He wanted Southwest Airlines to own the idea of “low-cost” in the airline category. The company is renowned for its engineering excellence and status appeal (Kumar 10). In 2019, Southwest Airlines showed profits for 47 years consecutively. The rationale for adopting this design is to increase the company’s level of understanding regarding the prevailing market environment. Dominant players can leverage their connections, superiority, and resources to lobby successfully for the adoption of legislation that advances their agenda. On the other hand, only 5% of the respondents were of the opinion that they are not certain of their continued usage of air mode of transport. Creating a high level of familiarity increases the ease with which a product or a brand enters the international market. Saqib, S. Business strategies and approaches for effective engineering management, Hershey: Business Science Reference, 2013. Despite the economic fluctuations, the airline has managed to attain a relatively high level of profitability. For example, Delta Airline accounts for 22% of the market share while the American Airlines and JetBlue airlines market share are estimated to be 12.7% and 1.9% respectively (“International Air Transport Association” par. This section highlights the methodological aspects considered in gathering conducting market research. Did you find this article interesting? This move will improve Southwest Airlines’ competitive edge both in the local and international markets. It is also assumed that Southwest Airlines will successfully utilize its strengths regarding human and financial capital in exploiting the opportunities available in the international market. Cost leadershipThe generic strategy adopted by Southwest airlines is cost leadership. Using its low-cost, no-frill, customer friendly, point-to-point operational strategy, Southwest has been able to sustain considerable growth over the years and reported straight profits since its incumbent. Market communication will aid the customer to identify Southwest Airlines’ point of difference against its competitors. Cookies Policy, This research paper on Southwest Airlines Business Strategy was written and submitted by your fellow student. During an economic downturn, customers cut down on their discretionary expenses and choose less expensive ground transportation alternatives. Subsequently, Southwest Airlines will be in a position to maximize its profitability in the international market due to the relatively low labor cost. One of most effective strategy that the airline should consider entails market penetration. Thus, failure of the company to adjust its business strategy might limit its future competitiveness. Subsequently, the two types of questionnaires enabled the researcher to gather facts and the respondents’ opinions regarding the air transport industry in Brazil. Southwest Airlines strengths in departures are more than any others in US airline, Diverse, management is upper; business run very well, Considered in recent years the best low-cost carrier in terms of expenses, usage high One of the factors that have made the airline succeed under the low-cost structure entails the usage of the Boeing 737 as the company’s aircraft type. United States Securities and Exchange Commission: Southwest Airlines Company, 2011. This view arises from the fact that a company compensates for the decline in sales growth in countries characterized by a slow rate of market growth. Southwest Airlines knows this – they excel by putting employees at the center of their business. Southwest Airline faces intense competition from three main airline companies, which include JetBlue Airways Corporation, Americana Airlines Group Incorporation, and Delta Airlines Incorporation. Cultural specificity refers to the extent to which an organization’s product addresses the specific needs of a particular need for a culture or sub-culture. Web. Southwest can lose profitability and sustainability in case the US market dries up suddenly. The questionnaires were comprised of open and close-ended questionnaires. Southwest will provide a stable work environment with equal opportunity for learning and personal growth. On the contrary, the airline will obtain a license to operate in the target international market immediately. Attaining high profits consistently is the main purpose of going into business. In its international market penetration, Southwest Airlines should consider adopting the concept of direct entry strategy. The strategy continues Southwest Airlines just announced its boldest move yet to stand out from the crowd. Some of the alternatives that the airline should consider include market development, market penetration, and product development. This finding shows that customers are increasingly being concerned with acquiring unique experience in consuming air transport services. Therefore, the airline must focus on ensuring that the product information created in the target market is universal. However, the report recommends Southwest Airlines to adopt the market penetration strategy. Moreover, the global airline industry has changed significantly over the past few years. While other low-cost airlines have failed, Southwest remains strong. What’s Ahead for Airlines and Aviation In 2020, Why millennial-themed airlines