Case Study Description of Accounting for Frequent Fliers
Airline frequent flier programs offer members the opportunity to earn free flights by accumulating mileage. Accounting and reporting the obligations of airlines and the cost of frequent flier programs raises difficult measurement issues. In 1991, the U.S. Securities and Exchange Commission began to require airlines to disclose the number of free flights program members took. The case allows estimates of the cost and obligations of the United Air Lines program.
Authors :: William J. Bruns Jr., Susan S. Harmeling
Swot Analysis of "Accounting for Frequent Fliers" written by William J. Bruns Jr., Susan S. Harmeling includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Frequent Flier facing as an external strategic factors. Some of the topics covered in Accounting for Frequent Fliers case study are - Strategic Management Strategies, Business law, Costs and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Accounting for Frequent Fliers casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, increasing commodity prices, increasing government debt because of Covid-19 spendings, increasing energy prices, increasing household debt because of falling income levels,
supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of Accounting for Frequent Fliers
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Accounting for Frequent Fliers case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Frequent Flier, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Frequent Flier 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 Accounting for Frequent Fliers can be done for the following purposes –
1. Strategic planning using facts provided in Accounting for Frequent Fliers case study
2. Improving business portfolio management of Frequent Flier
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 Frequent Flier
Strengths Accounting for Frequent Fliers | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Frequent Flier in Accounting for Frequent Fliers Harvard Business Review case study are -
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Frequent Flier digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Frequent Flier has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
High brand equity
– Frequent Flier has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Frequent Flier to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Frequent Flier is one of the most innovative firm in sector. Manager in Accounting for Frequent Fliers Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Analytics focus
– Frequent Flier 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 William J. Bruns Jr., Susan S. Harmeling 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.
Successful track record of launching new products
– Frequent Flier has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Frequent Flier 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Accounting for Frequent Fliers firm has clearly differentiated products in the market place. This has enabled Frequent Flier to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Frequent Flier to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– Frequent Flier is one of the leading recruiters in the industry. Managers in the Accounting for Frequent Fliers are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Effective Research and Development (R&D)
– Frequent Flier 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 Accounting for Frequent Fliers - 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 Frequent Flier
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Frequent Flier does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Frequent Flier in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Frequent Flier 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 Frequent Flier is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Accounting for Frequent Fliers Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Frequent Flier is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses Accounting for Frequent Fliers | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Accounting for Frequent Fliers are -
Slow decision making process
– As mentioned earlier in the report, Frequent Flier 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. Frequent Flier 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.
No frontier risks strategy
– After analyzing the HBR case study Accounting for Frequent Fliers, 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Frequent Flier needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Frequent Flier is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Accounting for Frequent Fliers can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Capital Spending Reduction
– Even during the low interest decade, Frequent Flier 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.
Low market penetration in new markets
– Outside its home market of Frequent Flier, firm in the HBR case study Accounting for Frequent Fliers needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Skills based hiring
– The stress on hiring functional specialists at Frequent Flier 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.
Interest costs
– Compare to the competition, Frequent Flier 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.
Slow to strategic competitive environment developments
– As Accounting for Frequent Fliers HBR case study mentions - Frequent Flier 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.
Lack of clear differentiation of Frequent Flier products
– To increase the profitability and margins on the products, Frequent Flier needs to provide more differentiated products than what it is currently offering in the marketplace.
Increasing silos among functional specialists
– The organizational structure of Frequent Flier is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Frequent Flier needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Frequent Flier to focus more on services rather than just following the product oriented approach.
Opportunities Accounting for Frequent Fliers | 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 Accounting for Frequent Fliers are -
Leveraging digital technologies
– Frequent Flier 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.
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. Frequent Flier 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. Frequent Flier 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.
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 Frequent Flier to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Frequent Flier 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 Frequent Flier to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Frequent Flier 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.
Buying journey improvements
– Frequent Flier can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Accounting for Frequent Fliers 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.
Using analytics as competitive advantage
– Frequent Flier 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 Accounting for Frequent Fliers - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Frequent Flier to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Frequent Flier 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Frequent Flier can use these opportunities to build new business models that can help the communities that Frequent Flier operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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 Frequent Flier in the consumer business. Now Frequent Flier 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, Frequent Flier 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Frequent Flier 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.
Developing new processes and practices
– Frequent Flier 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.
Threats Accounting for Frequent Fliers External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Accounting for Frequent Fliers are -
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 Frequent Flier.
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.
High dependence on third party suppliers
– Frequent Flier 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.
Stagnating economy with rate increase
– Frequent Flier 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.
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 Frequent Flier business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of Frequent Flier
– 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 Frequent Flier.
Environmental challenges
– Frequent Flier 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. Frequent Flier can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Regulatory challenges
– Frequent Flier 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Accounting for Frequent Fliers, Frequent Flier 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 .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Frequent Flier in the Finance & Accounting industry. The Finance & Accounting 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.
Technology acceleration in Forth Industrial Revolution
– Frequent Flier has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Frequent Flier 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.
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. Frequent Flier needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Frequent Flier with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of Accounting for Frequent Fliers 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 Accounting for Frequent Fliers 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 Accounting for Frequent Fliers 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 Accounting for Frequent Fliers 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 Accounting for Frequent Fliers 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 Frequent Flier needs to make to build a sustainable competitive advantage.
