BUSINESS

PLANNING

ASSIGNMENT 3

SOUTHWEST AIRLINES CASE STUDY

Submitted To :

Dr. Vasudevan
Sundararajan
 Overview

Vision : To be the world's most loved, most efficient, and most

profitable airline.
Mission : Connect people to what's important in their lives
through friendly, reliable, and low-cost air travel.

Southwest Airlines began operations in 1966 as a low-cost

carrier serving three Texas cities: Dallas, Houston, and San
Antonio.
The founders of the company are Rollin King, a San Antonio
entrepreneur, and Herb Kelleher

Southwest Airlines' business model :

Fly on favourable timetables to attract passengers.
Ensure that travellers arrive at their destination on time.
Ensure that customers have a positive experience.
When compared to travelling by car, the fares are really
reasonable.

Southwest Airlines has one of the lowest operational cost

structures in the domestic airline business in the United States.
They continually made money by providing the cheapest and
most straightforward fares as compared to other low-cost
airlines. Southwest Airlines also triumphed through a slew of
industry challenges and commercial restraints.
 SWOT ANALYSIS.

Strenghts
LUV culture - Making every customer feel like a family member
is a powerful way to increase customer loyalty. Using its
enticingly warm LUV culture, the airline has mastered the art of
bringing the customer into the Southwest family.
Reduced Costs - Southwest Airlines' low-cost flights are one of
the reasons for its large number of loyal customers. Passengers
can book flight tickets starting at $45 for a one-way flight using
the airlines' Low Fare Calendar. For many years, the airline has
held the title of the best low-cost carrier.
Best Place to Work - Southwest Airlines has consistently been
ranked as one of America's best employers. Southwest Airlines is
ranked second among America's Best Employers 2019 by
Forbes.
The World's Most Admired Corporation - Southwest Airlines
was ranked #11 on Fortune's list of the world's most admired
companies in 2019.
Consistent Profitability - The main goal of starting a business is
to consistently make a lot of money. It promotes growth by
enabling businesses to accumulate capital for expansion and
R&D. Southwest Airlines made a profit for the 47th year in a row
in 2019. Given the competitive nature of the airline industry, this
is an outstanding achievement.
Brand Worth - Southwest Airlines is the world's fourth most
valuable airline brand, with a brand value of $6.6 billion.
 Weakness
Lack of Diversification - Relying too heavily on a single revenue
source exposes a company to catastrophic loss in the event of
uncertainty or economic turmoil within that sector.
Dependent on US Market - Depending on the U.S marketSouthwest
Airlines does not offer international flights. It relies entirely on the
domestic US market (except a few tropical vacation islands in
Mexico, Central America, and the Caribbean).
Overdependence on Boeing 737s - Southwest Airlines has relied
solely on Boeing 737s since its inception. Due to fewer planes, the
grounding of the Boeing 737 MAX resulted in a revenue loss.

Opportunities

Enhance the booking process - Southwest introduced PayPal and

Apple Pay to its website, mobile app, and in-flight WiFi purchase page
in 2019. It's a fantastic opportunity for the company to broaden its e-
payment options for its customers.
Increase Freight Business - Southwest Airlines can expand its freight
business to enter the ever-expanding global logistics market, which is
expected to be worth $6 trillion in 2019.
Make Use of New Technologies - The ever-increasing number of
internet use cases provides Southwest Airlines with an opportunity to
market its services directly to a large audience. In addition, to
expedite the security process, the airline can implement emerging
technology trends such as biometric boarding kiosks.
Make long-distance flights available - Longer-distance flights are
becoming more popular as more millennials enter the workforce and
dare to work and live farther away from home than previous
generations. Southwest Airlines can expand from short-haul to long-
haul flights to capitalise on rising demand.
 Threats
Publicity that is negative - According to a US government report,
the airline has been flying jets with no confirmed maintenance
records for more than two years, exposing over 17 million
passengers to safety risks.
Fierce Competition - Southwest Airlines faces stiff competition from
other players in the US airline industry, including Jet Blue, Delta,
American, Spirit, United, and Alaska. During an economic downturn,
customers reduce their discretionary spending and opt for less
expensive ground transportation options.
Fuel Price Increase - Fuel prices have a significant impact on the
profitability and sustainability of airlines. Southwest's profitability
and sustainability may be jeopardised if fuel prices rise due to
increased operating costs.
Extreme Requirements - The airline industry's stringent
requirements can put Southwest Airlines' operations in peril, from
FAA inspections to government legal compliance.
Economic Shock (Uncertain Times) - The airline industry's flaws
have been revealed in these uncertain times. Planes have been
grounded, and demand for air travel has dropped, resulting in losses
of millions of dollars.
Terrorist Attacks - Following the terrorist attacks of September 11,
2001, the airline industry saw a reduction in leisure travel. Any
future terror attack might be disastrous not only for Southwest
Airlines, but for the entire airline sector and economy.
 PESTLE Analysis