don’t attract millennials, Airlines slash routes, outlook, and executive pay, Why JetBlue Airways Could Be the Best Airline Stock of 2020, Southwest Airlines is operating 49 planes that may not have been properly inspected, top FAA official says, Southwest speaks out about draft government report saying it neglected to prioritize safety. Southwest Airlines : Case Study 1. Being a dominant player in the market is particularly beneficial in industries that are influenced by intense lobbying, such as airlines. Personal SWOT Analysis | SWOT analysis of a person, Samsung SWOT Analysis 2020 | SWOT Analysis of Samsung, Whole Foods SWOT Analysis 2021 | SWOT analysis of Whole Foods, Amazon SWOT 2021 | SWOT analysis of Amazon, Uber SWOT Analysis 2019 | SWOT analysis of Uber. Southwest Airlines can expand from short hauls to long flights to exploit growing demand. However, changes in industry dynamics such as increase the price of jet fuel are challenges for the company to sustain its low pricing strategy. The respondents were of the opinion that air transport is relatively convenient and safe compared to other modes of transport. Southwest Airlines has boasted one of the strongest management teams in the entire airline industry. In addition to the above aspects, the adoption of this strategy will enable the firm to avoid the market risk associated with an increase in competition in the domestic market. Southwest Airlines Key Strategies Business Level strategy. Currently, most customers are attracted to Southwest Airlines because of its low pricing. The air travel agents in Brazil have developed a database containing information on customers that seek air travel services from the respective agents. In addition to the above aspects, the respondents in the focus group interview argued that the Brazilian airline industry is characterized by a relatively high market opportunity. One of the decision criteria considered in selecting the international market penetration strategy arises from the need to increase sales revenue by tapping international market opportunities. In the event of an increase in fuel prices, Southwest’s profitability and sustainability could be threatened due to increased operating costs. Our Employee Promise Southwest Airlines uses its generic competitive strategy to counteract the competitive power of other firms, such as Delta Air Lines, United Airlines, and American Airlines. How Does Credit Karma Work and Make Money? In the process of entering the international market, it is assumed that Southwest Airlines will not incur legal restrictions in the target market. One of the factors that have contributed to its market dominance entails the adoption of the low-cost structure. Strategic Profile and Case Analysis Purpose The mission of Southwest Airlines is dedication to the highest quality of customer service delivered with a sense of warmth, friendliness, individual pride, and company spirit. The choice of international market penetration as the best business strategy over product and market development strategies has arisen from the recognition of the value associated with the strategy. Company: Southwest Airlines Co. CEO: Gary Kelly Founders: Herb Kelleher & Rollin King Year founded: 1967 ( as Air Southwest), and 1971 (as Southwest Airlines) Headquarter: Dallas, Texas, U.S. Percy, L. Strategy integrated marketing communication; Theory and practice, New York: Routledge, 2011. One of the markets that the airline should consider entering includes Brazil. Thompson defines a production-oriented firm as an entity that is concerned with reducing the cost of production through mass production to maximize its profitability (202). Therefore, to overcome this aspect, the airline’s management team should communicate its intended strategic decision prior to its implementation. Julian, C. International joint venture performance in South East Asia, New York: Edward Elgar Publishing, 2009. Hill and Jones affirm that a market-oriented entity is largely concerned with developing and utilizing market intelligence (212). Strategic Profile and Case Analysis Purpose The mission of Southwest Airlines is dedication to the highest quality of customer service delivered with a sense of warmth, friendliness, individual pride, and company spirit. Your information is safe and will never be shared. According to a recent HBS Case Study, southwest airlines is the “most heavily unionized” US airline (about 81% of its employees belong to an union) and its salary rates are considered to be at or above average compared to the US airline industry. Therefore, 607 million passengers are expected to be using air transport by 2034. Thus, the study is based on the assumption that the sample size of 120 respondents is sufficient and hence the findings of the study can be generalized. This assertion corresponds with IATA’s findings on the growth of international passenger traffic in Brazil by 5.7% between 2013 and 2013. Since its inception, Southwest Airlines has exclusively used Boeing 737s for all its flight operations. Subsequently, the likelihood of the employees delivering exemplary customer service will be improved significantly. Cowney, D. A. Share your thoughts and experiences in the comments section below. Subsequently, the study adopted the purposive sampling technique. The