Hainan Airlines A (600221) SWOT Analysis / TOWS Matrix / 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 – challanges to central banks by blockchain based private currencies, technology disruption, central banks are concerned over increasing inflation, supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, increasing energy prices, cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc

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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.

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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

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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.

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.

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.

Cross disciplinary teams

– Horizontal connected teams at the Hainan Airlines A 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.

Ability to lead change in Airline

– Hainan Airlines A is one of the leading players in the Airline industry in China. Over the years it has not only transformed the business landscape in the Airline industry in China but also across the existing markets. The ability to lead change has enabled Hainan Airlines A in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Effective Research and Development (R&D)

– Hainan Airlines A has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Hainan Airlines A 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.

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.

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.

Sustainable margins compare to other players in Airline industry

– Hainan Airlines A has clearly differentiated products in the market place. This has enabled Hainan Airlines A to fetch slight price premium compare to the competitors in the Airline industry. The sustainable margins have also helped Hainan Airlines A to invest into research and development (R&D) and innovation.

Operational resilience

– The operational resilience strategy of Hainan Airlines A 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.

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.

Ability to recruit top talent

– Hainan Airlines A is one of the leading players in the Airline 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.

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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 -

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.

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.

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.

Capital Spending Reduction

– Even during the low interest decade, Hainan Airlines A 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.

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.

Increasing silos among functional specialists

– The organizational structure of Hainan Airlines A is dominated by functional specialists. It is not different from other players in the Airline industry, but Hainan Airlines A needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Hainan Airlines A to focus more on services in the Airline industry rather than just following the product 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 Hainan Airlines A supply chain. Even after few cautionary changes, Hainan Airlines A is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hainan Airlines A vulnerable to further global disruptions in South East Asia.

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.

Aligning sales with marketing

– From the outside it seems that Hainan Airlines A 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 Hainan Airlines A can leverage the sales team experience to cultivate customer relationships as Hainan Airlines A is planning to shift buying processes online.

Workers concerns about automation

– As automation is fast increasing in the Airline industry, Hainan Airlines A 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.

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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 -

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. Hainan Airlines A can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Learning at scale

– Online learning technologies has now opened space for Hainan Airlines A to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.

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.

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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hainan Airlines A can use these opportunities to build new business models that can help the communities that Hainan Airlines A operates in. Secondly it can use opportunities from government spending in Airline sector.

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. Hainan Airlines A 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. Hainan Airlines A 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.

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.

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.

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 Hainan Airlines A in the Airline industry. Now Hainan Airlines A can target international markets with far fewer capital restrictions requirements than the existing system.

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.

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.

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.

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.

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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 -

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.

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.

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.

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.

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. Hainan Airlines A can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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.

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 Hainan Airlines A in the Airline sector and impact the bottomline 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.

Regulatory challenges

– Hainan Airlines A 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.

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.

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.

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 Hainan Airlines A.

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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.

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