry are lowering. It can presents Allegiant with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Airline sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Allegiant 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.
Regulatory challenges
– Allegiant 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.
Consumer confidence and its impact on Allegiant 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.
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 Allegiant.
Shortening product life cycle
– it is one of the major threat that Allegiant is facing in Airline sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Allegiant needs to understand the core reasons impacting the Airline industry. This will help it in building a better workplace.
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. Allegiant can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Allegiant 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. Allegiant can take advantage of this fund but it will also bring new competitors in the Airline industry.
Weighted SWOT Analysis of Allegiant Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Allegiant 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 Allegiant 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 Allegiant 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 Allegiant 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 Allegiant needs to make to build a sustainable competitive advantage.