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, Erika H. James, Marie-Grace U. Ngo
Swot Analysis of "Cebu Pacific Air (C)" written by Gerry Yemen, Erika H. James, 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 (C) 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 (C) casestudy better are - – geopolitical disruptions, technology disruption, talent flight as more people leaving formal jobs, increasing energy prices, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google,
cloud computing is disrupting traditional business models, there is backlash against globalization, etc
Introduction to SWOT Analysis of Cebu Pacific Air (C)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Cebu Pacific Air (C) 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 (C) can be done for the following purposes –
1. Strategic planning using facts provided in Cebu Pacific Air (C) 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 (C) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Cebu Gokongwei in Cebu Pacific Air (C) Harvard Business Review case study are -
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.
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.
Innovation driven organization
– Cebu Gokongwei is one of the most innovative firm in sector. Manager in Cebu Pacific Air (C) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Effective Research and Development (R&D)
– Cebu Gokongwei 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 Cebu Pacific Air (C) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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 (C) 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.
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.
Analytics focus
– Cebu Gokongwei 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 Gerry Yemen, Erika H. James, Marie-Grace U. Ngo 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.
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.
Sustainable margins compare to other players in Leadership & Managing People industry
– Cebu Pacific Air (C) 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.
Strong track record of project management
– Cebu Gokongwei is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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 (C) 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 Cebu Pacific Air (C) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Cebu Pacific Air (C) are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Cebu Pacific Air (C), is just above the industry average. Cebu Gokongwei 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.
Products dominated business model
– Even though Cebu Gokongwei 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 - Cebu Pacific Air (C) should strive to include more intangible value offerings along with its core products and services.
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.
Need for greater diversity
– Cebu Gokongwei 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Cebu Pacific Air (C) 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.
Low market penetration in new markets
– Outside its home market of Cebu Gokongwei, firm in the HBR case study Cebu Pacific Air (C) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Cebu Pacific Air (C), it seems that the employees of Cebu Gokongwei 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.
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Cebu Pacific Air (C) 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 Cebu Gokongwei has relatively successful track record of launching new products.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Cebu Gokongwei is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Cebu Pacific Air (C) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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 (C), 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.
Opportunities Cebu Pacific Air (C) | 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 (C) are -
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.
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 Cebu Gokongwei in the consumer business. Now Cebu Gokongwei can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Cebu Gokongwei 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, Cebu Pacific Air (C), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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 (C) case study. Cebu Gokongwei can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Using analytics as competitive advantage
– Cebu Gokongwei has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Cebu Pacific Air (C) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Cebu Gokongwei to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Cebu Gokongwei can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Cebu Pacific Air (C) 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.
Manufacturing automation
– Cebu Gokongwei can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Cebu Gokongwei 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Cebu Gokongwei can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Cebu Pacific Air (C) 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 (C) are -
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Cebu Gokongwei with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Cebu Gokongwei in the Leadership & Managing People sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Cebu Pacific Air (C), Cebu Gokongwei may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
Environmental challenges
– Cebu Gokongwei 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. Cebu Gokongwei can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
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.
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.
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.
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.
Stagnating economy with rate increase
– Cebu Gokongwei 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.
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.
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.
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.
Weighted SWOT Analysis of Cebu Pacific Air (C) 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 (C) 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 (C) 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 (C) 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 (C) 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.