Southwest Airlines Strategy Case
Strategy and Policy
Case 2. Southwest Airlines.
I- Strategic Profile and Case Analysis Purpose
Southwest airlines were founded in 1971 by King and Herb Kellerher. They started with a low cost strategy in a risky market where profitability depends a lot on fuel prices and external factors, such as the willingness of consumers to pay ticket prices. They started growing a lot with various strategies that permitted them beat a lot of their competitors, but in order to stay in the market they need to improve those strategies and come up with new ones to stay differentiated from the other airlines. Now they’re ranked the top 7 airline that controls the share of the market, but new strategies will be needed for them to continue to be a profitable company.
The purpose of the case is to find the strategy that better suits Southwest Airlines to continue operating with their low-cost focus and at the same time differentiate themselves from the rest of the competitors.
II- External Situation Analysis A. General Environmental analysis
1- Demographic: * Consumers of Southwest airlines are price sensitive and are looking for the lowest prices. * Consumers that aren’t as concerned about comfortable flights as much as reliable ones. * Not influenced by costumer reward programs. * Concerned about convenience and scheduling.
2- Economic: * Asian marketing plummeting in 1998, causing jet fuel costs to drop to 35 cents per gallon. * Increasing of fuel costs from $11 to $34 per barrel. * Terrible drop in the air travel industry after 9/11. * 2008 recession, from which Southwest got out successfully. * Risks because of the difficulty to be a profitable business.
3- Political/Legal: * Problems with the FAA in 2008 for violating mandatory safety checks, and subsequently paying $10.2 million in fines. * The pressure of safety regulation. * The great amount of firms in the industry that file for bankruptcy.
Case 2. Southwest Airlines.
I- Strategic Profile and Case Analysis Purpose
Southwest airlines were founded in 1971 by King and Herb Kellerher. They started with a low cost strategy in a risky market where profitability depends a lot on fuel prices and external factors, such as the willingness of consumers to pay ticket prices. They started growing a lot with various strategies that permitted them beat a lot of their competitors, but in order to stay in the market they need to improve those strategies and come up with new ones to stay differentiated from the other airlines. Now they’re ranked the top 7 airline that controls the share of the market, but new strategies will be needed for them to continue to be a profitable company.
The purpose of the case is to find the strategy that better suits Southwest Airlines to continue operating with their low-cost focus and at the same time differentiate themselves from the rest of the competitors.
II- External Situation Analysis A. General Environmental analysis
1- Demographic: * Consumers of Southwest airlines are price sensitive and are looking for the lowest prices. * Consumers that aren’t as concerned about comfortable flights as much as reliable ones. * Not influenced by costumer reward programs. * Concerned about convenience and scheduling.
2- Economic: * Asian marketing plummeting in 1998, causing jet fuel costs to drop to 35 cents per gallon. * Increasing of fuel costs from $11 to $34 per barrel. * Terrible drop in the air travel industry after 9/11. * 2008 recession, from which Southwest got out successfully. * Risks because of the difficulty to be a profitable business.
3- Political/Legal: * Problems with the FAA in 2008 for violating mandatory safety checks, and subsequently paying $10.2 million in fines. * The pressure of safety regulation. * The great amount of firms in the industry that file for bankruptcy.