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 - – digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, increasing energy prices,
geopolitical disruptions, wage bills are increasing, 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 -
Ability to recruit top talent
– Estonian Air's is one of the leading recruiters in the industry. Managers in the Estonia Air's Big Buy are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Cross disciplinary teams
– Horizontal connected teams at the Estonian Air's 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.
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.
Effective Research and Development (R&D)
– Estonian Air's 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 Estonia Air's Big Buy - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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.
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.
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.
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.
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.
Training and development
– Estonian Air's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Estonia Air's Big Buy 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.
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 -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Estonia Air's Big Buy, it seems that the employees of Estonian Air's 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.
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.
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.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Estonia Air's Big Buy, is just above the industry average. Estonian Air's 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Estonia Air's Big Buy 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 Estonian Air's has relatively successful track record of launching new products.
High bargaining power of channel partners
– Because of the regulatory requirements, Karen Popovich, D Lander, Robert Letovsky suggests that, Estonian Air's 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.
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.
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.
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.
Slow to strategic competitive environment developments
– As Estonia Air's Big Buy HBR case study mentions - Estonian Air's takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
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 -
Leveraging digital technologies
– Estonian Air's can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
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.
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.
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.
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.
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.
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.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Estonian Air's 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, Estonia Air's Big Buy, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Manufacturing automation
– Estonian Air's 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 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 -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Estonia Air's Big Buy, Estonian Air's 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 .
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.
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. Estonian Air's 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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Estonian Air's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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.
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 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.
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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Estonian Air's 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.
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 Estonian Air's business can come under increasing regulations regarding data privacy, data security, etc.
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.
