SWOT Analysis: Air Arabia Company and IKEA

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Table of Contents

SWOT analysis
Introduction
References

SWOT analysis

This is the abbreviation that stands for Strengths, Weaknesses, Opportunities and Threats. It is a tool that is used in determining the core areas of competencies in a business organization at a given time. It is used in the process of auditing market situation hence helps in identifying key issues that requires attention. Swot is one of the fast analytical approaches that reveal various issues that need intelligent approach.

It involves scrutinizing the marketing structure that surrounds the organization. Valentin (2001) said that the SWOT analysis involves searching for insights into ways of realizing the desired solutions. The SWOT analysis is no doubt a valuable tool in the field of business strategy because it makes it possible for decision makers to consider important aspects of their organizations environment and helps them organize their thoughts (Valentin, 2001, pp 54-68).

The main objective of SWOT analysis is that it helps in identifying the internal and external factors that are core to the performance of the company. The internal factors are the strengths and weaknesses while the external factors are the opportunities and threats from the external environment.

Internal factors focuses on the organization itself, the employees, capital structure, assets, how the market is organized, core competencies, the product lines, what the company manufactures and is capable of doing. The external factors on the other hand comprises of both direct and indirect forces. The direct forces are the competitors, suppliers and the clients while the indirect forces comprise the economic, social and political factors (Matt, 2010, pp 1-36).

Introduction

Air Arabia was set up in 2003 and is one of the airline companys operating from Sharjah airport in Saudi Arabia. It has nine planes that fly to different destinations across the Middle East, South and Central Asia and some parts of Africa. It is one of low cost carriers which offer only economy travel cabins. The company recorded a revenue growth of 27.4% between 2007 and 2010 which produced a net income of 22.8%. The company has extended its operations to meet the local needs by distributing tickets through their sale shops alongside currency exchange bureaus (EFG-Hermes UAE, 2007, pp 2-39).

Strengths

The airline boast of some key strength that is rare with most of the companies, its management structure is not that big and comprises of experienced team, it has a well established tie with the base where it operates which is Sharjah Airport. The airport is located close to Dubai which is a good business centre.

The company enjoys first mover advantage because of its low cost and hence faces low competition. They offer online bookings and no-frill services at low costs, the low prices is what makes clients from different sectors to use Arab Air, they also offer complementary services such as air cargo services (EFG-Hermes UAE, 2007, pp 2-39).

Opportunities

The opportunities that the company enjoys are the extension of its Sharjah hub by purchasing new aircraft. There is also the plan to develop some operations that supports the airline like the hanger for maintenance and constructing a hotel to accommodate the clients. The rapid economic and population growth offers a good customer base in the Air travel, there is also tremendous growth in the tourism sector which is a further boost to Air travel (EFG-Hermes UAE, 2007, pp 2-39).

Weaknesses

Arab Air has low number of aircrafts that do not fully satisfy the huge customer base it commands. It is currently operating on nine aircrafts but has since planned to increase the number to thirty four by the year 2015. This puts the company in a low situation when it comes to dynamic response.

The company still depends on the short haul routes and uses a single type of Air craft, airbus A320. This means that any small interference to its operations could adversely affect its income. This is contrary to other air lines that offer multiple aircraft types with classes of travel of the passengers choice. The air line still do not own any ground handling service, but as per now is planning to enter into a joint venture with Sharjah Airport Authority to improve on these services (EFG-Hermes UAE, 2007, pp 2-39).

Threats

The company faces some threats that it must contend with, one of them is more rapid development that is expected on the market sector that has not been utilized for quite long. This comes as a result of the expected higher economic growth. There is also the global economic downturn that might affect its operations due to increase in fuel prices.

The company faces very stiff competition from other airlines, the delivery of the airplanes it hopes to acquire might delay, not forgetting the challenge it might get during the roll-out of the companys brand. The Middle East records the lowest rates of e-ticket usage despite the region being at the fore front in the air travel growth; this presents Air Arabia with some instances of low potential in travel (EFG-Hermes UAE, 2007, pp 2-39).

Similarities

Both companies have a plan to utilize the website to improve on their services. IKEA is building online help to guide customers on how to maintain a more sustainable life. Their program offers customers tips and ideas through the website on how to reduce their effects on the surroundings.

Arab airlines on the other hand plan to improve on their e-ticket sales to customers. This will offer the customers cheaper means since they will not need to travel long distances to obtain air tickets or make hotel reservations (Faculty of Business Studies, 2010; EFG-Hermes UAE, 2007, pp 2-39).

Both companies offer low prices to their services and products. This helps them to counter the wave of other competitors who still value high pricing of products and services in the market. The low prices attract most customers especially during difficult financial times. In order to improve its performance, IKEA has established a good brand name that is recognized globally, this has helped in maintaining the strong growth it requires in order to have a strong market identity amongst the clients.

Air Arabia being the first low cost air company in the Middle East, utilized this opportunity to create a strong brand name that secured it favour amongst the travellers in the market (Faculty of Business Studies, 2010; EFG-Hermes UAE, 2007, pp 2-39).

Differences

Air Arabia is working in partnership with other companies in order to strengthen its acquisition of some essential assets like the ground handling venture which is a partnership between Air Arabia and Sharja Airport Authority.

On the issue of catering services it plans to partner with Alfa Overseas Holdings. IKEA on the other hand despite being a home furnishing retailer, supplements its income through its constituent stores which are the restaurants, cafes and food shops (Faculty of Business Studies, 2010; EFG-Hermes UAE, 2007, pp 2-39).

References

EFG-Hermes UAE. 2007. Air Arabia. Accessed at https://www.efghermes.com/en/Pages/default.aspx . Dubai- UAE pp 2-39

Faculty of Business Studies. 2010. Undestanding Business Functions I: IKEA case study. Arab Open University. Web.

Matt, E. 2010. Competitive Intelligence; Excellence in Financial management. Accessed at https://exinfm.com/ pp 1-36

Valentin K. 2001. SWOT analysis from a resource-based view. Journal of Marketing Theory and Practice. 9(2): 54-68.

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