China Southern Airlines (1055) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for China Southern Airlines (Hong Kong)

Based on various researches at Oak Spring University , China Southern Airlines is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, technology disruption, competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , etc

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Introduction to SWOT Analysis of China Southern Airlines

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that China Southern Airlines can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the China Southern Airlines, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which China Southern Airlines 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 China Southern Airlines can be done for the following purposes –
1. Strategic planning of China Southern Airlines
2. Improving business portfolio management of China Southern Airlines
3. Assessing feasibility of the new initiative in Hong Kong
4. Making a Airline sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of China Southern Airlines

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Strengths of China Southern Airlines | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of China Southern Airlines are -

Highly skilled collaborators

– China Southern Airlines 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 China Southern Airlines have helped the firm to develop new products and bring them quickly to the marketplace.

Strong track record of project management in the Airline industry

– China Southern Airlines is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Learning organization

- China Southern Airlines 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 China Southern Airlines is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at China Southern Airlines emphasize – knowledge, initiative, and innovation.

Operational resilience

– The operational resilience strategy of China Southern Airlines 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.

Effective Research and Development (R&D)

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

Innovation driven organization

– China Southern Airlines is one of the most innovative firm in Airline sector.

Analytics focus

– China Southern Airlines 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 Hong Kong 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

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

Organizational Resilience of China Southern Airlines

– The covid-19 pandemic has put organizational resilience at the centre of everthing China Southern Airlines does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

High switching costs

– The high switching costs that China Southern Airlines 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.

Cross disciplinary teams

– Horizontal connected teams at the China Southern Airlines 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.

High brand equity

– China Southern Airlines has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled China Southern Airlines to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

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Weaknesses of China Southern Airlines | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of China Southern Airlines are -

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 China Southern Airlines supply chain. Even after few cautionary changes, China Southern Airlines is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left China Southern Airlines vulnerable to further global disruptions in South East Asia.

Lack of clear differentiation of China Southern Airlines products

– To increase the profitability and margins on the products, China Southern Airlines needs to provide more differentiated products than what it is currently offering in the marketplace.

No frontier risks strategy

– From the 10K / annual statement of China Southern Airlines, 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 China Southern Airlines 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. China Southern Airlines should strive to include more intangible value offerings along with its core products and services.

Need for greater diversity

– China Southern Airlines 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.

High operating costs

– Compare to the competitors, China Southern Airlines 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 China Southern Airlines lucrative customers.

Workers concerns about automation

– As automation is fast increasing in the Airline industry, China Southern Airlines 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.

Low market penetration in new markets

– Outside its home market of Hong Kong, China Southern Airlines needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, China Southern Airlines is slow explore the new channels of communication. These new channels of communication can help China Southern Airlines to provide better information regarding Airline products and services. It can also build an online community to further reach out to potential customers.

Aligning sales with marketing

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

High cash cycle compare to competitors

China Southern Airlines 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.

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China Southern Airlines Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of China Southern Airlines are -

Manufacturing automation

– China Southern Airlines 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.

Loyalty marketing

– China Southern Airlines 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for China Southern Airlines in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Airline 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 China Southern Airlines 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 China Southern Airlines to hire the very best people irrespective of their geographical location.

Developing new processes and practices

– China Southern Airlines 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.

Leveraging digital technologies

– China Southern Airlines 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.

Buying journey improvements

– China Southern Airlines 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.

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 China Southern Airlines 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.

Better consumer reach

– The expansion of the 5G network will help China Southern Airlines to increase its market reach. China Southern Airlines 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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, China Southern Airlines 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 China Southern Airlines to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Learning at scale

– Online learning technologies has now opened space for China Southern Airlines 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.

Increase in government spending

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

Using analytics as competitive advantage

– China Southern Airlines 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 China Southern Airlines to build a competitive advantage using analytics. The analytics driven competitive advantage can help China Southern Airlines to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

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Threats China Southern Airlines External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of China Southern Airlines are -

Environmental challenges

– China Southern Airlines 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. China Southern Airlines can take advantage of this fund but it will also bring new competitors in the Airline industry.

Regulatory challenges

– China Southern Airlines 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 China Southern Airlines 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.

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 China Southern Airlines.

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 China Southern Airlines in the Airline sector and impact the bottomline of the organization.

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

Consumer confidence and its impact on China Southern Airlines 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.

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. China Southern Airlines needs to understand the core reasons impacting the Airline industry. This will help it in building a better workplace.

Shortening product life cycle

– it is one of the major threat that China Southern Airlines is facing in Airline sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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.

Stagnating economy with rate increase

– China Southern Airlines 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 international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, China Southern Airlines 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 China Southern Airlines prominent markets.

Increasing wage structure of China Southern Airlines

– 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 China Southern Airlines.

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Weighted SWOT Analysis of China Southern Airlines Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at China Southern Airlines 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 China Southern Airlines 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 China Southern Airlines 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 China Southern Airlines 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 China Southern Airlines needs to make to build a sustainable competitive advantage.

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