CASE STUDY S.W.O.T ANALYSIS
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SWOTAnalysis1.docxRunning head: SWOT ANALYSIS 1
SWOT ANALYSIS 4
Ximena Carrillo
SWOT Analysis
06/09/18
SWOT Analysis
This case analysis evaluates the strengths, weaknesses, opportunities, and threats of the U.S. airline industry with a view of providing recommendations for the future strategy.
Strengths
Many incumbent companies have large sizes that protect them from the shocks of the industry. Regardless of the huge losses that airlines in the U.S. Airline industry have recorded, many such as US Airways have remained in business. Additionally, a hypothetical company in the industry may have managerial know-how because of the many years of operations over the small point-to-point airlines that have been starting operations in the industry. Further, the company has high capacity airplanes that will be able to deal with large volume given the expanding needs of the global world.
Weaknesses
Many companies in the industry have a history of making losses. The US Airlines industry lost about 35 billion dollars between 2001 and 2006. In this context, the business environment of the airline company may not be predictable because of changes in the factors that affect the business such as oil and labor prices. For instance, beginning 2001, oil prices and labor prices accounted for 32 per cent and 26 per cent of revenue respectively. Influx of low-cost budget carriers in the industry is a threat to the incumbent companies since they may not be able to re-price their flights because of the high-cost structure. Competition from the new entrants who are providing customized services will affect the profitability of companies in the industry. It is paramount to evaluate how the company may use technology and managerial abilities to get more clients and stay ahead of competition if it is to overcome the existing threats.
Opportunities
One of the opportunities that the company in the industry have is to explore opportunities for mergers. Mergers in the industry helps companies to reduce costs and make profits. Companies also put themselves under protection using the Bankruptcy protection Act. With the growth in the opportunities in developing countries such as India and China, incumbent company may use its resources to grow its business globally. Globalization is an opportunity that the company can take advantage of to ensure that the organization remains on the profitability track and a going concern. Another opportunity is ability to shed off excess capacity when it is not adding value to the company. Since the organization has many segments, the management may decide to give up some of the areas that are not adding value to the organization.
Threats
There is free entry of new businesses in the industry, which is a threat to businesses that have invested a lot of money such as US Airways. Free entry of companies will continue to bring about excess capacity, which is a threat to future competitiveness of companies in the industry. Another threat is the increased technology in marketing. With more knowledgeable and focused customers, it will be impossible for a company to get high-paying customers.
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