Strategic Evaluation of South West Airlines

Introduction Southwest Airlines has been a able beforehand aggregation over the aftermost 4 decades. Application its low-cost, no-frill, chump friendly, point-to-point operational strategy, Southwest has been able to sustain ample beforehand over the years and appear beeline profits back its incumbent. Southwest Airlines now has a bazaar assets of $9.1 billion and is positioned as one of the arch airlines in the disturbing airlines industry. Over the aftermost decade, abounding airlines accept appear almanac losses in the US while abounding accept filed for bankruptcy, Southwest has been able to abide assisting and abide to grow. However, with the airline extensive its maturity, it charcoal to see whether this beforehand can be abiding for the accessible years. This article uses assorted accoutrement and frameworks to assay the alien ambiance and its challenges, and centralized assets and capabilities of Southwest airlines. This alien and centralized assay is aimed to adviser the cardinal administration of aggregation in compassionate the ambiance it business operates in, and how it can acknowledge to that ambiance by acumen its centralized resources. External Analysis Understanding the ambiance in which a aggregation operates is a analytical aspect of a rational access appear cardinal management. It underscores an organization’s charge to acknowledge abundant factors in its operating environment, and how these can appulse aloft it. For the purpose of evaluating the alien ambiance of Southwest Airlines, this article uses two of the best accepted tools; namely: Liam Fahey and V. K. Narayanan’s STEP or PEST abstraction (1986); and Michael Porter’s bristles armament archetypal (1980; 2008). PEST Analysis Political factors Southwest Airline operates domestically in US and accordingly its action is decidedly afflicted by the airline action of Federal Aviation Administration (FAA) (see Specifically, the 1979 ‘Wright Amendment’; a legislation apropos the ‘Wright Zone’ which prohibits any airline to fly ceaseless or accommodate through-plane account from Dallas Love Field to any burghal in any accompaniment except for area in Texas, Louisiana, Arkansas, Oklahoma, New Mexico, Alabama, Mississippi, and Kansas has been affecting Southwest’s operation for the accomplished three decades. Recently, new legislation has been anesthetized to abolition the Wright Amendment. It would appear in aftereffect in 2014 (Thompson and Gamble, 2012). The political ambiance in the US has been abortive for Southwest Airlines over the years due to able lobbying in assembly by supporters of battling airlines adjoin the company’s interests. However, Southwest Airlines has on abundant occasions won acknowledged battles adjoin rivals in the US courts. An important political agency affecting the Southwest Airlines action is terrorism. During the aftermost decade, the blackmail of agitation in noncombatant aircrafts has had a abrogating appulse on airline industry in that it has added the airport costs incurred due to added aegis measures. Economic factors Aircraft derives its ammunition from oil; accordingly a acceleration in the amount of oil has a above appulse aloft Southwest Airlines’ advantage biking (Thompson and Gamble, 2012). The approaching trends of oil prices are awful capricious due to the political changes occurring aural the Middle-East region, abnormally the relations amid US and Iran. On the another hand, the recession in 2008 has had a favorable appulse aloft Southwest’s operations. Although the chump appeal for air biking bargain due to cuts in claimed and business costs beyond the US, the chump appeal for low-fares basic Southwest Airline underwent a beforehand due to a about-face in consumers’ preferences appear cheaper, no- amenity airlines (Southwest, 2010). Concerning budgetary issues, back Southwest Airline operates alone aural US, appropriately bill fluctuations do not appulse Southwest Airlines’ operations. Social Factors Unlike another low-fare and no-frill airlines in the Europe, Southwest Airline has a able charge appear chump service. The airline has consistently adopted a chump axial access for its administration and business activities (Campbell, 2010). Its chump casework cadre are broadly encouraged aloft activity a footfall avant-garde in appeasing barter through abnormal tactics. Their efforts are adored through acceptance and rewards, and are not punished for implementing their acceptable acumen (Thompson and Gamble, 2012). Technological factors Technological developments accept both created new opportunities as able-bodied as threats for Southwest Airlines. The actualization of teleconferencing and able-bodied advice another the internet has provided businesses with an another for accepted travelling. On the another hand, technology has additionally provided airline industry with the befalling to aggrandize their beat anon to consumers through e-commerce sites. Indeed Southwest Airlines was the aboriginal airline aggregation to acquaint ticketless biking and allows barter to accomplish anxiety online through its e-commerce website (Thompson and Gamble, 2012). Porter’s Bristles Armament Model To assay the operating ambiance of Southwest Airlines and appraise the attributes of the antagonism Southwest Airline faces, a Porter’s Bristles Armament assay will be used, created by Porter E.M assistant at Harvard University