Case Study Description of JetBlue Airways IPO Valuation
This case examines the April 2002 decision of JetBlue management to price the initial public offering of JetBlue stock during one of the worst periods in airline history. The case outlines JetBlue's innovative strategy and the associated strong financial performance over its initial two years. Students are invited to value the stock and take a position on whether the current $22-$24 per share filing range is appropriate. The case is designed to showcase corporate valuation using discounted cash flow and peer-company market multiples. The epilogue details the 67% first-day rise in JetBlue stock from the $27 offer price. With such a backdrop, students are exposed to one of the well-known finance anomalies--the IPO underpricing phenomenon--and are invited to critically discuss various proposed explanations.
Authors :: Michael J. Schill, Garth Monroe, Cheng Cui
Swot Analysis of "JetBlue Airways IPO Valuation" written by Michael J. Schill, Garth Monroe, Cheng Cui includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Jetblue Invited facing as an external strategic factors. Some of the topics covered in JetBlue Airways IPO Valuation case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the JetBlue Airways IPO Valuation casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy,
increasing commodity prices, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of JetBlue Airways IPO Valuation
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in JetBlue Airways IPO Valuation case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Jetblue Invited, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Jetblue Invited 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 JetBlue Airways IPO Valuation can be done for the following purposes –
1. Strategic planning using facts provided in JetBlue Airways IPO Valuation case study
2. Improving business portfolio management of Jetblue Invited
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Jetblue Invited
Strengths JetBlue Airways IPO Valuation | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Jetblue Invited in JetBlue Airways IPO Valuation Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Jetblue Invited in the sector have low bargaining power. JetBlue Airways IPO Valuation has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Jetblue Invited to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy in the JetBlue Airways IPO Valuation 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.
Training and development
– Jetblue Invited has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in JetBlue Airways IPO Valuation 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Jetblue Invited digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Jetblue Invited 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.
Diverse revenue streams
– Jetblue Invited is present in almost all the verticals within the industry. This has provided firm in JetBlue Airways IPO Valuation 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.
Learning organization
- Jetblue Invited 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 Jetblue Invited is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in JetBlue Airways IPO Valuation Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Jetblue Invited is one of the leading recruiters in the industry. Managers in the JetBlue Airways IPO Valuation are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Superior customer experience
– The customer experience strategy of Jetblue Invited in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Jetblue Invited is one of the most innovative firm in sector. Manager in JetBlue Airways IPO Valuation Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Strong track record of project management
– Jetblue Invited is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Successful track record of launching new products
– Jetblue Invited has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Jetblue Invited 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)
– Jetblue Invited 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 JetBlue Airways IPO Valuation - 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 JetBlue Airways IPO Valuation | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of JetBlue Airways IPO Valuation are -
High operating costs
– Compare to the competitors, firm in the HBR case study JetBlue Airways IPO Valuation 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 Jetblue Invited 's lucrative customers.
Aligning sales with marketing
– It come across in the case study JetBlue Airways IPO Valuation 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 JetBlue Airways IPO Valuation can leverage the sales team experience to cultivate customer relationships as Jetblue Invited is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study JetBlue Airways IPO Valuation, is just above the industry average. Jetblue Invited 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.
Lack of clear differentiation of Jetblue Invited products
– To increase the profitability and margins on the products, Jetblue Invited needs to provide more differentiated products than what it is currently offering in the marketplace.
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 Jetblue Invited supply chain. Even after few cautionary changes mentioned in the HBR case study - JetBlue Airways IPO Valuation, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Jetblue Invited 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 JetBlue Airways IPO Valuation, in the dynamic environment Jetblue Invited has struggled to respond to the nimble upstart competition. Jetblue Invited has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Need for greater diversity
– Jetblue Invited 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.
Interest costs
– Compare to the competition, Jetblue Invited 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 star products
– The top 2 products and services of the firm as mentioned in the JetBlue Airways IPO Valuation 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 Jetblue Invited has relatively successful track record of launching new products.
Increasing silos among functional specialists
– The organizational structure of Jetblue Invited is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Jetblue Invited needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Jetblue Invited to focus more on services rather than just following the product oriented approach.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study JetBlue Airways IPO Valuation, it seems that the employees of Jetblue Invited 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 JetBlue Airways IPO Valuation | 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 JetBlue Airways IPO Valuation are -
Learning at scale
– Online learning technologies has now opened space for Jetblue Invited 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Jetblue Invited can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– Jetblue Invited 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Jetblue Invited 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.
Manufacturing automation
– Jetblue Invited can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting 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.
Loyalty marketing
– Jetblue Invited 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.
Developing new processes and practices
– Jetblue Invited can develop new processes and procedures in Finance & Accounting 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.
Using analytics as competitive advantage
– Jetblue Invited 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 JetBlue Airways IPO Valuation - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Jetblue Invited to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Jetblue Invited can use these opportunities to build new business models that can help the communities that Jetblue Invited operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Jetblue Invited 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 Jetblue Invited to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help Jetblue Invited to increase its market reach. Jetblue Invited 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.
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 Jetblue Invited 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.
Buying journey improvements
– Jetblue Invited can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. JetBlue Airways IPO Valuation 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.
Threats JetBlue Airways IPO Valuation External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study JetBlue Airways IPO Valuation are -
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. Jetblue Invited 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.
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 wage structure of Jetblue Invited
– 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 Jetblue Invited.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study JetBlue Airways IPO Valuation, Jetblue Invited may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
High dependence on third party suppliers
– Jetblue Invited 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.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Jetblue Invited can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Jetblue Invited in the Finance & Accounting industry. The Finance & Accounting 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.
Technology acceleration in Forth Industrial Revolution
– Jetblue Invited has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Jetblue Invited needs to keep up with the evolution of technology in the Finance & Accounting 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.
Environmental challenges
– Jetblue Invited 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. Jetblue Invited can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Jetblue Invited 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 Jetblue Invited is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Jetblue Invited 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 JetBlue Airways IPO Valuation 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 JetBlue Airways IPO Valuation 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 JetBlue Airways IPO Valuation 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 JetBlue Airways IPO Valuation 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 JetBlue Airways IPO Valuation 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 Jetblue Invited needs to make to build a sustainable competitive advantage.