Political Factors
Southwest Airlines Co. operates Regional Airlines in more than a
dozen countries, exposing itself to a variety of political risks and
political systems. Before joining or investing in a certain market,
Southwest Airlines Co. must carefully consider the following
factors:

Political stability and the importance of the Regional Airlines

sector in the country's economy.
Government bureaucracy and involvement in the Regional
Airlines industry.
Contract enforcement legal framework
Protection of intellectual property
Tariffs and trade rules that apply to services
Favored business associates
Antitrust laws affecting regional airlines
Are there any pricing regulating mechanisms in place for
services?
Rates of taxation and incentives
Legislation governing wages, such as the minimum wage and
overtime pay
Regional Airlines have work week limitations.
Employee benefits that are required
In the services sector, there are industrial safety regulations.
 Economic Factors
Southwest Airlines Co. may anticipate the growth trajectory
of not only the sector but also the organisation by using
country economic factors such as growth rate, inflation, and
industry economic indicators such as Regional Airlines
industry growth rate, consumer spending, and so on. When
conducting a PESTLE study, Southwest Airlines Co. should
examine the following economic aspects.

Type of economic system in operation countries - what

kind of economy exists and how stable it is.
Exchange rates and currency stability in the host country.
The industry of regional airlines has a high standard of
infrastructure.
In the economy, labour costs and productivity
Stage of the business cycle (e.g. prosperity, recession,
recovery)
The rate of economic expansion
Discretionary earnings
Percentage of people unemployed
The rate of inflation
Rates of interest
 Social Factors
The following are social aspects that Southwest Airlines Co.'s
leadership should consider while doing a PESTEL analysis:

Demographics and educational attainment of the people

In society, there is a class structure, a hierarchy, and a power
structure.
In the Southwest Airlines Co.'s industry, there is a high level of
education as well as a high standard of education.
It is a matter of culture (gender roles, social conventions etc.)
The larger nature of society and the entrepreneurial spirit.
Entrepreneurship is encouraged in some societies but not in
others.
Perceptions (health, environmental consciousness, etc.)
Interests in leisure time

Technological Factors
A company should not only do a technological analysis of the
industry, but also determine the rate at which technology disrupts
it. Understanding the following effects of technology is part of
technology analysis:
Southwest Airlines Co.'s competitors have made recent
technology advancements.
The impact of technology on product offerings
Impact on the regional airline industry's cost structure
Impact on the services sector's value chain structure
Rate of technological diffusion
 Legal Factors
The legal framework and organisations in place to defend an
organization's intellectual property rights are insufficient. When
entering a new market, Southwest Airlines should carefully consider
the following legal considerations:
Antitrust laws in the Regional Airlines business and the country as
a whole.
Anti-discrimination legislation
Patents, copyright, and intellectual property law
E-commerce and consumer protection
Employment legislation
Health and safety regulations
Data Security

Environmental Factors
Before entering new markets or starting a new operation in an existing
market, a company should thoroughly assess the environmental criteria
that must be met in those markets. The following are some of the
environmental considerations that a company should think about ahead
of time:

Weather
Changes in the climate
Environmental legislation
Regulations on air and water pollution in the Regional Airlines
business
Recycling
Management of waste in the services industry
Attitudes toward "green" or environmentally friendly items
Attitudes toward renewable energy and support for it
 External Analysis

Porter's Five Forces Model

The Porter Five Forces model borrows heavily from the

traditional field of microeconomics. In the case name case study,
the five forces that determine the industry structure of the
organisation are as follows:

1. Buyers' bargaining power with Southwest Airlines – When

buyers have strong bargaining power, they tend to drive
down prices, limiting Southwest Airlines' ability to earn
sustainable profits.
2. The bargaining power of Southwest Airlines' suppliers - If
suppliers have a lot of bargaining power, they can get a
better deal from Southwest Airlines.
3. Rivalry among existing players – When competition is
fierce, existing players like Southwest Airlines find it
difficult to earn sustainable profits.
4. Threat of substitute products and services - If the threat of
substitute products and services is high, Southwest Airlines
must either continuously invest in R&D or risk losing out to
industry disruptors.
5. Threat of new entrants - if a significant threat is seen ,
current players will be willing to earn lower profits to
mitigate the threats.
Internal Analysis - VRIO Analysis

Southwest Airlines' VRIO analysis is a resource-oriented internal

analysis of the company. It is predicated on the notion that
Southwest Airlines can use strategic resources to gain a long-term
competitive edge over its competitors in the sector. Southwest
Airlines may benefit from this long-term competitive advantage by
earning above-average profits and avoiding competitive pressures.

Financial resources, personnel resources, marketing

Value expertise, and operational management are the most
important resources for the company.

