Case Study Description of WestJet: The Pearson Decision
In early 2003, WestJet's management was reviewing its plans for growth, specifically considering whether WestJet should move its eastern Canada base of operations from Hamilton's Munro Airport to Toronto Pearson Airport. WestJet had grown rapidly since its launch in 1996 and was now the second largest airline in Canada. WestJet had originally focused on western Canada, but had entered eastern Canada in March 2000, with an eastern base of operations in Hamilton, a secondary airport in the greater Toronto area. Pearson was Canada's largest domestic and international airport, the primary commercial airport for the greater Toronto area and a hub of WestJet's largest competitor, Air Canada. Compared with Pearson, Hamilton was less congested and charged much lower fees. WestJet's operations had been closely modeled on Southwest Airlines'. The use of a secondary airport such as Hamilton as a base of operations was consistent with Southwest's low-cost, high-utilization features. With higher costs and longer turnaround times due to congestion, a base at Pearson was arguably not consistent with the Southwest business model; however, it was hard for WestJet to ignore the growth potential.
Swot Analysis of "WestJet: The Pearson Decision" written by Roderick E. White, Derek Lehmberg includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Westjet Pearson facing as an external strategic factors. Some of the topics covered in WestJet: The Pearson Decision case study are - Strategic Management Strategies, Growth strategy, Operations management and Strategy & Execution.
Some of the macro environment factors that can be used to understand the WestJet: The Pearson Decision casestudy better are - – wage bills are increasing, geopolitical disruptions, increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies, technology disruption, there is increasing trade war between United States & China, cloud computing is disrupting traditional business models,
increasing energy prices, increasing commodity prices, etc
Introduction to SWOT Analysis of WestJet: The Pearson Decision
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in WestJet: The Pearson Decision case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Westjet Pearson, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Westjet Pearson 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 WestJet: The Pearson Decision can be done for the following purposes –
1. Strategic planning using facts provided in WestJet: The Pearson Decision case study
2. Improving business portfolio management of Westjet Pearson
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 Westjet Pearson
Strengths WestJet: The Pearson Decision | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Westjet Pearson in WestJet: The Pearson Decision Harvard Business Review case study are -
Analytics focus
– Westjet Pearson 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 Roderick E. White, Derek Lehmberg 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.
Sustainable margins compare to other players in Strategy & Execution industry
– WestJet: The Pearson Decision firm has clearly differentiated products in the market place. This has enabled Westjet Pearson to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Westjet Pearson to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Westjet Pearson is present in almost all the verticals within the industry. This has provided firm in WestJet: The Pearson Decision 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.
Cross disciplinary teams
– Horizontal connected teams at the Westjet Pearson are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Operational resilience
– The operational resilience strategy in the WestJet: The Pearson Decision 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.
Organizational Resilience of Westjet Pearson
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Westjet Pearson does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Westjet Pearson 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 WestJet: The Pearson Decision - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of Westjet Pearson in the sector have low bargaining power. WestJet: The Pearson Decision has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Westjet Pearson to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Westjet Pearson 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.
Superior customer experience
– The customer experience strategy of Westjet Pearson in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Westjet Pearson has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Westjet Pearson 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.
High brand equity
– Westjet Pearson has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Westjet Pearson to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses WestJet: The Pearson Decision | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of WestJet: The Pearson Decision are -
High cash cycle compare to competitors
Westjet Pearson 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.
Skills based hiring
– The stress on hiring functional specialists at Westjet Pearson 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.
Slow decision making process
– As mentioned earlier in the report, Westjet Pearson 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. Westjet Pearson 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 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 Westjet Pearson supply chain. Even after few cautionary changes mentioned in the HBR case study - WestJet: The Pearson Decision, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Westjet Pearson vulnerable to further global disruptions in South East Asia.
Low market penetration in new markets
– Outside its home market of Westjet Pearson, firm in the HBR case study WestJet: The Pearson Decision needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study WestJet: The Pearson Decision, is just above the industry average. Westjet Pearson 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.
Slow to strategic competitive environment developments
– As WestJet: The Pearson Decision HBR case study mentions - Westjet Pearson 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.
Lack of clear differentiation of Westjet Pearson products
– To increase the profitability and margins on the products, Westjet Pearson needs to provide more differentiated products than what it is currently offering in the marketplace.
Need for greater diversity
– Westjet Pearson 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.
Increasing silos among functional specialists
– The organizational structure of Westjet Pearson is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Westjet Pearson needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Westjet Pearson to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Westjet Pearson 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 - WestJet: The Pearson Decision should strive to include more intangible value offerings along with its core products and services.
Opportunities WestJet: The Pearson Decision | 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 WestJet: The Pearson Decision are -
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Westjet Pearson can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Westjet Pearson can use these opportunities to build new business models that can help the communities that Westjet Pearson operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Building a culture of innovation
– managers at Westjet Pearson 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
– Westjet Pearson can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. WestJet: The Pearson Decision 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Westjet Pearson 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.
Manufacturing automation
– Westjet Pearson 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.
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. Westjet Pearson 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. Westjet Pearson 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.
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 Westjet Pearson 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Westjet Pearson 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 Westjet Pearson to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Westjet Pearson 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Westjet Pearson 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, WestJet: The Pearson Decision, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Westjet Pearson in the consumer business. Now Westjet Pearson can target international markets with far fewer capital restrictions requirements than the existing system.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Westjet Pearson can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats WestJet: The Pearson Decision External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study WestJet: The Pearson Decision are -
Environmental challenges
– Westjet Pearson 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. Westjet Pearson can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Shortening product life cycle
– it is one of the major threat that Westjet Pearson is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Westjet Pearson can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Westjet Pearson.
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 Westjet Pearson business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Westjet Pearson 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.
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. Westjet Pearson 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Westjet Pearson 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 Westjet Pearson with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
Consumer confidence and its impact on Westjet Pearson 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.
Increasing wage structure of Westjet Pearson
– 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 Westjet Pearson.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study WestJet: The Pearson Decision, Westjet Pearson 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 .
Weighted SWOT Analysis of WestJet: The Pearson Decision 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 WestJet: The Pearson Decision 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 WestJet: The Pearson Decision 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 WestJet: The Pearson Decision 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 WestJet: The Pearson Decision 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 Westjet Pearson needs to make to build a sustainable competitive advantage.
