Air France KLM (AIRF) SWOT Analysis / TOWS Matrix / MBA Resources
Airline
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Air France KLM (France)
Based on various researches at Oak Spring University , Air France KLM is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, increasing transportation and logistics costs, increasing commodity prices,
wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Air France KLM can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Air France KLM, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Air France KLM 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 Air France KLM can be done for the following purposes –
1. Strategic planning of Air France KLM
2. Improving business portfolio management of Air France KLM
3. Assessing feasibility of the new initiative in France
4. Making a Airline sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Air France KLM
Strengths of Air France KLM | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Air France KLM are -
Learning organization
- Air France KLM 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 Air France KLM is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Air France KLM emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Air France KLM is one of the leading players in the Airline industry in France. It is in a position to attract the best talent available in France. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Airline industry
– Air France KLM has clearly differentiated products in the market place. This has enabled Air France KLM to fetch slight price premium compare to the competitors in the Airline industry. The sustainable margins have also helped Air France KLM to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Air France KLM is present in almost all the verticals within the Airline industry. This has provided Air France KLM 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.
Innovation driven organization
– Air France KLM is one of the most innovative firm in Airline sector.
Digital Transformation in Airline industry
- digital transformation varies from industry to industry. For Air France KLM digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Air France KLM 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.
Successful track record of launching new products
– Air France KLM has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Air France KLM 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.
Strong track record of project management in the Airline industry
– Air France KLM is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Air France KLM 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 Air France KLM 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.
Superior customer experience
– The customer experience strategy of Air France KLM in Airline industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Air France KLM has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Air France KLM 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.
Weaknesses of Air France KLM | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Air France KLM are -
Capital Spending Reduction
– Even during the low interest decade, Air France KLM 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.
Ability to respond to the competition
– As the decision making is very deliberative at Air France KLM, in the dynamic environment of Airline industry it has struggled to respond to the nimble upstart competition. Air France KLM has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Air France KLM is slow explore the new channels of communication. These new channels of communication can help Air France KLM to provide better information regarding Airline products and services. It can also build an online community to further reach out to potential customers.
High operating costs
– Compare to the competitors, Air France KLM 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 Air France KLM lucrative customers.
Skills based hiring in Airline industry
– The stress on hiring functional specialists at Air France KLM 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.
Products dominated business model
– Even though Air France KLM 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. Air France KLM should strive to include more intangible value offerings along with its core products and services.
Employees’ less understanding of Air France KLM strategy
– From the outside it seems that the employees of Air France KLM don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Low market penetration in new markets
– Outside its home market of France, Air France KLM needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Air France KLM products
– To increase the profitability and margins on the products, Air France KLM needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
Air France KLM has a high cash cycle compare to other players in the Airline 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, Air France KLM 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.
Air France KLM Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Air France KLM are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Air France KLM can use these opportunities to build new business models that can help the communities that Air France KLM operates in. Secondly it can use opportunities from government spending in Airline sector.
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 Air France KLM in the Airline industry. Now Air France KLM can target international markets with far fewer capital restrictions requirements than the existing system.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Air France KLM 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 Air France KLM to hire the very best people irrespective of their geographical location.
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. Air France KLM can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Air France KLM has opened avenues for new revenue streams for the organization in Airline industry. This can help Air France KLM to build a more holistic ecosystem for Air France KLM products in the Airline industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Air France KLM 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 Air France KLM to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Air France KLM can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– Air France KLM 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, Air France KLM is facing challenges because of the dominance of functional experts in the organization. Air France KLM 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, Air France KLM 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 Air France KLM 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.
Buying journey improvements
– Air France KLM 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.
Learning at scale
– Online learning technologies has now opened space for Air France KLM 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.
Threats Air France KLM External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Air France KLM are -
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. Air France KLM 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.
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 Air France KLM business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Air France KLM 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 Air France KLM 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
– Air France KLM 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. Air France KLM can take advantage of this fund but it will also bring new competitors in the Airline industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Air France KLM 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 Air France KLM prominent markets.
Increasing wage structure of Air France KLM
– 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 Air France KLM.
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 Air France KLM.
Stagnating economy with rate increase
– Air France KLM 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 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.
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. Air France KLM needs to understand the core reasons impacting the Airline industry. This will help it in building a better workplace.
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.
Consumer confidence and its impact on Air France KLM 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.
Weighted SWOT Analysis of Air France KLM Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Air France KLM 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 Air France KLM 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 Air France KLM 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 Air France KLM 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 Air France KLM needs to make to build a sustainable competitive advantage.
