Business plan

Topics: Southwest Airlines, Airline, Low-cost carrier Pages: 8 (1311 words) Published: March 8, 2014
Conduct an analysis for your business.
Part 2B Strategic Positioning and SWOT analysis.
Force: Threat of Entrants

Airline Industry - South West Airlines

1)
Break even Point: How many products do you need to
sell to break-even.
The more you need to sell to breakeven the lower the threat of entrants.

A medium number of airline tickets need to be
sold to breakeven. It may not be an extremely
high number as the costs associated with business
can be reduced by leasing rather then buying
planes.

2)
Economies of Scale: If you produce more does the unit
cost decrease, does your business reduce costs. If your business has high efficiency then other businesses find it hard to compete, when they first start.
The better existing businesses economies of scale the lower the threat of entrants.

Economies of Scale can be achieved if the airline
can sell a large number of products. However in
an industry with high competition this can be
difficult to achieve for a long time.

3)
Capital requirement of entry: How much money is
required to start the business.
The higher the startup costs the lower the threat of entrants.

Capital can be low if ‘leasing’ rather than buying
planes.

4)
Access to distribution channels: How many retail outlets
are owned by manufacturers.
The more retail outlets owned by manufacturers the lower the threat of entrants.

No problems as an airline business can use the
internet to sell tickets.

5)
Government action and Legislation: Patent protection
(does the government stop other businesses from copying the
products or services of your business)
The higher the government protection the lower the threat of entrants.

6)
Experience: Early market entrants gain experience more
quickly.
The more experienced competitors in the industry the lower the threat of entrants.

There is no government protection for the Airline
industry, although some brand protection does
exist. However there is increased government
restrictions to limit noise (including restrictions on
types of aircraft used and limits on number of
operations).

Many experienced competitors exist in the airline
industry. Some smaller newer operators have also
been introduced.

Overall the threat of entrants is high as there is a
reasonably low break even point, a low capital
investment, easy access to distribution channels and
little government protection.

Force: Threat of Substitutes

Airline Industry - South West Airlines

Product for product substitution (e.g. email for postal service) The harder it is to replace your product with another product the lower the threat of substitutes.

Low product for product substitution [unlikely to
replace airline travel (with for eg, the train or
bus)]

Generic Substitution: products or services compete for disposable income. (e.g. cars, holidays etc.)
The more important your product to the consumer and the more they need to spend money on it, the lower the threat of

High Generic Substitution [Many tourists consider
airline travel a luxury and not important.

substitutes.

Therefore will spend money on other more
important products before spending money on
Airline tickets.
Threat of substitutes is medium in force as
product for product substitution is low and
generic substitution is high.

Force: Bargaining Power of Buyers
The Buyer Power is high for your business when:
• The Industry has a large number of small operators.
• There are many sources of supply due to an
undifferentiated product.
If there are a large number of undifferentiated products the buyer has more choice and therefore more power. As a result buyers will choose based on the lowest price.

Airline Industry - South West Airlines

Higher buyer power caused by many medium and
large businesses competing for the same market
with undifferentiated products. This means the
buyers have more choices and will choose the
product with the lowest price....
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