SkyWest (SKYW) SWOT Analysis / TOWS Matrix / MBA Resources
Airline
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for SkyWest (United States)
Based on various researches at Oak Spring University , SkyWest is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings, geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google,
increasing household debt because of falling income levels, increasing energy prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that SkyWest can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the SkyWest, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which SkyWest 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 SkyWest can be done for the following purposes –
1. Strategic planning of SkyWest
2. Improving business portfolio management of SkyWest
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 SkyWest
Strengths of SkyWest | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of SkyWest are -
Successful track record of launching new products
– SkyWest has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. SkyWest 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.
Sustainable margins compare to other players in Airline industry
– SkyWest has clearly differentiated products in the market place. This has enabled SkyWest to fetch slight price premium compare to the competitors in the Airline industry. The sustainable margins have also helped SkyWest to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– SkyWest has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – SkyWest 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.
Ability to recruit top talent
– SkyWest 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.
Strong track record of project management in the Airline industry
– SkyWest is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Low bargaining power of suppliers
– Suppliers of SkyWest in the Transportation sector have low bargaining power. SkyWest has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps SkyWest to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– SkyWest 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.
High switching costs
– The high switching costs that SkyWest 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.
Superior customer experience
– The customer experience strategy of SkyWest in Airline industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- SkyWest 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 SkyWest is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at SkyWest emphasize – knowledge, initiative, and innovation.
High brand equity
– SkyWest has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled SkyWest to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of SkyWest
– The covid-19 pandemic has put organizational resilience at the centre of everthing SkyWest does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses of SkyWest | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of SkyWest are -
Slow to strategic competitive environment developments
– As SkyWest 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.
Slow decision making process
– As mentioned earlier in the report, SkyWest has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Airline industry over the last five years. SkyWest even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
No frontier risks strategy
– From the 10K / annual statement of SkyWest, 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.
Products dominated business model
– Even though SkyWest 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. SkyWest should strive to include more intangible value offerings along with its core products and services.
High bargaining power of channel partners in Airline industry
– because of the regulatory requirements in United States, SkyWest 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.
Aligning sales with marketing
– From the outside it seems that SkyWest 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 SkyWest can leverage the sales team experience to cultivate customer relationships as SkyWest is planning to shift buying processes online.
Increasing silos among functional specialists
– The organizational structure of SkyWest is dominated by functional specialists. It is not different from other players in the Airline industry, but SkyWest needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help SkyWest to focus more on services in the Airline industry rather than just following the product oriented approach.
High dependence on SkyWest ‘s star products
– The top 2 products and services of SkyWest 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 SkyWest has relatively successful track record of launching new products.
Skills based hiring in Airline industry
– The stress on hiring functional specialists at SkyWest 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 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 SkyWest supply chain. Even after few cautionary changes, SkyWest is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left SkyWest vulnerable to further global disruptions in South East Asia.
Capital Spending Reduction
– Even during the low interest decade, SkyWest 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.
SkyWest Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of SkyWest are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for SkyWest 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 SkyWest to hire the very best people irrespective of their geographical location.
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 SkyWest 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.
Manufacturing automation
– SkyWest 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.
Developing new processes and practices
– SkyWest 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.
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. SkyWest 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. SkyWest 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, SkyWest is facing challenges because of the dominance of functional experts in the organization. SkyWest 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, SkyWest 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.
Using analytics as competitive advantage
– SkyWest 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 SkyWest to build a competitive advantage using analytics. The analytics driven competitive advantage can help SkyWest to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. SkyWest can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, SkyWest can use these opportunities to build new business models that can help the communities that SkyWest operates in. Secondly it can use opportunities from government spending in Airline sector.
Building a culture of innovation
– managers at SkyWest 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.
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. SkyWest can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– SkyWest 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.
Threats SkyWest External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of SkyWest are -
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 SkyWest in the Airline sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that SkyWest is facing in Airline sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Airline industry are lowering. It can presents SkyWest with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Airline sector.
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 SkyWest.
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. SkyWest 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
– SkyWest 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.
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 SkyWest 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, SkyWest 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.
High dependence on third party suppliers
– SkyWest high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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.
Environmental challenges
– SkyWest 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. SkyWest can take advantage of this fund but it will also bring new competitors in the Airline industry.
Regulatory challenges
– SkyWest 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for SkyWest 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.
Weighted SWOT Analysis of SkyWest Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at SkyWest 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 SkyWest 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 SkyWest 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 SkyWest 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 SkyWest needs to make to build a sustainable competitive advantage.
