And many have got successful too in earning the market share. The emerging competition by new companies is a growing threat for the company and it should be tackled properly to avoid any future disturbances. Southwest also utilizes a specialized scheduling system that permits 80% of their customers to fly non-stop and confines time used up at gates to twenty-five minutes or less. However again, this also presents a flaw as any system breakdown, specifically in the computerized check in terminals could lead to a loss of information, goodwill, and in the end, revenue. Also in the part of effectiveness, Southwest has hedged 73% of its fuel expenditure at $36 per barrel at a point when the price is costing most other airlines over $60 (Arndt). In 2005 without help, this prevarication policy condensed Southwest's fuel and oil expenses by over $900 million which allotted them more financial freedom as discussed above. The chance of this hedge reversing itself to turn out to be a liability to Southwest is highly doubtful as fuel costs are only estimated to increase for the projected future.
In order to further describe the competition Southwest Airlines is facing a Competitive Profile Matrix is designed. The following Competitive Profile Matrix tells about the tough competitors which are in a good position to have an edge over Southwest Airlines. It tells about the strengths and weaknesses of other competitors in contrast with Southwest Airlines.
Factors Weight Southwest Airlines United Airlines Delta Airlines Ratings Score
Score 1. Low fares.15 4.60 3.50 4.60 2. Customer Service.15 2.30 4.60 3.50 3. Employee Relations.15 4.60 3.50 3.50 4. Rate of Expansion.10 2.20. 4.50 4.50 5. Marketing.15 4.60 4.50 4.50 6. Finance Structure.15 4.40 4.40 4.40 7. Management Policies.15 4.60 4.60 2.20
EXTERNAL FACTOR EVALUATION MATRIX
The external factors such as environmental, economic, social, cultural, demographic, political, legal technological etc. have a great influence on the company's performance. Thus to provide a better view of all these factors External Evaluation Matrix is designed. A rating of 4 here means the company is very good at reacting to all the external factors. Following are the external factors which contribute to the performance of Southwest airlines.
Major External Factors Weight Rating Score Opportunities 1. The point to point market remains a growth market.10 3.30 2. Adding of more Long haul routes.10 3.30 3. Expanding internationally into other territories.10 1.10 4. Expanding east U.S. short haul routes.10 4.40 5. Established Economy.10 4.40 Threats 1. Great fuelling costs.15 2.30 2. Economic downturn.15 3.45 3. Policies of Competitors.5-4.20 4. Corporate cost saving measures.10 3.30 5. Merging of Airlines sharing agreements scheduling and marketing agreements.5-2.10 Total 1.0-2.85
The key strength Southwest contains to propose is that it is possibly the most economically firm corporation in the United States airline market as earlier confirmed. For thirty one consecutive decades it has created a profit; not falling into the red even following the consequences of the September 11th attacks in 2001. This permits southwest the liberty to amend policy and make judgments that a more greatly weighted corporation, such as Delta may not be able to reproduce.
Whereas financial constancy is a key factor to Southwest's accomplishment, there are numerous different competencies that have led to this place. To start with, Southwest has an tremendously optimistic status due to its better corporate veracity. Southwest was familiar for the ninth straight year in 2005 as one of America's Most well-liked Companies by Forbes and has detained the characteristic of being between Business Ethic's list of the top 100 Best Corporate Citizens for the last five years. (Annual Report 2005).
This benevolence permits Southwest to magnetize and sustain a solid group of workers - further than a quarter of a million job hunters applied for less than 3,000 posts previous year letting Southwest to keep high standards when filling positions. These faithful workers assist to counterbalance the risk Southwest faces by listing itself as a "low cost" airline. By containing employees that take pleasure in their positions and present themselves in a sociable, professional way, it adds excellence and worth by inserting an affirmative element in to a traveler's Southwest experience. Additionally, motivated Southwest workers were able to make use of their improved productivity and innovation to make the company's operating expense down by 1.5%. 82% Southwest's work strength is unionized and this may serve to keep staff satisfied, settled terms involving.".. hiring and retention rates, and costs for health care are items with potentially significant impact on the Company's operating results" (Annual Report 2005). This potential weakness could guide to decreased revenue as Southwest's labor demanding organization continues to expand.
