Low Cost Differentiation Preemptive Strengths Service (Porter\'s

Low Cost

Differentiation

Preemptive

Strengths

Service (Porter's value chain):

Best low-fare carrier

(a) High capacity usage (few unfilled seats), and is, therefore, one of the most profitable airlines, while many other airlines are unprofitable. (b) It can maintain focus on cutting frills.

Best low-fare carrier by standardization of fleet

(a) Few unfilled seats. SWA has only one basic type of aircraft. This reduces training times (b) it can continue this direction.

Price and great staff relationship

(a) Employees work very well as a team (b) Employees are encouraged to have and show their sense of humor. This should continue though within bounds

Flexible as well as unionized.

Step 4: (a) Maintains very good relationships with its unions (b) may need to set conditions with its flexibility

Weaknesses

Operations (Porter's value chain):

Mainly operates its own booking service

Step 4: (a) Booking flights is not available except directly through Southwest Airlines (b) Can work on devising other options

Are copied by other airlines

Step 4: (a) It does not offer frills such as airport lounges, videos on board, etc. (which other airlines may do). (b) can consider differentiating themselves in other cost-free fun ways

Limit themselves to only 60 plus cities

Step 4: (a) No flights to international destinations (b) can consider offering flights during other parts of the day

Flexible (as preemptive step) even though they are unionized

Step 4: (a) Most employees belong to a union (in order to maintain their operations with airline) (b) can reinforce their good relationships with both union and employees.

Opportunities

Social (PEST):

Growth of Hispanic population and the elderly generation; these are attracted to low-cost.

Step 4: (a) Opportunities for growth in markets that are attracted to low-cost (b) SWA should advertise to and target those markets

Longer flights are a growing market: Southwest can differentiate themselves by providing low-cost longer flights

Step 4: (a) More people interested in longer flights (b) SWA can consider offering flights during other parts of the day

New technology - opportunities for new services and products.

Southwest uses the Internet a lot. Internet has improved providing better opportunity for marketing, ticketing, etc.

Step 4: a. The world is becoming more globally interconnected. (b) SWA can capitalize on that by using new internet tools (particularly social media) for its advantage.

Overall air travel is predicted to increase this decade. Southwest can prepare itself for this increase.

Step 4: (a) Global travel may increase (b) SWA should expand its room for cargo and freight.

Threats

Political (PEST):

Increase in oil price

Step 4: (a) negative political impact on oil price (b) SWA can minimize the effect of oil prices rises by hedging their oil purchases and operating the aircraft efficiently.

Competitors such as JetBlue and AirTran -- are copying its model

Step 4: (a) Competition (b) SWA can work at attracting customers by providing the best service and value