This report entails an analysis of the Southwest Airways, a company dealing with air transportation. The first section gives an overview of the company, history, problems, and the general operation of the company. The second part analyses the strength, weakness, opportunities and threats (SWOT) in the organization. The final part provides recommendations that the company can use in overcoming the weaknesses and threats as well as maximizing the strength and opportunity.
Rolling King and Herb Kelleher started Southwest air Company in 1971. It started as a simple airline but has now grown to be the fourth largest airline in America, operating under the symbol LUV on NYSE (eCheat.com, 1999). According to eCheat.com, the founders of Southwest airways had a notion that “if you get your passengers to their destinations, when they want to get their, on time, at the lowest possible fares and make darn sure they have a good time doing it, people will fly your airlines.” This is one notion that has spurred the company to greater heights it is experiencing.
The major problem facing the southwest airways is that the company is running out of market that suits its model. This is attributed to the fact that the airways system initially aimed at doing the point-to-point flying system instead of the traditional system of establishing airport hubs, so as to maximize the employee and the airplane productivity. According to Davidson (2003), this can be attribute to lack of differentiation in the transport system.
Corporate culture of Southwest airways (SWOT Analysis).
Southwest airways is the only major airline in the US that has constantly been profitable in the last five years. (Auxilium West). It is also a company with a good reputation as an employer.
Southwest’s success lies in the way of employing. According to Herb Kelleher, CEO, the company looks for Zealous persons regardless of the job category. The employee has to be a person with positive attitudes, sense of humor and who is ready to work as a team and not as an individual (Auxilium West). This is because the company beliefs that if you get the right persons to hire, then you can presumable build a workforce culture required. The company also puts a lot of emphasis on the way it interacts with the people. This is mostly in demeanor. The people needs to feel happy and fulfilled, and the management has to show that it is happy about its people and cares on what happens to them even outside the workforce.
The company has a competitive advantage over the other competitors due to the low priced tickets it offers. The company provides services to customers who are willing to pay low prices so as to forego services search as in-flight meals, direct routes and fancy seats. This kind of low cost model has helped the company to be in better shape than other competitors after the September11. Most if the passengers lost faith in especially larger airlines because they felt that they were more susceptible to hijacking as happened on that day. This meant a big loss on the major airlines and had to downsize, but to southwest, it was able to turn in profits.
The company also depends on the low cost model planes – the Boeing 737s, which offers only coach seats. This has been very advantageous because many people don’t prefer luxurious services for a short flight, hence Southwest Company meets this demand. On contrary, other competitors have gone into luxurious services that have left Southwest with many customers. Another strength lies in the company’s commitment to make the employees happy. This is because the company beliefs that when the employees are happy, they will serve the customers to their satisfaction, and when customers are satisfied, they will come back, in the end, the shareholders will also be happy. The relationship of the employees and the management is very good. The employees are allowed to have independent unions and flexible contracts. This gives allowance to the employees to work for longer hours.
One of the weaknesses that the company has is the coverage area. The company serves only 29 states, which makes it unable to compete with other bigger companies both nationally and internationally. The company is also not able to utilize the hub that allows bigger competitors to get out. Because most of these bigger competitors know that they cannot match the price offered by Southwest, they narrow the price difference between themselves and Southwest’s while stressing on quality (eCheat.com). Other competitors use the flight hub to serve the remote customers.
The company depends on the Boeing 737 model. This is a big weakness if this model receives a bad reputation or there is a critical flaw discovered. This will imply a very costly venture in making the replacement of all the planes or in trying to counter the bad publicity.
One of the biggest threats is if any competitor goes in the direction of offering services as the southwest company. This implies the company will loose its originality and face a stiffer competition especially from bigger companies owning hubs decides to offer the same services as that of Southwest. This might imply introducing and expanding the southwest’s cost model in the system thus increasing competition.
Southwest airlines is a discount airliner. These operations are facing a lot of rivalry in the market. The rivalry is increasing while the market decreases. This is due to the fact that as rivalry is enhanced among companies, the companies are forced to downsize, and with the worsening economic conditions, competitors will further downsize and in the end start competing for the same remaining market (echeat.com).
The company’s customers are both in the residential and commercial sectors. This implies that there are no chances of them integrating backwards. This implies that the chances of the customers integrating backwards to build their own transporting planes are not easy. This is an opportunity that the company has used to expand rapidly.
The company’s other opportunity lies in the fact that the threats of new entrants is not high, because of low demand and the hurdles that might be brought about by the FAA and government regulations, the company has chances of continued growth.
The company has been able to experience good profits by taking advantage of poor economic situations. Poor economic situations make many people to opt for cheaper prices. The cheap prices have become a model of target by many competitors, as most might end up downsizing and bringing more competition in the market. Many of these competitors are able to reduce the difference of prices between their companies and that of Southwest. Therefore, to avoid any consequences that the price-cutting might bring, Southwest can further reduce their prices. This in the short run might be a loss to the company but in the long run will enable to eliminate some competitors in the market. But this lowering of the price has to be cautiously undertaken. The best way to lower the prices is when the company is sure that some or one of its competitors is facing bankruptcy. With that, lowering of prices will further increase loss in such companies hence closing down and reducing competition.
The company has been able to go on making profit even at times of poor economic conditions. Most of the competitors of the company have been going bankruptcy and this can be an opportunity if the company can research on the other markets that had been held especially by the competitors and expand there.
Even though the company tries to avoid luxuriousness, it would be very appealing if the company will upgrade the seats (though expensive) and this is a venture might accommodate most customers and open up to larger market.
The company has gone into a long way from a simple company since its inception up to now, becoming one of the airways to reckon. The company has been able to operate on a continuous profit despite other airlines facing bankruptcy especially after the September 11 incidence.
Therefore, the company should take this opportunity of bankrupt airways, and the advantages it has of low tickets to expand further into other markets as well as going internationally. Upgrading of its system and cutting the prices even lower will enable the company to attract and capture a large market share and bring much profit in the future.