BAE Systems (BAESF) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for BAE Systems (United States)

Based on various researches at Oak Spring University , BAE Systems is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, increasing commodity prices, technology disruption, wage bills are increasing, etc

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Introduction to SWOT Analysis of BAE Systems

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that BAE Systems can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the BAE Systems, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which BAE Systems 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 BAE Systems can be done for the following purposes –
1. Strategic planning of BAE Systems
2. Improving business portfolio management of BAE Systems
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 BAE Systems

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Strengths of BAE Systems | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of BAE Systems are -

Successful track record of launching new products

– BAE Systems has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. BAE Systems 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 Aerospace & Defense industry

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

Ability to recruit top talent

– BAE Systems 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.

Training and development

– BAE Systems 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.

Learning organization

- BAE Systems 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 BAE Systems is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at BAE Systems emphasize – knowledge, initiative, and innovation.

Digital Transformation in Aerospace & Defense industry

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

High brand equity

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

Innovation driven organization

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

Analytics focus

– BAE Systems 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.

High switching costs

– The high switching costs that BAE Systems 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.

Highly skilled collaborators

– BAE Systems 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 BAE Systems have helped the firm to develop new products and bring them quickly to the marketplace.

Ability to lead change in Aerospace & Defense

– BAE Systems 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 BAE Systems 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 BAE Systems | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of BAE Systems are -

Interest costs

– Compare to the competition, BAE Systems 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.

Ability to respond to the competition

– As the decision making is very deliberative at BAE Systems, in the dynamic environment of Aerospace & Defense industry it has struggled to respond to the nimble upstart competition. BAE Systems has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Aligning sales with marketing

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

Capital Spending Reduction

– Even during the low interest decade, BAE Systems 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.

Low market penetration in new markets

– Outside its home market of United States, BAE Systems needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Increasing silos among functional specialists

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

Lack of clear differentiation of BAE Systems products

– To increase the profitability and margins on the products, BAE Systems needs to provide more differentiated products than what it is currently offering in the marketplace.

Skills based hiring in Aerospace & Defense industry

– The stress on hiring functional specialists at BAE Systems 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 dependence on BAE Systems ‘s star products

– The top 2 products and services of BAE Systems still accounts for major business revenue. This dependence on star products in Aerospace & Defense industry has resulted into insufficient focus on developing new products, even though BAE Systems has relatively successful track record of launching new products.

Products dominated business model

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

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 BAE Systems supply chain. Even after few cautionary changes, BAE Systems is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left BAE Systems vulnerable to further global disruptions in South East Asia.

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BAE Systems Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of BAE Systems are -

Building a culture of innovation

– managers at BAE Systems 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, BAE Systems is facing challenges because of the dominance of functional experts in the organization. BAE Systems can utilize new technology in the field of Aerospace & Defense industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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. BAE Systems can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, BAE Systems 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 BAE Systems to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, BAE Systems can use these opportunities to build new business models that can help the communities that BAE Systems operates in. Secondly it can use opportunities from government spending in Aerospace & Defense sector.

Better consumer reach

– The expansion of the 5G network will help BAE Systems to increase its market reach. BAE Systems 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 BAE Systems in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Aerospace & Defense industry, and it will provide faster access to the consumers.

Manufacturing automation

– BAE Systems can use the latest technology developments to improve its manufacturing and designing process in Aerospace & Defense 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.

Leveraging digital technologies

– BAE Systems 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 Aerospace & Defense industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. BAE Systems 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. BAE Systems 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 Aerospace & Defense industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for BAE Systems in the Aerospace & Defense industry. Now BAE Systems can target international markets with far fewer capital restrictions requirements than the existing system.

Remote work and new talent hiring opportunities

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

Creating value in data economy

– The success of analytics program of BAE Systems has opened avenues for new revenue streams for the organization in Aerospace & Defense industry. This can help BAE Systems to build a more holistic ecosystem for BAE Systems products in the Aerospace & Defense industry by providing – data insight services, data privacy related products, data based consulting services, etc.

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Threats BAE Systems External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of BAE Systems 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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for BAE Systems 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.

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 BAE Systems business can come under increasing regulations regarding data privacy, data security, etc.

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. BAE Systems can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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 BAE Systems in the Aerospace & Defense sector and impact the bottomline of the organization.

Regulatory challenges

– BAE Systems 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 Aerospace & Defense industry regulations.

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 BAE Systems.

Increasing wage structure of BAE Systems

– 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 BAE Systems.

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. BAE Systems needs to understand the core reasons impacting the Aerospace & Defense industry. This will help it in building a better workplace.

Barriers of entry lowering

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

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, BAE Systems may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Aerospace & Defense sector.

Technology acceleration in Forth Industrial Revolution

– BAE Systems has witnessed rapid integration of technology during Covid-19 in the Aerospace & Defense industry. As one of the leading players in the industry, BAE Systems 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.

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. BAE Systems 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.

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Weighted SWOT Analysis of BAE Systems Template, Example

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

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