Case Study Description of Northwest Airlines: Brush with Bankruptcy (A)--November 1992
Deals with Northwest's financial crisis between the fall of 1992 and the following spring. Northwest's leaders face the problem of how to meet an impending $600 million payment on the 1989 LBO loan when the airline had run out of cash. Concludes by outlining options for Northwest to avert disaster, and it includes a brief background note on financial restructuring.
Swot Analysis of "Northwest Airlines: Brush with Bankruptcy (A)--November 1992" written by Leonard A. Schlesinger, Davis Dyer includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Northwest's Northwest facing as an external strategic factors. Some of the topics covered in Northwest Airlines: Brush with Bankruptcy (A)--November 1992 case study are - Strategic Management Strategies, Financial management, Labor, Mergers & acquisitions, Recession, Reorganization and Technology & Operations.
Some of the macro environment factors that can be used to understand the Northwest Airlines: Brush with Bankruptcy (A)--November 1992 casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs,
talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of Northwest Airlines: Brush with Bankruptcy (A)--November 1992
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Northwest Airlines: Brush with Bankruptcy (A)--November 1992 case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Northwest's Northwest, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Northwest's Northwest 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 Northwest Airlines: Brush with Bankruptcy (A)--November 1992 can be done for the following purposes –
1. Strategic planning using facts provided in Northwest Airlines: Brush with Bankruptcy (A)--November 1992 case study
2. Improving business portfolio management of Northwest's Northwest
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Northwest's Northwest
Strengths Northwest Airlines: Brush with Bankruptcy (A)--November 1992 | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Northwest's Northwest in Northwest Airlines: Brush with Bankruptcy (A)--November 1992 Harvard Business Review case study are -
Highly skilled collaborators
– Northwest's Northwest 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 Northwest Airlines: Brush with Bankruptcy (A)--November 1992 HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Northwest's Northwest in the sector have low bargaining power. Northwest Airlines: Brush with Bankruptcy (A)--November 1992 has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Northwest's Northwest to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– Northwest's Northwest is present in almost all the verticals within the industry. This has provided firm in Northwest Airlines: Brush with Bankruptcy (A)--November 1992 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 Northwest's Northwest 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.
High switching costs
– The high switching costs that Northwest's Northwest 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.
Operational resilience
– The operational resilience strategy in the Northwest Airlines: Brush with Bankruptcy (A)--November 1992 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.
Effective Research and Development (R&D)
– Northwest's Northwest 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 Northwest Airlines: Brush with Bankruptcy (A)--November 1992 - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Technology & Operations industry
– Northwest Airlines: Brush with Bankruptcy (A)--November 1992 firm has clearly differentiated products in the market place. This has enabled Northwest's Northwest to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Northwest's Northwest to invest into research and development (R&D) and innovation.
Strong track record of project management
– Northwest's Northwest is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to lead change in Technology & Operations field
– Northwest's Northwest 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 Northwest's Northwest in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Northwest's Northwest
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Northwest's Northwest does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Northwest's Northwest in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses Northwest Airlines: Brush with Bankruptcy (A)--November 1992 | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Northwest Airlines: Brush with Bankruptcy (A)--November 1992 are -
Skills based hiring
– The stress on hiring functional specialists at Northwest's Northwest 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Northwest Airlines: Brush with Bankruptcy (A)--November 1992, it seems that the employees of Northwest's Northwest 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.
Need for greater diversity
– Northwest's Northwest 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.
Aligning sales with marketing
– It come across in the case study Northwest Airlines: Brush with Bankruptcy (A)--November 1992 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 Northwest Airlines: Brush with Bankruptcy (A)--November 1992 can leverage the sales team experience to cultivate customer relationships as Northwest's Northwest is planning to shift buying processes online.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Northwest Airlines: Brush with Bankruptcy (A)--November 1992, in the dynamic environment Northwest's Northwest has struggled to respond to the nimble upstart competition. Northwest's Northwest has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lack of clear differentiation of Northwest's Northwest products
– To increase the profitability and margins on the products, Northwest's Northwest needs to provide more differentiated products than what it is currently offering in the marketplace.
