SWOT Analysis / TOWS Matrix for Spirit Airlines (United States)
Based on various researches at Oak Spring University , Spirit Airlines is operating in a macro-environment that has been destablized by – wage bills are increasing, technology disruption, challanges to central banks by blockchain based private currencies, increasing commodity prices, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies,
increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Spirit Airlines can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Spirit Airlines, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Spirit 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 Spirit Airlines can be done for the following purposes –
1. Strategic planning of Spirit Airlines
2. Improving business portfolio management of Spirit 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 Spirit Airlines
Strengths of Spirit Airlines | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Spirit Airlines are -
Sustainable margins compare to other players in Airline industry
– Spirit Airlines has clearly differentiated products in the market place. This has enabled Spirit Airlines to fetch slight price premium compare to the competitors in the Airline industry. The sustainable margins have also helped Spirit Airlines to invest into research and development (R&D) and innovation.
Learning organization
- Spirit 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 Spirit Airlines is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Spirit Airlines emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Spirit 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.
Effective Research and Development (R&D)
– Spirit Airlines has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Spirit 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.
Training and development
– Spirit Airlines 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.
Diverse revenue streams
– Spirit Airlines is present in almost all the verticals within the Airline industry. This has provided Spirit 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.
Ability to lead change in Airline
– Spirit Airlines 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 Spirit Airlines in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Spirit 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.
Digital Transformation in Airline industry
- digital transformation varies from industry to industry. For Spirit Airlines digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Spirit 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.
Successful track record of launching new products
– Spirit Airlines has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Spirit Airlines 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.
High brand equity
– Spirit Airlines has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Spirit Airlines to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Spirit Airlines in the Transportation sector have low bargaining power. Spirit Airlines has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Spirit Airlines to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses of Spirit Airlines | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Spirit Airlines are -
High bargaining power of channel partners in Airline industry
– because of the regulatory requirements in United States, Spirit 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.
Ability to respond to the competition
– As the decision making is very deliberative at Spirit Airlines, in the dynamic environment of Airline industry it has struggled to respond to the nimble upstart competition. Spirit Airlines has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Spirit Airlines is slow explore the new channels of communication. These new channels of communication can help Spirit Airlines to provide better information regarding Airline products and services. It can also build an online community to further reach out to potential customers.
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 Spirit Airlines supply chain. Even after few cautionary changes, Spirit Airlines is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Spirit Airlines vulnerable to further global disruptions in South East Asia.
Interest costs
– Compare to the competition, Spirit 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.
High operating costs
– Compare to the competitors, Spirit Airlines 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 Spirit Airlines lucrative customers.
Aligning sales with marketing
– From the outside it seems that Spirit 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 Spirit Airlines can leverage the sales team experience to cultivate customer relationships as Spirit Airlines is planning to shift buying processes online.
Products dominated business model
– Even though Spirit Airlines 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. Spirit Airlines should strive to include more intangible value offerings along with its core products and services.
Need for greater diversity
– Spirit 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.
No frontier risks strategy
– From the 10K / annual statement of Spirit 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.
Compensation and incentives
– The revenue per employee of Spirit Airlines 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.
Spirit Airlines Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Spirit Airlines are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Spirit Airlines can use these opportunities to build new business models that can help the communities that Spirit Airlines operates in. Secondly it can use opportunities from government spending in Airline sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Spirit 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 Spirit Airlines to hire the very best people irrespective of their geographical location.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Spirit 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 Spirit 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.
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 Spirit 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.
Loyalty marketing
– Spirit 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.
Leveraging digital technologies
– Spirit 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Spirit 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.
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. Spirit Airlines 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. Spirit Airlines 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
– Spirit Airlines 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.
Creating value in data economy
– The success of analytics program of Spirit Airlines has opened avenues for new revenue streams for the organization in Airline industry. This can help Spirit Airlines to build a more holistic ecosystem for Spirit Airlines products in the Airline industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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. Spirit Airlines can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Developing new processes and practices
– Spirit 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.
Buying journey improvements
– Spirit Airlines 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.
Threats Spirit Airlines External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Spirit Airlines are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Airline industry are lowering. It can presents Spirit Airlines with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Airline sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Spirit 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.
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. Spirit Airlines can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Spirit 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Spirit 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 Spirit Airlines prominent markets.
Increasing wage structure of Spirit 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 Spirit Airlines.
Shortening product life cycle
– it is one of the major threat that Spirit Airlines is facing in Airline sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Spirit Airlines has witnessed rapid integration of technology during Covid-19 in the Airline industry. As one of the leading players in the industry, Spirit 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.
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.
Consumer confidence and its impact on Spirit Airlines 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Spirit 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.
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.
Regulatory challenges
– Spirit 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.
Weighted SWOT Analysis of Spirit Airlines Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Spirit 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 Spirit 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 Spirit 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 Spirit 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 Spirit Airlines needs to make to build a sustainable competitive advantage.