An additional strength contributing to Southwest's economic accomplishment is their ready approval of new technology. Services for example ticket-less check-in, which lets travelers to board their flight not just more speedily but furthermore with no distressing about losing a paper boarding pass, and the Southwest desktop icon, a marketing policy that makes use of a ...
Regrettably, one of Southwest's supreme strengths is also one of its main weaknesses. The low cost of Southwest's tickets is the foundation stone of the company's strategy and describes the nature of Southwest. This discounted ticket rate unluckily has led to the eradication of a first class and a decrease in overall facilities (refreshments, in flight movies, etc.). As a result of lack of these apparently needless services, some in the marketplace may distinguish Southwest as the airline of the second class resident although Southwest's very good safety record and well-mannered staff. While ill-fated, Southwest is accessible with the chance to reinvent its image comparative to other airlines - a procedure it has already commenced by switching its traditional plane colors for a more reorganized system. Another area that presents both a weak point and chance for development is Southwest's geographic service. Southwest make tracks from 62 cities covering only two-thirds of the United States. No service is supplied to Canada or Mexico in spite of their closeness to existing Southwest routes. Though, Southwest's present policies plan for and make available the resources to allow for growth. In 2005, the company added thirty-three leased Boeing 737's to service two additional cities, increasing their overall capacity by 11%.
Superficially, Southwest faces equal problems to the rest of the airline industry but from an imprecisely less precarious position. Government system, such as the Wright Amendment that at present limits commercial flights out of Dallas Love Field (Southwest's primary hub), can put a strict limitation on Southwest's development potential and it's capability to function in certain markets. Adjustments to prior regulation, such as those prepared in reaction to terrorism, can also force a revise in current airline trends.
With the danger of terrorism still moderately high, post-September 11, 2001 security will carry on to cause a raise in costs. Resting on this, passengers are as a final point becoming relaxed again with air travel, and any attack.".. even if not made directly on the airline industry" (Annual Report 2005) would confidently have a negative impact upon airline revenues as citizens once again became terrified to get to the skies. Any loss of assurance in the protection of air travel would direct to a transfer to the use of other forms of transportation, leaving Southwest struggling to fill its seats. Optimistically, Southwest has used its strengths to last out the situation earlier and as long as the company keeps its existing policies, should be able to carry on any unexpected terrorist attack.
All associations have strengths and weaknesses in the practical areas of dealing. No enterprise is evenly strong or weak in all regions. Organizations should struggle to exploit upon the internal strengths and prevail over weaknesses
INTERNAL FACTOR EVALUATION (IFE) MATRIX
The Internal Factor Evaluation (IFE) Matrix go over the main points and calculates the main strengths and weaknesses in the functional areas of a business, and also grants a way of recognizing and estimating the relationships among those areas. Scores can range from 1.0 to 4 with 2.5 being the average. Scores below 2.5 point out that a corporation is weak internally.
Key External Factors
Recognized as one of the world's safest airlines
Best customer satisfaction ranking of any major U.S. airline for the eighth year in a row
U.S. only major short-haul, low-fare, high frequency, point-to-point carrier
Lowest debt among U.S. carriers
Lowest cost airline in its market
Twenty-four years of operating at a profit
Low price fares, no frills
Commitment to only Boeing 737 aircraft
Avoids formal strategic planning and management
Unionized labor force
Few long-haul flights
No centralized reservation system
No international flights
Low customer service budget
Strengths-weaknesses-opportunities-threats (SWOT) Matrix
The strengths-weaknesses-opportunities-threats (SWOT) Matrix is a tool that assists manager to build up four types of strategies. The four sorts are Strength-Opportunity (SO) Strategies, Weakness-Opportunity…
Southwest also utilizes a specialized scheduling system that permits 80% of their customers to fly non-stop and confines time used up at gates to twenty-five minutes or less. However again, this also presents a flaw as any system breakdown, specifically in the computerized check in terminals could lead to a loss of information, goodwill, and in the end, revenue. Also in the part of effectiveness, Southwest has hedged 73% of its fuel expenditure at $36 per barrel at a point when the price is costing most other airlines over $60 (Arndt). In 2005 without help, this prevarication policy condensed Southwest's fuel and oil expenses by over $900 million which allotted them more financial freedom as discussed above. The chance of this hedge reversing itself to turn out to be a liability to Southwest is highly doubtful as fuel costs are only estimated to increase for the projected future.
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