Workers concerns about automation
– As automation is fast increasing in the segment, Northwest's Northwest needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Northwest's Northwest is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Northwest Airlines: Brush with Bankruptcy (A)--November 1992 can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Interest costs
– Compare to the competition, Northwest's Northwest 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 cash cycle compare to competitors
Northwest's Northwest 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.
Slow decision making process
– As mentioned earlier in the report, Northwest's Northwest 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. Northwest's Northwest 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.
Opportunities Northwest Airlines: Brush with Bankruptcy (A)--November 1992 | 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 Northwest Airlines: Brush with Bankruptcy (A)--November 1992 are -
Loyalty marketing
– Northwest's Northwest 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Northwest's Northwest is facing challenges because of the dominance of functional experts in the organization. Northwest Airlines: Brush with Bankruptcy (A)--November 1992 case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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 Northwest's Northwest 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 Northwest's Northwest 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 Northwest's Northwest to hire the very best people irrespective of their geographical location.
Manufacturing automation
– Northwest's Northwest can use the latest technology developments to improve its manufacturing and designing process in Technology & Operations 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.
Developing new processes and practices
– Northwest's Northwest can develop new processes and procedures in Technology & Operations 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Technology & Operations industry, but it has also influenced the consumer preferences. Northwest's Northwest can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Better consumer reach
– The expansion of the 5G network will help Northwest's Northwest to increase its market reach. Northwest's Northwest 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 Northwest's Northwest 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 Technology & Operations segment.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Northwest's Northwest in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Technology & Operations segment, and it will provide faster access to the consumers.
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 Northwest's Northwest in the consumer business. Now Northwest's Northwest can target international markets with far fewer capital restrictions requirements than the existing system.
Creating value in data economy
– The success of analytics program of Northwest's Northwest has opened avenues for new revenue streams for the organization in the industry. This can help Northwest's Northwest to build a more holistic ecosystem as suggested in the Northwest Airlines: Brush with Bankruptcy (A)--November 1992 case study. Northwest's Northwest can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Northwest's Northwest can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Northwest Airlines: Brush with Bankruptcy (A)--November 1992 External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Northwest Airlines: Brush with Bankruptcy (A)--November 1992 are -
Regulatory challenges
– Northwest's Northwest 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 Technology & Operations industry regulations.
Technology acceleration in Forth Industrial Revolution
– Northwest's Northwest has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Northwest's Northwest needs to keep up with the evolution of technology in the Technology & Operations 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 wage structure of Northwest's Northwest
– 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 Northwest's Northwest.
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 Northwest's Northwest.
Shortening product life cycle
– it is one of the major threat that Northwest's Northwest is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Northwest's Northwest 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.
Environmental challenges
– Northwest's Northwest 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. Northwest's Northwest can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
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 Northwest's Northwest business can come under increasing regulations regarding data privacy, data security, etc.
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 Northwest's Northwest in the Technology & Operations sector and impact the bottomline 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 Northwest's Northwest in the Technology & Operations industry. The Technology & Operations 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.
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. Northwest's Northwest 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.
Stagnating economy with rate increase
– Northwest's Northwest 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 Northwest Airlines: Brush with Bankruptcy (A)--November 1992, Northwest's Northwest may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
Weighted SWOT Analysis of Northwest Airlines: Brush with Bankruptcy (A)--November 1992 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 Northwest Airlines: Brush with Bankruptcy (A)--November 1992 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 Northwest Airlines: Brush with Bankruptcy (A)--November 1992 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 Northwest Airlines: Brush with Bankruptcy (A)--November 1992 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 Northwest Airlines: Brush with Bankruptcy (A)--November 1992 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 Northwest's Northwest needs to make to build a sustainable competitive advantage.
