Southwest Airlines
Strategy Content
Issue 1: SWA’s decision to acquire AirTran poses many obstacles for SWA’s sales strategy. The acquisition will threaten the pricing structure of SWA. It will give them the opportunity to raise its fair, as there is less competition in the Northeast (where AirTran serves) and major airlines have paired off leaving only five major players (Huffington post, 2010). Further promoting a fare increase is SWA’s refusal to charge for baggage. Although, this is a great sales tactic, it provides no source of revenue, resulting in a fare increase that would compensate for the increased costs of operating internationally. Even though, SWA will gain the Atlanta hub with its business travelers who are willing to pay more, it may lose some of its other customers who are more price-sensitive. The company may also face prolonged turnaround times due to an increase in airport locations with undoubtedly longer wait times, further damaging SWA’s sales strategy and effectiveness.
Issue 2: Further threatening SWA’s effectiveness is the new corporate culture formed post-acquisition. When the culture of a company is its DNA, any acquisition will inevitably test its unique culture and business model. “When firms with strong cultures make large acquisitions, their cultures are significantly more likely to suffer” (Bargeron, 2012). In 2009, SWA was ranked the best place to work by its employees, however studies show that 84% of companies who take part in a large acquisition usually fall off this list or move down in the rankings within two years (Bargeron, 2012). It may prove very difficult for the 8000 AirTran employees to adapt to the culture of SWA. AirTran’s company culture is not nearly as focused on integration and constant communication as SWA’s is (McGregor, 2010). SWA selects its hires very carefully through an intense screening process, thus the acquisition of AirTran employees that have not been screened as “ideal” SWA employees may result in a
Issue 1: SWA’s decision to acquire AirTran poses many obstacles for SWA’s sales strategy. The acquisition will threaten the pricing structure of SWA. It will give them the opportunity to raise its fair, as there is less competition in the Northeast (where AirTran serves) and major airlines have paired off leaving only five major players (Huffington post, 2010). Further promoting a fare increase is SWA’s refusal to charge for baggage. Although, this is a great sales tactic, it provides no source of revenue, resulting in a fare increase that would compensate for the increased costs of operating internationally. Even though, SWA will gain the Atlanta hub with its business travelers who are willing to pay more, it may lose some of its other customers who are more price-sensitive. The company may also face prolonged turnaround times due to an increase in airport locations with undoubtedly longer wait times, further damaging SWA’s sales strategy and effectiveness.
Issue 2: Further threatening SWA’s effectiveness is the new corporate culture formed post-acquisition. When the culture of a company is its DNA, any acquisition will inevitably test its unique culture and business model. “When firms with strong cultures make large acquisitions, their cultures are significantly more likely to suffer” (Bargeron, 2012). In 2009, SWA was ranked the best place to work by its employees, however studies show that 84% of companies who take part in a large acquisition usually fall off this list or move down in the rankings within two years (Bargeron, 2012). It may prove very difficult for the 8000 AirTran employees to adapt to the culture of SWA. AirTran’s company culture is not nearly as focused on integration and constant communication as SWA’s is (McGregor, 2010). SWA selects its hires very carefully through an intense screening process, thus the acquisition of AirTran employees that have not been screened as “ideal” SWA employees may result in a
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