Case Study Description of Transaero: Turbulent Times
By January 2015, OJSC Transaero Airlines (Transaero) was the largest Russian open joint-stock airline and the second-largest airline carrier in Russia and Eastern Europe combined. Tracing its history back to 1990, Transaero was the safest airline in Russia and was ranked 17th in the world in 2015 in terms of safety. In September 2015, the public learned that Transaero had serious financial troubles, which could lead to bankruptcy for the firm. The news came as a shock because Transaero had demonstrated a stable performance accompanied by sound financial results for many years. The 2015 news revealed that Transaero was unable to service its debt of US$4 billion, including the company's lease obligations. Was it possible for the safest, second-largest Russian airline company to avoid bankruptcy? Elena Senatorova is affiliated with Moscow State University. Grigori Erenburg and Ruth Ann Strickland are affiliated with King's University College.
Authors :: Elena Senatorova, Grigori Erenburg, Ruth Ann Strickland
Swot Analysis of "Transaero: Turbulent Times" written by Elena Senatorova, Grigori Erenburg, Ruth Ann Strickland includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Transaero Airline facing as an external strategic factors. Some of the topics covered in Transaero: Turbulent Times case study are - Strategic Management Strategies, Financial management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Transaero: Turbulent Times casestudy better are - – there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices, there is backlash against globalization, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion,
geopolitical disruptions, wage bills are increasing, etc
Introduction to SWOT Analysis of Transaero: Turbulent Times
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Transaero: Turbulent Times case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Transaero Airline, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Transaero Airline 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 Transaero: Turbulent Times can be done for the following purposes –
1. Strategic planning using facts provided in Transaero: Turbulent Times case study
2. Improving business portfolio management of Transaero Airline
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 Transaero Airline
Strengths Transaero: Turbulent Times | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Transaero Airline in Transaero: Turbulent Times Harvard Business Review case study are -
Learning organization
- Transaero Airline 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 Transaero Airline is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Transaero: Turbulent Times Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Transaero Airline 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.
Organizational Resilience of Transaero Airline
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Transaero Airline does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– Transaero Airline has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Transaero: Turbulent Times 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 Transaero: Turbulent Times 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.
Innovation driven organization
– Transaero Airline is one of the most innovative firm in sector. Manager in Transaero: Turbulent Times Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Strong track record of project management
– Transaero Airline is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of Transaero Airline in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Low bargaining power of suppliers
– Suppliers of Transaero Airline in the sector have low bargaining power. Transaero: Turbulent Times has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Transaero Airline to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Transaero Airline 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 Elena Senatorova, Grigori Erenburg, Ruth Ann Strickland 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.
High switching costs
– The high switching costs that Transaero Airline 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.
Ability to recruit top talent
– Transaero Airline is one of the leading recruiters in the industry. Managers in the Transaero: Turbulent Times are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses Transaero: Turbulent Times | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Transaero: Turbulent Times are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Transaero: Turbulent Times, in the dynamic environment Transaero Airline has struggled to respond to the nimble upstart competition. Transaero Airline has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High cash cycle compare to competitors
Transaero Airline 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Transaero Airline 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 strategic competitive environment developments
– As Transaero: Turbulent Times HBR case study mentions - Transaero Airline 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.
Increasing silos among functional specialists
– The organizational structure of Transaero Airline is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Transaero Airline needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Transaero Airline to focus more on services rather than just following the product oriented approach.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Transaero: Turbulent Times, it seems that the employees of Transaero Airline 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.
Capital Spending Reduction
– Even during the low interest decade, Transaero Airline 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Transaero: Turbulent Times 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 Transaero Airline has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, firm in the HBR case study Transaero: Turbulent Times 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 Transaero Airline 's lucrative customers.
No frontier risks strategy
– After analyzing the HBR case study Transaero: Turbulent Times, it seems that company is thinking about the frontier risks that can impact Finance & Accounting 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.
Need for greater diversity
– Transaero Airline 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.
Opportunities Transaero: Turbulent Times | 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 Transaero: Turbulent Times are -
Creating value in data economy
– The success of analytics program of Transaero Airline has opened avenues for new revenue streams for the organization in the industry. This can help Transaero Airline to build a more holistic ecosystem as suggested in the Transaero: Turbulent Times case study. Transaero Airline can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Transaero Airline is facing challenges because of the dominance of functional experts in the organization. Transaero: Turbulent Times 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.
Manufacturing automation
– Transaero Airline can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Transaero Airline 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, Transaero: Turbulent Times, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Transaero Airline can use these opportunities to build new business models that can help the communities that Transaero Airline operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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 Transaero Airline 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Transaero Airline can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Leveraging digital technologies
– Transaero Airline 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.
Loyalty marketing
– Transaero Airline has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Developing new processes and practices
– Transaero Airline can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Transaero Airline 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.
Building a culture of innovation
– managers at Transaero Airline 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Transaero Airline 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.
Threats Transaero: Turbulent Times External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Transaero: Turbulent Times are -
Consumer confidence and its impact on Transaero Airline 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.
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 Transaero Airline business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Transaero Airline 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. Transaero Airline can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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.
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. Transaero Airline 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.
Shortening product life cycle
– it is one of the major threat that Transaero Airline is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Transaero Airline needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Increasing wage structure of Transaero Airline
– 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 Transaero Airline.
Technology acceleration in Forth Industrial Revolution
– Transaero Airline has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Transaero Airline needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
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. Transaero Airline can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Transaero Airline with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Transaero Airline 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 Transaero: Turbulent Times .
Weighted SWOT Analysis of Transaero: Turbulent Times 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 Transaero: Turbulent Times 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 Transaero: Turbulent Times 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 Transaero: Turbulent Times 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 Transaero: Turbulent Times 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 Transaero Airline needs to make to build a sustainable competitive advantage.
