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 – there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation, supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, 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 -

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.

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.

Ability to lead change in Airline

– China Southern Airlines is one of the leading players in the Airline industry in Hong Kong. Over the years it has not only transformed the business landscape in the Airline industry in Hong Kong but also across the existing markets. The ability to lead change has enabled China Southern Airlines 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)

– 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.

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.

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.

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.

Digital Transformation in Airline industry

- digital transformation varies from industry to industry. For China Southern Airlines digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. China Southern Airlines 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.

Diverse revenue streams

– China Southern Airlines is present in almost all the verticals within the Airline industry. This has provided China Southern Airlines 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.

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.

Superior customer experience

– The customer experience strategy of China Southern Airlines in Airline industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

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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 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.

High dependence on China Southern Airlines ‘s star products

– The top 2 products and services of China Southern Airlines 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 China Southern Airlines has relatively successful track record of launching new products.

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.

Employees’ less understanding of China Southern Airlines strategy

– From the outside it seems that the employees of China Southern Airlines 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.

Slow to strategic competitive environment developments

– As China Southern Airlines 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.

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.

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.

Increasing silos among functional specialists

– The organizational structure of China Southern Airlines is dominated by functional specialists. It is not different from other players in the Airline industry, but China Southern Airlines needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help China Southern Airlines to focus more on services in the Airline industry rather than just following the product oriented approach.

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.

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.

Ability to respond to the competition

– As the decision making is very deliberative at China Southern Airlines, in the dynamic environment of Airline industry it has struggled to respond to the nimble upstart competition. China Southern Airlines has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

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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 -

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.

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.

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. China Southern Airlines can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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.

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.

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.

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.

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.

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. China Southern Airlines 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. China Southern Airlines 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, China Southern Airlines 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.

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. China Southern Airlines can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

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.

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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 -

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.

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.

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.

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 China Southern Airlines business can come under increasing regulations regarding data privacy, data security, etc.

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.

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.

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.

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.

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. China Southern Airlines 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.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Airline industry are lowering. It can presents China Southern Airlines with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Airline sector.

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.

High dependence on third party suppliers

– China Southern Airlines 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

– 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.

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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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