External Analysis Southwest Airlines One of United

External Analysis Southwest Airlines

One of United States' most successful airlines in the business is Southwest airlines. The company has been one of the most successful businesses in the economy with no case of worker layoff or strike being recorded in the organization. The company has dedicated its commitment to ensuring it provides a favorable environment for its workers. The company's corporate culture has played a significant role in the success of the company as it recognizes the workers emotions. Positive attitude is influential in the workplace as the workers become more productive. The air transport business is in an industry where profit maximization is a challenge to many players. The struggling economy and the increased number of players in the company make the industry unfavorable for business. The industry is also affected by the increased price of fuel which increases the cost of transportation. The paper conducts environmental analysis of Southwest Airlines by highlighting the factors affecting the business and the methods used by management to counter their effect.

Industrial analysis

External analysis of the business environment is beneficial to the business as it allows the organization to gather information that would be of great assistance. External analysis enables Southwest Airlines to determine the opportunities available in the market and the threats. The industrial analysis shows all the threats and opportunities affecting players in the airline industry. One of the opportunities available to Southwest Airline is the presence of mergers and alliances which are aimed at strengthening markets in the industry. Last year the company acquired AirTran Airline which is a major stakeholder in the market (Zahorsky, 2009).

Southwest Airlines has built a strong reputation in the market which has earned the company industrial recognition. This advertises the brand name which attracts customers to the company. Southwest Airlines has strong fleet operations which enable the company to serve a wide client base. These strengths to the company enable it to have a competitive advantage in the industry. Some of the weaknesses the company faces include low employee productivity, a decline in operation efficiency and dependence on passenger revenue. This weakness affects the competitiveness of the company in the market.

Opportunities to southwest Airlines

The decision to expand through acquiring the airline has enabled the company to expand its operations by talking up routes owned by the acquired company. The company has also merged with WestJet and Volaris which are major international airlines in the industry. The mergers with the two international airlines have enabled the company to reduce airfares and the impact of effect of floating passenger traffic. Southwest Airlines also uses the opportunity of technology to improve its competitiveness in the market (SWOT analysis, 2009).

Technology enables the business to make fright booking convenient to the customers and to connect the company with the clients. The use of technology has improved the services offered by the airline thus increasing the number of customers. The company also has the opportunity to expand into the freight delivery market. Globalization concept has become acceptable over the years has necessitating the transportation of goods to global branches. The airline is strategizing on how to take advantage of the available opportunities to increase the revenue generated.

Threats facing southwest airlines

Southwest Airlines External analysis consist the evaluation of the threats facing the company to ensure that the business strategizes on how to minimize their effect. The threats to the company are likely to affect other players in the industry. One of the major threats is the security threat which has led to increased safety precautions by the airlines. Increased safety precautions have resulted in an increase in operational cost which has reduced the profit margins.

Another threat affecting the company is an increase in the competition in the industry. Increased competition has resulted in migration of customers due to competitive rates offered by other airlines. Decrease in air travel over the years has not helped the situation affecting the industry. To neutralize the threats, Southwest Airlines has improved its marketing strategy to ensure that the company builds on it customer base. The company has improved its services to build customer loyalty and its use of technology has made booking of flights convenient for its customers (SWOT analysis, 2009).

5-forces in porter's model

Porter five models is effective tool in evaluating the competitiveness of a firm within an industry. The model evaluates the competition within an industry and also evaluates the threats from the environment. The threat of substitution is a force affecting the airline industry. Air travel is considered a fast way of moving to places to conduct businesses. An improvement in the field of technology has substituted the need to travel over long distances to conduct business transactions. Teleconferencing has been the preferred method to conduct business due to its efficiency and cost effectiveness's. This has resulted in the decrease in the number of customers in the market (Porter's Five Forces: A model for industry analysis. 2007).

Another force that has an influence over the airline industry is the threat of new entrants in the market. The determinants to the possibility of new entrants in the market depend on the barriers to entry and the profitability of the venture. Entry into the airline business is relatively easily and the returns during the peak season are good. New entrants can get training on how to run an airline company. Southwest Airlines thus operates in an industry where new entrants to the industry are a constant threat (Porter's Five Forces: A model for industry analysis. 2007).

The power of the customers is also another force in the market. Some companies serve a small group of customers who comprise majority of the market. This forces the company to be controlled by such customers. The customers dictate the prices paid for the services and the quality of service provided. These groups of customers have a choice of many suppliers in the market thus the effect of the power of the buyers in the industry. The power of the supplier is also a market force covered in the model. This refers to the power of the supplier of over the airline. Southwest Airlines uses planes from different companies thus reducing the influence of the suppliers over the company. The company can get a good deal for a plane as the company has other suppliers. The other force is the rivalry between the other airlines in the market. The players in the market provide competition for the airline and are responsible for low sales. Competition in this business can be from the local and international airlines in the country.