American Airlines DRC (AALL34) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for American Airlines DRC (Brazil)

Based on various researches at Oak Spring University , American Airlines DRC is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, technology disruption, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, there is backlash against globalization, increasing household debt because of falling income levels, increasing energy prices, supply chains are disrupted by pandemic , etc

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Introduction to SWOT Analysis of American Airlines DRC

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that American Airlines DRC can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the American Airlines DRC, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which American Airlines DRC 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 American Airlines DRC can be done for the following purposes –
1. Strategic planning of American Airlines DRC
2. Improving business portfolio management of American Airlines DRC
3. Assessing feasibility of the new initiative in Brazil
4. Making a NA sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of American Airlines DRC

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Strengths of American Airlines DRC | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of American Airlines DRC are -

High brand equity

– American Airlines DRC has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled American Airlines DRC to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Ability to recruit top talent

– American Airlines DRC is one of the leading players in the NA industry in Brazil. It is in a position to attract the best talent available in Brazil. The firm has a robust talent identification program that helps in identifying the brightest.

Digital Transformation in NA industry

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

Strong track record of project management in the NA industry

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

Operational resilience

– The operational resilience strategy of American Airlines DRC comprises – understanding the underlying the factors in the NA 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.

Superior customer experience

– The customer experience strategy of American Airlines DRC in NA industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Cross disciplinary teams

– Horizontal connected teams at the American Airlines DRC 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 American Airlines DRC in the NA sector have low bargaining power. American Airlines DRC has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps American Airlines DRC to manage not only supply disruptions but also source products at highly competitive prices.

Effective Research and Development (R&D)

– American Airlines DRC has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – American Airlines DRC staying ahead in the NA industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Training and development

– American Airlines DRC has one of the best training and development program in NA 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 switching costs

– The high switching costs that American Airlines DRC 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.

Analytics focus

– American Airlines DRC 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 NA industry. The technology infrastructure of Brazil 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.

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Weaknesses of American Airlines DRC | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of American Airlines DRC are -

Compensation and incentives

– The revenue per employee of American Airlines DRC is just above the NA 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.

Capital Spending Reduction

– Even during the low interest decade, American Airlines DRC 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 NA industry using digital technology.

High bargaining power of channel partners in NA industry

– because of the regulatory requirements in Brazil, American Airlines DRC 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 NA industry.

Products dominated business model

– Even though American Airlines DRC has some of the most successful models in the NA industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. American Airlines DRC should strive to include more intangible value offerings along with its core products and services.

Need for greater diversity

– American Airlines DRC 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.

High operating costs

– Compare to the competitors, American Airlines DRC has high operating costs in the NA industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract American Airlines DRC lucrative customers.

Skills based hiring in NA industry

– The stress on hiring functional specialists at American Airlines DRC 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 decision making process

– As mentioned earlier in the report, American Airlines DRC has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the NA industry over the last five years. American Airlines DRC 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 American Airlines DRC supply chain. Even after few cautionary changes, American Airlines DRC is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left American Airlines DRC vulnerable to further global disruptions in South East Asia.

High cash cycle compare to competitors

American Airlines DRC has a high cash cycle compare to other players in the NA industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Employees’ less understanding of American Airlines DRC strategy

– From the outside it seems that the employees of American Airlines DRC 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.

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American Airlines DRC Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of American Airlines DRC are -

Redefining models of collaboration and team work

– As explained in the weaknesses section, American Airlines DRC is facing challenges because of the dominance of functional experts in the organization. American Airlines DRC can utilize new technology in the field of NA industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Loyalty marketing

– American Airlines DRC 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.

Reforming the budgeting process

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

Remote work and new talent hiring opportunities

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

Using analytics as competitive advantage

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

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 American Airlines DRC 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.

Better consumer reach

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

Lowering marketing communication costs

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

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. American Airlines DRC can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Buying journey improvements

– American Airlines DRC can improve the customer journey of consumers in the NA 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.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in NA industry, but it has also influenced the consumer preferences. American Airlines DRC can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Learning at scale

– Online learning technologies has now opened space for American Airlines DRC 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.

Manufacturing automation

– American Airlines DRC can use the latest technology developments to improve its manufacturing and designing process in NA 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.

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Threats American Airlines DRC External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of American Airlines DRC are -

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for American Airlines DRC in NA industry. The NA 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.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to NA industry are lowering. It can presents American Airlines DRC with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the NA sector.

Environmental challenges

– American Airlines DRC 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. American Airlines DRC can take advantage of this fund but it will also bring new competitors in the NA industry.

Stagnating economy with rate increase

– American Airlines DRC 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 NA industry.

Increasing wage structure of American Airlines DRC

– 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 American Airlines DRC.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, American Airlines DRC 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 American Airlines DRC prominent markets.

Regulatory challenges

– American Airlines DRC 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 NA industry regulations.

Technology acceleration in Forth Industrial Revolution

– American Airlines DRC has witnessed rapid integration of technology during Covid-19 in the NA industry. As one of the leading players in the industry, American Airlines DRC needs to keep up with the evolution of technology in the NA 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.

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.

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 American Airlines DRC business can come under increasing regulations regarding data privacy, data security, 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. American Airlines DRC needs to understand the core reasons impacting the NA industry. This will help it in building a better workplace.

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. American Airlines DRC 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.

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.

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Weighted SWOT Analysis of American Airlines DRC Template, Example

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

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