airline offers scheduled air transport services in the US and near-international markets. In its market penetration, the firm should target the international market. According to Thompson, “an organization must be the cost leader and unchallenged in this position to implement the low-cost leadership strategy” (201). Despite the benefits associated with market penetration, implementation of the strategy is time intensive (Geppert 35). Overall I think Southwest Airlines is the most attractive airline in the industry due to its business strategy and strong earnings performance. The study identifies the development of unique customer experience as one of the core pillars in succeeding in the target market. Furthermore, the industry players may imitate the low-cost structure adopted by the firm hence limiting Southwest Airlines ability to maximize its profitability using the low-cost model. However, the influence of different exogenous factors has made it a challenge for airline companies to maximize their profitability. Training employees on cultural aspects will play a fundamental role in improving the efficiency and effectiveness with which they serve customers. Moreover, the organization should ensure that the product being introduced in the international market is aligned with the customers’ needs and wants. To acquire a market share of over 15% in the Brazilian air transport industry within a period of one year. Air transportation: a management perspective, New York: Ashgate Publishing, 2012. This aspect has been made possible due to the integration of the ‘Bags Fly Free’ concept. The report cites Brazil as the largest market as illustrated by table 1 below. This aspect might occur if the competitors in the new market entered starts offering air travel services similar to the firm. The airline has mastered the art of bringing the customer into the Southwest family using its enticingly warm LUV culture. IvyPanda. He wanted Southwest Airlines to own the idea of “low-cost” in the airline category. The profitability and sustainability of airlines are heavily dependent on fuel prices. The product strategy and mix in Southwest Airlines marketing strategy can be explained as follows: Southwest Airlines is a leading airlines company based out of America. Based on the simple random sampling, a sample of 120 respondents was constructed. By investing in extensive market penetration, the likelihood of a firm increasing its market share is considerably high because of the positive influence created on the rival customers mind. Print. However, Southwest is the granddaddy of the low-cost flight, and CEOs of other low-cost airlines have openly acknowledged their debt to the airline for a solid, cost-saving strategy. professor kohn southwest airlines case analysis what does it take to make money in the business? Using its low-cost, passenger friendly, point-to-point operational strategy, Southwest has been able to sustain considerable growth year after year and remain profitable for 33 straight years. Join our newsletter today to get updates on the latest posts! Boeing’s Max aircraft are crucial for Southwest Airlines’ growth plans and modernization initiatives. Southwest Airlines will be venturing into a new territory. Southwest Airlines Co. is a major United States airline headquartered in Dallas, Texas, and is the world’s largest low-cost carrier. By the end of 2014, the cost of jet fuel at Southwest airline had increased from $1.80 per gallon to $3.16 per gallon between 2007 and 2014. For one, the government recently announced that it would be taking action against the airlines’ decision to fly 49 used jets acquired from foreign carriers without proper inspection. Southwest Airlines corporate vision statement & corporate mission statement are analyzed in this aviation business purpose & management strategy case study. In addition to customers, the survey also entailed seeking information from industry experts. First, adopting the market development and product development strategies while still limiting its operations in its US domestic market might limit the firm’s ability to achieve and sustain a high level of profitability. The firm will achieve this goal by marketing its products into new market segments. Moreover, the firm faces the risk of product imitation in the new market. This move will increase the likelihood of maximizing profitability. The airline’s cost-cutting measures, exceptional customer service, positive organizational culture, and low-fare business model are the key pillars of its success. Strategic Profile and Case Analysis Purpose The mission of Southwest Airlines is dedication to the highest quality of customer service delivered Thus, the organization will assess whether it commences actual business operation within the stipulated time. Cross-border cultural differences are a major barrier in an organization’s quest to succeed in the international market (Julian118). Web. Retrieved from https://ivypanda.com/essays/southwest-airlines-business-strategy/. All the respondents interviewed through the focus group interview cited Brazil as the most attractive airline market in Latin America. [1] It is headquartered in Dallas, Texas. Julian specifies that creating “varying levels of awareness, knowledge, familiarity and experience with a product or