Alaska Air (ALK) SWOT Analysis / TOWS Matrix / MBA Resources
Airline
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Alaska Air (United States)
Based on various researches at Oak Spring University , Alaska Air is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing commodity prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%,
geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Alaska Air can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Alaska Air, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Alaska Air 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 Alaska Air can be done for the following purposes –
1. Strategic planning of Alaska Air
2. Improving business portfolio management of Alaska Air
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 Alaska Air
Strengths of Alaska Air | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Alaska Air are -
Strong track record of project management in the Airline industry
– Alaska Air is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Alaska Air is one of the most innovative firm in Airline sector.
Diverse revenue streams
– Alaska Air is present in almost all the verticals within the Airline industry. This has provided Alaska Air 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.
Successful track record of launching new products
– Alaska Air has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Alaska Air 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.
Learning organization
- Alaska Air 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 Alaska Air is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Alaska Air emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Alaska Air in Airline industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Alaska Air 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 Alaska Air have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Alaska Air 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.
Ability to lead change in Airline
– Alaska Air 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 Alaska Air in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Airline industry
- digital transformation varies from industry to industry. For Alaska Air digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Alaska Air 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.
Organizational Resilience of Alaska Air
– The covid-19 pandemic has put organizational resilience at the centre of everthing Alaska Air does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Alaska Air 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.
Weaknesses of Alaska Air | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Alaska Air are -
Compensation and incentives
– The revenue per employee of Alaska Air 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.
Products dominated business model
– Even though Alaska Air 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. Alaska Air should strive to include more intangible value offerings along with its core products and services.
Need for greater diversity
– Alaska Air 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.
Interest costs
– Compare to the competition, Alaska Air 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.
High dependence on Alaska Air ‘s star products
– The top 2 products and services of Alaska Air 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 Alaska Air has relatively successful track record of launching new products.
Aligning sales with marketing
– From the outside it seems that Alaska Air 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 Alaska Air can leverage the sales team experience to cultivate customer relationships as Alaska Air is planning to shift buying processes online.
High cash cycle compare to competitors
Alaska Air 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.
Increasing silos among functional specialists
– The organizational structure of Alaska Air is dominated by functional specialists. It is not different from other players in the Airline industry, but Alaska Air needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Alaska Air to focus more on services in the Airline industry rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, Alaska Air 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 Alaska Air lucrative customers.
Ability to respond to the competition
– As the decision making is very deliberative at Alaska Air, in the dynamic environment of Airline industry it has struggled to respond to the nimble upstart competition. Alaska Air has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Workers concerns about automation
– As automation is fast increasing in the Airline industry, Alaska Air needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Alaska Air Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Alaska Air are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Alaska Air can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Alaska Air 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 Alaska Air to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Alaska Air in the Airline industry. Now Alaska Air can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Alaska Air 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.
Building a culture of innovation
– managers at Alaska Air 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 Airline industry.
Using analytics as competitive advantage
– Alaska Air 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 Alaska Air to build a competitive advantage using analytics. The analytics driven competitive advantage can help Alaska Air to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– Alaska Air 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.
Creating value in data economy
– The success of analytics program of Alaska Air has opened avenues for new revenue streams for the organization in Airline industry. This can help Alaska Air to build a more holistic ecosystem for Alaska Air products in the Airline industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Alaska Air 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.
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. Alaska Air 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. Alaska Air 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Alaska Air 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.
Loyalty marketing
– Alaska Air 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.
Manufacturing automation
– Alaska Air 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.
Threats Alaska Air External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Alaska Air are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Alaska Air 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.
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 Alaska Air business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Alaska Air 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
– Alaska Air 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.
Environmental challenges
– Alaska Air 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. Alaska Air can take advantage of this fund but it will also bring new competitors in the Airline industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Alaska Air 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 Alaska Air prominent markets.
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. Alaska Air needs to understand the core reasons impacting the Airline industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Alaska Air has witnessed rapid integration of technology during Covid-19 in the Airline industry. As one of the leading players in the industry, Alaska Air needs to keep up with the evolution of technology in the Airline 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.
Increasing wage structure of Alaska Air
– 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 Alaska Air.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Airline industry are lowering. It can presents Alaska Air with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Airline sector.
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 Alaska Air in the Airline sector and impact the bottomline of the organization.
Regulatory challenges
– Alaska Air 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 Alaska Air 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 Alaska Air Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Alaska Air 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 Alaska Air 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 Alaska Air 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 Alaska Air 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 Alaska Air needs to make to build a sustainable competitive advantage.