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 - – cloud computing is disrupting traditional business models, geopolitical disruptions, technology disruption, increasing commodity prices, increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies,
customer relationship management is fast transforming because of increasing concerns over data privacy, challanges to central banks by blockchain based private currencies, 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 -
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.
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.
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.
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.
Learning organization
- Cebu Gokongwei is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Cebu Gokongwei is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Cebu Pacific Air (C) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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.
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.
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 (C) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Cebu Gokongwei digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Cebu Gokongwei has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
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.
High brand equity
– Cebu Gokongwei has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Cebu Gokongwei to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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 -
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.
Workers concerns about automation
– As automation is fast increasing in the segment, Cebu Gokongwei needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Cebu Pacific Air (C), 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.
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.
Aligning sales with marketing
– It come across in the case study Cebu Pacific Air (C) 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 (C) can leverage the sales team experience to cultivate customer relationships as Cebu Gokongwei is planning to shift buying processes online.
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.
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.
Slow to strategic competitive environment developments
– As Cebu Pacific Air (C) HBR case study mentions - Cebu Gokongwei 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.
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.
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.
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 -
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.
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.
Loyalty marketing
– Cebu Gokongwei 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.
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.
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.
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.
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.
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.
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.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Cebu Gokongwei can use these opportunities to build new business models that can help the communities that Cebu Gokongwei operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
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 -
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 .
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.