Despegar.com (DESP) SWOT Analysis / TOWS Matrix / MBA Resources
Personal Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Despegar.com (United States)
Based on various researches at Oak Spring University , Despegar.com is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, increasing commodity prices, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, increasing energy prices, there is backlash against globalization, there is increasing trade war between United States & China,
technology disruption, increasing household debt because of falling income levels, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Despegar.com can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Despegar.com, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Despegar.com 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 Despegar.com can be done for the following purposes –
1. Strategic planning of Despegar.com
2. Improving business portfolio management of Despegar.com
3. Assessing feasibility of the new initiative in United States
4. Making a Personal Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Despegar.com
Strengths of Despegar.com | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Despegar.com are -
Superior customer experience
– The customer experience strategy of Despegar.com in Personal Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Despegar.com is present in almost all the verticals within the Personal Services industry. This has provided Despegar.com 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.
Ability to recruit top talent
– Despegar.com is one of the leading players in the Personal Services industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Effective Research and Development (R&D)
– Despegar.com has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Despegar.com staying ahead in the Personal Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in Personal Services
– Despegar.com is one of the leading players in the Personal Services industry in United States. Over the years it has not only transformed the business landscape in the Personal Services industry in United States but also across the existing markets. The ability to lead change has enabled Despegar.com in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Despegar.com has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Despegar.com 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.
Learning organization
- Despegar.com 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 Despegar.com is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Despegar.com emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy of Despegar.com comprises – understanding the underlying the factors in the Personal Services 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.
High switching costs
– The high switching costs that Despegar.com 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.
Highly skilled collaborators
– Despegar.com has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Personal Services industry. Secondly the value chain collaborators of Despegar.com have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Despegar.com 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 Personal Services industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
High brand equity
– Despegar.com has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Despegar.com to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of Despegar.com | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Despegar.com are -
High operating costs
– Compare to the competitors, Despegar.com has high operating costs in the Personal Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Despegar.com lucrative customers.
High cash cycle compare to competitors
Despegar.com has a high cash cycle compare to other players in the Personal Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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 Despegar.com supply chain. Even after few cautionary changes, Despegar.com is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Despegar.com vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– From the outside it seems that Despegar.com needs to have more collaboration between its sales team and marketing team. Sales professionals in the Personal Services industry have deep experience in developing customer relationships. Marketing department at Despegar.com can leverage the sales team experience to cultivate customer relationships as Despegar.com is planning to shift buying processes online.
Increasing silos among functional specialists
– The organizational structure of Despegar.com is dominated by functional specialists. It is not different from other players in the Personal Services industry, but Despegar.com needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Despegar.com to focus more on services in the Personal Services industry rather than just following the product oriented approach.
Need for greater diversity
– Despegar.com 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Despegar.com is slow explore the new channels of communication. These new channels of communication can help Despegar.com to provide better information regarding Personal Services products and services. It can also build an online community to further reach out to potential customers.
High bargaining power of channel partners in Personal Services industry
– because of the regulatory requirements in United States, Despegar.com 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 Personal Services industry.
Low market penetration in new markets
– Outside its home market of United States, Despegar.com needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
No frontier risks strategy
– From the 10K / annual statement of Despegar.com, it seems that company is thinking out the frontier risks that can impact Personal Services industry. 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.
High dependence on Despegar.com ‘s star products
– The top 2 products and services of Despegar.com still accounts for major business revenue. This dependence on star products in Personal Services industry has resulted into insufficient focus on developing new products, even though Despegar.com has relatively successful track record of launching new products.
Despegar.com Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Despegar.com are -
Creating value in data economy
– The success of analytics program of Despegar.com has opened avenues for new revenue streams for the organization in Personal Services industry. This can help Despegar.com to build a more holistic ecosystem for Despegar.com products in the Personal Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Leveraging digital technologies
– Despegar.com 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Personal Services industry, but it has also influenced the consumer preferences. Despegar.com can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Despegar.com can use the latest technology developments to improve its manufacturing and designing process in Personal Services sector. 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Despegar.com 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 Despegar.com to hire the very best people irrespective of their geographical location.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Despegar.com 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 Despegar.com to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Loyalty marketing
– Despegar.com 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.
Use of Bitcoin and other crypto currencies for transactions in Personal Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Despegar.com in the Personal Services industry. Now Despegar.com can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Despegar.com can develop new processes and procedures in Personal Services 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Personal Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Despegar.com 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. Despegar.com 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.
Buying journey improvements
– Despegar.com can improve the customer journey of consumers in the Personal Services industry by using analytics and artificial intelligence. It 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.
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 Despegar.com 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Despegar.com can use these opportunities to build new business models that can help the communities that Despegar.com operates in. Secondly it can use opportunities from government spending in Personal Services sector.
Threats Despegar.com External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Despegar.com are -
Consumer confidence and its impact on Despegar.com 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 Personal Services industry and other sectors.
Stagnating economy with rate increase
– Despegar.com 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 Personal Services industry.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Despegar.com.
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. Despegar.com 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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Personal Services industry are lowering. It can presents Despegar.com with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Personal Services sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Despegar.com in Personal Services industry. The Personal Services 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Despegar.com 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 Despegar.com prominent markets.
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. Despegar.com needs to understand the core reasons impacting the Personal Services industry. This will help it in building a better workplace.
Increasing wage structure of Despegar.com
– 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 Despegar.com.
Environmental challenges
– Despegar.com 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. Despegar.com can take advantage of this fund but it will also bring new competitors in the Personal Services industry.
Regulatory challenges
– Despegar.com 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 Personal Services industry regulations.
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 Despegar.com business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Despegar.com Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Despegar.com 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 Despegar.com 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 Despegar.com 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 Despegar.com 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 Despegar.com needs to make to build a sustainable competitive advantage.
