External Analysis of Southwest Airlines
External Analysis Southwest Airlines
Will Southwest Airline's strategic plan continue to bring success in the new airline industry landscape? This paper sought to answer this question by examining the external increasingly consolidated environment in which Southwest competes. The review was conducted through application of Porter's Five Forces, a PEAT analysis, and a SWOT analysis.
The report concludes that Southwest has gained ground and maintained stability, changing only as much as it needed in order to remain the friendly domestic budget airline it started out as, and to compete effectively but with fidelity to its vision and values.
This paper will present a brief analysis of the competitive landscape for Southwest Airlines based in order to assess the airline's future capabilities in an environment in which other airlines are increasingly co-opting Southwest's successful and innovative strategies. This deductive exploration of the landscape will continue at the micro level through application of Porter's five forces framework. The treatment will follow a tiered approach that examines the macro-environment, the micro-environment, and -- to some degree -- the internal environment. The external analysis at the macro level will be accomplished by analyzing the PEST filters at the micro-environment level. Finally, a SWOT analysis will be generated for Southwest Airlines against the background of the macro level and the micro level analyses. The unit of analysis for this paper is the company level for Southwest Airlines. The NAICS code is 4811, which includes all companies providing scheduled air transportation of passengers and cargo. The Charter and Other Nonscheduled Air Transportation category includes those companies providing nonscheduled transportation.
Strategic Analysis
Southwest Airlines competes with about 600 companies across the domestic airline industry ("Airline Industry," 2011). The major airlines include United Continental, American (which is owned by AMR) and Delta ("Airline Industry," 2011). In addition, there are a number of express delivery companies, such as UPS, FedEx, and DHL. The ten largest companies earn more than 75% of the revenue for the industry ("Airline Industry," 2011). About 70% of revenue comes from domestic flights and approximately 20% comes from international flights. Reservations, and the provision of training, servicing, and maintenance, account for the remaining revenue generated in the airlines industry ("Airline Industry," 2011).
Porter's Five Forces
The structure of an industry can have a profound effect on the level of profitability that can be sustained. Rivalry can best be understood within the context of an industry. Michael Porter developed a model for analyzing the influence of industry context on competition.
Supplier Power. There is virtually no vertical integration in the airlines industry. However, horizontal integration has been very evident. A number of mergers of large airlines have occurred over the past decade. Consolidation is expected to continue as airlines reach for stability and profitability ("Domestic Airlines," 2011). The supplier power force is high.
Buyer Power. Buyers in the airlines industry -- primarily airports -- tend to be weak. However, buyers are trying some new tactics to drive up their share of the revenue. Tampa International Airlines, for instance, is offering $2.5 million in airport fee waivers and advertising over a two-year period to any airline that begins daily flights to Europe with a wide-body 767 (Huettel, 2011). Even new domestic service and shorter international flights will qualify for smaller incentives.
Despite the increased dependence on the Internet, the freight and mail poundage increased by 3.6% from 2010 to 2011 ("Research and Innovative," 2011). Some minor increases in airfare in 2011 did little to dampen flyer behavior, as the number of enplaned passengers increased 2.4% by from 2010 to 2011 ("Research and Innovative," 2011). The percentage of scheduled service fell 3.9% from 2011 to 2011 ("Research and Innovative," 2011). Market shares for the major airlines are as follows: Delta at 16.6%, Southwest at 14.4%, American at 13.5%, United at 10.0%, U.S. Airways at 7.9%, Continental at 7.3%, JetBlue at 4.4%, Alaska at 3.4%, AirTran Corporation at 3.4%, SkyWest at 2.1%, and Other at 17% ("Research and Innovative," 2011). These market shares point to three distinct tiers in the industry, which could certainly be a factor in the wave of consolidation, with larger airlines acquiring somewhat smaller ones. The buyer power force is high.
Threat of New Entrants. Barriers to entry in the airline industry are great. Economies of scale can only be achieved by airlines achieving a fairly substantial size. Local and regional airlines are able to be competitive on a smaller scale than larger airlines and their entry costs are less. New entrants in this category have entered the...
Southwest Airlines is one of the most successful low-cost airlines in the world. The company's focus on constant innovation, excellent labor relations, and sound financial management have ensured its success at a time when many companies have suffered from the economic downturn. In this way Southwest Airlines has created an example of business success for many. The company's success is also due to the consistency among its organization practices, which
Southwest Airlines has been an innovator in the airline industry. The company has steadily implemented one of the most interesting operational strategies since the company was founded. As a result, Southwest Airlines has earned countless awards rated against factors such as employee satisfaction, customer satisfaction, and profitability. Furthermore, Southwest was able to claim these awards while being able to also claim some of the lowest operating costs in the industry.
Southwest Airlines Case Analysis Southwest Airlines is a company that has grown from a small regional carrier in Texas and surrounding states to the largest U.S.-based airline. The primary strategy of the company is to be the low-cost, no frills option for people wanting to travel within the United States. Recently, Southwest acquired another carrier so they will soon begin international flights to the Caribbean and Mexico. This paper discusses the
Southwest Airlines has been a model of success for the past forty years. It is a success based on company values, on low prices, on business innovation, and on the quality of the service, among other elements. The company built on these values and used an adequate promotional campaign and strategy to build brand loyalty. Today, many of the company's clients use its services because of what is known as
And many have got successful too in earning the market share. The emerging competition by new companies is a growing threat for the company and it should be tackled properly to avoid any future disturbances. In order to further describe the competition Southwest Airlines is facing a Competitive Profile Matrix is designed. The following Competitive Profile Matrix tells about the tough competitors which are in a good position to have
External Analysis Southwest Airlines One of United States' most successful airlines in the business is Southwest airlines. The company has been one of the most successful businesses in the economy with no case of worker layoff or strike being recorded in the organization. The company has dedicated its commitment to ensuring it provides a favorable environment for its workers. The company's corporate culture has played a significant role in the success
Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.
Get Started Now