VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Global Business
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America
The case describes the emergence and business model of VivaColombia, a low-cost Colombian airline. The airline was established in 2008, although it did not begin operations until May 2012. Since its inception, VivaColombia has grown within both the domestic and international markets. It provides passenger transportation services to major and intermediate cities in Colombia and to major cities in international destinations. In 2015, VivaColombia had nine Airbus A320 aircraft serving 21 routes in Colombia and six international routes in North, Central, and South America. It had over 500 employees. In 2015, it carried over 2.9 million passengers on domestic and international flights, with sales of $US119.2 million and profits of more than $US971,000. Although VivaColombia's board of directors was satisfied with the results achieved to date, they disagreed about how to proceed. Some board members believed that VivaColombia should consolidate its domestic operations. They were concerned about the large number of customer service complaints that had accompanied its rapid growth. In addition, two low-cost international carriers were planning to enter the Colombian market, which the board feared would jeopardize VivaColombia's position in the domestic market. Other board members thought VivaColombia should take advantage of the opportunity to expand into Brazil, a major Latin American market, presented by Aerocivil, Colombia's civil aviation authority, which had authorized VivaColombia to operate the BogotA?, Colombia-Sao Paulo, Brazil route. Students must decide whether the company should expand into Brazil or consolidate operations in the domestic market.
Swot Analysis of "VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America" written by Elkin Rave, Juan Franco includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Vivacolombia Domestic facing as an external strategic factors. Some of the topics covered in VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America case study are - Strategic Management Strategies, Decision making, Supply chain and Global Business.
Some of the macro environment factors that can be used to understand the VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America casestudy better are - – challanges to central banks by blockchain based private currencies, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, technology disruption, wage bills are increasing, supply chains are disrupted by pandemic , there is increasing trade war between United States & China,
banking and financial system is disrupted by Bitcoin and other crypto currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Vivacolombia Domestic, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Vivacolombia Domestic 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 VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America can be done for the following purposes –
1. Strategic planning using facts provided in VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America case study
2. Improving business portfolio management of Vivacolombia Domestic
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Vivacolombia Domestic
Strengths VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Vivacolombia Domestic in VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Vivacolombia Domestic in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Vivacolombia Domestic 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.
Diverse revenue streams
– Vivacolombia Domestic is present in almost all the verticals within the industry. This has provided firm in VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America 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.
High brand equity
– Vivacolombia Domestic has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Vivacolombia Domestic to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Vivacolombia Domestic 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 Vivacolombia Domestic is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Training and development
– Vivacolombia Domestic has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America 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
– Vivacolombia Domestic has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Vivacolombia Domestic 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.
Operational resilience
– The operational resilience strategy in the VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America 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.
Sustainable margins compare to other players in Global Business industry
– VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America firm has clearly differentiated products in the market place. This has enabled Vivacolombia Domestic to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Vivacolombia Domestic to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Vivacolombia Domestic in the sector have low bargaining power. VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Vivacolombia Domestic to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Vivacolombia Domestic
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Vivacolombia Domestic does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Vivacolombia Domestic is one of the most innovative firm in sector. Manager in VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America 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 Vivacolombia Domestic has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America HBR case study mentions - Vivacolombia Domestic 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.
High operating costs
– Compare to the competitors, firm in the HBR case study VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America 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 Vivacolombia Domestic 's lucrative customers.
High bargaining power of channel partners
– Because of the regulatory requirements, Elkin Rave, Juan Franco suggests that, Vivacolombia Domestic is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Capital Spending Reduction
– Even during the low interest decade, Vivacolombia Domestic has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America, it seems that the employees of Vivacolombia Domestic 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.
Aligning sales with marketing
– It come across in the case study VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America 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 VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America can leverage the sales team experience to cultivate customer relationships as Vivacolombia Domestic is planning to shift buying processes online.
Interest costs
– Compare to the competition, Vivacolombia Domestic 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.
Lack of clear differentiation of Vivacolombia Domestic products
– To increase the profitability and margins on the products, Vivacolombia Domestic needs to provide more differentiated products than what it is currently offering in the marketplace.
Need for greater diversity
– Vivacolombia Domestic 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America, in the dynamic environment Vivacolombia Domestic has struggled to respond to the nimble upstart competition. Vivacolombia Domestic has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America | 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 VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America are -
Learning at scale
– Online learning technologies has now opened space for Vivacolombia Domestic 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.
Buying journey improvements
– Vivacolombia Domestic can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America 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.
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 Vivacolombia Domestic in the consumer business. Now Vivacolombia Domestic can target international markets with far fewer capital restrictions requirements than the existing system.
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 Vivacolombia Domestic 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.
Better consumer reach
– The expansion of the 5G network will help Vivacolombia Domestic to increase its market reach. Vivacolombia Domestic 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.
Using analytics as competitive advantage
– Vivacolombia Domestic 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 VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Vivacolombia Domestic to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Loyalty marketing
– Vivacolombia Domestic 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.
Building a culture of innovation
– managers at Vivacolombia Domestic 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 Global Business segment.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Vivacolombia Domestic is facing challenges because of the dominance of functional experts in the organization. VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Vivacolombia Domestic 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, VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Vivacolombia Domestic can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Vivacolombia Domestic 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Vivacolombia Domestic can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America are -
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Vivacolombia Domestic can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Vivacolombia Domestic 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 VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America, Vivacolombia Domestic may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
Shortening product life cycle
– it is one of the major threat that Vivacolombia Domestic is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Vivacolombia Domestic
– 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 Vivacolombia Domestic.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Vivacolombia Domestic with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Vivacolombia Domestic business can come under increasing regulations regarding data privacy, data security, etc.
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.
Technology acceleration in Forth Industrial Revolution
– Vivacolombia Domestic has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Vivacolombia Domestic needs to keep up with the evolution of technology in the Global Business sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Vivacolombia Domestic 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 VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America .
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. Vivacolombia Domestic needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Environmental challenges
– Vivacolombia Domestic 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. Vivacolombia Domestic can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Vivacolombia Domestic in the Global Business industry. The Global Business 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.
Weighted SWOT Analysis of VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America 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 VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America 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 VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America 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 VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America 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 VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America 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 Vivacolombia Domestic needs to make to build a sustainable competitive advantage.