Business School. The bristles armament are as follows: The acceding ability of suppliers is aerial in the airline industry. For archetype ammunition is a above ascribe into an airline aggregation (it accounts for 40% of all operating costs) (Thompson and Gamble, 2012), and the companies which accommodate ammunition tend to be large, and appropriately accept immense acceding power. Their acceding ability is added added due to the absence of any applicable ammunition alternative. Accordingly charging a exceptional amount by oil companies is alone natural. Another account of affair for the airline industry is the acceding ability of aircraft suppliers. The aircraft accomplishment companies accept a cartel as alone two companies abide in the industry namely Airbus and Boeing. Bargaining ability of buyers is additionally aerial as the barter of airline industry are consistently attractive for another air biking companies to get best amount for their money. Additionally, abounding another abounding account airlines are because adopting a low amount archetypal for beneath routes with no frills, appropriately accretion choices for barter (Mouawad, 2010). Competitive Rivalry: Southwest Airlines’ no basic archetypal is been broadly pursued by assorted long-haul, full-service airlines aural US. Therefore, the airlines industry is awful aggressive for Southwest Airline. Entry Barriers; There are aerial barriers to access the airline industry as it requires a ample antecedent basic investment. Furthermore, the airline industry is faced with added antagonism and is no best as advantageous as afore in affiliation with the amount wars, appropriately authoritative adaptation difficult for new entrants. Substitutes: Although barter can about-face to biking through train, coaches and cars, such biking modes are advised as afflictive and the amount advantage is neither too substantial. Therefore, the blackmail of acting is actual low. Internal Analysis The ability abject appearance of action emphasizes aloft a company’s centralized capabilities in formulating strategies to accomplish a acceptable aggressive advantage in its bazaar (Prahalad and Hamel, 1990). It deals with the aggressive ambiance faced by an alignment through an chaotic approach. The afterward are Southwest’s centralized resources. The Antagonistic and Can-do Ability at South West Southwest Airline has a able antagonistic can-do attitude built-in in its accumulated culture. The company’s acknowledged attempt in its determinative years produced a able ‘esprit de corps’ amid the company’s employees. With the media advertisement Southwest Airlines difficulties, the company’s advisers were acutely acquainted of the actuality that the airlines actuality was on the line. According to Colleen Barrett, the challenges faced by Southwest Airlines due to angry adversaries by rivals and bounded admiral were active in architecture the affection of Southwest advisers and ingraining a combative, can-do spirit in the accumulated ability (Thompson and Gamble, 2012). Southwest’s Administration and Management One of the best acclaimed leaders of the aggregation was Herb Kelleher, beneath whose administration the aggregation prospered for about four decades, including its determinative struggles. Kelleher adopted to do abundant of the administration from alfresco the appointment whilst actuality amid the agents members. He was a acceptable listener, and a backer of absolute observation. He consistently encouraged his staffers in assuming their duties. He abounding best of the graduation ceremonies of his flight associates classes and akin helped amount accoutrements on ‘Black Fridays’. He was awful antagonistic and had a baroque lifestyle; both of which were reflected in the company’s operations and management. Surprisingly, Kelleher was an adherent of abnegation back it came to the banking accessory of the business (Thompson and Gamble, 2012). Much was the approaching administration of the aggregation was anon mentored by Kelleher himself. For instance, James parker (CEO 2001 – 2004) was associated with Kelleher with added than 23 years. Kelleher and Parker were advised to anticipate abundant alike. Similarly, Colleen Barrette (President 2001 – 2008) was additionally associated with Kelleher and the aggregation for added than two decades. Both these controlling additionally followed Kelleher footsteps in spending best of their time on ability building, assurance architecture and chump service. Gerry Kelly (CEO 2004 – Onwards) added avant-garde the accumulated ability by through a abiding focus aloft amateur basal band of Performance, People, and Planet (Thompson and Gamble, 2012). Human Ability Management Herb Kelleher was a able accepter in the assumption that if a aggregation keeps its advisers happy, its advisers will in acknowledgment accumulate its chump happy. Therefore, he arguable that the employees- not the customers- came first. Kelleher knew accoutrements of advisers by their name. Likewise, Colleen Barrette, put abundant efforts in creating a ancestors like atmosphere aural the aggregation and put alternating a arrangement of contacts to break in blow with anniversary agent (Baum, 2006). The company’s accumulated ability treats its advisers like a family, insisting aloft their important addition appear accepting a annoyed clientele. It commendations its advisers as the ‘creators’ of the company. The aggregation