On February 2, 1998, Lance Gokongwei, the 31-year old chief executive officer of Cebu Pacific Air (Cebu), learned that Flight 5J-387 from Manila to Cagayan de Oro failed to arrive at its destination on schedule and was believed to be missing. The airline was barely three years old and just beginning to gain significant market presence in the Philippine domestic airline industry. The (A) case describes the information Gokongwei had at the time. The subsequent cases (labeled (B), (C), and (D) describe the events that followed the tragic demise of Flight 5J-387. Cebu Pacific's transparency with the media, full cooperation with the government inquiry, assistance to victims' families at a personal level, and readiness to face up to its obligations gained the sympathy and trust of the public. At one point the government grounded the airline, citing safety concerns. Statements were published in national newspapers that expressed confidence in the airworthiness of Cebu Pacific, and disapproval for the airline's suspension. More important, the CEO, Lance Gokongwei, received encouragement and support from his employees through their volunteer efforts during the disaster and letters of support, while hundreds took unpaid leaves. This case provides an international dimension to the study of leadership. The material presents an opportunity to challenge students to consider leadership issues and present recommendations within the context of a cultural and economic environment different from the United States.
Authors :: Gerry Yemen, James G. Clawson, Marie-Grace U. Ngo
Swot Analysis of "Cebu Pacific Air (A)" written by Gerry Yemen, James G. Clawson, Marie-Grace U. Ngo includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Cebu Gokongwei facing as an external strategic factors. Some of the topics covered in Cebu Pacific Air (A) case study are - Strategic Management Strategies, Human resource management, Leadership and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Cebu Pacific Air (A) casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, increasing commodity prices,
wage bills are increasing, central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of Cebu Pacific Air (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Cebu Pacific Air (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Cebu Gokongwei, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Cebu Gokongwei 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 Cebu Pacific Air (A) can be done for the following purposes –
1. Strategic planning using facts provided in Cebu Pacific Air (A) case study
2. Improving business portfolio management of Cebu Gokongwei
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Cebu Gokongwei
Strengths Cebu Pacific Air (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Cebu Gokongwei in Cebu Pacific Air (A) Harvard Business Review case study are -
Successful track record of launching new products
– Cebu Gokongwei has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Cebu Gokongwei 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.
Training and development
– Cebu Gokongwei has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Cebu Pacific Air (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.
Organizational Resilience of Cebu Gokongwei
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Cebu Gokongwei does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Leadership & Managing People field
– Cebu Gokongwei 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 Cebu Gokongwei in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy in the Cebu Pacific Air (A) 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.
Highly skilled collaborators
– Cebu Gokongwei has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Cebu Pacific Air (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Cebu Gokongwei is one of the leading recruiters in the industry. Managers in the Cebu Pacific Air (A) 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 Cebu Gokongwei 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 Leadership & Managing People industry
– Cebu Pacific Air (A) firm has clearly differentiated products in the market place. This has enabled Cebu Gokongwei to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Cebu Gokongwei to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Cebu Gokongwei in the sector have low bargaining power. Cebu Pacific Air (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Cebu Gokongwei to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of Cebu Gokongwei in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Cebu Gokongwei is present in almost all the verticals within the industry. This has provided firm in Cebu Pacific Air (A) 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 Cebu Pacific Air (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Cebu Pacific Air (A) are -
Lack of clear differentiation of Cebu Gokongwei products
– To increase the profitability and margins on the products, Cebu Gokongwei needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, Cebu Gokongwei 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. Cebu Gokongwei 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.
Skills based hiring
– The stress on hiring functional specialists at Cebu Gokongwei 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.
Increasing silos among functional specialists
– The organizational structure of Cebu Gokongwei is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Cebu Gokongwei needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Cebu Gokongwei to focus more on services rather than just following the product oriented approach.
High bargaining power of channel partners
– Because of the regulatory requirements, Gerry Yemen, James G. Clawson, Marie-Grace U. Ngo suggests that, Cebu Gokongwei 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 Cebu Pacific Air (A), in the dynamic environment Cebu Gokongwei has struggled to respond to the nimble upstart competition. Cebu Gokongwei has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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 Cebu Gokongwei supply chain. Even after few cautionary changes mentioned in the HBR case study - Cebu Pacific Air (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Cebu Gokongwei vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– It come across in the case study Cebu Pacific Air (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 Cebu Pacific Air (A) can leverage the sales team experience to cultivate customer relationships as Cebu Gokongwei is planning to shift buying processes online.
Interest costs
– Compare to the competition, Cebu Gokongwei 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 operating costs
– Compare to the competitors, firm in the HBR case study Cebu Pacific Air (A) 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 Cebu Gokongwei 's lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, Cebu Gokongwei 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.
Opportunities Cebu Pacific Air (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 Cebu Pacific Air (A) are -
Better consumer reach
– The expansion of the 5G network will help Cebu Gokongwei to increase its market reach. Cebu Gokongwei 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.
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 Cebu Gokongwei 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Cebu Gokongwei in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
Buying journey improvements
– Cebu Gokongwei can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Cebu Pacific Air (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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Cebu Gokongwei can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Cebu Gokongwei 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 Cebu Gokongwei 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 Leadership & Managing People segment.
Learning at scale
– Online learning technologies has now opened space for Cebu Gokongwei 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.
Developing new processes and practices
– Cebu Gokongwei can develop new processes and procedures in Leadership & Managing People 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Cebu Gokongwei can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Cebu Gokongwei 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 Cebu Gokongwei to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of Cebu Gokongwei has opened avenues for new revenue streams for the organization in the industry. This can help Cebu Gokongwei to build a more holistic ecosystem as suggested in the Cebu Pacific Air (A) case study. Cebu Gokongwei 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 Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Cebu Gokongwei 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. Cebu Gokongwei 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.
Threats Cebu Pacific Air (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Cebu Pacific Air (A) are -
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. Cebu Gokongwei needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
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.
Shortening product life cycle
– it is one of the major threat that Cebu Gokongwei is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Cebu Gokongwei 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 Cebu Pacific Air (A) .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Cebu Gokongwei in the Leadership & Managing People industry. The Leadership & Managing People 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.
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.
Consumer confidence and its impact on Cebu Gokongwei 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.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Cebu Gokongwei can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Cebu Gokongwei 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 Leadership & Managing People industry regulations.
Increasing wage structure of Cebu Gokongwei
– 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 Cebu Gokongwei.
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 Cebu Gokongwei business can come under increasing regulations regarding data privacy, data security, etc.
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. Cebu Gokongwei 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.
High dependence on third party suppliers
– Cebu Gokongwei 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.
Weighted SWOT Analysis of Cebu Pacific Air (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 Cebu Pacific Air (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 Cebu Pacific Air (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 Cebu Pacific Air (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 Cebu Pacific Air (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 Cebu Gokongwei needs to make to build a sustainable competitive advantage.