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 - – increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings,
there is backlash against globalization, cloud computing is disrupting traditional business models, 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 -
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Vivacolombia Domestic 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.
Effective Research and Development (R&D)
– Vivacolombia Domestic 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 VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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.
Ability to recruit top talent
– Vivacolombia Domestic is one of the leading recruiters in the industry. Managers in the VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
Strong track record of project management
– Vivacolombia Domestic is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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.
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 -
Low market penetration in new markets
– Outside its home market of Vivacolombia Domestic, firm in the HBR case study VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 Vivacolombia Domestic supply chain. Even after few cautionary changes mentioned in the HBR case study - VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Vivacolombia Domestic vulnerable to further global disruptions in South East Asia.
Workers concerns about automation
– As automation is fast increasing in the segment, Vivacolombia Domestic 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.
No frontier risks strategy
– After analyzing the HBR case study VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America, it seems that company is thinking about the frontier risks that can impact Global Business strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Slow decision making process
– As mentioned earlier in the report, Vivacolombia Domestic 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. Vivacolombia Domestic 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.
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.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America, is just above the industry average. Vivacolombia Domestic 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.
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.
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 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.
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 -
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Vivacolombia Domestic in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Vivacolombia Domestic 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.
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.
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.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Vivacolombia Domestic 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 Vivacolombia Domestic to hire the very best people irrespective of their geographical location.
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.
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.
Developing new processes and practices
– Vivacolombia Domestic can develop new processes and procedures in Global Business 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.
Creating value in data economy
– The success of analytics program of Vivacolombia Domestic has opened avenues for new revenue streams for the organization in the industry. This can help Vivacolombia Domestic to build a more holistic ecosystem as suggested in the VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America case study. Vivacolombia Domestic can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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 -
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.
Consumer confidence and its impact on Vivacolombia Domestic 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.
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.
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 Vivacolombia Domestic.
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.
Regulatory challenges
– Vivacolombia Domestic 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 Global Business industry regulations.
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.
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.
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.
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.
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 Vivacolombia Domestic in the Global Business 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 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.
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.
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.
