Strategic Analysis of the Southwest Airlines By Essay

Excerpt from Essay :

strategic analysis of the Southwest Airlines. By examining the SWOT analysis of the Southwest Airline it is concluded that the best strategy for the company is the low cost leadership strategy because the competitive advantage that Southwest Airlines enjoys is its low operating cost. The company has to plan its future tactics keeping in mind the cost-cutting phenomenon; this will help the company to sustain its position. The recommendation for the company is to continue the provision of service at low price and improve employee management relationship for a better and coordinated implementation of the strategies.

Southwest Airlines is the largest airline company with the lowest cost present in the United States. It was established in 1967 and since then it has continued its strategy of cost minimizing efficiently. In this paper, the focus is on the specific strategy of the Southwest Airlines. From the Porter generic strategies, Southwest Airlines has chosen low cost leadership strategy (Gittell, 2005). A thorough study of the weaknesses and strengths of the company will ensure that its selection of strategic plan is correct. Among the various strategies, the most suitable strategy for Southwest Airlines is the low cost strategy and it is evident from the SWOT analysis.


The following are some of the internal strengths and weaknesses and external opportunities and threats faced by the Southwest Airlines.

Strengths: The major strength is its low operating cost. Technological expertise, financial position, good customer service, safety record, innovation, good marketing campaign and usage of proper equipment's are some of the basic strengthening points of the company.

Weaknesses: These are some of the weaknesses that the company is facing currently; no proper airport lounge, no baggage transfer outside Southwest, no indirect booking of flights available, union system of the employees, single type of aircraft i.e. Boeing 737. Overcoming these problems is possible through proper strategic planning (Hunger & Wheelen, 2011).

Opportunities: Vertical integration, long-term industry growth, growth opportunities for the small urban airports, high availability of potential markets, new technologies, internet marketing and international markets are some of the major and golden opportunities that Southwest airlines can avail.

Threats: Some threats that are prevailing in the current scenario for the Southwest Airlines include increase in fuel price, general economic downturn, and downfall of tourism due to terrorism, increasing number of competitors in the market, lack of qualified employees, high- speed rails, and government regulations.

The company must use its strengths to overcome its weaknesses. Similarly the company needs to avail the opportunities, in this way the threats will automatically decline. In order to do this, Southwest Airlines need to adopt a strategy that can accomplish its goal in a very systematic manner. In the light of the above SWOT analysis, the niche strategy is the best strategy for the Southwest Airlines to maximize profit within the minimized cost.

Niche strategy:

This strategy focuses on a specific goal on which the Southwest Airlines works and excel itself. Niche marketing strategy always chooses the specified opportunity of the market environment. Southwest Airlines must take care while choosing the opportunity because some opportunities are the environmental traps that may harm the Southwest Airlines good will (Thompson & Strickland, 2004).

Value Creation: The first important point while setting up niche marketing strategy is to create value among the customers sp that they can be loyal with the company and do not go for the packages offered by the competitors.

For the purpose of value creation, Southwest Airlines must work over its uniqueness because this is the only thing that will help the company to sustain its position effectively in the market.

Low cost leadership strategy:

This strategy focuses on the management techniques to lower its cost in order to give the product to its customers at minimum possible price with good quality. Such a strategy makes the management more focused about the internal matters of the Southwest Airlines. This low cost leadership strategy enhance the value of the Southwest Airlines in the eyes of the customer and the company get higher share in the market as compare to its competitors. Southwest Airlines can give low cost benefit to its customers by delivering the service at lower price and hiring the low cost suppliers (Drucker & Drucker, 1999). Another example of the company that has targeted this strategy and has been successful in capturing customer as well as market share is "Wal-Mart." Another reason behind the successful leadership of Wal-Mart is its relationship with the suppliers and strong power to bargain with them. A strong control over the logistics and in-bound supplies is must in order to get low cost benefit.

Know your customers

The next point that must be kept in mind while making up the strategy is that if there is any requirement to make up the strategy. Knowing the customer is necessary before setting up the strategies because sometimes we implement such strategies that customers do not care about. Providing customers the facilities that they do not bother about is useless because such services increase the costs and we do not get the higher value from the customers.

Southwest Airlines has adopted the frill strategy that includes lowest transportation charges and timely schedule. This offer attracts the customers largely because they are more concerned about the fares as compare to any other facilities of meal, seats or luggage transfers.

Thus, it can be said that only such strategy help to increase the value of the Southwest Airlines that are according to the customers need and they can be cost minimizing as well (Grubbs-West, 2005).

Blue Ocean Strategy:

Blue ocean strategy came after the deep study of 150 strategies of industries. The decision makers studied for 10 years about the implemented strategies of more than 30 industries. Under this strategy, the Southwest Airlines seeks to get good market position and cost minimizing ways as well. In order to get a strong position it is not compulsory to suppress the competition from the market but to get such a position where the competitors cannot hit the company's perception in the customers' minds. This strategy does not finish the competitive market of the Southwest Airlines but it provides such methodologies that create new market space. The tools that the blue ocean strategy uses help to attain a sustainable position in the new as well as existing markets. These methodologies also prefer the concept of innovation because only the power of innovation can make a safe place in the market and can save a company from the rivalry of its competitors.

There are seven tools for the blue ocean strategy that include strategy canvas, value curve, four actions framework, six paths, buyer experience cycle, buyer utility map and blue ocean idea index. The blue ocean strategy not only covers the establishment of the strategy but also the way to execute it in the most effective manner. The three basic concepts on which the blue ocean strategy is based are value innovation, tipping point leadership and fair process (Muse, 2002). The framework of the blue ocean strategy not only helps to enhance the performance of the Southwest Airlines to increase its value but it also help the company's personnel to implement it easily and communicate the idea to the staff and customers conveniently.

The strategy canvas: The strategy canvas is the basic framework of the blue ocean strategy. Its horizontal axis shows the competing factors for the Southwest Airlines that exist in the current scenario while vertical axis shows the offers of Southwest Airlines that customers are enjoying in the competitive environment. The constituent element of the strategy canvas is the value curve. It gives the graphical representation of all the competitive factors that are prevailing in the market.

The strategy canvas helps to capture the market space. It shows where the competitors are currently focusing and determine the next step that the Southwest Airlines should take in response of the competitors. Moreover, it helps the company to focus on other factors as well except the competitors like the potential customers that can increase the value if they get a little bit of attention.

Objectives of blue ocean strategy: In order to increase the market share, southwest Airlines try its level best to capture maximum customers. For this purpose, the company offer maximum packages to their customers to make them loyal with the company. In a highly competitive market, the risk to get value from the customer against the offerings increases.

Southwest Airlines, in order to get a safe place in the market must focus on other factors as well besides targeted customers. The company needs to implement such strategies that are equally attractive for the customers as well as non-customers. Such strategies bring up new customers and Southwest Airline will get a new target market that is more influential than the previous one.

Before offering the blue ocean opportunities to the non-customers, the company must check that whether the offer will create a real demand or it is just…

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