The case focuses on the profitability of the Indian aviation industry and explains how Indigo Airlines, a new entrant in the Indian aviation space, registered profits within three years of its inception while its competitors continued to struggle with losses. The case demonstrates how a firm incorporating innovative business practices can not only survive but also earn abnormal profits. The strategies adopted by Indigo Airlines to reduce its operational cost and enhance its revenue are discussed in the case. The case also explores whether the profits earned by Indigo are sustainable in the long run and focuses on the changes in the competitive positioning of Indigo Airlines as it switches from the position of a low cost player to a hybrid player in the aviation industry. Authors Arpita Agnihotri and Saurabh Bhattacharya are affiliated with IBS, Hyderabad.
Swot Analysis of "Indigo Airlines" written by Arpita Agnihotri, Saurabh Bhattacharya includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Indigo Aviation facing as an external strategic factors. Some of the topics covered in Indigo Airlines case study are - Strategic Management Strategies, and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Indigo Airlines casestudy better are - – there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, increasing transportation and logistics costs, wage bills are increasing,
technology disruption, digital marketing is dominated by two big players Facebook and Google, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Indigo Airlines case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Indigo Aviation, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Indigo Aviation 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 Indigo Airlines can be done for the following purposes –
1. Strategic planning using facts provided in Indigo Airlines case study
2. Improving business portfolio management of Indigo Aviation
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 Indigo Aviation
Strengths Indigo Airlines | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Indigo Aviation in Indigo Airlines Harvard Business Review case study are -
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Indigo Aviation digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Indigo Aviation 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.
High brand equity
– Indigo Aviation has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Indigo Aviation to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy in the Indigo Airlines 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.
Ability to recruit top talent
– Indigo Aviation is one of the leading recruiters in the industry. Managers in the Indigo Airlines are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High switching costs
– The high switching costs that Indigo Aviation 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.
Successful track record of launching new products
– Indigo Aviation has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Indigo Aviation 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.
Learning organization
- Indigo Aviation 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 Indigo Aviation is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Indigo Airlines Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Training and development
– Indigo Aviation has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Indigo Airlines 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
– Indigo Airlines firm has clearly differentiated products in the market place. This has enabled Indigo Aviation to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Indigo Aviation to invest into research and development (R&D) and innovation.
Innovation driven organization
– Indigo Aviation is one of the most innovative firm in sector. Manager in Indigo Airlines Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to lead change in Strategy & Execution field
– Indigo Aviation 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 Indigo Aviation in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Indigo Aviation 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 Arpita Agnihotri, Saurabh Bhattacharya 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.
Weaknesses Indigo Airlines | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Indigo Airlines are -
Skills based hiring
– The stress on hiring functional specialists at Indigo Aviation 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.
High cash cycle compare to competitors
Indigo Aviation 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.
Need for greater diversity
– Indigo Aviation 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.
Low market penetration in new markets
– Outside its home market of Indigo Aviation, firm in the HBR case study Indigo Airlines needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, firm in the HBR case study Indigo Airlines 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 Indigo Aviation 's lucrative customers.
Products dominated business model
– Even though Indigo Aviation 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 - Indigo Airlines 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, Indigo Aviation is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Indigo Airlines can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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 Indigo Aviation supply chain. Even after few cautionary changes mentioned in the HBR case study - Indigo Airlines, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Indigo Aviation vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– After analyzing the HBR case study Indigo Airlines, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Slow decision making process
– As mentioned earlier in the report, Indigo Aviation has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Indigo Aviation even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High bargaining power of channel partners
– Because of the regulatory requirements, Arpita Agnihotri, Saurabh Bhattacharya suggests that, Indigo Aviation is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Opportunities Indigo Airlines | 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 Indigo Airlines are -
Developing new processes and practices
– Indigo Aviation 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.
Buying journey improvements
– Indigo Aviation can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Indigo Airlines 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.
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. Indigo Aviation can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Indigo Aviation 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 Indigo Airlines - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Indigo Aviation to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help Indigo Aviation to increase its market reach. Indigo Aviation 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.
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. Indigo Aviation 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. Indigo Aviation 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.
Loyalty marketing
– Indigo Aviation 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.
Leveraging digital technologies
– Indigo Aviation 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Indigo Aviation can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Indigo Aviation can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Indigo Aviation 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Indigo Aviation to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Indigo Aviation to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Indigo Aviation 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.
Threats Indigo Airlines External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Indigo Airlines are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Indigo Aviation 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Indigo Aviation with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Shortening product life cycle
– it is one of the major threat that Indigo Aviation is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Indigo Aviation needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Environmental challenges
– Indigo Aviation 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. Indigo Aviation can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Regulatory challenges
– Indigo Aviation 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.
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. Indigo Aviation can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Indigo Airlines, Indigo Aviation 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 .
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.
Technology acceleration in Forth Industrial Revolution
– Indigo Aviation has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Indigo Aviation 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.
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 Indigo Aviation in the Strategy & Execution sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Indigo Aviation 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 Indigo Airlines .
Consumer confidence and its impact on Indigo Aviation 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.
Weighted SWOT Analysis of Indigo Airlines 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 Indigo Airlines 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 Indigo Airlines 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 Indigo Airlines 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 Indigo Airlines 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 Indigo Aviation needs to make to build a sustainable competitive advantage.