Estonia Air's Big Buy SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Innovation & Entrepreneurship
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Estonia Air's Big Buy
Rait Kalda, vice president of operations for AS Estonian Air, faced a challenge: how should Estonian Air address projected increases in intra-European flight demand in light of high fuel costs, competitive challenges, economic uncertainty, and last year's net loss? If Kalda's assessment led to expanding Estonian Air's fleet, he had to decide which plane model would achieve operational efficiencies, satisfy load factor requirements, and meet various other performance and financial metrics. In order to fully comprehend Kalda's challenge, the case first presents the reader with a brief synopsis of Estonia's economy; the airline industry; and the three types of competitive airline industry groups- legacy carriers, low cost carriers, and regional carriers. This is followed by an overview of Estonian Air's competitors and its opportunities for growth. The case provides detailed information regarding the advantages and disadvantages of the Boeing 737 Jet, the Bombardier Q400 Turboprop, and a used Saab 340A turboprop. Finally, the case summarizes Estonian Air's internal analysis and growth strategy, with pertinent input from conversations between Rait Kalda and the vice president of finance and administration, Andrus Aljas. Students are required to complete an operational analysis on factors such as capacity, fuel savings, and utilization rates. If Estonian Air does indeed decide to expand, the case states that the airline will continue with its past practice of leasing the aircraft. Using current financial statements, as well as information presented in the case, students can also prepare a basic net present value (NPV) model and scenario analysis for leasing each of the aircraft alternatives. Finally, students have the opportunity to combine both qualitative and quantitative factors to support their analysis.
Authors :: Karen Popovich, D Lander, Robert Letovsky
Swot Analysis of "Estonia Air's Big Buy" written by Karen Popovich, D Lander, Robert Letovsky includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Estonian Air's facing as an external strategic factors. Some of the topics covered in Estonia Air's Big Buy case study are - Strategic Management Strategies, Financial analysis, Financial management, Manufacturing and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Estonia Air's Big Buy casestudy better are - – increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, increasing transportation and logistics costs, wage bills are increasing, there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google,
talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of Estonia Air's Big Buy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Estonia Air's Big Buy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Estonian Air's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Estonian Air's 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 Estonia Air's Big Buy can be done for the following purposes –
1. Strategic planning using facts provided in Estonia Air's Big Buy case study
2. Improving business portfolio management of Estonian Air's
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 Estonian Air's
Strengths Estonia Air's Big Buy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Estonian Air's in Estonia Air's Big Buy Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Estonian Air's in the sector have low bargaining power. Estonia Air's Big Buy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Estonian Air's to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Estonian Air's is one of the most innovative firm in sector. Manager in Estonia Air's Big Buy Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Strong track record of project management
– Estonian Air's 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 Estonian Air's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Estonian Air's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Analytics focus
– Estonian Air's 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 Karen Popovich, D Lander, Robert Letovsky 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.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Estonia Air's Big Buy firm has clearly differentiated products in the market place. This has enabled Estonian Air's to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Estonian Air's to invest into research and development (R&D) and innovation.
Ability to lead change in Innovation & Entrepreneurship field
– Estonian Air's 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 Estonian Air's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Superior customer experience
– The customer experience strategy of Estonian Air's in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy in the Estonia Air's Big Buy 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.
Successful track record of launching new products
– Estonian Air's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Estonian Air's has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
High brand equity
– Estonian Air's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Estonian Air's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Estonian Air's is present in almost all the verticals within the industry. This has provided firm in Estonia Air's Big Buy case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Weaknesses Estonia Air's Big Buy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Estonia Air's Big Buy are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Estonia Air's Big Buy, in the dynamic environment Estonian Air's has struggled to respond to the nimble upstart competition. Estonian Air's has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lack of clear differentiation of Estonian Air's products
– To increase the profitability and margins on the products, Estonian Air's needs to provide more differentiated products than what it is currently offering in the marketplace.
Products dominated business model
– Even though Estonian Air's 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 - Estonia Air's Big Buy should strive to include more intangible value offerings along with its core products and services.
No frontier risks strategy
– After analyzing the HBR case study Estonia Air's Big Buy, 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.
Capital Spending Reduction
– Even during the low interest decade, Estonian Air's 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.
Interest costs
– Compare to the competition, Estonian Air's 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.
Aligning sales with marketing
– It come across in the case study Estonia Air's Big Buy 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 Estonia Air's Big Buy can leverage the sales team experience to cultivate customer relationships as Estonian Air's is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of Estonian Air's, firm in the HBR case study Estonia Air's Big Buy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Estonian Air's is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Estonian Air's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Estonian Air's to focus more on services rather than just following the product oriented approach.
Skills based hiring
– The stress on hiring functional specialists at Estonian Air's 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.
Need for greater diversity
– Estonian Air's 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 Estonia Air's Big Buy | 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 Estonia Air's Big Buy are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Estonian Air's 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 Estonian Air's to hire the very best people irrespective of their geographical location.
Building a culture of innovation
– managers at Estonian Air's 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Estonian Air's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Estonian Air's 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, Estonian Air's can use these opportunities to build new business models that can help the communities that Estonian Air's operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Estonian Air's in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Innovation & Entrepreneurship segment, and it will provide faster access to the consumers.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Estonian Air's is facing challenges because of the dominance of functional experts in the organization. Estonia Air's Big Buy 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 Estonian Air's in the consumer business. Now Estonian Air's can target international markets with far fewer capital restrictions requirements than the existing system.
Creating value in data economy
– The success of analytics program of Estonian Air's has opened avenues for new revenue streams for the organization in the industry. This can help Estonian Air's to build a more holistic ecosystem as suggested in the Estonia Air's Big Buy case study. Estonian Air's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Estonian Air's 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.
Learning at scale
– Online learning technologies has now opened space for Estonian Air's 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 Estonian Air's 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.
Developing new processes and practices
– Estonian Air's 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.
Threats Estonia Air's Big Buy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Estonia Air's Big Buy are -
Regulatory challenges
– Estonian Air's 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.
Technology acceleration in Forth Industrial Revolution
– Estonian Air's has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Estonian Air's needs to keep up with the evolution of technology in the Innovation & Entrepreneurship sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
High 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. Estonian Air's needs to understand the core reasons impacting the Innovation & Entrepreneurship 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, Estonian Air's 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 Estonia Air's Big Buy .
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.
High dependence on third party suppliers
– Estonian Air's 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.
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.
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. Estonian Air's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Estonian Air's 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. Estonian Air's can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
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 Estonian Air's in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Increasing wage structure of Estonian Air's
– 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 Estonian Air's.
Consumer confidence and its impact on Estonian Air's 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.
Stagnating economy with rate increase
– Estonian Air's 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.
Weighted SWOT Analysis of Estonia Air's Big Buy 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 Estonia Air's Big Buy 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 Estonia Air's Big Buy 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 Estonia Air's Big Buy 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 Estonia Air's Big Buy 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 Estonian Air's needs to make to build a sustainable competitive advantage.