Case Study Description of NWA, Inc. - Northwest Airlines Revenue Management
Northwest Airlines is evaluating improvements to its revenue management system. This system executes a program of economic price discrimination under which the airline attempts to control the conditions on its discount fare offerings. Students must evaluate the effect of deregulation on the economics of the airline industry, and weigh the importance of aggressive asset management. They must then evaluate price discrimination as a means for airlines to maximize the profit contribution from the fixed inventory of seats on each flight. A secondary issue for the case (though it is crucial for airlines) is the importance of the proposed technology to Northwest's competitive position in the industry.
Swot Analysis of "NWA, Inc. - Northwest Airlines Revenue Management" written by Jonathan Tiemann includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Airlines Northwest facing as an external strategic factors. Some of the topics covered in NWA, Inc. - Northwest Airlines Revenue Management case study are - Strategic Management Strategies, Marketing, Operations management, Pricing, Regulation and Finance & Accounting.
Some of the macro environment factors that can be used to understand the NWA, Inc. - Northwest Airlines Revenue Management casestudy better are - – supply chains are disrupted by pandemic , there is increasing trade war between United States & China, increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation, there is backlash against globalization, increasing household debt because of falling income levels,
challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of NWA, Inc. - Northwest Airlines Revenue Management
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in NWA, Inc. - Northwest Airlines Revenue Management case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Airlines Northwest, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Airlines Northwest 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 NWA, Inc. - Northwest Airlines Revenue Management can be done for the following purposes –
1. Strategic planning using facts provided in NWA, Inc. - Northwest Airlines Revenue Management case study
2. Improving business portfolio management of Airlines Northwest
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 Airlines Northwest
Strengths NWA, Inc. - Northwest Airlines Revenue Management | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Airlines Northwest in NWA, Inc. - Northwest Airlines Revenue Management Harvard Business Review case study are -
Analytics focus
– Airlines Northwest 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 Jonathan Tiemann 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.
Training and development
– Airlines Northwest has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in NWA, Inc. - Northwest Airlines Revenue Management 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.
Ability to lead change in Finance & Accounting field
– Airlines Northwest is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Airlines Northwest in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Cross disciplinary teams
– Horizontal connected teams at the Airlines Northwest 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.
High switching costs
– The high switching costs that Airlines Northwest 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.
Sustainable margins compare to other players in Finance & Accounting industry
– NWA, Inc. - Northwest Airlines Revenue Management firm has clearly differentiated products in the market place. This has enabled Airlines Northwest to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Airlines Northwest to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Airlines Northwest in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Airlines Northwest is one of the most innovative firm in sector. Manager in NWA, Inc. - Northwest Airlines Revenue Management Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High brand equity
– Airlines Northwest has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Airlines Northwest to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Airlines Northwest digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Airlines Northwest 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.
Successful track record of launching new products
– Airlines Northwest has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Airlines Northwest 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.
Learning organization
- Airlines Northwest 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 Airlines Northwest is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in NWA, Inc. - Northwest Airlines Revenue Management Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses NWA, Inc. - Northwest Airlines Revenue Management | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of NWA, Inc. - Northwest Airlines Revenue Management 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 Airlines Northwest supply chain. Even after few cautionary changes mentioned in the HBR case study - NWA, Inc. - Northwest Airlines Revenue Management, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Airlines Northwest vulnerable to further global disruptions in South East Asia.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the NWA, Inc. - Northwest Airlines Revenue Management 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 Airlines Northwest has relatively successful track record of launching new products.
No frontier risks strategy
– After analyzing the HBR case study NWA, Inc. - Northwest Airlines Revenue Management, 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
– Airlines Northwest 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.
High operating costs
– Compare to the competitors, firm in the HBR case study NWA, Inc. - Northwest Airlines Revenue Management 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 Airlines Northwest 's lucrative customers.
Lack of clear differentiation of Airlines Northwest products
– To increase the profitability and margins on the products, Airlines Northwest needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study NWA, Inc. - Northwest Airlines Revenue Management, it seems that the employees of Airlines Northwest 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study NWA, Inc. - Northwest Airlines Revenue Management, is just above the industry average. Airlines Northwest 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study NWA, Inc. - Northwest Airlines Revenue Management, in the dynamic environment Airlines Northwest has struggled to respond to the nimble upstart competition. Airlines Northwest has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow decision making process
– As mentioned earlier in the report, Airlines Northwest 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. Airlines Northwest 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Airlines Northwest is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study NWA, Inc. - Northwest Airlines Revenue Management can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities NWA, Inc. - Northwest Airlines Revenue Management | 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 NWA, Inc. - Northwest Airlines Revenue Management are -
Buying journey improvements
– Airlines Northwest can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. NWA, Inc. - Northwest Airlines Revenue Management 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.
Loyalty marketing
– Airlines Northwest 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.
Using analytics as competitive advantage
– Airlines Northwest 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 NWA, Inc. - Northwest Airlines Revenue Management - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Airlines Northwest to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Airlines Northwest is facing challenges because of the dominance of functional experts in the organization. NWA, Inc. - Northwest Airlines Revenue Management 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Airlines Northwest can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Airlines Northwest 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 Airlines Northwest to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Airlines Northwest 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.
Better consumer reach
– The expansion of the 5G network will help Airlines Northwest to increase its market reach. Airlines Northwest 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Airlines Northwest 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.
Developing new processes and practices
– Airlines Northwest 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.
Creating value in data economy
– The success of analytics program of Airlines Northwest has opened avenues for new revenue streams for the organization in the industry. This can help Airlines Northwest to build a more holistic ecosystem as suggested in the NWA, Inc. - Northwest Airlines Revenue Management case study. Airlines Northwest can build new products and services such as - data insight services, data privacy related products, data based consulting services, 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 Airlines Northwest in the consumer business. Now Airlines Northwest can target international markets with far fewer capital restrictions requirements than the existing system.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Airlines Northwest 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.
Threats NWA, Inc. - Northwest Airlines Revenue Management External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study NWA, Inc. - Northwest Airlines Revenue Management are -
Environmental challenges
– Airlines Northwest 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. Airlines Northwest can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Airlines Northwest 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 NWA, Inc. - Northwest Airlines Revenue Management .
High dependence on third party suppliers
– Airlines Northwest 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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study NWA, Inc. - Northwest Airlines Revenue Management, Airlines Northwest 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 .
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. Airlines Northwest 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.
Technology acceleration in Forth Industrial Revolution
– Airlines Northwest has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Airlines Northwest 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.
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 Airlines Northwest in the Finance & Accounting sector and impact the bottomline of the organization.
Increasing wage structure of Airlines Northwest
– 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 Airlines Northwest.
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. Airlines Northwest needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Airlines Northwest 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.
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 Airlines Northwest.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Airlines Northwest 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 NWA, Inc. - Northwest Airlines Revenue Management 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 NWA, Inc. - Northwest Airlines Revenue Management 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 NWA, Inc. - Northwest Airlines Revenue Management 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 NWA, Inc. - Northwest Airlines Revenue Management 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 NWA, Inc. - Northwest Airlines Revenue Management 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 Airlines Northwest needs to make to build a sustainable competitive advantage.
