Southwest Airline Executive Summary

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Southwest Airline Case ¨C Executive Summary

Introduction in 1971, Herbert D. Kelleher with other few business partners started an Airline services. Up till 1991, Southwest served low-fair air transportation among 32 cities in 14 states with over 20 million customers annually in the United States. Although the industry suffered a major blow from the unfavorable economic conditions, the company was still holding strong; while other airline companies were in debt. The major success to their continued success was due to their low-cost model and competitors were aware that they cannot match Southwest Airlines low prices therefore, by dropping the price even lower; Southwest Airlines can force a company to go bankrupt.

In this executive summary, we conduct a Porter¡¯s Analysis to investigate Southwest¡¯s competitive environment. Suppliers include those who provided service/products necessary for Southwest Airlines to their business function. For Southwest Airlines, suppliers included mechanics (and other maintenance people), providers of fuel, food (the snacks that are offered). The suppliers did not have much bargaining power. Customers included both residential and commercial sectors. There was no bargaining power for customers, as there was no threat of backward integration; it was unlikely that customers of Southwest Airlines were going to build their own airplanes and flew themselves. Rivalry among competitors set the price-Southwest Airlines was a discount airliner. Rivalry was increasing, as the market decreased, and competitors downsized, the competitors become more or less equal in size and capacity. This means that as economic conditions worsen, competitors downsize and then compete for the same remaining market. The threat of new entrants was low, the demand was not high. On top of that, there were hurdles, not necessarily the greatest; the huge capital requirement. Substitute products include the train and bus which cover long distances. While these...
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