Preview Travel was a leader in the online travel industry, having generated $80 million in bookings in 1997 and growing at a 34% compound annual growth rate per quarter. This case describes the evolution of Preview Travel's business plan and financing strategy and highlights a financial turning point that the company faced in August 1997. In August 1997, the company was in need of an additional cash infusion and had received strong indications of interest from a major U.S. media company. However, Preview Travel was disappointed with the offer the media company eventually made--$4.50 a share--since it was significantly less than the Series E round a year earlier ($9.00 a share). An investment bank advising Preview Travel believed that Preview Travel could garner a higher valuation in the public market and recommended that the company consider an IPO as an alternative means of raising capital. However, there were risks to this strategy. Closes with the question of whether Preview Travel should accept the "sure" but low offer from the media company or pursue an accelerated and potentially risky IPO.
Swot Analysis of "Preview Travel (A)" written by William A. Sahlman, Nicole Tempest includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Preview Travel facing as an external strategic factors. Some of the topics covered in Preview Travel (A) case study are - Strategic Management Strategies, Financial management, IPO and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Preview Travel (A) casestudy better are - – digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs,
supply chains are disrupted by pandemic , technology disruption, etc
Introduction to SWOT Analysis of Preview Travel (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Preview Travel (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Preview Travel, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Preview Travel 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 Preview Travel (A) can be done for the following purposes –
1. Strategic planning using facts provided in Preview Travel (A) case study
2. Improving business portfolio management of Preview Travel
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Preview Travel
Strengths Preview Travel (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Preview Travel in Preview Travel (A) Harvard Business Review case study are -
Organizational Resilience of Preview Travel
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Preview Travel does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Preview Travel 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 Preview Travel is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Preview Travel (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to lead change in Innovation & Entrepreneurship field
– Preview Travel 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 Preview Travel 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 Innovation & Entrepreneurship industry
– Preview Travel (A) firm has clearly differentiated products in the market place. This has enabled Preview Travel to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Preview Travel to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Preview Travel are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
High brand equity
– Preview Travel has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Preview Travel to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Preview Travel has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Preview Travel (A) 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.
Analytics focus
– Preview Travel 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 William A. Sahlman, Nicole Tempest 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.
Effective Research and Development (R&D)
– Preview Travel 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 Preview Travel (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management
– Preview Travel is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of Preview Travel in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Preview Travel digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Preview Travel 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.
Weaknesses Preview Travel (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Preview Travel (A) are -
Increasing silos among functional specialists
– The organizational structure of Preview Travel is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Preview Travel needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Preview Travel to focus more on services rather than just following the product oriented approach.
Lack of clear differentiation of Preview Travel products
– To increase the profitability and margins on the products, Preview Travel needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Preview Travel (A), it seems that the employees of Preview Travel 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.
Capital Spending Reduction
– Even during the low interest decade, Preview Travel 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.
Aligning sales with marketing
– It come across in the case study Preview Travel (A) 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 Preview Travel (A) can leverage the sales team experience to cultivate customer relationships as Preview Travel is planning to shift buying processes online.
No frontier risks strategy
– After analyzing the HBR case study Preview Travel (A), it seems that company is thinking about the frontier risks that can impact Innovation & Entrepreneurship 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Preview Travel (A) 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 Preview Travel has relatively successful track record of launching new products.
High bargaining power of channel partners
– Because of the regulatory requirements, William A. Sahlman, Nicole Tempest suggests that, Preview Travel 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.
High cash cycle compare to competitors
Preview Travel 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Preview Travel (A), is just above the industry average. Preview Travel 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.
Interest costs
– Compare to the competition, Preview Travel 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.
Opportunities Preview Travel (A) | 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 Preview Travel (A) are -
Creating value in data economy
– The success of analytics program of Preview Travel has opened avenues for new revenue streams for the organization in the industry. This can help Preview Travel to build a more holistic ecosystem as suggested in the Preview Travel (A) case study. Preview Travel can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Innovation & Entrepreneurship industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Preview Travel 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. Preview Travel 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Preview Travel 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.
Learning at scale
– Online learning technologies has now opened space for Preview Travel 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.
Using analytics as competitive advantage
– Preview Travel 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 Preview Travel (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Preview Travel to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Preview Travel can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Preview Travel (A) 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Preview Travel can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Innovation & Entrepreneurship industry, but it has also influenced the consumer preferences. Preview Travel can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Preview Travel can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Preview Travel (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Preview Travel is facing challenges because of the dominance of functional experts in the organization. Preview Travel (A) 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.
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 Preview Travel in the consumer business. Now Preview Travel can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Preview Travel can develop new processes and procedures in Innovation & Entrepreneurship 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Preview Travel 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 Preview Travel to hire the very best people irrespective of their geographical location.
Threats Preview Travel (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Preview Travel (A) are -
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.
Consumer confidence and its impact on Preview Travel 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.
Environmental challenges
– Preview Travel 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. Preview Travel can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship 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 Preview Travel business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Preview Travel 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 Preview Travel (A) .
Easy access to finance
– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Preview Travel 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. Preview Travel needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Preview Travel is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Preview Travel in the Innovation & Entrepreneurship industry. The Innovation & Entrepreneurship 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.
Increasing wage structure of Preview Travel
– 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 Preview Travel.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Preview Travel with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Regulatory challenges
– Preview Travel 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 Innovation & Entrepreneurship industry regulations.
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 Preview Travel.
Weighted SWOT Analysis of Preview Travel (A) 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 Preview Travel (A) 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 Preview Travel (A) 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 Preview Travel (A) 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 Preview Travel (A) 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 Preview Travel needs to make to build a sustainable competitive advantage.
