Air India: Maharaja in Debt Trap SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Air India: Maharaja in Debt Trap
In the year 2016, after more than a decade of loss-making, Air India posted an operating profit of INR 1.05 billion. Over the years, Air India's greatest problem has been its crippling debt. At the end of fiscal 2014-15, the airline had a total debt of INR 513.67 billion. While the airline managed to phase out more than INR 50 billion of debt from its books during the year 2015-16, its total debt still stood at INR 460 billion. In order to facilitate the revival of Air India, Ashwani Lohani, known as the "turnaround man", was appointed Chairman and Managing Director of Air India. As Lohani piloted Air India towards revival, efforts were being made to convert INR 100 billion of Air India's debt into equity, a move that would substantially reduce its interest burden and give banks a major say in its functioning. Lohani was in talks with banks and investors who could play a critical role in Air India's debt restructuring. Lohani mulled over the various options related to debt restructuring. It remained to be seen whether Lohani's image as the "turnaround man" coupled with Air India's operating profits would increase investor confidence and help Air India deal with its debt burden. While Air India's modest operating profit was good news, it remained to be seen if it could provide relief to the sick airline's actual financials. It also remained to be seen whether Lohani's attempts at improving employee relations with the organization and the operational changes he was introducing to Air India could help turn the tide for the ailing airline. As of July, 2017, two questions remained: Had Air India really turned the corner under Lohani's leadership? Could Air India's short-term progress help it to overcome the huge debt that had become the "elephant in the room"?
Swot Analysis of "Air India: Maharaja in Debt Trap" written by Vaidyanathan Krishnamurthy, Catherine Xavier includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Air Debt facing as an external strategic factors. Some of the topics covered in Air India: Maharaja in Debt Trap case study are - Strategic Management Strategies, Crisis management, Reorganization and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Air India: Maharaja in Debt Trap casestudy better are - – central banks are concerned over increasing inflation, supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy,
there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, etc
Introduction to SWOT Analysis of Air India: Maharaja in Debt Trap
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Air India: Maharaja in Debt Trap case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Air Debt, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Air Debt 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 Air India: Maharaja in Debt Trap can be done for the following purposes –
1. Strategic planning using facts provided in Air India: Maharaja in Debt Trap case study
2. Improving business portfolio management of Air Debt
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 Air Debt
Strengths Air India: Maharaja in Debt Trap | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Air Debt in Air India: Maharaja in Debt Trap Harvard Business Review case study are -
Training and development
– Air Debt has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Air India: Maharaja in Debt Trap 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.
Operational resilience
– The operational resilience strategy in the Air India: Maharaja in Debt Trap 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 Air Debt in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Strong track record of project management
– Air Debt is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Air Debt 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.
Ability to recruit top talent
– Air Debt is one of the leading recruiters in the industry. Managers in the Air India: Maharaja in Debt Trap are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Finance & Accounting industry
– Air India: Maharaja in Debt Trap firm has clearly differentiated products in the market place. This has enabled Air Debt to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Air Debt to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Air Debt in the sector have low bargaining power. Air India: Maharaja in Debt Trap has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Air Debt to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Air Debt is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Vaidyanathan Krishnamurthy, Catherine Xavier can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Highly skilled collaborators
– Air Debt 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 Air India: Maharaja in Debt Trap HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Air Debt 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.
Successful track record of launching new products
– Air Debt has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Air Debt 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.
Weaknesses Air India: Maharaja in Debt Trap | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Air India: Maharaja in Debt Trap are -
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 Air Debt supply chain. Even after few cautionary changes mentioned in the HBR case study - Air India: Maharaja in Debt Trap, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Air Debt vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, firm in the HBR case study Air India: Maharaja in Debt Trap 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 Air Debt 's lucrative customers.
Skills based hiring
– The stress on hiring functional specialists at Air Debt 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.
Products dominated business model
– Even though Air Debt has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Air India: Maharaja in Debt Trap should strive to include more intangible value offerings along with its core products and services.
High bargaining power of channel partners
– Because of the regulatory requirements, Vaidyanathan Krishnamurthy, Catherine Xavier suggests that, Air Debt 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.
Lack of clear differentiation of Air Debt products
– To increase the profitability and margins on the products, Air Debt needs to provide more differentiated products than what it is currently offering in the marketplace.
Increasing silos among functional specialists
– The organizational structure of Air Debt is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Air Debt needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Air Debt to focus more on services rather than just following the product oriented approach.
Workers concerns about automation
– As automation is fast increasing in the segment, Air Debt 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.
High cash cycle compare to competitors
Air Debt 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Air India: Maharaja in Debt Trap, is just above the industry average. Air Debt 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Air India: Maharaja in Debt Trap 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 Air Debt has relatively successful track record of launching new products.
Opportunities Air India: Maharaja in Debt Trap | 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 Air India: Maharaja in Debt Trap are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Air Debt in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Loyalty marketing
– Air Debt 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 Air Debt 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 Finance & Accounting segment.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Air Debt can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Air Debt can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Using analytics as competitive advantage
– Air Debt 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 Air India: Maharaja in Debt Trap - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Air Debt to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Air Debt 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 Air Debt to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help Air Debt to increase its market reach. Air Debt 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.
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 Air Debt in the consumer business. Now Air Debt can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Air Debt 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Air Debt 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, Air India: Maharaja in Debt Trap, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Air Debt is facing challenges because of the dominance of functional experts in the organization. Air India: Maharaja in Debt Trap 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.
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. Air Debt 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
– Air Debt 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.
Threats Air India: Maharaja in Debt Trap External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Air India: Maharaja in Debt Trap are -
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. Air Debt needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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. Air Debt 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.
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. Air Debt can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Air India: Maharaja in Debt Trap, Air Debt 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 .
Regulatory challenges
– Air Debt 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 Finance & Accounting industry regulations.
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 Air Debt.
Stagnating economy with rate increase
– Air Debt 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.
Shortening product life cycle
– it is one of the major threat that Air Debt 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 Air Debt 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.
High dependence on third party suppliers
– Air Debt 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.
Increasing wage structure of Air Debt
– 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 Air Debt.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Air Debt 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 Air India: Maharaja in Debt Trap .
Weighted SWOT Analysis of Air India: Maharaja in Debt Trap 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 Air India: Maharaja in Debt Trap 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 Air India: Maharaja in Debt Trap 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 Air India: Maharaja in Debt Trap 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 Air India: Maharaja in Debt Trap 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 Air Debt needs to make to build a sustainable competitive advantage.
