Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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Case Study Description of Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning
In 2002 the management team of Deutsche Lufthansa AG was considering the upcoming threat from low-cost airlines in the context of an increasingly complex and competitive strategic environment. Finally the decision was taken to respond to the innovation by opening an own low-cost carrier, Germanwings in late 2002. But over time the business model of Germanwings was modified repeatedly. The case series covers * Lufthansa's considerations regarding various options to respond to the competitive challenges brought up by the emerging low-cost airlines such as easyJet or Ryanair in 2002 (Case A), * the foundation of Germanwings in late 2002 and some early successes until 2005 (Case B), and * some more recent changes in the Germanwings business model in the following five years until end of 2010 (Case C).
Swot Analysis of "Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning" written by Urs Mueller, Francis Bidault includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Germanwings 2002 facing as an external strategic factors. Some of the topics covered in Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning case study are - Strategic Management Strategies, Disruptive innovation and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning casestudy better are - – increasing transportation and logistics costs, technology disruption, geopolitical disruptions, there is backlash against globalization, increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs,
increasing commodity prices, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Germanwings 2002, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Germanwings 2002 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 Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning can be done for the following purposes –
1. Strategic planning using facts provided in Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning case study
2. Improving business portfolio management of Germanwings 2002
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Germanwings 2002
Strengths Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Germanwings 2002 in Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning Harvard Business Review case study are -
Ability to recruit top talent
– Germanwings 2002 is one of the leading recruiters in the industry. Managers in the Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Successful track record of launching new products
– Germanwings 2002 has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Germanwings 2002 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.
Operational resilience
– The operational resilience strategy in the Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Training and development
– Germanwings 2002 has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Sustainable margins compare to other players in Strategy & Execution industry
– Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning firm has clearly differentiated products in the market place. This has enabled Germanwings 2002 to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Germanwings 2002 to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Germanwings 2002 has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Analytics focus
– Germanwings 2002 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 industry. The technology infrastructure suggested by Urs Mueller, Francis Bidault can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Innovation driven organization
– Germanwings 2002 is one of the most innovative firm in sector. Manager in Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Superior customer experience
– The customer experience strategy of Germanwings 2002 in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Germanwings 2002 is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Germanwings 2002 is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Germanwings 2002 has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Germanwings 2002 is present in almost all the verticals within the industry. This has provided firm in Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Weaknesses Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning, is just above the industry average. Germanwings 2002 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.
Capital Spending Reduction
– Even during the low interest decade, Germanwings 2002 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 industry using digital technology.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning, it seems that the employees of Germanwings 2002 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.
Low market penetration in new markets
– Outside its home market of Germanwings 2002, firm in the HBR case study Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Germanwings 2002 is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Need for greater diversity
– Germanwings 2002 has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow to strategic competitive environment developments
– As Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning HBR case study mentions - Germanwings 2002 takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High cash cycle compare to competitors
Germanwings 2002 has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Products dominated business model
– Even though Germanwings 2002 has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning should strive to include more intangible value offerings along with its core products and services.
High operating costs
– Compare to the competitors, firm in the HBR case study Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Germanwings 2002 's lucrative customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Germanwings 2002 needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Opportunities Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning are -
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. Germanwings 2002 can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Germanwings 2002 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Germanwings 2002 in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Using analytics as competitive advantage
– Germanwings 2002 has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Germanwings 2002 to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Creating value in data economy
– The success of analytics program of Germanwings 2002 has opened avenues for new revenue streams for the organization in the industry. This can help Germanwings 2002 to build a more holistic ecosystem as suggested in the Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning case study. Germanwings 2002 can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help Germanwings 2002 to increase its market reach. Germanwings 2002 will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Germanwings 2002 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, as suggested in case study, Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Loyalty marketing
– Germanwings 2002 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.
Learning at scale
– Online learning technologies has now opened space for Germanwings 2002 to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Germanwings 2002 can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Germanwings 2002 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 Strategy & Execution segment.
Buying journey improvements
– Germanwings 2002 can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Germanwings 2002 can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Germanwings 2002 can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Threats Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning are -
Environmental challenges
– Germanwings 2002 needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Germanwings 2002 can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Germanwings 2002 with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Germanwings 2002 can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Germanwings 2002 will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Stagnating economy with rate increase
– Germanwings 2002 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 field.
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 Germanwings 2002 business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Germanwings 2002 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 the industry and other sectors.
High dependence on third party suppliers
– Germanwings 2002 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Germanwings 2002 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 prominent markets illustrated in HBR case study Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning .
Regulatory challenges
– Germanwings 2002 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 Strategy & Execution industry regulations.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning, Germanwings 2002 may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Technology acceleration in Forth Industrial Revolution
– Germanwings 2002 has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Germanwings 2002 needs to keep up with the evolution of technology in the Strategy & Execution 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.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Weighted SWOT Analysis of Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning 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 the case study Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning 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 the Harvard case study Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning 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 Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning is 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 Germanwings 2002 needs to make to build a sustainable competitive advantage.
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