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Introduction

SWOT analysis is a method of analysis that reflects on Strengths, Weaknesses,

Opportunities and threats involved in a prospect. It specifies the objectives of that venture and

identification of both external and internal factors that work in favor or not in favor of that

venture. The technique was coined by Albert Humphrey of Stanford research Institute in the late

1960’s and early 1970’s. Strengths are the general characteristics of that venture that make it

stand out among others. Weakness entails the characteristics that put the venture to a

disadvantage in comparison to other ventures. Opportunities are the external factors that can lead

to improvement of the venture. Threats are the factors in the business environment that could be

troublesome to the venture. SWOT analysis assists in setting objectives for an organization.

PEST analysis abbreviates for Political, Economic, Social and technological strategy of

analysis. It entails the factors on the macro environment. Modification of the strategy led to

inclusion of legal and environment factors.

PEST analysis focuses on the following components

Political factors - show the extent to which the government influences a business venture. They

cover areas like policies on taxation, laws on labor and environment restrictions on trade, tariffs

and the stability.

Economic factors- these have a prime impact on the operation of the business. These

factors include inflation, currency exchange rates, growth of the economy and interest rates.

Social factors like culture, growth rate of the population, age distribution, and attitudes to

careers. Companies some times change their managerial strategies to conform to these social

aspects. This includes recruiting old workers, and holding seminars to train workers.

Technological factors aspects like automation, incentives on technological innovations,

and rate of change in technology.

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Environment- this includes aspects of both ecology and environment such as the weather,

changes in climate and climate. These can help in the creation of new ventures or the collapse of

some others.

Legal factors include antitrust laws, discrimination laws, employment laws safety laws

and many others. They affect the company’s operations, costs and demand for products.

For the betterment of this airline, a merger would benefit in countering competition from

other airlines like Delta airlines and Northwest Airlines which as of now control much of the U.S

airline market.

American Airlines is a subsidiary of AMR Corporation and one of the leading airlines in

the U.S. It has two subsidiaries, that is American Eagle and American Connection. It is the

second largest airline in the world based on revenues used in its operation, its size of fleet and

miles covered in passenger transport. It has an extensive operation of both domestic and

international flights in North America, Latin America, Europe, Asia and the Caribbean. It was

formed through acquisitions by around 82 small airlines in 1930 and has extensively grown since

then.

In regard to American Airways, PEST analysis puts into account the political, economic,

social and technological environments within which this company operates. Within the macro-

environmental aspects, focus is put on those factors that impact more on the airline.

The September 11, 2011 terrorist attack markedly shook the political stability of the United

States. This led to a fall in business and air travel. This had negative implications on income

generation and profits. Other factors that implicated negatively on the Airlines business include

regulation on pricing, legislation of wages and trade union requirements, emphasis was put on

the airport, and the national security as well and the policies of 1978 being deregulated.

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Prior to the September 11 attack, the United States economy was in some mild recession. The

industry was fighting carriers on discounts. The economic aftermath of September 11 impacted

dramatically on the airline industry which was in a slight contraction. This led to deceleration on

economic growth, fuel costs went high trade accounts had to be balanced, and there was a

tremendous fluctuation on the exchange rates of the dollar against the Yen and the Euro.

On social factor, emphasis on this analysis is laid on September 11 attacks because the event had

a global impact. The social implications herein included staff layoffs, decline in both lower and

middle class travels, it impacted negatively on safety of air travel; decline in consumer travel

plans in regard to air travel and low fare became an acceptable alternative.

Technological aspects – The internet has profoundly impacted on the consumer behavior.

This is because this new mode of communication has influenced the mode of airline ticket sales.

Some of the technological developments in American Airlines include: The SABRE system,

shopping services, which include Travelocity, Orbitz, and Expedia, the internet has become a

tool for flight shopping, online reservations of tickets and ticketing and a decrease in the number

of travel agencies.

SWOT analysis on American Airlines focuses on the strengths that have enabled it to

reach where it is the weaknesses that it has, opportunities that come its way and the threats that

the airline has to counter.

Following are some of its strengths: It is a fast growing company, it is able to reach a

wide range of populations across the globe, it has a broad and well built portfolio, and it has a

healthy operational capability a share in the market that is well established.

The company has several weaknesses among them being: the company has been lagging behind

innovatively and online. Compared to other companies in the same market share, the company is

lagging behind on real networks performance.

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The airline has had several opportunities, which it has, utilized to drive towards its

success. These include: several strategic alliances, capitalization on HDTV growth, it is also

taking advantage of the internet for its online growth, it has integrated music and video services

on mobiles for its advertisements, it is making more acquisitions expansion and for it to reach

more people.

Over the years, the airline has had to counter several threats among them being: They

face stiff competition from online competitors who are more innovative and respond more

quickly to changes in the market, there are several regulations that have also slowed its growth

e.g. FCC, the slight recession on the U.S economy has also been a threat to its fast growth.

In the year 2011, the airline filed for bankruptcy protection. It vowed to emerge from

bankruptcy. Several factors had contributed to the company’s bankruptcy among them high

prices of fuel and decreased profitability as from 2007. The company has to cut its labor by

13000 people, thus cutting labor cost by $2 billion, add flights to about five main airports and

has to increase its revenue by $3 billion.

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Works Cited

Bee, Frances. and Roland Bee}. Facilitation Skills. London: Institute of Personnel and

Development, 1998.

Cadle, James et.al. Business Analysis Techniques. London: British Computer Society, 2010.

Henry, Anthony. Understanding Strategic Management / Anthony Henry. Oxford University

Press: Oxford University Press, 2008.

Shermerhorn, John. Management. New York: Wiley, 2010.

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