Southwest Airlines

NATIONAL AMERICAN UNIVERSITY
STRATEGIC MANAGEMENT
SUMMER 2005
SOUTHWEST AIRLINES CASE STUDY  
INDUSTRY & COMPETITIVE ANALYSIS
Driving Forces

1. Entry/exit of major firms:   The airline industry has many entry barriers so the dangers associated incoming airlines are low.   Lately, however, there have been many airlines exiting which causes fierce competition to gain their customers.

2. Changes in cost and efficiency:   Cost of fuel, increasing inflation, increasing interest rates, maintenance costs, safe flights, and timely arrival and departures all play a major role in the airline industry

3. The internet:   The internet enables flyers to go online and do more comparative shopping for good prices, flight schedules, and flight destinations.   It is also more user friendly for businesses.

4. Strong regulatory/political/governmental/societal influences:   Because of the incidents of 911, the government has cracked down on flight as well as preflight security.   It has forced airlines to train their pilots, flight attendants, and ground crews.   This has forced airlines to raise their prices and pay more attention as to who they hire.   Another major act of terrorism could cripple the Airline industy.
COMPETITIVE ANALYSIS
Southwest Airline's 5 Forces of Competition

Bargaining Power of Suppliers
Full-service airlines have a high level of fixed and operating costs in order to establish and maintain air services: labor, fuel, airplanes, engines, spares and parts, IT services and networks, airport equipment, airport handling services, sales distribution, catering, training, insurance, and other costs.
The company saved a great deal of money by owning only one type of aircraft, the Boeing 737.   It acquired some of its new aircraft at favorable prices because it also served as the launch company for the aircraft.   It also saves money on parts, training, and maintenance.   They do not serve meals as did most other airlines, they only serve beverages and... [continues]

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