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Strategic planning is important for any company as it helps the company to strategically position itself in the industry. S W O T analysis is a tool that helps the company to do this. S W O T analysis is an attempt to reflect upon the strengths, weaknesses, opportunities and threats that the company face in its short period as well as long period functioning.
The airline industry offers an air source of transport to passengers and freight. A strength in this business can be a possibility to earn high income through its operations. It is not a kind of business that anyone can undertake as it requires huge investment. If investment is made and the required logistics is applied, then there is a chance for making huge profits. This is a strength. Also the unique patterns of services, the facilities that the airliner provides etc can be viewed as it's strengths. On the other hand weaknesses can be lack of infrastructure facilities, inefficient work force, high spoilage rate which is the rate of passengers missing their flights and subsequently returned money, highly competitive market etc.
Opportunities mean that aspects that help the company to ensure a continued growth. The world is becoming a global village. This scenario demands modes of transport that cater to the needs of the people who travel around the world. Businesses are operating on a trans national mode. Tourism sector is evolving into newer versions. All these situations can be viewed as opportunities for the airline company. On the other end, a threat at the moment is the the pandemic, which has hit the tourism sector badly, rising fuel price, government intervention etc can be considered as threats.
BCG matrix is developed by Boston Consulting Group. It based it's analysis on the development of four categories based on industry attractiveness indicating the growth rate of that industry and competitive position or relative market share. Higher the market share, higher will be the cash returns.There are four quadrants into which firm brands are classified, namely dogs, cash cows, stars and question marks.
Companies that hold low market shares compared to their competitors are categorized into the first classification. Companies that operate in a slowly growing market are also included in this category. If an airliner is classified into a poor dog category, strategic choices would be retrenchment or liquidation. Cash cows are the profitable brands. As the name suggests they should be milked to provide as much cash as possible. Cash cows need investment not to induce growth but to maintain their current market share. Strategic choices would be product development or diversification.
Stars operate in high growth industries. Also companies that have high market share are also included in this category. A company should invest on these primary units as they have the potential to become cash cows. But if the company can not catch up with the technical innovations, star would turn into poor dog. Strategic choices would be vertical integration, horizontal integration or market penetration. Question marks are the brands that need closer attention. They are loss making companies in fast growing markets holding low market share and consuming large amount of cash. Here strategic choices would be product development or divestiture.
The internal external matrix is based on an analysis of factors relevant to internal and external situations. Graphically represented analysis suggest grow and build or hold and maintain or harvest or exit strategies.
