Based on various researches at Oak Spring University , LATAM Airlines ADR is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation,
geopolitical disruptions, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of LATAM Airlines ADR
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that LATAM Airlines ADR can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the LATAM Airlines ADR, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which LATAM Airlines ADR 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 LATAM Airlines ADR can be done for the following purposes –
1. Strategic planning of LATAM Airlines ADR
2. Improving business portfolio management of LATAM Airlines ADR
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 LATAM Airlines ADR
Strengths of LATAM Airlines ADR | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of LATAM Airlines ADR are -
High switching costs
– The high switching costs that LATAM Airlines ADR 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.
Sustainable margins compare to other players in Airline industry
– LATAM Airlines ADR has clearly differentiated products in the market place. This has enabled LATAM Airlines ADR to fetch slight price premium compare to the competitors in the Airline industry. The sustainable margins have also helped LATAM Airlines ADR to invest into research and development (R&D) and innovation.
Ability to lead change in Airline
– LATAM Airlines ADR 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 LATAM Airlines ADR in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of LATAM Airlines ADR
– The covid-19 pandemic has put organizational resilience at the centre of everthing LATAM Airlines ADR does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Analytics focus
– LATAM Airlines ADR 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.
Digital Transformation in Airline industry
- digital transformation varies from industry to industry. For LATAM Airlines ADR digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. LATAM Airlines ADR 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.
Training and development
– LATAM Airlines ADR 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.
Cross disciplinary teams
– Horizontal connected teams at the LATAM Airlines ADR 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.
Diverse revenue streams
– LATAM Airlines ADR is present in almost all the verticals within the Airline industry. This has provided LATAM Airlines ADR 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.
Low bargaining power of suppliers
– Suppliers of LATAM Airlines ADR in the Transportation sector have low bargaining power. LATAM Airlines ADR has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps LATAM Airlines ADR to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– LATAM Airlines ADR has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. LATAM Airlines ADR 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.
Ability to recruit top talent
– LATAM Airlines ADR is one of the leading players in the Airline 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.
Weaknesses of LATAM Airlines ADR | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of LATAM Airlines ADR are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, LATAM Airlines ADR is slow explore the new channels of communication. These new channels of communication can help LATAM Airlines ADR to provide better information regarding Airline products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative at LATAM Airlines ADR, in the dynamic environment of Airline industry it has struggled to respond to the nimble upstart competition. LATAM Airlines ADR has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on LATAM Airlines ADR ‘s star products
– The top 2 products and services of LATAM Airlines ADR 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 LATAM Airlines ADR has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee of LATAM Airlines ADR 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.
Lack of clear differentiation of LATAM Airlines ADR products
– To increase the profitability and margins on the products, LATAM Airlines ADR needs to provide more differentiated products than what it is currently offering in the marketplace.
Increasing silos among functional specialists
– The organizational structure of LATAM Airlines ADR is dominated by functional specialists. It is not different from other players in the Airline industry, but LATAM Airlines ADR needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help LATAM Airlines ADR to focus more on services in the Airline industry rather than just following the product oriented approach.
Products dominated business model
– Even though LATAM Airlines ADR 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. LATAM Airlines ADR should strive to include more intangible value offerings along with its core products and services.
No frontier risks strategy
– From the 10K / annual statement of LATAM Airlines ADR, 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.
Aligning sales with marketing
– From the outside it seems that LATAM Airlines ADR 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 LATAM Airlines ADR can leverage the sales team experience to cultivate customer relationships as LATAM Airlines ADR is planning to shift buying processes online.
High cash cycle compare to competitors
LATAM Airlines ADR 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.
Workers concerns about automation
– As automation is fast increasing in the Airline industry, LATAM Airlines ADR 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.
LATAM Airlines ADR Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of LATAM Airlines ADR are -
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. LATAM Airlines ADR can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Redefining models of collaboration and team work
– As explained in the weaknesses section, LATAM Airlines ADR is facing challenges because of the dominance of functional experts in the organization. LATAM Airlines ADR can utilize new technology in the field of Airline industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Creating value in data economy
– The success of analytics program of LATAM Airlines ADR has opened avenues for new revenue streams for the organization in Airline industry. This can help LATAM Airlines ADR to build a more holistic ecosystem for LATAM Airlines ADR products in the Airline industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for LATAM Airlines ADR 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.
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 LATAM Airlines ADR in the Airline industry. Now LATAM Airlines ADR can target international markets with far fewer capital restrictions requirements than the existing system.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, LATAM Airlines ADR can use these opportunities to build new business models that can help the communities that LATAM Airlines ADR operates in. Secondly it can use opportunities from government spending in Airline sector.
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 LATAM Airlines ADR 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.
Using analytics as competitive advantage
– LATAM Airlines ADR 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 LATAM Airlines ADR to build a competitive advantage using analytics. The analytics driven competitive advantage can help LATAM Airlines ADR to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help LATAM Airlines ADR to increase its market reach. LATAM Airlines ADR 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 LATAM Airlines ADR 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.
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. LATAM Airlines ADR 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. LATAM Airlines ADR 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.
Manufacturing automation
– LATAM Airlines ADR 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.
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. LATAM Airlines ADR can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats LATAM Airlines ADR External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of LATAM Airlines ADR are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, LATAM Airlines ADR 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 LATAM Airlines ADR prominent markets.
Increasing wage structure of LATAM Airlines ADR
– 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 LATAM Airlines ADR.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Airline industry are lowering. It can presents LATAM Airlines ADR 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 LATAM Airlines ADR in the Airline sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– LATAM Airlines ADR has witnessed rapid integration of technology during Covid-19 in the Airline industry. As one of the leading players in the industry, LATAM Airlines ADR 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.
Consumer confidence and its impact on LATAM Airlines ADR 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 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 LATAM Airlines ADR 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, LATAM Airlines ADR 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.
Environmental challenges
– LATAM Airlines ADR 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. LATAM Airlines ADR can take advantage of this fund but it will also bring new competitors in the Airline industry.
Shortening product life cycle
– it is one of the major threat that LATAM Airlines ADR is facing in Airline sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Easy access to finance
– Easy access to finance in Airline industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. LATAM Airlines ADR can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– LATAM Airlines ADR 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.
Weighted SWOT Analysis of LATAM Airlines ADR Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at LATAM Airlines ADR 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 LATAM Airlines ADR 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 LATAM Airlines ADR 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 LATAM Airlines ADR 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 LATAM Airlines ADR needs to make to build a sustainable competitive advantage.
