Case Study Description of JetBlue: Prepare for Financing
The CFO of JetBlue is trying to decide which of two financing proposals to pursue. A straight equity issue will dilute his principal shareholders' ownership, but seems like the safer alternative in an industry that is notorious for its high failure rate. On the other hand, a convertible debt alternative seems less dilutive, and cheaper, but brings with it an increased risk of default and financial problems. Which option should John Owen pursue?
Authors :: Nabil N. El-Hage, Christopher E.J. Payton, Darren Smart
Swot Analysis of "JetBlue: Prepare for Financing" written by Nabil N. El-Hage, Christopher E.J. Payton, Darren Smart includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Jetblue Dilutive facing as an external strategic factors. Some of the topics covered in JetBlue: Prepare for Financing case study are - Strategic Management Strategies, Costs, Entrepreneurial finance, Growth strategy and Finance & Accounting.
Some of the macro environment factors that can be used to understand the JetBlue: Prepare for Financing casestudy better are - – technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels, wage bills are increasing,
cloud computing is disrupting traditional business models, increasing energy prices, etc
Introduction to SWOT Analysis of JetBlue: Prepare for Financing
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in JetBlue: Prepare for Financing case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Jetblue Dilutive, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Jetblue Dilutive 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 JetBlue: Prepare for Financing can be done for the following purposes –
1. Strategic planning using facts provided in JetBlue: Prepare for Financing case study
2. Improving business portfolio management of Jetblue Dilutive
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 Jetblue Dilutive
Strengths JetBlue: Prepare for Financing | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Jetblue Dilutive in JetBlue: Prepare for Financing Harvard Business Review case study are -
Training and development
– Jetblue Dilutive has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in JetBlue: Prepare for Financing 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Jetblue Dilutive digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Jetblue Dilutive 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.
Learning organization
- Jetblue Dilutive 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 Jetblue Dilutive is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in JetBlue: Prepare for Financing Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Organizational Resilience of Jetblue Dilutive
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Jetblue Dilutive does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Jetblue Dilutive has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Jetblue Dilutive to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management
– Jetblue Dilutive is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Successful track record of launching new products
– Jetblue Dilutive has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Jetblue Dilutive 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.
High switching costs
– The high switching costs that Jetblue Dilutive 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.
Cross disciplinary teams
– Horizontal connected teams at the Jetblue Dilutive are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Ability to lead change in Finance & Accounting field
– Jetblue Dilutive 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 Jetblue Dilutive in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Finance & Accounting industry
– JetBlue: Prepare for Financing firm has clearly differentiated products in the market place. This has enabled Jetblue Dilutive to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Jetblue Dilutive to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Jetblue Dilutive in the sector have low bargaining power. JetBlue: Prepare for Financing has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Jetblue Dilutive to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses JetBlue: Prepare for Financing | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of JetBlue: Prepare for Financing are -
Interest costs
– Compare to the competition, Jetblue Dilutive 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study JetBlue: Prepare for Financing, is just above the industry average. Jetblue Dilutive 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.
Slow decision making process
– As mentioned earlier in the report, Jetblue Dilutive 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. Jetblue Dilutive 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.
Need for greater diversity
– Jetblue Dilutive 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.
Products dominated business model
– Even though Jetblue Dilutive 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 - JetBlue: Prepare for Financing should strive to include more intangible value offerings along with its core products and services.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study JetBlue: Prepare for Financing, in the dynamic environment Jetblue Dilutive has struggled to respond to the nimble upstart competition. Jetblue Dilutive has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Jetblue Dilutive 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.
Increasing silos among functional specialists
– The organizational structure of Jetblue Dilutive is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Jetblue Dilutive needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Jetblue Dilutive to focus more on services rather than just following the product oriented approach.
Slow to strategic competitive environment developments
– As JetBlue: Prepare for Financing HBR case study mentions - Jetblue Dilutive 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the JetBlue: Prepare for Financing 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 Jetblue Dilutive has relatively successful track record of launching new products.
Aligning sales with marketing
– It come across in the case study JetBlue: Prepare for Financing 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 JetBlue: Prepare for Financing can leverage the sales team experience to cultivate customer relationships as Jetblue Dilutive is planning to shift buying processes online.
Opportunities JetBlue: Prepare for Financing | 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 JetBlue: Prepare for Financing are -
Leveraging digital technologies
– Jetblue Dilutive 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.
Buying journey improvements
– Jetblue Dilutive can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. JetBlue: Prepare for Financing 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.
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. Jetblue Dilutive can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Jetblue Dilutive 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.
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. Jetblue Dilutive can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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. Jetblue Dilutive 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. Jetblue Dilutive 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.
Loyalty marketing
– Jetblue Dilutive 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.
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 Jetblue Dilutive 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 Jetblue Dilutive 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 Jetblue Dilutive 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 Jetblue Dilutive to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Jetblue Dilutive 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Jetblue Dilutive is facing challenges because of the dominance of functional experts in the organization. JetBlue: Prepare for Financing 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.
Better consumer reach
– The expansion of the 5G network will help Jetblue Dilutive to increase its market reach. Jetblue Dilutive 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.
Threats JetBlue: Prepare for Financing External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study JetBlue: Prepare for Financing are -
Stagnating economy with rate increase
– Jetblue Dilutive can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Shortening product life cycle
– it is one of the major threat that Jetblue Dilutive 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 Jetblue Dilutive with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Jetblue Dilutive in the Finance & Accounting sector and impact the bottomline 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. Jetblue Dilutive 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Jetblue Dilutive 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study JetBlue: Prepare for Financing, Jetblue Dilutive 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 .
Environmental challenges
– Jetblue Dilutive 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. Jetblue Dilutive can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Technology acceleration in Forth Industrial Revolution
– Jetblue Dilutive has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Jetblue Dilutive 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 dependence on third party suppliers
– Jetblue Dilutive 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.
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 Jetblue Dilutive.
Regulatory challenges
– Jetblue Dilutive 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.
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. Jetblue Dilutive can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of JetBlue: Prepare for Financing 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 JetBlue: Prepare for Financing 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 JetBlue: Prepare for Financing 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 JetBlue: Prepare for Financing 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 JetBlue: Prepare for Financing 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 Jetblue Dilutive needs to make to build a sustainable competitive advantage.