Threat of Entry from new competitors
Reaction from the existing players
Reaction from the existing players can affect seriously to the potential new entrants. And that’s what exactly happening in this case. Before the starting operation of Southwest Airlines, three other existing players in the airlines industry had reacted severely.
After the approval application from the TAC (Texas Aeronautics Commission), immediately Braniff, Continental and Trans Texas had obtained a temporary court order to protect TAC from issuing a certificate to fly to the newly entered Southwest Airlines. This whole court order procedure had been longer till June, 1971. So, for the serious reaction of the existing players, Southwest had to fight for four years (1967-1971) to get the certificate or formal order of flying. Also, two days before the starting of inaugural flights, again Braniff and Texas International convincing the district court judge came up with an injunction to keep Southwest from the beginning airline service.
So, for the serious reaction from the existing players, threat of entry from new entrants is low and which leads to attractiveness of the industry goes up.
Learning and experience curve effect
Learning curve has a major impact on the industries attractiveness as experience people know better about the industry that how to serve. When, experience people come up with the new entrants to establish the business, its effects the business.
As, in this case, in the initial stage of Southwest Airlines, Lamar Muse was brought as Southwest’s CEO and Muse was an aggressive and self-confident airline veteran who knew the airlines business well and he had the entrepreneurial skills to handle the challenges. Also according to the comment of other people as Herb Kelleher, Muse was the person exactly what they needed.
Now, also from the case we could see that, the most perfect and experienced person Muse handled the challenges in the...
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