Valuation Ratios in the Airline Industry SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Valuation Ratios in the Airline Industry
This case is available in only hard copy format (HBP does not have digital distribution rights to the content). As a result, a digital Educator Copy of the case is not available through this web site.Four firms in the airline industry illustrate the underlying differences in valuation multiples (price-earnings and price-to-book).
Authors :: Paul M. Healy, Krishna G. Palepu, Jonathan Barnett
Swot Analysis of "Valuation Ratios in the Airline Industry" written by Paul M. Healy, Krishna G. Palepu, Jonathan Barnett includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Site.four Copy facing as an external strategic factors. Some of the topics covered in Valuation Ratios in the Airline Industry case study are - Strategic Management Strategies, Financial analysis and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Valuation Ratios in the Airline Industry casestudy better are - – challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China,
increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of Valuation Ratios in the Airline Industry
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Valuation Ratios in the Airline Industry case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Site.four Copy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Site.four Copy 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 Valuation Ratios in the Airline Industry can be done for the following purposes –
1. Strategic planning using facts provided in Valuation Ratios in the Airline Industry case study
2. Improving business portfolio management of Site.four Copy
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 Site.four Copy
Strengths Valuation Ratios in the Airline Industry | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Site.four Copy in Valuation Ratios in the Airline Industry Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Site.four Copy 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.
Learning organization
- Site.four Copy 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 Site.four Copy is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Valuation Ratios in the Airline Industry Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Site.four Copy digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Site.four Copy 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.
Superior customer experience
– The customer experience strategy of Site.four Copy in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Site.four Copy 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
– Valuation Ratios in the Airline Industry firm has clearly differentiated products in the market place. This has enabled Site.four Copy to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Site.four Copy to invest into research and development (R&D) and innovation.
Organizational Resilience of Site.four Copy
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Site.four Copy does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy in the Valuation Ratios in the Airline Industry 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.
High brand equity
– Site.four Copy has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Site.four Copy to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Finance & Accounting field
– Site.four Copy 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 Site.four Copy in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Site.four Copy 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 Paul M. Healy, Krishna G. Palepu, Jonathan Barnett 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.
Diverse revenue streams
– Site.four Copy is present in almost all the verticals within the industry. This has provided firm in Valuation Ratios in the Airline Industry case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Weaknesses Valuation Ratios in the Airline Industry | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Valuation Ratios in the Airline Industry are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Valuation Ratios in the Airline Industry, is just above the industry average. Site.four Copy 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 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 Site.four Copy supply chain. Even after few cautionary changes mentioned in the HBR case study - Valuation Ratios in the Airline Industry, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Site.four Copy vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– It come across in the case study Valuation Ratios in the Airline Industry that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Valuation Ratios in the Airline Industry can leverage the sales team experience to cultivate customer relationships as Site.four Copy is planning to shift buying processes online.
High cash cycle compare to competitors
Site.four Copy 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.
Slow decision making process
– As mentioned earlier in the report, Site.four Copy 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. Site.four Copy 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 Valuation Ratios in the Airline Industry, 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.
Low market penetration in new markets
– Outside its home market of Site.four Copy, firm in the HBR case study Valuation Ratios in the Airline Industry needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, Site.four Copy 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.
Products dominated business model
– Even though Site.four Copy 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 - Valuation Ratios in the Airline Industry should strive to include more intangible value offerings along with its core products and services.
Increasing silos among functional specialists
– The organizational structure of Site.four Copy is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Site.four Copy needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Site.four Copy to focus more on services rather than just following the product oriented approach.
Slow to strategic competitive environment developments
– As Valuation Ratios in the Airline Industry HBR case study mentions - Site.four Copy 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.
Opportunities Valuation Ratios in the Airline Industry | 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 Valuation Ratios in the Airline Industry are -
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 Site.four Copy 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.
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. Site.four Copy can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of Site.four Copy has opened avenues for new revenue streams for the organization in the industry. This can help Site.four Copy to build a more holistic ecosystem as suggested in the Valuation Ratios in the Airline Industry case study. Site.four Copy 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 Site.four Copy in the consumer business. Now Site.four Copy can target international markets with far fewer capital restrictions requirements than the existing system.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Site.four Copy 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 Site.four Copy to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Site.four Copy 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Site.four Copy is facing challenges because of the dominance of functional experts in the organization. Valuation Ratios in the Airline Industry 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.
Developing new processes and practices
– Site.four Copy 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.
Using analytics as competitive advantage
– Site.four Copy 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 Valuation Ratios in the Airline Industry - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Site.four Copy to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help Site.four Copy to increase its market reach. Site.four Copy 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.
Learning at scale
– Online learning technologies has now opened space for Site.four Copy 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Site.four Copy can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Site.four Copy can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Valuation Ratios in the Airline Industry External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Valuation Ratios in the Airline Industry are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Site.four Copy 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 Valuation Ratios in the Airline Industry .
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 Site.four Copy business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Site.four Copy 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.
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. Site.four Copy 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.
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 Site.four Copy in the Finance & Accounting sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Site.four Copy 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.
Increasing wage structure of Site.four Copy
– 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 Site.four Copy.
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.
Consumer confidence and its impact on Site.four Copy 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Valuation Ratios in the Airline Industry, Site.four Copy 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 .
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 Site.four Copy.
Shortening product life cycle
– it is one of the major threat that Site.four Copy is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Site.four Copy 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 Valuation Ratios in the Airline Industry 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 Valuation Ratios in the Airline Industry 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 Valuation Ratios in the Airline Industry 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 Valuation Ratios in the Airline Industry 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 Valuation Ratios in the Airline Industry 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 Site.four Copy needs to make to build a sustainable competitive advantage.