Case Study Description of 2012 Fuel Hedging at JetBlue Airways
At the start of 2012, Helena Morales, an equity analyst, was examining the jet fuel hedging strategy of JetBlue Airways for the coming year. Airlines cross-hedged their jet fuel price risk using derivatives contracts on other oil products such as WTI and Brent crude oil. Consequently, an airline was exposed to basis risk. In 2011, dislocations in the oil market led to a Brent-WTI premium wherein jet fuel started to move with Brent instead of WTI, as it traditionally did. Faced with hedging losses, several U.S. airlines started to change their hedging strategies, moving away from WTI. But others worried that the Brent-WTI premium might be a temporary phenomenon. For 2012, would JetBlue continue using WTI for its hedges, or would it switch to an alternative such as Brent?
Swot Analysis of "2012 Fuel Hedging at JetBlue Airways" written by Pedro Matos includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Wti Brent facing as an external strategic factors. Some of the topics covered in 2012 Fuel Hedging at JetBlue Airways case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the 2012 Fuel Hedging at JetBlue Airways casestudy better are - – cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, challanges to central banks by blockchain based private currencies, wage bills are increasing,
supply chains are disrupted by pandemic , technology disruption, etc
Introduction to SWOT Analysis of 2012 Fuel Hedging at JetBlue Airways
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in 2012 Fuel Hedging at JetBlue Airways case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Wti Brent, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Wti Brent 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 2012 Fuel Hedging at JetBlue Airways can be done for the following purposes –
1. Strategic planning using facts provided in 2012 Fuel Hedging at JetBlue Airways case study
2. Improving business portfolio management of Wti Brent
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 Wti Brent
Strengths 2012 Fuel Hedging at JetBlue Airways | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Wti Brent in 2012 Fuel Hedging at JetBlue Airways Harvard Business Review case study are -
Highly skilled collaborators
– Wti Brent has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in 2012 Fuel Hedging at JetBlue Airways HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Wti Brent 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 Wti Brent is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in 2012 Fuel Hedging at JetBlue Airways Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Finance & Accounting industry
– 2012 Fuel Hedging at JetBlue Airways firm has clearly differentiated products in the market place. This has enabled Wti Brent to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Wti Brent to invest into research and development (R&D) and innovation.
Strong track record of project management
– Wti Brent is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to recruit top talent
– Wti Brent is one of the leading recruiters in the industry. Managers in the 2012 Fuel Hedging at JetBlue Airways are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Low bargaining power of suppliers
– Suppliers of Wti Brent in the sector have low bargaining power. 2012 Fuel Hedging at JetBlue Airways has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Wti Brent to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy in the 2012 Fuel Hedging at JetBlue Airways 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.
Ability to lead change in Finance & Accounting field
– Wti Brent 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 Wti Brent in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Wti Brent digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Wti Brent 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 switching costs
– The high switching costs that Wti Brent 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.
Organizational Resilience of Wti Brent
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Wti Brent does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Wti Brent 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 2012 Fuel Hedging at JetBlue Airways - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses 2012 Fuel Hedging at JetBlue Airways | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of 2012 Fuel Hedging at JetBlue Airways are -
Workers concerns about automation
– As automation is fast increasing in the segment, Wti Brent 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.
High operating costs
– Compare to the competitors, firm in the HBR case study 2012 Fuel Hedging at JetBlue Airways 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 Wti Brent 's lucrative customers.
High bargaining power of channel partners
– Because of the regulatory requirements, Pedro Matos suggests that, Wti Brent is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Skills based hiring
– The stress on hiring functional specialists at Wti Brent 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.
Increasing silos among functional specialists
– The organizational structure of Wti Brent is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Wti Brent needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Wti Brent to focus more on services rather than just following the product oriented approach.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the 2012 Fuel Hedging at JetBlue Airways 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 Wti Brent has relatively successful track record of launching new products.
Slow decision making process
– As mentioned earlier in the report, Wti Brent 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. Wti Brent 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 strategic competitive environment developments
– As 2012 Fuel Hedging at JetBlue Airways HBR case study mentions - Wti Brent 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study 2012 Fuel Hedging at JetBlue Airways, it seems that the employees of Wti Brent 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.
No frontier risks strategy
– After analyzing the HBR case study 2012 Fuel Hedging at JetBlue Airways, 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
– Wti Brent has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Opportunities 2012 Fuel Hedging at JetBlue Airways | 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 2012 Fuel Hedging at JetBlue Airways are -
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 Wti Brent in the consumer business. Now Wti Brent can target international markets with far fewer capital restrictions requirements than the existing system.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Wti Brent can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– Wti Brent 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.
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. Wti Brent 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. Wti Brent 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Wti Brent 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 Wti Brent to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of Wti Brent has opened avenues for new revenue streams for the organization in the industry. This can help Wti Brent to build a more holistic ecosystem as suggested in the 2012 Fuel Hedging at JetBlue Airways case study. Wti Brent can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help Wti Brent to increase its market reach. Wti Brent 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, Wti Brent 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.
Using analytics as competitive advantage
– Wti Brent 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 2012 Fuel Hedging at JetBlue Airways - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Wti Brent to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Wti Brent 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
– Wti Brent 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.
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 Wti Brent 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.
Buying journey improvements
– Wti Brent can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. 2012 Fuel Hedging at JetBlue Airways 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.
Threats 2012 Fuel Hedging at JetBlue Airways External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study 2012 Fuel Hedging at JetBlue Airways are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Wti Brent 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.
Regulatory challenges
– Wti Brent 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.
Consumer confidence and its impact on Wti Brent 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 2012 Fuel Hedging at JetBlue Airways, Wti Brent 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 .
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.
Technology acceleration in Forth Industrial Revolution
– Wti Brent has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Wti Brent 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.
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. Wti Brent 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.
Environmental challenges
– Wti Brent 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. Wti Brent can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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. Wti Brent can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Wti Brent
– 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 Wti Brent.
High dependence on third party suppliers
– Wti Brent 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
– Wti Brent 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.
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 Wti Brent in the Finance & Accounting sector and impact the bottomline of the organization.
Weighted SWOT Analysis of 2012 Fuel Hedging at JetBlue Airways 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 2012 Fuel Hedging at JetBlue Airways 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 2012 Fuel Hedging at JetBlue Airways 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 2012 Fuel Hedging at JetBlue Airways 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 2012 Fuel Hedging at JetBlue Airways 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 Wti Brent needs to make to build a sustainable competitive advantage.
