Professional Documents
Culture Documents
ELLYS SIREGAR
MM EKSEKUTIF - 27
CASE FACT
Substitute products include the train and bus which cover long
distances. While these alternates cannot offer the speed of travel,
most of Southwest Airlines' customers are attracted to the low price.
SWOT ANALYSIS
Strenghts
Opportunities
1. There are opportunities for expansion to new markets.
• The new Boeing 737-700 has the ability to fly longer distances non-
stop, which may change the definition of "short haul
2. Demographic trends appear favorable to an airline focusing on price
and reliability.
• The consumer continues to seek convenience and time savings.
Flying, rather than driving, will meet that need if the price is
right and the airline is reliable.
• 3. The competition is looking to international, rather than domestic
markets, for growth opportunities.
3. Improved computer technology will allow more ticketless
transactions and reservations made by PC.
Threats
1. Southwest's ability to hold the line on costs will impact its cost
leadership position.
• The largest cost component is labor. This cost could be
impacted by union actions, which cover 85% of Southwest's
workforce.
• The second largest cost component is fuel , which could be
negatively impacted by economic or political events.
1. Government regulation could hinder Southwest's ability to control
costs, control fares, or enter new markets.
• Recent government crackdown on safety (e.g., insulation, cargo
fire detection) means costly retrofits.
• Proposed re-regulation would limit existing firm's ability to
respond to underpricing by new companies.
• Prior to deregulation in 1978, carriers were limited in their ability
to enter new markets.
• The government recently proposed an increase in facility tax
rates, which would have resulted in higher costs.
1. Improved telecommunications may lower demand for air travel, or
may lower demand for "discount" airlines.
• E-mail and teleconferencing can result in less need to travel.
• Consumers may demand "personal" technology on planes, such
as movies, phones, games, etc.
1. Alternative forms of transportation, such as a high-speed railway,
could weaken demand for air travel. Also, if the economy weakens,
people may choose to drive rather than fly.
2. Southwest would be hurt if the public perception were that low price
equates to low quality.
How they do it :
• The culture permeates the entire organization and sends clear signals about
behavior expected at Southwest
• Shared values : having fun at work to enhance a sense of community, trust, and
spirit to counterbalance the stress & pressure
between parties.
✔ Clan control : Involves culture, shared values, beliefs, expectations,
✔ Bureaucratic control
Safe airline :
✔ Market control
• Southwest operates the lowest cost major airline in the industry (cost
leadership strategy) :
Recommendation :
Southwest Airlines strategy has been successfully implemented, and the
above SWOT analysis does not indicate that a major shift in strategy should
be made at this time. They should continue utilizing a cost leadership
strategy to underprice competitors and gain market share. This strategy has
not only resulted in increased market share, but has also increased overall
demand for air travel. Southwest should continue its market development
strategy, focusing domestically. There are numerous untapped markets in
the U.S., many of which are actively seeking Southwest's presence.
Additionally, competitors are now focusing on foreign markets, and
deregulation there could result in price wars and increased competition.
In expanding domestically, Southwest should continue its focus strategy of
providing frequent, "point to point" flights. The expansion into new cities
should be at a moderate pace to ensure adequate coverage of new markets.
Ideal new cities will allow for non-stop flights. As the range of the aircraft
expands, the potential markets will also expand.
Southwest should strengthen its mission statement--simply by writing it
down. The employees' commitment to action described in the case indicates
that the mission of the airline is clear: to be a low-price, frequent flight, short
haul, reliable carrier. However, this is not evident by reading the mission
statement. Still, Southwest should avoid creating too formal a mission
statement, which would be at odds with its culture.
Southwest should continue to embrace new technologies such as ticketless
travel and PC reservations. New technology also includes a commitment to
new aircraft, which will result in a young, safe fleet of jets with longer range.
All of these new technologies will permit Southwest to contain costs, to
expand to more markets, and to maintain its image as a safe and reliable
carrier.
And finally, Southwest should continue to foster its remarkable culture. The
company's fun-loving attitude and dedication to its employees have
contributed both tangible and intangible benefits. It is a true competitive
advantage.
References
Boykin, Ryan. (2007, May 8 12). Southwest Airline : Marketing Plan, [online]
http://www.google.com
“Southwest Airlines Co: Strategic Issue.,” Chairman, President, and CEO
[online] http://www.google.com
“Southwest Airline Case Study: History and Analysis". Upload by Avalon on
Aug 4, 2005 [online] http://www.google.com.
Marketing Study of Southwest Airlines: A Symbol of Freedom". Submitted by:
Fiorello B. Abenes, Ph.D. [online] http://www.hoovers.com.
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