SWOT Analysis / TOWS Matrix for AVIC Aviation Engine (China)
Based on various researches at Oak Spring University , AVIC Aviation Engine 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, there is increasing trade war between United States & China, increasing commodity prices, central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%,
competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of AVIC Aviation Engine
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that AVIC Aviation Engine can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the AVIC Aviation Engine, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which AVIC Aviation Engine 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 AVIC Aviation Engine can be done for the following purposes –
1. Strategic planning of AVIC Aviation Engine
2. Improving business portfolio management of AVIC Aviation Engine
3. Assessing feasibility of the new initiative in China
4. Making a Aerospace & Defense sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of AVIC Aviation Engine
Strengths of AVIC Aviation Engine | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of AVIC Aviation Engine are -
High switching costs
– The high switching costs that AVIC Aviation Engine 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.
Digital Transformation in Aerospace & Defense industry
- digital transformation varies from industry to industry. For AVIC Aviation Engine digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. AVIC Aviation Engine 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
– AVIC Aviation Engine has one of the best training and development program in Capital Goods 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.
Low bargaining power of suppliers
– Suppliers of AVIC Aviation Engine in the Capital Goods sector have low bargaining power. AVIC Aviation Engine has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps AVIC Aviation Engine to manage not only supply disruptions but also source products at highly competitive prices.
Ability to lead change in Aerospace & Defense
– AVIC Aviation Engine is one of the leading players in the Aerospace & Defense industry in China. Over the years it has not only transformed the business landscape in the Aerospace & Defense industry in China but also across the existing markets. The ability to lead change has enabled AVIC Aviation Engine in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– AVIC Aviation Engine has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Aerospace & Defense industry. Secondly the value chain collaborators of AVIC Aviation Engine have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- AVIC Aviation Engine 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 AVIC Aviation Engine is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at AVIC Aviation Engine emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– AVIC Aviation Engine has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. AVIC Aviation Engine 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
– AVIC Aviation Engine is one of the leading players in the Aerospace & Defense industry in China. It is in a position to attract the best talent available in China. The firm has a robust talent identification program that helps in identifying the brightest.
Effective Research and Development (R&D)
– AVIC Aviation Engine has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – AVIC Aviation Engine staying ahead in the Aerospace & Defense industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– AVIC Aviation Engine 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 Aerospace & Defense industry. The technology infrastructure of China 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.
Innovation driven organization
– AVIC Aviation Engine is one of the most innovative firm in Aerospace & Defense sector.
Weaknesses of AVIC Aviation Engine | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of AVIC Aviation Engine are -
No frontier risks strategy
– From the 10K / annual statement of AVIC Aviation Engine, it seems that company is thinking out the frontier risks that can impact Aerospace & Defense 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.
Slow decision making process
– As mentioned earlier in the report, AVIC Aviation Engine has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Aerospace & Defense industry over the last five years. AVIC Aviation Engine 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.
Aligning sales with marketing
– From the outside it seems that AVIC Aviation Engine needs to have more collaboration between its sales team and marketing team. Sales professionals in the Aerospace & Defense industry have deep experience in developing customer relationships. Marketing department at AVIC Aviation Engine can leverage the sales team experience to cultivate customer relationships as AVIC Aviation Engine is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As AVIC Aviation Engine is one of the leading players in the Aerospace & Defense industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Aerospace & Defense industry in last five years.
High cash cycle compare to competitors
AVIC Aviation Engine has a high cash cycle compare to other players in the Aerospace & Defense industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Interest costs
– Compare to the competition, AVIC Aviation Engine 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.
Capital Spending Reduction
– Even during the low interest decade, AVIC Aviation Engine 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 Aerospace & Defense industry using digital technology.
Products dominated business model
– Even though AVIC Aviation Engine has some of the most successful models in the Aerospace & Defense industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. AVIC Aviation Engine should strive to include more intangible value offerings along with its core products and services.
Need for greater diversity
– AVIC Aviation Engine 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.
Workers concerns about automation
– As automation is fast increasing in the Aerospace & Defense industry, AVIC Aviation Engine 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.
Increasing silos among functional specialists
– The organizational structure of AVIC Aviation Engine is dominated by functional specialists. It is not different from other players in the Aerospace & Defense industry, but AVIC Aviation Engine needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help AVIC Aviation Engine to focus more on services in the Aerospace & Defense industry rather than just following the product oriented approach.
AVIC Aviation Engine Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of AVIC Aviation Engine are -
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Aerospace & Defense industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. AVIC Aviation Engine 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. AVIC Aviation Engine 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, AVIC Aviation Engine is facing challenges because of the dominance of functional experts in the organization. AVIC Aviation Engine can utilize new technology in the field of Aerospace & Defense 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 AVIC Aviation Engine 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.
Use of Bitcoin and other crypto currencies for transactions in Aerospace & Defense industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for AVIC Aviation Engine in the Aerospace & Defense industry. Now AVIC Aviation Engine can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– AVIC Aviation Engine can improve the customer journey of consumers in the Aerospace & Defense 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.
Better consumer reach
– The expansion of the 5G network will help AVIC Aviation Engine to increase its market reach. AVIC Aviation Engine 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.
Using analytics as competitive advantage
– AVIC Aviation Engine has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Aerospace & Defense sector. This continuous investment in analytics has enabled AVIC Aviation Engine to build a competitive advantage using analytics. The analytics driven competitive advantage can help AVIC Aviation Engine to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects AVIC Aviation Engine can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, AVIC Aviation Engine can use these opportunities to build new business models that can help the communities that AVIC Aviation Engine operates in. Secondly it can use opportunities from government spending in Aerospace & Defense sector.
Loyalty marketing
– AVIC Aviation Engine 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.
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. AVIC Aviation Engine can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Lowering marketing communication costs
– 5G expansion will open new opportunities for AVIC Aviation Engine in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Aerospace & Defense 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 AVIC Aviation Engine 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 AVIC Aviation Engine to hire the very best people irrespective of their geographical location.
Threats AVIC Aviation Engine External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of AVIC Aviation Engine are -
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.
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.
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 AVIC Aviation Engine.
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 AVIC Aviation Engine business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of AVIC Aviation Engine
– 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 AVIC Aviation Engine.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, AVIC Aviation Engine 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 AVIC Aviation Engine prominent markets.
Stagnating economy with rate increase
– AVIC Aviation Engine 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 Aerospace & Defense industry.
High dependence on third party suppliers
– AVIC Aviation Engine 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.
Regulatory challenges
– AVIC Aviation Engine 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 Aerospace & Defense industry regulations.
Environmental challenges
– AVIC Aviation Engine 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. AVIC Aviation Engine can take advantage of this fund but it will also bring new competitors in the Aerospace & Defense industry.
Easy access to finance
– Easy access to finance in Aerospace & Defense industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. AVIC Aviation Engine can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– AVIC Aviation Engine has witnessed rapid integration of technology during Covid-19 in the Aerospace & Defense industry. As one of the leading players in the industry, AVIC Aviation Engine needs to keep up with the evolution of technology in the Aerospace & Defense 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. AVIC Aviation Engine 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 AVIC Aviation Engine Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at AVIC Aviation Engine 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 AVIC Aviation Engine 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 AVIC Aviation Engine 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 AVIC Aviation Engine 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 AVIC Aviation Engine needs to make to build a sustainable competitive advantage.