The Five Forces
Southwest Airlines 2
Michael Porter’s ideology of The Five Forces Model is the framework for the modern thinking about competition and strategy (Magretta, 2010). The five forces that any company needs to address in any industry are, The Threat of Entrants, The Bargaining Power of Buyers, Threats of Substitutions, The Bargaining Power of Supplier, and The Intensity of Competitive Rivalry. The forces are interrelated in such a way that if implemented accordingly can bring about the ultimate success of a company. When a company or corporation can look at each of these forces, and address each of these forces with clarity and honesty they will obtain the competitive advantage within their industry.
The airline industry has struggled since 9/11, for various reasons and most airlines have felt the financial impact. However, Southwest Airlines continue to be an industry leader because of their strategic planning that includes Porter’s Five Forces Model. Their success is evident based on their net profit of 459.00 million during the fiscal year 2010, compared to for example, American Airlines which only had a net profit of 143.00 million in the fiscal year 2010 (NewsyStocks, 2010). Southwest Airline can attribute its success to their simple, yet very effective value proposition: point-to-point short travel routes, with quick turn-around time, at the lowest possible cost and a value chain that includes activities to fulfill their proposition (Southwest, 2012). While the industry focused on long and short travel Southwest focused on point to point and quick turn-around, when the industry was wanting higher costs, dealing with agents and ticket offices Southwest was providing low cost reservations (Southwest, 2012). The simple strategy was what set them apart from their competitors, and over the years they have been able to develop and adjust their strategy which has allowed the company to gain a sustainable competitive...