China Eastern Airlines (670) SWOT Analysis / TOWS Matrix / MBA Resources
Airline
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for China Eastern Airlines (Hong Kong)
Based on various researches at Oak Spring University , China Eastern Airlines is operating in a macro-environment that has been destablized by – there is backlash against globalization, digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings, geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, increasing commodity prices,
technology disruption, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of China Eastern Airlines
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that China Eastern Airlines can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the China Eastern Airlines, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which China Eastern 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.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of China Eastern Airlines can be done for the following purposes –
1. Strategic planning of China Eastern Airlines
2. Improving business portfolio management of China Eastern 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 Eastern Airlines
Strengths of China Eastern Airlines | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of China Eastern Airlines are -
Organizational Resilience of China Eastern Airlines
– The covid-19 pandemic has put organizational resilience at the centre of everthing China Eastern Airlines does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Analytics focus
– China Eastern 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.
Strong track record of project management in the Airline industry
– China Eastern 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.
Highly skilled collaborators
– China Eastern 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 Eastern Airlines have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– China Eastern Airlines has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. China Eastern Airlines 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.
Cross disciplinary teams
– Horizontal connected teams at the China Eastern 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.
Training and development
– China Eastern Airlines has one of the best training and development program in Transportation industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Ability to recruit top talent
– China Eastern Airlines is one of the leading players in the Airline industry in Hong Kong. It is in a position to attract the best talent available in Hong Kong. The firm has a robust talent identification program that helps in identifying the brightest.
High brand equity
– China Eastern Airlines has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled China Eastern Airlines to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– China Eastern Airlines has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – China Eastern 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.
Ability to lead change in Airline
– China Eastern 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 Eastern Airlines in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Airline industry
– China Eastern Airlines has clearly differentiated products in the market place. This has enabled China Eastern Airlines to fetch slight price premium compare to the competitors in the Airline industry. The sustainable margins have also helped China Eastern Airlines to invest into research and development (R&D) and innovation.
Weaknesses of China Eastern Airlines | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of China Eastern Airlines are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, China Eastern Airlines is slow explore the new channels of communication. These new channels of communication can help China Eastern Airlines to provide better information regarding Airline products and services. It can also build an online community to further reach out to potential customers.
High cash cycle compare to competitors
China Eastern 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.
Slow to strategic competitive environment developments
– As China Eastern 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.
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 Eastern Airlines supply chain. Even after few cautionary changes, China Eastern Airlines is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left China Eastern Airlines vulnerable to further global disruptions in South East Asia.
Capital Spending Reduction
– Even during the low interest decade, China Eastern Airlines 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, China Eastern 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 Eastern Airlines lucrative customers.
Skills based hiring in Airline industry
– The stress on hiring functional specialists at China Eastern Airlines 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.
Compensation and incentives
– The revenue per employee of China Eastern Airlines is just above the Airline industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Employees’ less understanding of China Eastern Airlines strategy
– From the outside it seems that the employees of China Eastern 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.
No frontier risks strategy
– From the 10K / annual statement of China Eastern 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.
Ability to respond to the competition
– As the decision making is very deliberative at China Eastern Airlines, in the dynamic environment of Airline industry it has struggled to respond to the nimble upstart competition. China Eastern Airlines has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
China Eastern Airlines Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of China Eastern Airlines are -
Manufacturing automation
– China Eastern 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.
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 Eastern Airlines can use these opportunities to build new business models that can help the communities that China Eastern Airlines 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 China Eastern Airlines in the Airline industry. Now China Eastern Airlines can target international markets with far fewer capital restrictions requirements than the existing system.
Using analytics as competitive advantage
– China Eastern 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 Eastern Airlines to build a competitive advantage using analytics. The analytics driven competitive advantage can help China Eastern Airlines to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, China Eastern 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.
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 Eastern Airlines can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, China Eastern 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 Eastern 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.
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 Eastern 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.
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 Eastern 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 Eastern 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.
Building a culture of innovation
– managers at China Eastern Airlines can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Airline industry.
Loyalty marketing
– China Eastern 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 Eastern 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.
Threats China Eastern Airlines External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of China Eastern 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 Eastern 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.
Consumer confidence and its impact on China Eastern 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.
Stagnating economy with rate increase
– China Eastern 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.
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 Eastern Airlines needs to understand the core reasons impacting the Airline industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, China Eastern Airlines 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.
High dependence on third party suppliers
– China Eastern 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.
Shortening product life cycle
– it is one of the major threat that China Eastern Airlines is facing in Airline sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– China Eastern 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.
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 Eastern Airlines business can come under increasing regulations regarding data privacy, data security, etc.
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 Eastern Airlines can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– China Eastern Airlines has witnessed rapid integration of technology during Covid-19 in the Airline industry. As one of the leading players in the industry, China Eastern Airlines 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.
Increasing wage structure of China Eastern 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 Eastern Airlines.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, China Eastern 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 Eastern Airlines prominent markets.
Weighted SWOT Analysis of China Eastern Airlines Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at China Eastern 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 Eastern 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 Eastern 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 Eastern 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 Eastern Airlines needs to make to build a sustainable competitive advantage.