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 – technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing,
increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, 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 -
Innovation driven organization
– Spirit Airlines is one of the most innovative firm in Airline sector.
Organizational Resilience of Spirit Airlines
– The covid-19 pandemic has put organizational resilience at the centre of everthing Spirit Airlines does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Spirit Airlines in Airline industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
Operational resilience
– The operational resilience strategy of Spirit 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.
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.
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.
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 switching costs
– The high switching costs that Spirit 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)
– 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.
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.
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.
Weaknesses of Spirit Airlines | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Spirit Airlines are -
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.
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.
High dependence on Spirit Airlines ‘s star products
– The top 2 products and services of Spirit 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 Spirit Airlines has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of United States, Spirit Airlines needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
Increasing silos among functional specialists
– The organizational structure of Spirit Airlines is dominated by functional specialists. It is not different from other players in the Airline industry, but Spirit Airlines needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Spirit Airlines to focus more on services in the Airline industry rather than just following the product oriented approach.
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.
Lack of clear differentiation of Spirit Airlines products
– To increase the profitability and margins on the products, Spirit Airlines needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring in Airline industry
– The stress on hiring functional specialists at Spirit 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.
Spirit Airlines Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Spirit Airlines are -
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.
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.
Building a culture of innovation
– managers at Spirit Airlines 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 Airline industry.
Better consumer reach
– The expansion of the 5G network will help Spirit Airlines to increase its market reach. Spirit 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.
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 Spirit Airlines in the Airline industry. Now Spirit Airlines can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
Using analytics as competitive advantage
– Spirit 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 Spirit Airlines to build a competitive advantage using analytics. The analytics driven competitive advantage can help Spirit Airlines to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, Spirit 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Spirit Airlines is facing challenges because of the dominance of functional experts in the organization. Spirit Airlines 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.
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.
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.
Threats Spirit Airlines External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Spirit Airlines are -
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.
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 Spirit Airlines business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.
Environmental challenges
– Spirit Airlines 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. Spirit Airlines can take advantage of this fund but it will also bring new competitors in the Airline industry.
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 Spirit Airlines in the Airline sector and impact the bottomline of the organization.
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. Spirit Airlines needs to understand the core reasons impacting the Airline industry. This will help it in building a better workplace.
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.
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.
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 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.
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.
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.