has a able appearance of alert to its advisers ideas, and does not accept in acute their thinking. The aggregation additionally insists aloft hiring alone those who allotment the above ethics as its accumulated ability and does not lay off any of its advisers (Thompson and Gamble, 2012) Southwest Airlines Strategy Southwest has pursued a low-cost, low-price, no-frills, action from day one. It fabricated air biking affordable to the accumulation American population. Southwest beforehand admission acquirement requirements are added allowing than rivals and the aggregation offers abysmal discounts for some seats purchased through its website. The aggregation offers ‘Business Select’ fares for abridgement absent business travelers. This book offers aboriginal boarding privileges to cartage forth with added Rapid Rewards (Anthony, 2011). Despite abounding of its rivals charging added for add on services, like blockage bags, in-flight snacks, affairs a admission in being from airport, fees for alteration reservations, etc., Southwest insists aloft an all-embracing everyman fare. Its abstraction of amount animation that is, the abrasion of accumulation margins through alms everyman fares in added than compensated by increases sales volumes is accurate to be accurate for best of its markets. Southwest’s point to point avenue arrangement additionally minimizes connections, delays and absolute cruise time. Its accent on ceaseless flights amid brace of cities allows 75 % of its cartage to fly ceaseless to their destination. (Thompson and Gamble, 2012; Anthony, 2011) Strategic Options Based on the above alien and centralized assay of Southwest Airlines this article presents a set of cardinal options for the company. Aboriginal this article presents a TOWS cast to accomplish cardinal options: StrengthsWeaknesses OpportunitiesSouthwest Airlines can use its huge chump abject to acquaint accessory artefact afar from chargeless add-ons account in its flightsSo far, Southwest Airline is the alone airline authoritative a connected accumulation and ability connected beforehand in the US. It does not accept any accurate weaknesses in its accepted accumulated strategy Southwest Airlines can added absorb e-commerce technology in its operation through developing applications for acute phones that accredit barter to acquirement tickets, assay for promotional and abatement offers, and assay in. Southwest Airline can beforehand its Amateur Basal band appearance as its charge appear ambiance and beforehand a ‘green’ image. Sustain its advisers action and adherence akin through added convalescent the aggregation animal ability behavior pertaining to ·Performance administration and appraisal ·Rewards and amenities ·Stocks and shares options as advantage and bonus ThreatsSouthwest Airline has so far not affianced in strategies that beforehand the Airline’s ‘green’ and ambiance affable image. This can be a blackmail as barter are added involving ecology apropos in their acquirement decisions.The aggregation can acknowledge to ambiguous oil prices by ambiguity for oil prices Strategic Administration for Beforehand Strategies Business firms charge abide connected beforehand and change in adjustment to absorb their about position in the bazaar and in adjustment to beforehand their position, they charge abound “twice as fast as that” (Ansoff, 1957, p.113). According to Ansoff, there are four beforehand strategies namely: bazaar penetration, bazaar development, artefact development and diversification. Southwest Airlines can accompany beforehand strategies as its cardinal administration for the company. Based on Ansoff’s beforehand matrix, the afterward is the cardinal beforehand administration strategies for Southwest Airlines: Products ExistingNew MarketExistingMarket Assimilation and ConsolidationProduct Development This should be a key cardinal administration for the company. Southwest Airlines should consolidate absolute routes and access its bazaar allotment on absolute routes. The aggregation should additionally abide from its accepted routes with low chump volumes area abounding of the flight seats go empty.Southwest Airlines should aggrandize into accessory articles and casework such as car rentals, hotels and accommodations, auto services, etc. This could be a acceptable cardinal fit for its accepted destinations. These casework should additionally attach to its accumulated action of best amount for the money and everyman costs. NewMarket DevelopmentDiversification The aggregation should abide to analyze new destinations to aggrandize its business operations. It can be a assisting strategy. Over the years, the aggregation has associated several ethics with its cast angel such as a awful competitive, survivor, and best amount for the money. This cast disinterestedness could be acclimated by the aggregation to aggrandize into accompanying about-face such as, accouterment and accommodation business. Expansion alfresco the US calm bazaar ability not be a applicable action for the aggregation and it ability be a aberration from the company’s amount competenciesSouthwest Airlines’ about-face into connected booty flight or aerial added than point to point flights ability not be a acceptable about-face action as this would afresh be a desperate about-face from the company’s amount competencies Evaluation of Cardinal Options According to Goold and Luchs (1993), the administration abstract and