Whether the Southwest Airlines' valuable resources are

rare or expensive to obtain. If they are not unusual then Rare
both present competitors and potential entrants will simply
able to acquire access to them and enter the competitive
scene.
Southwest Airlines' uniqueness is that it is impossible to
duplicate. Their products can be imitated in only two ways:
Imitate duplication of the company's products and competitors
developing substitute items that undermine the current
industry structure.
Organizational Competence & Capabilities to Make the Most
of Resources assesses how well the organisation has been able Organi
to exploit the market's most precious, uncommon, and
-zation
difficult-to-replicate resource. Southwest Airlines has been
able to establish itself in the market as a result of all of these
characteristics.
Southwest Airlines Analysis

Market and portfolio analysis

Southwest Airlines grew from a small Texas carrier to the nation's
fourth-largest airline in 1971. It is critical to notify the current
section primary analysis of Southwest Company's strategic
management prior to any changes in leadership. Southwest Airlines
was a highly successful and competitive company that ranked
among the top five in the United States prior to the leadership
changes. Southwest's current purpose is to provide the lowest fares
for business and leisure travellers travelling between states. Instead
of competing with large-scale airlines on international routes,
Southwest focuses on "point-to-point" interstate short trips, with a
focus on profitability rather than market share. This strong vision
outweighs the allure of the international flight market, keeping
Southwest Airlines focused on its own profitable niche. Southwest
has a large modern fleet of 547 aircraft, all of which are Boeing
737s. This is a good thing because customers will have plenty of
legroom and relatively wide aisles on the plane, which is not always
the case even with major airlines. Nothing beats the value that
Southwest provides to its customers. Southwest also has constant
deals coming out where people can fly for even lower fares on
special days, and this makes it the number one choice of all budget-
conscious passengers.
 Industry and Competitive Anlaysis
Various technologies are available to help airlines reduce costs while
increasing revenue. On the other hand, Southwest and other low-
cost carriers did not use flexible pricing; instead, they used other
technologies to cut costs. Southwest is widely regarded as a pioneer
in the application of new technologies. Southwest, for example, was
the first airline to have tactlessness by having an internet website.
With the introduction of new aircraft, airlines will have access to
more fuel-efficient aircraft and flight management systems to
reduce fuel consumption. Any airline company must maintain and
strengthen a set of competitive advantages that distinguish it from
its competitors. Southwest Airlines' business model is based on
ultra-efficient operations, low-cost pricing, and cutting-edge
logistics solutions. Furthermore, their strategy includes a strong
emphasis on the customer experience and planning ahead of time.
Finally, none of this would be possible without a highly motivated
workforce. Southwest achieved multiple competitive advantages as
a result of this sound strategy, allowing it to remain relevant in a
rapidly changing world.

KEY TAKEAWAYS :
Southwest Airlines is more adaptable than the majority of large
airlines.
Southwest is the only major airline in the United States that is also a
low-cost carrier.
Southwest Airlines' strategy focuses on attracting and retaining
highly motivated employees.
Southwest is constantly working to improve its business model and
practices.
 Strategies

Strategy is the long-term direction and scope of an

organisation: it achieves an advantage for the organisation
through its resource configuration within a challenging
environment to meet market needs and fulfil stakeholder
expectations.

Development Strategy
Southwest Airlines should pursue a merger or acquisition
as a strategic advantage move in order to maximise
profitability.

The strategic outlook for Southwest Airlines will change

with the acquisition, and therefore the objectives, scope,
and advantage elements need to be re-identified in relation
to the strategic move.

Southwest Airlines will consider how to best utilise the

partner airlines in order to maximise profitability by
evaluating all routes and redesigning flight plans. The
process of change and transition will \simpact their
objective and scope so that they are \srealigned with their
new advantage strategy.
 Corporate - Level Strategy
It is worth noting that most of Southwest Airlines' revenue comes from
passenger transportation. The company can implement a corporate-level
medium diversification strategy. The company under consideration
successfully implements the main idea of the value-creating strategy, namely
diversification into real life. The organization's diversification strategy is
responsible for the company's current success.
It will increase the firm's profitability in the future. This marketing strategy is a
good fit for the country's largest and one of the world's largest passenger
transportation companies. As a result, the company can quickly provide a wide
range of services at a low cost. Furthermore, this strategy leads to expanding
the company's operations both within the United States and in other
countries. In the long run, Southwest Airlines will provide reservation services
to its customers worldwide. This will make the company stronger and more
competitive in the global air transportation market.

Competitive starategy
To gain a future cost advantage, the company should devise new competitive
strategies. For example, the company could offer its customers lower prices.
This can be accomplished by purchasing large planes. Discounts should also be
provided on special occasions in order to attract more customers. Alternatives
can be used by the company to create a new differentiation advantage.
Customers can benefit from free internet access and improved loyalty
programmes, which the company can provide. New resources, such as free
internet (Wi-Fi), proper customer support, comfortable seats, and loyalty
programmes, should be made available to the targeted passengers. Such
strategies will eventually increase the firm's profitability. The company can
target such people by providing high-quality services. Many students are
learning new business management skills. Such graduates should be hired by
the company in order to provide quality services to targeted passengers. The
company can also improve its security. The company can also improve its
services by providing free meals and utilising an online reservation system. To
provide the best services, proper leadership practices will also be required.
 Submitted By :

Apoorva Rawat - 21050341005

Siddharth Menon - 21050341040