brand may result in differential attitudes towards similar products” (119). The study also sought to understand the customers’ purchase behavior regarding air travel. The airport selected should not be congested to sustain the airlines’ short turnaround duration. One of the fundamental aspects that Southwest Airline should take into account in its international market penetration entails communicating the value that the organization intends to introduce in the market. The world’s first low-cost airline was Pacific Southwest Airlines, who began operating interstate flights between northern and southern California in 1949. Southwest Airlines has consistently been ranked as one of the best employers in America. First, Southwest Airline should assess the efficiency with which the identified airport is managed and is not characterized by cases of congestion. Subsequently, the study has employed Microsoft Excel as the core data analysis and presentation tool. Southwest Airlines only uses Boeing 737 jetliner models except during the period 1979 to … The airline was established in 1967 by Herb Kelleher as Air Southwest Co. and adopted its current name, Southwest Airlines Co., in 1971, when it began operating as an intrastate airline wholly within the state of Texas, first flying between Dallas and San Antonio. During peak travel season, Southwest operates over, “Don’t put all your eggs in one basket” comes to mind. Through this strategy, the airline has succeeded in developing a point of difference hence improving its competitiveness. Southwest Airlines now has a market capitalization of $14 billion and is One of most effective strategy that the airline should consider entails market penetration. The “International Air Transport Association” asserts that airline companies are struggling to acquire a high market share because of the changing business environment (par. However, the company has a hiring freeze amid the pandemic. Therefore, in its market penetration process, it is imperative for Southwest Airline to consider integrating the concept of customer service as one of its organizational ethics. Southwest Airlines has historically been successful through organizational innovation consisting of a well-structured and consistent strategy (Raynor, 2011). Southwest Airlines is repeatedly recognized as a desirable employer. The purpose of the training will be to ensure that all the employees appreciate the importance of diversity. This assertion arises from the view that the firm leverages on the market intelligence gathered from the market research that the firm undertakes. 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. In the course of its operation, Southwest Airlines has succeeded in establishing strength regarding adherence to industry standards and optimal financial and human capital strength. Therefore, to survive in such a market, the industry players should not ignore the importance of integrating customer relationship as a way of attracting and retaining customers hence optimizing their performance. Neelankavil and Rai assert that Latin American countries are characterized by a relatively lower labor costs compared to the US (161). “Don’t put all your eggs in one basket” comes to mind. In 2011, the airline acquired AirTran Airways hence expanding and diversifying its route network. The survey research approach will enable the researcher to gather relevant data regarding the target customers’ attitude and opinion regarding air travel. Southwest Airlines will incur substantial costs in implementing the above activities. Overall I think Southwest Airlines is the most attractive airline in the industry due to its business strategy and strong earnings performance. For example, despite the fluctuation in fuel price, Southwest Airlines has continued to exempt its customers from additional fees for first or second checked bags. A management consultant and entrepreneur. Virtually every U.S. airline has already sent out … Southwest can lose profitability and, Since its founding, Southwest Airlines has depended solely on, On Mar 13, 2019, the Federal Aviation Administration (FAA) issued an emergency order to ground all MAX aircraft following two fatal accidents. Thus, the airline was ranked amongst the top five traveled brands by the American Brand Excellence Awards (“International Air Transport Association” par. Southwest wasn’t just trying to be different; it had a clear strategy. | Southwest Gift Cards Competitors: Delta Airlines | American Airlines | Spirit | United Airlines | JetBlue | Skywest | Alaska | Frontier | Republic. Therefore, the level of customer service will be improved substantially. Twenty percent (20%) of the respondents argued that they use air travel for business purposes while 55% said their air travel is necessitated by personal reasons. If you are the copyright owner of this paper and no longer wish to have your work published on IvyPanda. Southwest Airline principally offers point-to-point transport as opposed to hub-and-spoke service. Delta Airlines, the American Airlines, and JetBlue. The choice of international market arises from the need to exploit opportunities available in the international market. In addition to the increasing cost of operations, Southwest Airlines is also facing a challenge arising from the elusive nature