Hainan Airlines A (600221) SWOT Analysis / TOWS Matrix / MBA Resources
Airline
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Hainan Airlines A (China)
Based on various researches at Oak Spring University , Hainan Airlines A is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, geopolitical disruptions, wage bills are increasing, technology disruption, increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google,
supply chains are disrupted by pandemic , increasing commodity prices, etc
Introduction to SWOT Analysis of Hainan Airlines A
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hainan Airlines A can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hainan Airlines A, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hainan Airlines A 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 Hainan Airlines A can be done for the following purposes –
1. Strategic planning of Hainan Airlines A
2. Improving business portfolio management of Hainan Airlines A
3. Assessing feasibility of the new initiative in China
4. Making a Airline sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hainan Airlines A
Strengths of Hainan Airlines A | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hainan Airlines A are -
Successful track record of launching new products
– Hainan Airlines A has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hainan Airlines A 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.
Training and development
– Hainan Airlines A 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.
Innovation driven organization
– Hainan Airlines A is one of the most innovative firm in Airline sector.
Digital Transformation in Airline industry
- digital transformation varies from industry to industry. For Hainan Airlines A digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hainan Airlines A 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.
Analytics focus
– Hainan Airlines A 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 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.
Low bargaining power of suppliers
– Suppliers of Hainan Airlines A in the Transportation sector have low bargaining power. Hainan Airlines A has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hainan Airlines A to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Hainan Airlines A
– The covid-19 pandemic has put organizational resilience at the centre of everthing Hainan Airlines A does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management in the Airline industry
– Hainan Airlines A is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Hainan Airlines A has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Airline industry. Secondly the value chain collaborators of Hainan Airlines A have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of Hainan Airlines A in Airline industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Hainan Airlines A 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.
High brand equity
– Hainan Airlines A has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hainan Airlines A to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of Hainan Airlines A | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hainan Airlines A are -
High dependence on Hainan Airlines A ‘s star products
– The top 2 products and services of Hainan Airlines A 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 Hainan Airlines A has relatively successful track record of launching new products.
High bargaining power of channel partners in Airline industry
– because of the regulatory requirements in China, Hainan Airlines A 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.
Low market penetration in new markets
– Outside its home market of China, Hainan Airlines A needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Ability to respond to the competition
– As the decision making is very deliberative at Hainan Airlines A, in the dynamic environment of Airline industry it has struggled to respond to the nimble upstart competition. Hainan Airlines A has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High operating costs
– Compare to the competitors, Hainan Airlines A 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 Hainan Airlines A lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Hainan Airlines A 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. Hainan Airlines A 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.
Interest costs
– Compare to the competition, Hainan Airlines A 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.
Slow to strategic competitive environment developments
– As Hainan Airlines A 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.
Skills based hiring in Airline industry
– The stress on hiring functional specialists at Hainan Airlines A 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.
Lack of clear differentiation of Hainan Airlines A products
– To increase the profitability and margins on the products, Hainan Airlines A needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee of Hainan Airlines A 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.
Hainan Airlines A Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hainan Airlines A are -
Better consumer reach
– The expansion of the 5G network will help Hainan Airlines A to increase its market reach. Hainan Airlines A 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Hainan Airlines A can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– Hainan Airlines A 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.
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 Hainan Airlines A 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.
Leveraging digital technologies
– Hainan Airlines A 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hainan Airlines A is facing challenges because of the dominance of functional experts in the organization. Hainan Airlines A 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Hainan Airlines A 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 Hainan Airlines A to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Hainan Airlines A 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.
Building a culture of innovation
– managers at Hainan Airlines A 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.
Loyalty marketing
– Hainan Airlines A 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.
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. Hainan Airlines A can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Using analytics as competitive advantage
– Hainan Airlines A 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 Hainan Airlines A to build a competitive advantage using analytics. The analytics driven competitive advantage can help Hainan Airlines A to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Hainan Airlines A 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 Hainan Airlines A External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hainan Airlines A are -
Shortening product life cycle
– it is one of the major threat that Hainan Airlines A is facing in Airline sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Hainan Airlines A
– 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 Hainan Airlines A.
High dependence on third party suppliers
– Hainan Airlines A 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Airline industry are lowering. It can presents Hainan Airlines A with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Airline sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hainan Airlines A 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.
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. Hainan Airlines A 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Hainan Airlines A 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hainan Airlines A 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 Hainan Airlines A prominent markets.
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
– Hainan Airlines A 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. Hainan Airlines A can take advantage of this fund but it will also bring new competitors in the Airline industry.
Consumer confidence and its impact on Hainan Airlines A 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.
Stagnating economy with rate increase
– Hainan Airlines A 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.
Technology acceleration in Forth Industrial Revolution
– Hainan Airlines A has witnessed rapid integration of technology during Covid-19 in the Airline industry. As one of the leading players in the industry, Hainan Airlines A 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.
Weighted SWOT Analysis of Hainan Airlines A Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hainan Airlines A 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 Hainan Airlines A 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 Hainan Airlines A 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 Hainan Airlines A 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 Hainan Airlines A needs to make to build a sustainable competitive advantage.
