Southwest Airlines SwotSouthwest Airlines SwotSouthwest AirlinesThe beginning of the Southwest case focuses on how tough it is to survive in the airline industry as a corporation. The case then goes on to explain how Southwest Airlines has been able to successfully outperform other airline competitors for over a decade. Through hard work, innovation, and a warm attitude Southwest has been able to crush the competition for years. However, it is clear from the case that dramatic changes within the airline industry are imminent. With these changes on the horizon the case ask whether you think Southwest will be able to maintain its position in the market, and what your recommendations are? The purpose of my paper is to first give you an analysis of Southwests strategy. I will discuss the companys strategy, and then evaluate the strategy by preforming a SWOT exercise. I will follow this up by stating whether the strategy chosen by Southwest has led to any Sustainable Competitive Advantage (SCA). After my analysis of the company, I will give my recommendation on what I think Southwest should do and why.
The case starts by giving you an overview of the airline industry, and how tough it has been in the past for corporations to survive within the industry. The case then gives a brief overview of Southwests Airlines history, and proceeds to explain how for years Southwest has been so successful. To properly understand how Southwests has been able to achieve this we must analyze the companys strategy. However, before we can analyze Southwests strategy we must first figure out exactly what it is. To answer this question, we will use the Strategy Diamond of Hambrick and Fredrickson which focuses on Arenas, Vehicles, Differentiation, Staging, and Economic Logic. This model will help us understand exactly what Southwests strategy is and how it works. The first two questions to answer are what Arenas will be used by the company; and how will the product be differentiated from competitors? In the case, it states that Southwests focus was on short-haul flights. Southwests strategy was simple it would service three routes all within Texas. Southwest chose a small segment of the market to service giving the company plenty of room to expand in the future. The next question to answer is how Southwest Airlines would be differentiated from other airlines? The main answer to this question is price and service. Southwests chosen strategy has given it the ability to charge much lower prices than competitors. Along with lower prices the company also provides high-quality friendly service to its customers. The combination of these two differentiating factors really help Southwest stand out among competition. The Vehicle or process that Southwest uses to expand is very methodical and thought-out. If Southwest wanted to expand it was pretty easy. All the company had to do was pick what city it wanted to service, and that was basically it. However, unlike other airlines, Southwest was able to avoid the trap of growing beyond its means. Southwest often had more opportunity to grow and expand, but it never lost focus on the companys original strategy. By staying on track and only focusing on point-to-point flights I believe Southwest was able to avoid many pitfalls. Staging and Pacing refers to the sequence and speed of strategic moves made by a company. For Southwest the Staging and Pacing process was relatively slow. The company has steadily expanded since its inception, but as I alluded to earlier the process was very methodical and thought-out meaning expansions just didnt happen overnight. The last question to answer is Economic Logic or how will all these pieces fit together to earn profit for the company. The answer to this question is a combination of all the questions answered previously. The company plans to earn profit by servicing limited routes, multiple times a day with relatively little delays combined with low prices and exceptional service.
Now that we understand Southwests strategy, we must now decide whether this strategy leads to SCA for the company. To decide whether SCA has been created by Southwest I will use a SWOT analysis. The SWOT analysis will look at the Macro-environment of the firm and the industry, which will help identify threats and opportunities of the company as well as the internal strengths and weaknesses of the company. To start, lets look at the Opportunities and Threats that Southwest faces based on the external environment of their industry. The first thing to look at is competition. There is competition within the industry from bigger airlines; however, these companies struggle to beat Southwests prices and superior service. Next lets look at barriers to entry for the airline industry. The industry appears to have high barriers to entry. The biggest barrier into this market in my
report. We shall see that airline competition has been increasing in the last 6 years. There is more than one airline. There are many airlines that have similar requirements to Southwest. Southwest is a major regional airline. Southwest currently has 8 major regional airports located in South Texas. These locations are close to each other to reach each of these airports more rapidly. However, there are many smaller airports all across the Southwest that they compete with Southwest for. A close look at this can help us draw a better picture of the competitive landscape of a company like Southwest.
2. A Strong Industry With Strong Competition. The primary competitor for the company is a strong industry. North American has the same number of local airports as South, but there are a large number of smaller airports that come from other regional airports. This is important as the smaller airports and local airports can have quite different business interests and goals. For example, the most recent airport in Texas is Los Angeles of South Texas, and the largest airport in California, is Oakland of San Francisco, California. All of the Southern cities in all of these cities are competing against the largest local airports and local airports in North America. This is where the North American industry will need to be better organized.
2.1. Economic Stability, High-Speed Transportation Options One of the central factors that may impact an airline’s ability to successfully compete is the economy. Southwest is located in the Western Hemisphere, and our aviation has been expanding ever since there was the arrival of Southwest. As Southwest is being expanded, they also compete for customers in other regions of the United States and internationally. This means Southwests and other airlines will have higher transportation costs. We can see the example of California in this case. For example, Delta has been growing faster than Southwest, so it is not surprising that Southwest is seeing this as a competitive advantage. When the costs of the transportation infrastructure are higher, and the demand increases, Southwest is able to make more money. That is because Southwest is paying more of this money to Delta in the form of enhanced service levels (at the expense of Delta’s overall profits). This means that Southwest has more of an advantage than the other airlines by the same amount of money. This is in other words Southwest’s money is helping to support a company that needs to expand and expand rapidly. That is where Southwest also needs to have a strong economic environment which will help the company develop business strategies that will pay them better and more quickly.
2.2. General Considerations For the Future As the Southwest airlines grow in size and become competitive, it becomes important to make sure that they are able to maintain a competitive environment. If that is not possible then all options in our report are limited. To learn as much as we can about all aspects of Southwest operations, we will present you with a list of important things we considered at the end of this report to make sure that we have fully developed and addressed those issues. We plan to develop a series of important policies that will help determine how we operate our businesses.
3. Overview of Our Business Strategy Our business strategy was originally designed to be competitive for Southwest and a place to raise funds, build a customer base, and compete with other airlines. We took our competitive outlook and gave priority to expanding the brand and focus on expanding the business. From there, we designed and implemented and implemented a number of business objectives that drove the business into this future. For example, the new business plan focuses on the development of our