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 - – there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, increasing transportation and logistics costs,
customer relationship management is fast transforming because of increasing concerns over data privacy, 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 -
High switching costs
– The high switching costs that Cebu Gokongwei has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
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.
Operational resilience
– The operational resilience strategy in the Cebu Pacific Air (C) 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 (C) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
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.
Low bargaining power of suppliers
– Suppliers of Cebu Gokongwei in the sector have low bargaining power. Cebu Pacific Air (C) 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.
Ability to recruit top talent
– Cebu Gokongwei is one of the leading recruiters in the industry. Managers in the Cebu Pacific Air (C) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
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.
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 -
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.
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.
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.
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 bargaining power of channel partners
– Because of the regulatory requirements, Gerry Yemen, Erika H. James, 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.
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 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.
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 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.
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.
No frontier risks strategy
– After analyzing the HBR case study Cebu Pacific Air (C), it seems that company is thinking about the frontier risks that can impact Leadership & Managing People 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.
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 -
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.
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.
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.
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.
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.
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.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Cebu Gokongwei is facing challenges because of the dominance of functional experts in the organization. Cebu Pacific Air (C) 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.
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.
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.
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.
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.
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 -
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.
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.
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.
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.
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.
Technology acceleration in Forth Industrial Revolution
– Cebu Gokongwei has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Cebu Gokongwei needs to keep up with the evolution of technology in the Leadership & Managing People 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.
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.
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.
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.
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.
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.
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.
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.
