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 – competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , increasing energy prices, challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, there is backlash against globalization,
central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, 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 -
Innovation driven organization
– Despegar.com is one of the most innovative firm in Personal Services sector.
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.
Training and development
– Despegar.com has one of the best training and development program in Services industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Cross disciplinary teams
– Horizontal connected teams at the Despegar.com are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Ability to lead change in 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.
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.
Low bargaining power of suppliers
– Suppliers of Despegar.com in the Services sector have low bargaining power. Despegar.com has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Despegar.com to manage not only supply disruptions but also source products at highly competitive prices.
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.
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.
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.
Organizational Resilience of Despegar.com
– The covid-19 pandemic has put organizational resilience at the centre of everthing Despegar.com does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
Weaknesses of Despegar.com | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Despegar.com are -
Workers concerns about automation
– As automation is fast increasing in the Personal Services industry, Despegar.com 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.
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.
Slow to strategic competitive environment developments
– As Despegar.com is one of the leading players in the Personal Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Personal Services industry in last five years.
Interest costs
– Compare to the competition, Despegar.com 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.
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.
Employees’ less understanding of Despegar.com strategy
– From the outside it seems that the employees of Despegar.com 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.
Ability to respond to the competition
– As the decision making is very deliberative at Despegar.com, in the dynamic environment of Personal Services industry it has struggled to respond to the nimble upstart competition. Despegar.com has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
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.
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.
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.
Despegar.com Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Despegar.com are -
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.
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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for Despegar.com 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Despegar.com is facing challenges because of the dominance of functional experts in the organization. Despegar.com can utilize new technology in the field of Personal Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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.
Building a culture of innovation
– managers at Despegar.com can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Personal Services industry.
Using analytics as competitive advantage
– Despegar.com has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Personal Services sector. This continuous investment in analytics has enabled Despegar.com to build a competitive advantage using analytics. The analytics driven competitive advantage can help Despegar.com to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Despegar.com can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
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.
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.
Threats Despegar.com External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Despegar.com are -
Technology acceleration in Forth Industrial Revolution
– Despegar.com has witnessed rapid integration of technology during Covid-19 in the Personal Services industry. As one of the leading players in the industry, Despegar.com needs to keep up with the evolution of technology in the Personal Services 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.
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 Despegar.com in the Personal Services sector and impact the bottomline of the organization.
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.
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.
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.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Despegar.com may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Personal Services sector.
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.
Shortening product life cycle
– it is one of the major threat that Despegar.com is facing in Personal Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Easy access to finance
– Easy access to finance in Personal Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Despegar.com can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.