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 household debt because of falling income levels, technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, increasing transportation and logistics costs, increasing energy prices, central banks are concerned over increasing inflation,
challanges to central banks by blockchain based private currencies, increasing commodity prices, 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 -
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.
Low bargaining power of suppliers
– Suppliers of Germanwings 2002 in the sector have low bargaining power. Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Germanwings 2002 to manage not only supply disruptions but also source products at highly competitive prices.
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.
Strong track record of project management
– Germanwings 2002 is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Germanwings 2002 digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Germanwings 2002 has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
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.
Organizational Resilience of Germanwings 2002
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Germanwings 2002 does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
Ability to lead change in Strategy & Execution field
– Germanwings 2002 is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Germanwings 2002 in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
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.
Highly skilled collaborators
– Germanwings 2002 has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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 -
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.
Skills based hiring
– The stress on hiring functional specialists at Germanwings 2002 has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
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.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning, in the dynamic environment Germanwings 2002 has struggled to respond to the nimble upstart competition. Germanwings 2002 has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Germanwings 2002 supply chain. Even after few cautionary changes mentioned in the HBR case study - Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Germanwings 2002 vulnerable to further global disruptions in South East Asia.
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.
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.
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.
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.
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.
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 -
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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Germanwings 2002 to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Germanwings 2002 is facing challenges because of the dominance of functional experts in the organization. Dealing with low-cost competition in the airline industry (C): Germanwings' repositioning case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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.
Developing new processes and practices
– Germanwings 2002 can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
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.
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.
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.
Leveraging digital technologies
– Germanwings 2002 can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, 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.
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.
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 -
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.
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.
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.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Germanwings 2002 needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Increasing wage structure of Germanwings 2002
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Germanwings 2002.
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.
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.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Shortening product life cycle
– it is one of the major threat that Germanwings 2002 is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Germanwings 2002 in the Strategy & Execution sector and impact the bottomline of the organization.
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 .
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Germanwings 2002 in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
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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