Azul (AZUL) SWOT Analysis / TOWS Matrix / MBA Resources
Airline
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Azul (United States)
Based on various researches at Oak Spring University , Azul is operating in a macro-environment that has been destablized by – increasing commodity prices, central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels,
challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Azul can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Azul, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Azul 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 Azul can be done for the following purposes –
1. Strategic planning of Azul
2. Improving business portfolio management of Azul
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 Azul
Strengths of Azul | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Azul are -
Sustainable margins compare to other players in Airline industry
– Azul has clearly differentiated products in the market place. This has enabled Azul to fetch slight price premium compare to the competitors in the Airline industry. The sustainable margins have also helped Azul to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– Azul 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 Azul have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Azul is present in almost all the verticals within the Airline industry. This has provided Azul 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 lead change in Airline
– Azul 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 Azul in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Azul in the Transportation sector have low bargaining power. Azul has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Azul to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Azul has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Azul 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.
Strong track record of project management in the Airline industry
– Azul 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
– Azul is one of the most innovative firm in Airline sector.
Analytics focus
– Azul 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.
Training and development
– Azul 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.
Digital Transformation in Airline industry
- digital transformation varies from industry to industry. For Azul digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Azul 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.
Operational resilience
– The operational resilience strategy of Azul comprises – understanding the underlying the factors in the Airline 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.
Weaknesses of Azul | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Azul are -
Skills based hiring in Airline industry
– The stress on hiring functional specialists at Azul 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.
High bargaining power of channel partners in Airline industry
– because of the regulatory requirements in United States, Azul 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 Airline industry.
High dependence on Azul ‘s star products
– The top 2 products and services of Azul 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 Azul has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As Azul is one of the leading players in the Airline industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Airline industry in last five years.
Products dominated business model
– Even though Azul 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. Azul should strive to include more intangible value offerings along with its core products and services.
Aligning sales with marketing
– From the outside it seems that Azul 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 Azul can leverage the sales team experience to cultivate customer relationships as Azul is planning to shift buying processes online.
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 Azul supply chain. Even after few cautionary changes, Azul is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Azul vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative at Azul, in the dynamic environment of Airline industry it has struggled to respond to the nimble upstart competition. Azul 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 Azul is dominated by functional specialists. It is not different from other players in the Airline industry, but Azul needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Azul 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, Azul 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.
High operating costs
– Compare to the competitors, Azul 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 Azul lucrative customers.
Azul Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Azul are -
Buying journey improvements
– Azul 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Azul 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 Azul to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– Azul 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 Azul to build a competitive advantage using analytics. The analytics driven competitive advantage can help Azul to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– Azul 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.
Learning at scale
– Online learning technologies has now opened space for Azul 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.
Better consumer reach
– The expansion of the 5G network will help Azul to increase its market reach. Azul 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, Azul can use these opportunities to build new business models that can help the communities that Azul operates in. Secondly it can use opportunities from government spending in Airline sector.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Airline industry, but it has also influenced the consumer preferences. Azul can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Azul 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 Azul to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Azul 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.
Manufacturing automation
– Azul 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.
Loyalty marketing
– Azul 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.
Creating value in data economy
– The success of analytics program of Azul has opened avenues for new revenue streams for the organization in Airline industry. This can help Azul to build a more holistic ecosystem for Azul products in the Airline industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Threats Azul External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Azul are -
Shortening product life cycle
– it is one of the major threat that Azul is facing in Airline sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Stagnating economy with rate increase
– Azul 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.
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 Azul business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Azul 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.
Technology acceleration in Forth Industrial Revolution
– Azul has witnessed rapid integration of technology during Covid-19 in the Airline industry. As one of the leading players in the industry, Azul 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.
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 Azul in the Airline sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Airline industry are lowering. It can presents Azul with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Airline sector.
Environmental challenges
– Azul 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. Azul can take advantage of this fund but it will also bring new competitors in the Airline industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Azul 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Azul 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 Azul prominent markets.
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.
High dependence on third party suppliers
– Azul 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.
Weighted SWOT Analysis of Azul Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Azul 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 Azul 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 Azul 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 Azul 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 Azul needs to make to build a sustainable competitive advantage.