of the once robust profitable industry. Therefore, the firm will be in a position to customize its product offering. They include low product cost, product performance, quality, reliability and robustness, and time-to-market (Saqib 65). Competitive Strategy Red Queen Effect Blue Ocean Strategy Only the paranoid survives Co-opetition Strategy Marketing Strategy Mintzberg’s 5 Ps Ansoff Matrix BCG Matrix Target Right Customers Product Strategy Product Life One of the ways through which this goal is achieved is by eliminating including aspects that customers may consider unimportant in its product offering (Thompson 201). One of the ways through which the airline can implement the market penetration strategy entails internationalization. Product standardization can aid an organization in managing the negative effects of such cultural differences. Besides, customer disaffection has become a major concern for airline carriers. Thus, the airline has succeeded in minimizing occurrence of flight delays. This aspect means that Southwest Airlines will consume a substantial amount of time in making its air transport services know in the new market. Therefore, the likelihood of the firm developing a high market share will be improved substantially. Unfortunately, your browser is too old to work on this site. Through international market penetration, Southwest Airline will exploit the market opportunities available in the international market. Southwest Airlines Business Strategy. Since its founding, Southwest Airlines has depended solely on Boeing 737s. How many pages (words) do you need? Latin American countries have experienced a considerable increment in demand for air travel over the past few years. Wensveen cites jet fuel as one of the major determinant in airfares (320). A mission statement also serves as a foundation for business strategy and planning as well as work design and business structure. Considering that both the expatriates and local employees will facilitate the firm’s operations in Brazil, coordination of business activities might be hampered by differences regarding national culture. 8). Strategy Execution: Managing Internal Operations Best Practices at Southwest As a vital key to this strategic analysis, I have had the pleasure of interacting with Southwest Airlines employees and gleaning their perspective of What is Southwest Airlines Low-Cost Strategy? One of the in-flight services that the airline should communicate entails its in-flight internet connectivity. On a Due to the adoption of the low-cost structure, Southwest Airlines can be described as a production-oriented entity. This study has integrated the concept of qualitative research design to achieve this goal. By integrating customer experience as one of organizational culture elements, Southwest Airlines will be in a position to attract a substantially large number of customers. According to Julian, a firm introducing a product that is not known in the market requires a firm to undertake extensive product familiarization (119). Southwest Airline will undertake some of the activities concurrently as illustrated by the Gantt chart below to optimize on the available time. The survey was conducted by identifying consumers in Brazil who have integrated air travel in their transportation consumption patterns. In March 2019, Southwest warned its investors that its first-quarter revenue is projected to drop between $200 and $300 million. Subsequently, market penetration amounts to an improvement in brand identity. Strategic management theory; an integrated approach, New York: Cengage Learning, 2012. Despite its efforts to implement the low-cost strategy, Southwest Airlines can no longer be termed as a low-cost carrier. It is imperative for Southwest Airlines to consider adopting the market penetration strategy to survive in the changing airline industry. It contains thousands of paper examples on a wide variety of topics, all donated by helpful students. Southwest has become one of the biggest airlines and is turning 40 next year, but it is clinging to a corporate culture of Halloween parties and rapping flight attendants. From 2011 to 2019, Southwest Airlines’ ASMs grew from 120.58 billion to 157.25 billion, making it one of a few national airlines with ridiculously high capacity. One of the critical aspects that the organization should take into account entail training its employees who will serve as expatriates in Brazil on the cultural aspects that they should observe in serving customers in the Brazilian market. Considering airlines is a cutthroat industry, it’s indeed a great accomplishment. New IATA passenger forecast reveals fast-growing markets of the future, Strategic Management Project: Emirates Airlines, Southwest Airlines Company’s Competitive Advantages, The Key Components at American Enterprise Architecture, Research and Development and the Marketing Departments, Southwest Airlines executive management team, Human Resource Department and Marketing Department. The organization should use different metrics depending on the nature of the activity. The outcome will be an increase in the level of customer satisfaction. Print. This view arises from the fact that the organization will offer unique products in the target market.
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