Swot Analysis of "American Express Travel Related Services Co." written by John J. Kao includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Gerstner Lou facing as an external strategic factors. Some of the topics covered in American Express Travel Related Services Co. case study are - Strategic Management Strategies, Creativity, Entrepreneurial management, Managing people, Organizational culture and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the American Express Travel Related Services Co. casestudy better are - – geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, cloud computing is disrupting traditional business models, wage bills are increasing, increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies,
there is increasing trade war between United States & China, technology disruption, etc
Introduction to SWOT Analysis of American Express Travel Related Services Co.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in American Express Travel Related Services Co. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Gerstner Lou, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Gerstner Lou 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 American Express Travel Related Services Co. can be done for the following purposes –
1. Strategic planning using facts provided in American Express Travel Related Services Co. case study
2. Improving business portfolio management of Gerstner Lou
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 Gerstner Lou
Strengths American Express Travel Related Services Co. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Gerstner Lou in American Express Travel Related Services Co. Harvard Business Review case study are -
Innovation driven organization
– Gerstner Lou is one of the most innovative firm in sector. Manager in American Express Travel Related Services Co. Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Low bargaining power of suppliers
– Suppliers of Gerstner Lou in the sector have low bargaining power. American Express Travel Related Services Co. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Gerstner Lou to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Gerstner Lou has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in American Express Travel Related Services Co. 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.
Operational resilience
– The operational resilience strategy in the American Express Travel Related Services Co. 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.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– American Express Travel Related Services Co. firm has clearly differentiated products in the market place. This has enabled Gerstner Lou to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Gerstner Lou to invest into research and development (R&D) and innovation.
Strong track record of project management
– Gerstner Lou is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Gerstner Lou
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Gerstner Lou does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Gerstner Lou in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Gerstner Lou 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 American Express Travel Related Services Co. - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Gerstner Lou digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Gerstner Lou 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.
Successful track record of launching new products
– Gerstner Lou has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Gerstner Lou 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.
Analytics focus
– Gerstner Lou 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 John J. Kao 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.
Weaknesses American Express Travel Related Services Co. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of American Express Travel Related Services Co. are -
Slow decision making process
– As mentioned earlier in the report, Gerstner Lou 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. Gerstner Lou 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.
Low market penetration in new markets
– Outside its home market of Gerstner Lou, firm in the HBR case study American Express Travel Related Services Co. needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Gerstner Lou products
– To increase the profitability and margins on the products, Gerstner Lou needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, firm in the HBR case study American Express Travel Related Services Co. 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 Gerstner Lou 's lucrative customers.
Skills based hiring
– The stress on hiring functional specialists at Gerstner Lou 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.
High bargaining power of channel partners
– Because of the regulatory requirements, John J. Kao suggests that, Gerstner Lou 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study American Express Travel Related Services Co., in the dynamic environment Gerstner Lou has struggled to respond to the nimble upstart competition. Gerstner Lou has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though Gerstner Lou 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 - American Express Travel Related Services Co. should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Gerstner Lou 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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Gerstner Lou supply chain. Even after few cautionary changes mentioned in the HBR case study - American Express Travel Related Services Co., it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Gerstner Lou vulnerable to further global disruptions in South East Asia.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study American Express Travel Related Services Co., it seems that the employees of Gerstner Lou 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.
Opportunities American Express Travel Related Services Co. | 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 American Express Travel Related Services Co. are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Gerstner Lou is facing challenges because of the dominance of functional experts in the organization. American Express Travel Related Services Co. 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 Gerstner Lou to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Gerstner Lou 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 Gerstner Lou 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 Gerstner Lou to hire the very best people irrespective of their geographical location.
Buying journey improvements
– Gerstner Lou can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. American Express Travel Related Services Co. 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.
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. Gerstner Lou 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. Gerstner Lou 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.
Building a culture of innovation
– managers at Gerstner Lou 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 Innovation & Entrepreneurship segment.
Better consumer reach
– The expansion of the 5G network will help Gerstner Lou to increase its market reach. Gerstner Lou 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, Gerstner Lou 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Gerstner Lou can use these opportunities to build new business models that can help the communities that Gerstner Lou operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
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. Gerstner Lou can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 Gerstner Lou 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.
Manufacturing automation
– Gerstner Lou can use the latest technology developments to improve its manufacturing and designing process in Innovation & Entrepreneurship 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.
Threats American Express Travel Related Services Co. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study American Express Travel Related Services Co. are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Gerstner Lou 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 American Express Travel Related Services Co. .
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study American Express Travel Related Services Co., Gerstner Lou may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Innovation & Entrepreneurship .
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. Gerstner Lou can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Gerstner Lou will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Gerstner Lou in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
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 Gerstner Lou.
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.
Environmental challenges
– Gerstner Lou 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. Gerstner Lou can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Gerstner Lou 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.
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.
High dependence on third party suppliers
– Gerstner Lou 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.
Increasing wage structure of Gerstner Lou
– 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 Gerstner Lou.
Regulatory challenges
– Gerstner Lou 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.
Weighted SWOT Analysis of American Express Travel Related Services Co. 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 American Express Travel Related Services Co. 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 American Express Travel Related Services Co. 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 American Express Travel Related Services Co. 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 American Express Travel Related Services Co. 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 Gerstner Lou needs to make to build a sustainable competitive advantage.