Case Study Description of Low-cost Carriers in India: SpiceJet's Perspective
This case discusses the emergence of low-cost carriers (LCCs) in India in relation to the growth of the Indian aviation industry and the subsequent fall of the LCCs into financial loss. The LCCs became important for value-adding and cost-cutting alternatives in corporate business travel. Before the 2008 global economic crisis, domestic air traffic LCCs recorded a compound annual passenger growth rate of 18 per cent. Among the many low-cost airlines in India, SpiceJet had been one of the most popular, with the lowest airfares and highest customer value. Though SpiceJet had a net profit of INR 1.01 billion (US$20.2 million) in fiscal year 2010-2011, the results following the financial year indicated that the company had also joined the ranks of loss-making airlines in India. A host of issues - such as rising debt, increasing cost to revenue ratios, growing management challenges, complicated flight operations, and rising oil prices - were threatening the survival of airline companies, especially LCCs. SpiceJet was no exception.
Authors :: Sanjeev Prashar, Adeshwar Raja Balaji Pras, V.S. Parasaran, Vijay Kumar Venna
Swot Analysis of "Low-cost Carriers in India: SpiceJet's Perspective" written by Sanjeev Prashar, Adeshwar Raja Balaji Pras, V.S. Parasaran, Vijay Kumar Venna includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lccs Spicejet facing as an external strategic factors. Some of the topics covered in Low-cost Carriers in India: SpiceJet's Perspective case study are - Strategic Management Strategies, and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Low-cost Carriers in India: SpiceJet's Perspective casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, supply chains are disrupted by pandemic , wage bills are increasing, technology disruption, cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies,
increasing energy prices, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Low-cost Carriers in India: SpiceJet's Perspective
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Low-cost Carriers in India: SpiceJet's Perspective case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lccs Spicejet, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lccs Spicejet 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 Low-cost Carriers in India: SpiceJet's Perspective can be done for the following purposes –
1. Strategic planning using facts provided in Low-cost Carriers in India: SpiceJet's Perspective case study
2. Improving business portfolio management of Lccs Spicejet
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 Lccs Spicejet
Strengths Low-cost Carriers in India: SpiceJet's Perspective | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lccs Spicejet in Low-cost Carriers in India: SpiceJet's Perspective Harvard Business Review case study are -
Diverse revenue streams
– Lccs Spicejet is present in almost all the verticals within the industry. This has provided firm in Low-cost Carriers in India: SpiceJet's Perspective 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.
Low bargaining power of suppliers
– Suppliers of Lccs Spicejet in the sector have low bargaining power. Low-cost Carriers in India: SpiceJet's Perspective has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lccs Spicejet to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Lccs Spicejet
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Lccs Spicejet does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Lccs Spicejet is one of the leading recruiters in the industry. Managers in the Low-cost Carriers in India: SpiceJet's Perspective are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Strategy & Execution industry
– Low-cost Carriers in India: SpiceJet's Perspective firm has clearly differentiated products in the market place. This has enabled Lccs Spicejet to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Lccs Spicejet to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– Lccs Spicejet 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 Low-cost Carriers in India: SpiceJet's Perspective HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Lccs Spicejet 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.
Innovation driven organization
– Lccs Spicejet is one of the most innovative firm in sector. Manager in Low-cost Carriers in India: SpiceJet's Perspective Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Analytics focus
– Lccs Spicejet 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 Sanjeev Prashar, Adeshwar Raja Balaji Pras, V.S. Parasaran, Vijay Kumar Venna 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.
Training and development
– Lccs Spicejet has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Low-cost Carriers in India: SpiceJet's Perspective 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.
Successful track record of launching new products
– Lccs Spicejet has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lccs Spicejet 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.
Effective Research and Development (R&D)
– Lccs Spicejet 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 Low-cost Carriers in India: SpiceJet's Perspective - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses Low-cost Carriers in India: SpiceJet's Perspective | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Low-cost Carriers in India: SpiceJet's Perspective are -
Slow decision making process
– As mentioned earlier in the report, Lccs Spicejet 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. Lccs Spicejet 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 operating costs
– Compare to the competitors, firm in the HBR case study Low-cost Carriers in India: SpiceJet's Perspective 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 Lccs Spicejet 's lucrative customers.
