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 - – central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings, geopolitical disruptions, increasing transportation and logistics costs, wage bills are increasing, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs,
technology disruption, competitive advantages are harder to sustain because of technology dispersion, 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 -
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.
Effective Research and Development (R&D)
– Indigo Aviation 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 Indigo Airlines - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
Organizational Resilience of Indigo Aviation
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Indigo Aviation does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Indigo Aviation is present in almost all the verticals within the industry. This has provided firm in Indigo Airlines 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.
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.
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.
Superior customer experience
– The customer experience strategy of Indigo Aviation in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
Strong track record of project management
– Indigo Aviation is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses Indigo Airlines | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Indigo Airlines are -
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.
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.
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.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Indigo Airlines, is just above the industry average. Indigo Aviation 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.
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Indigo Airlines HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Indigo Aviation has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As Indigo Airlines HBR case study mentions - Indigo Aviation 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.
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.
Aligning sales with marketing
– It come across in the case study Indigo Airlines that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Indigo Airlines can leverage the sales team experience to cultivate customer relationships as Indigo Aviation is planning to shift buying processes online.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Indigo Airlines, it seems that the employees of Indigo Aviation 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.
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 -
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Indigo Aviation can use these opportunities to build new business models that can help the communities that Indigo Aviation operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
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 Indigo Aviation 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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Indigo Aviation in the consumer business. Now Indigo Aviation can target international markets with far fewer capital restrictions requirements than the existing system.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Indigo Aviation 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.
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.
Building a culture of innovation
– managers at Indigo Aviation 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.
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.
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.
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.
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.
Manufacturing automation
– Indigo Aviation can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
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 -
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Indigo Aviation.
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.
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 .
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.
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. Indigo Aviation 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. Indigo Aviation needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– Indigo Aviation 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.
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 .
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.
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.
Increasing wage structure of Indigo Aviation
– 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 Indigo Aviation.
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.
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.
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.