Quite good – 79 of 100.

Even a negative scenario should be considered

and assessed – you have done it very good linguisticallty, and quite
logical analytically

Harvard Business School Case-“Southwest Airlines”

Prepared by Ermakova Aleksandra, ICF01

I. SUMMARY
Rollin W. King organized Southwest Airlines Corporation and decided to enter the
airlines market of triangle route area. In spite of the fact that the demand in this
market was not satisfied, his company faced tough competition with already
operating companies (this seems to be the problem), Braniff International Airways
and Texas International Airlines. In addition, the company faced internal
challenges in areas of finances, skeleton managing team and hiring new personnel.
8/10

II. THE PROBLEM

- Southwest has to decide how to respond to Braniff's move. And this is the logical
development of the problem above 17/20

III. CAST OF CHARACTERS

a. Rollin W. King – founder, executive vice president of operations
M. Lamar Muse – an independent financial consultant, then president and
treasurer
Andy Andrews – president of PSA, helped with pricing policy
Dick Elliott – first vice president of marketing
Jess R. Coker – second vice president of marketing
Camille Keith – public relations director
b. Southwest Airlines
Braniff International Airline – competitor
Texas International Airlines – competitor
Bloom Agency – advertising agency outsourced by Southwest
Wells, Rich, Green – Braniff’s advertising agencies Not relevant for the
Problem solving – now SWA were having their own marketing department
Aeronautics Comission not relevant
McDonell-Douglas, Boeing – other airlines, which were selling jets for
Southwest only if you know their role in solving the problem
3/5

IV. CHRONOLOGY
(reverse - from "today" to yesterday and further back to the past events)
1. Braniff also announced half-price sale
 2. Southwest successfully launched half-price fares to solve remaining problem
of substantial losses
3. A third phase of the advertising campaign was launched, major pricing
change occurred(half-price flights in both directions) what resulted in
growth of traffic levels
4. TI increased its fares to match Southwest's; Braniff met all aspects of the
fare and on-board service charges
5. A new Executive Class service on all full-fare flights, offering passengers
new amenities was announced by Southwest to break the news of the
increased fares
6. Southwest’s first birthday and specialized promotional campaign(mailing
list)
7. Capital gain(from selling th 4th boeing), lower operating costs, and a
continued increase in revenues led to fall of net loss.
8. New schedule reduced daily flights between Dallas and Houston
9. Average passenger loads increased, but it was still below the number
necessary to cover the rising total costs per trip
10.Southwest initiated a second phase of the advertising campaign, hired a new
vice president of marketing, and scrapped its public relations agency
11.Southwest flights between Dallas and Houston were transferred to Hobby
Airport, what contributed to increased transportation revenues
12.Braniff and TI announced $20 fares on both routes
13.Southwest shortened ticket purchases, using a machine to print out tickets
14.The Bloom Agency's advertising campaign for Southwest finally broke
15.The airline's continuing legal battles with Braniff and TI received extensive
publicity from the mass media
16.Recruitment advertising in one area proved outstandingly effective
17.Muse and King settled on a $20 fare for both routes. In comparison, Braniff
and TI coach fares were $27-28.
18.Four executives with many years' airline experience filled vacancies on the
management team
19.Southwest bought 4 Boeings, which were better than it’s competitors had.
20.Lamar Muse entered the company as a president and treasurer
21.Braniff and TI asked the Texas courts to enjoin issuance of the Texas
certificate for Southwest
22.Southwest Airlines was founded by Rollin W. King and entered the airlines
market of triangle route area
23.It is strikingly long!
.Take away everything which is not relevant here at the point of the case
analysis 2/5

V. ISSUES
1. Initial financial problems
2. Losses in the Dallas-San Antonio market(passenger loads are below the
number necessary to cover the total costs per trip)
 3. Inability to decrease prices more further on
4. Long-term tough competition
5. Reiteration of the strategy by the competitor, regardless of it’s capabilities
and unwillingness of the competitor to create the healthy competition. Not
quire clear - never mind – the issues are quite well developed – logical and
consistent 18/20

VI. OPTIONS - more than 1, not less than 3, and for each:
1. To leave the market and choose another one are you meaning Getting out of the
Triangle area and start everything anew?
a. Getting rid of unhealthy competition (competition is
unhealthy be definition, by default)
b. Uncertainty about the competition in a new market;
Additional losses on advertising campaign, because nobody knows about them in
other markets; Starting from the very beginning of developing the company.

2. To enter additional markets

a. Additional earnings, which can help to overcome the losses in
this market(diversification); competitive advantage over current competitors;
developing the image of huge successful company.
b. Additional losses; additional challenges with new personnel
and advertising.

3. To continue competition only in this market with new advertising strategies

a. No additional losses and challenges
b. The risk to lose the company, because the competitors have
more resources (such as capital) to continue this battle; doubts about the
effectiveness of further advertising campaign; no sources of additional capital.

If these are the options as you see them, one can accept them 18/20

VII. RECOMMENDATION
a. Looking at the advantages and disadvantages listed above, the
only reasonable decision for Southwest is to enter new markets.
b. This decision can allow the company to earn additional
capital, to develop their image and finally drive out the competitors thanks to
economies of scale.
– if it is YOUR choice as the leader – it has its right to exist, but frankly it does not
look natural – they created a company, involved dozens of people now you
recommend them to leave the market and go to another one?
7/10
VIII. PLAN OF ACTION
a. Step one: preparing for new markets
first part - market research, search for counterparties
second part - development of a market entry strategy
 b. Step two: retention of the existing market Not logical
first part – continuing advertising campaign
second part - maintaining competitive demand
c. Step three: entering the new market
first part – advertising campaign
second part – beginning of work
d. Step four: capture of the initial market
first part – decrease of prices to the level which is not
affordable for competitors
second part - covering costs with revenues from other
markets
third part – preparation for additional volume of
demand, because the competitors will not be able to operate with such tariffs and
will have to leave the market
fourth part – occupation of the full demand of the initial
market and further developing the new market
6/10
Frankly, it does not look feasible – new markets are not very frequently identified,
especially for such a specific and expensive business as airtravel.