Need for greater diversity
– Lccs Spicejet 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Low-cost Carriers in India: SpiceJet's Perspective, it seems that the employees of Lccs Spicejet 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Low-cost Carriers in India: SpiceJet's Perspective 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 Lccs Spicejet has relatively successful track record of launching new products.
Lack of clear differentiation of Lccs Spicejet products
– To increase the profitability and margins on the products, Lccs Spicejet needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As Low-cost Carriers in India: SpiceJet's Perspective HBR case study mentions - Lccs Spicejet 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.
Interest costs
– Compare to the competition, Lccs Spicejet has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
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 Lccs Spicejet supply chain. Even after few cautionary changes mentioned in the HBR case study - Low-cost Carriers in India: SpiceJet's Perspective, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lccs Spicejet vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Low-cost Carriers in India: SpiceJet's Perspective, in the dynamic environment Lccs Spicejet has struggled to respond to the nimble upstart competition. Lccs Spicejet has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
No frontier risks strategy
– After analyzing the HBR case study Low-cost Carriers in India: SpiceJet's Perspective, 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.
Opportunities Low-cost Carriers in India: SpiceJet's Perspective | 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 Low-cost Carriers in India: SpiceJet's Perspective are -
Loyalty marketing
– Lccs Spicejet 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.
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. Lccs Spicejet can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Using analytics as competitive advantage
– Lccs Spicejet 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 Low-cost Carriers in India: SpiceJet's Perspective - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lccs Spicejet to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lccs Spicejet can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lccs Spicejet 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 Lccs Spicejet to hire the very best people irrespective of their geographical location.
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 Lccs Spicejet 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 Lccs Spicejet in the consumer business. Now Lccs Spicejet can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Lccs Spicejet 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.
Building a culture of innovation
– managers at Lccs Spicejet 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
– Lccs Spicejet can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Low-cost Carriers in India: SpiceJet's Perspective 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.
Learning at scale
– Online learning technologies has now opened space for Lccs Spicejet 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.
Creating value in data economy
– The success of analytics program of Lccs Spicejet has opened avenues for new revenue streams for the organization in the industry. This can help Lccs Spicejet to build a more holistic ecosystem as suggested in the Low-cost Carriers in India: SpiceJet's Perspective case study. Lccs Spicejet can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Lccs Spicejet 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, Low-cost Carriers in India: SpiceJet's Perspective, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Low-cost Carriers in India: SpiceJet's Perspective External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Low-cost Carriers in India: SpiceJet's Perspective are -
Environmental challenges
– Lccs Spicejet 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. Lccs Spicejet can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Technology acceleration in Forth Industrial Revolution
– Lccs Spicejet has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Lccs Spicejet 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.
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. Lccs Spicejet needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Lccs Spicejet 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.
High dependence on third party suppliers
– Lccs Spicejet 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Lccs Spicejet with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing wage structure of Lccs Spicejet
– 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 Lccs Spicejet.
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. Lccs Spicejet can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Lccs Spicejet business can come under increasing regulations regarding data privacy, data security, etc.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lccs Spicejet 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 Low-cost Carriers in India: SpiceJet's Perspective .
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 Lccs Spicejet in the Strategy & Execution sector and impact the bottomline of the organization.
Regulatory challenges
– Lccs Spicejet 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.
Weighted SWOT Analysis of Low-cost Carriers in India: SpiceJet's Perspective 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 Low-cost Carriers in India: SpiceJet's Perspective 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 Low-cost Carriers in India: SpiceJet's Perspective 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 Low-cost Carriers in India: SpiceJet's Perspective 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 Low-cost Carriers in India: SpiceJet's Perspective 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 Lccs Spicejet needs to make to build a sustainable competitive advantage.
