China Eastern Airlines (CEA) SWOT Analysis / TOWS Matrix / MBA Resources
Airline
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for China Eastern Airlines (United States)
Based on various researches at Oak Spring University , China Eastern Airlines is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions,
wage bills are increasing, technology disruption, etc
Introduction to SWOT Analysis of China Eastern Airlines
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that China Eastern Airlines can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the China Eastern Airlines, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which China Eastern Airlines 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 China Eastern Airlines can be done for the following purposes –
1. Strategic planning of China Eastern Airlines
2. Improving business portfolio management of China Eastern Airlines
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 China Eastern Airlines
Strengths of China Eastern Airlines | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of China Eastern Airlines are -
Superior customer experience
– The customer experience strategy of China Eastern Airlines in Airline industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- China Eastern Airlines 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 China Eastern Airlines is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at China Eastern Airlines emphasize – knowledge, initiative, and innovation.
Digital Transformation in Airline industry
- digital transformation varies from industry to industry. For China Eastern Airlines digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. China Eastern Airlines 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.
Low bargaining power of suppliers
– Suppliers of China Eastern Airlines in the Transportation sector have low bargaining power. China Eastern Airlines has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps China Eastern Airlines to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– China Eastern Airlines 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.
Strong track record of project management in the Airline industry
– China Eastern Airlines 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 China Eastern Airlines 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.
Diverse revenue streams
– China Eastern Airlines is present in almost all the verticals within the Airline industry. This has provided China Eastern Airlines 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.
Highly skilled collaborators
– China Eastern Airlines 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 China Eastern Airlines have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that China Eastern Airlines 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.
Effective Research and Development (R&D)
– China Eastern Airlines has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – China Eastern Airlines 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.
Cross disciplinary teams
– Horizontal connected teams at the China Eastern Airlines 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.
Weaknesses of China Eastern Airlines | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of China Eastern Airlines are -
Employees’ less understanding of China Eastern Airlines strategy
– From the outside it seems that the employees of China Eastern Airlines 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.
Aligning sales with marketing
– From the outside it seems that China Eastern Airlines 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 China Eastern Airlines can leverage the sales team experience to cultivate customer relationships as China Eastern Airlines is planning to shift buying processes online.
Interest costs
– Compare to the competition, China Eastern Airlines 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, China Eastern Airlines is slow explore the new channels of communication. These new channels of communication can help China Eastern Airlines to provide better information regarding Airline products and services. It can also build an online community to further reach out to potential customers.
No frontier risks strategy
– From the 10K / annual statement of China Eastern Airlines, it seems that company is thinking out the frontier risks that can impact Airline industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Skills based hiring in Airline industry
– The stress on hiring functional specialists at China Eastern Airlines 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.
Need for greater diversity
– China Eastern Airlines 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 bargaining power of channel partners in Airline industry
– because of the regulatory requirements in United States, China Eastern Airlines 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 China Eastern Airlines ‘s star products
– The top 2 products and services of China Eastern Airlines 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 China Eastern Airlines has relatively successful track record of launching new products.
Capital Spending Reduction
– Even during the low interest decade, China Eastern Airlines 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.
Slow to strategic competitive environment developments
– As China Eastern Airlines 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.
China Eastern Airlines Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of China Eastern Airlines are -
Learning at scale
– Online learning technologies has now opened space for China Eastern Airlines 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 China Eastern Airlines to increase its market reach. China Eastern Airlines 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.
Creating value in data economy
– The success of analytics program of China Eastern Airlines has opened avenues for new revenue streams for the organization in Airline industry. This can help China Eastern Airlines to build a more holistic ecosystem for China Eastern Airlines products in the Airline industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects China Eastern Airlines can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– China Eastern Airlines 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.
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 China Eastern Airlines 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.
Leveraging digital technologies
– China Eastern Airlines 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.
Using analytics as competitive advantage
– China Eastern Airlines 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 China Eastern Airlines to build a competitive advantage using analytics. The analytics driven competitive advantage can help China Eastern Airlines to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Lowering marketing communication costs
– 5G expansion will open new opportunities for China Eastern Airlines 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for China Eastern Airlines 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 China Eastern Airlines to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– China Eastern Airlines 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, China Eastern Airlines 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 China Eastern Airlines to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Low interest rates
– Even though inflation is raising its head in most developed economies, China Eastern Airlines 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.
Threats China Eastern Airlines External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of China Eastern Airlines are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Airline industry are lowering. It can presents China Eastern Airlines with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Airline sector.
Shortening product life cycle
– it is one of the major threat that China Eastern Airlines is facing in Airline sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, China Eastern Airlines 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, China Eastern Airlines 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 China Eastern Airlines prominent markets.
Regulatory challenges
– China Eastern Airlines 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.
Stagnating economy with rate increase
– China Eastern Airlines 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.
Technology acceleration in Forth Industrial Revolution
– China Eastern Airlines has witnessed rapid integration of technology during Covid-19 in the Airline industry. As one of the leading players in the industry, China Eastern Airlines 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.
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. China Eastern Airlines 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.
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. China Eastern Airlines needs to understand the core reasons impacting the Airline industry. This will help it in building a better workplace.
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 China Eastern Airlines.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for China Eastern Airlines 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 wage structure of China Eastern Airlines
– 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 China Eastern Airlines.
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 China Eastern Airlines in the Airline sector and impact the bottomline of the organization.
Weighted SWOT Analysis of China Eastern Airlines Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at China Eastern Airlines 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 China Eastern Airlines 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 China Eastern Airlines 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 China Eastern Airlines 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 China Eastern Airlines needs to make to build a sustainable competitive advantage.
