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 - – increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, wage bills are increasing, there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, increasing energy prices, increasing government debt because of Covid-19 spendings,
supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, 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 -
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 brand equity
– Wti Brent has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Wti Brent to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
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.
Training and development
– Wti Brent has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in 2012 Fuel Hedging at JetBlue Airways 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.
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.
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.
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.
Innovation driven organization
– Wti Brent is one of the most innovative firm in sector. Manager in 2012 Fuel Hedging at JetBlue Airways Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Successful track record of launching new products
– Wti Brent has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Wti Brent 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.
Superior customer experience
– The customer experience strategy of Wti Brent in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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 -
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.
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.
Lack of clear differentiation of Wti Brent products
– To increase the profitability and margins on the products, Wti Brent needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Wti Brent is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study 2012 Fuel Hedging at JetBlue Airways can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study 2012 Fuel Hedging at JetBlue Airways, is just above the industry average. Wti Brent 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 2012 Fuel Hedging at JetBlue Airways, in the dynamic environment Wti Brent has struggled to respond to the nimble upstart competition. Wti Brent has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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 cash cycle compare to competitors
Wti Brent 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.
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 -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Wti Brent can use these opportunities to build new business models that can help the communities that Wti Brent operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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.
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.
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. Wti Brent can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Wti Brent is facing challenges because of the dominance of functional experts in the organization. 2012 Fuel Hedging at JetBlue Airways 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.
Learning at scale
– Online learning technologies has now opened space for Wti Brent 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.
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.
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.
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.
Loyalty marketing
– Wti Brent 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.
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.
Building a culture of innovation
– managers at Wti Brent can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
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.
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 -
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.
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.
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.
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.
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.
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.
Shortening product life cycle
– it is one of the major threat that Wti Brent is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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. Wti Brent needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Wti Brent 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 2012 Fuel Hedging at JetBlue Airways .
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 Wti Brent.
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.
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.