convenance has abundantly explored how organizations could best accomplishment their accumulated ability back the aboriginal 1990s. This assay led to the actualization of capacity such as amount competencies and ascendant argumentation appearance in conception accumulated cardinal administration for companies. Based on these views, three important attempt accept emerged for accumulated beforehand strategy: Growth and about-face should be bound to those businesses that accomplish synergy; synergy occurs back the achievement of several articles and casework (or businesses) adds up to added than the sum of its parts. It pertains to the conception of economies of scales in that two or added products/services or businesses can lower their costs by accumulation operations or accomplishment facilities, application accepted sales force or acquaint accordingly (Thompson and Martin, 2005). The accumulated action focus should be on abject amount competences beyond a assorted artefact and account portfolio, and, Successful beforehand strategies depend on architecture a portfolio of businesses or products/services which fit with the authoritative “dominant logic” of top admiral and their administration style. (Goold and Luchs, 1993; Lasserre, 2003) Coinciding with this ascendant business view, the above cardinal admonition for Southwest Airlines are accounted acceptable and applicable for its accumulated growth. For instance all the above cardinal options for Southwest Airlines affect to: Using the airlines able chump abject to acquaint accessory products; Further advancing its e-commerce services; Promoting its Amateur Basal band for ‘green’ image And acceptable the company’s animal ability behavior All of these options are based on the Southwest absolute amount competencies and administration ascendant argumentation appearance as articular in the centralized analysis. Similarly the company’s beforehand and about-face strategies, which affect to: Consolidation of absolute markets Refraining from about-face is un-related articles and casework (long booty flight, all-embracing flights, hubs-spoke flights) Expansion into accessory articles and casework and new assisting destinations aural US And about-face through accompanying business (hospitality and catering) All of these options acknowledge the company’s amount competencies and administration ascendant argumentation appearance forth with creating synergies for the company. Conclusion Southwest Airlines has faced angry aggressive ambiance and averted acute bazaar access barriers over the years to appear as a awful acknowledged and acceptable airline business. It operates in an industry with aerial acceding ability of suppliers and barter and able animosity from able-bodied accustomed competitors. The aggregation has auspiciously mitigated political hurdles and acclimated its amount competencies appear its advantage in an bread-and-butter ambiance area others accept scaled down. Moreover, the aggregation has acclimated technologies in its favor to sustain ability in its business operations. The centralized strengths of the aggregation lie aural its accumulated culture, and motivated and committed workforce. It amount adequacy pertains to its point to point, no-frill, bargain and low-price air biking account business model. Concluding this cardinal analysis, this article recommends Southwest airlines to apparatus cardinal options and commence aloft beforehand and about-face strategies which acknowledge the company’s above amount competencies and added beforehand its centralized strengths. These cardinal admonition are basic for the company’s connected beforehand and adaptation in the accessible years aural its corresponding industry. References Ansoff, I. (1957) Strategies for Diversification. Harvard Business Review. Vol. 35 Issue 5. Anthony, R. N. (2011) Administration Control Systems. Tata McGraw Hills Educations. Baum, T. (2006) Animal Ability Administration for the Tourism, Accommodation And Leisure. Cengage Learning EMEA Campbell. S (2010) How Southwest Airlines Became a Archetypal for Chump Loyalty. TMCnet. Available from (cited on 20th, March, 2013) Fahey. L and Narayanan, V. K, (1986) Macroenvironmental Assay for Cardinal Management. St. Paul: West Publishing. Goold, M. and Luchs, K. (1993) Why Diversify: Four Decades of Administration Thinking. Academic of Administration Executive. Vol. 7 No. 3 Johnson G. Scholes K. Whittingham W. 2008. Exploring Accumulated Strategy. 8th edition. Prentice Hall Lasserre, P. (2003) Global Cardinal Management, Basingstoke: Palgrave Macmillan Mouawad, J (2010). Pushing 40, Southwest Is Still Playing the Rebel. New York Times. Available from (cited on 20th, March, 2013) Porter, M. (2001) Account Operations Strategy. Harvard Business School Porter. M (2008). The Bristles Aggressive Armament that Shape Strategy. Harvard Business Review, January 2008, p.86-104. Prahalad, K. and Hamel, G. (1990) The Amount Competence of Organization. Harvard Business Review. 68(3), 79-91. Southwest (2010). Southwest Airlines One Report. Available from (cited on 20th, March, 2013) Thompson, A. and Gamble, J. (2012). South West Airlines in 2010: Culture, Values, and Operating Practices. Case 13. In Essential of Cardinal Management. McGraw Hill. Thompson J L & Martin F (2005), Cardinal Administration Awareness & Change. 5th Edition, Thomson learning

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