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 related cases (labeled (A), (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 (B)" 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 (B) 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 (B) casestudy better are - – challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, increasing commodity prices, increasing inequality as vast percentage of new income is going to the top 1%,
customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, etc
Introduction to SWOT Analysis of Cebu Pacific Air (B)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Cebu Pacific Air (B) 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 (B) can be done for the following purposes –
1. Strategic planning using facts provided in Cebu Pacific Air (B) 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 (B) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Cebu Gokongwei in Cebu Pacific Air (B) Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the Cebu Pacific Air (B) 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.
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.
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 (B) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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 (B) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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 (B) 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.
Innovation driven organization
– Cebu Gokongwei is one of the most innovative firm in sector. Manager in Cebu Pacific Air (B) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Sustainable margins compare to other players in Leadership & Managing People industry
– Cebu Pacific Air (B) 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.
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 (B) Harvard Business Review case study emphasize – knowledge, initiative, 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.
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.
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.
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.
Weaknesses Cebu Pacific Air (B) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Cebu Pacific Air (B) are -
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Cebu Pacific Air (B), 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.
No frontier risks strategy
– After analyzing the HBR case study Cebu Pacific Air (B), 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.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Cebu Pacific Air (B), 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.
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.
Aligning sales with marketing
– It come across in the case study Cebu Pacific Air (B) 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 (B) can leverage the sales team experience to cultivate customer relationships as Cebu Gokongwei is planning to shift buying processes online.
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.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Cebu Pacific Air (B), 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.
Opportunities Cebu Pacific Air (B) | 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 (B) are -
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 (B) case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Creating value in data economy
– The success of analytics program of 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 (B) 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Threats Cebu Pacific Air (B) 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 (B) are -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 (B) .
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.
Weighted SWOT Analysis of Cebu Pacific Air (B) 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 (B) 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 (B) 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 (B) 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 (B) 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.
