South West Airlines - Admission/Application Essay Example

South West Airlines Introduction South west airlines are one of the major low-cost airlines running in United States. The basic functions of the airline are providing high frequency, short haul, point to point and low fare services. Southwest was established in Texas and the operations were commenced in the year 1971(“About us”). The company started its operations with three Boeing aircrafts and providing services in three cities Houston, Dallas and San Antonio. At present, Southwest Airlines owns nearly 400 Boeing aircrafts and operates in almost 59 cities across United States. In the present report, the environmental factors affecting the overall performance of the airlines has been discussed. The various environmental issues are analyzed and strategic solutions are provided to overcome these issues and provide a sustainable solution for the long term growth and development of the airline company. PESTEL Analysis Political Political trends are not much influential in stable governments, as compared to those countries which are highly unstable. Yet political factors do have some influence on business operations, even in stable governments. The airline deregulation act was passed in the year 1978 by the US Congress. According to this law, interstate flights were permitted. This gave a boost to the revenues generated by the airlines. Presently the laws related to the airline sector are not very stringent and time taking and this helps in smooth functioning as well as establishment of brand and line extensions. The major political issues which have made the airline sector unstable, is the rise in terrorist attacks in the past few years. A major break down was the terrorist attack on the pentagon, which highly alerted the airline sector as a whole. Demand for air services reduced drastically after the incident and since then, security is one of the prime importance for airline operations. The cost for security and other advance technological acquisitions have increased. Even though there has not been any attack after that, the political conditions remain unstable in the country which throws a question on the long term strategic plans of the airline organization. Economical The economy of US is well developed and established. However, there has been significant change after the economic recession. Consumer spending has decreased, due to difficult credit conditions, and oil prices have increased drastically. Less spending power has automatically decreased the travelling frequency of consumers affecting the overall revenue generation and profits earned by the sector. Moreover the rising prices of jet fuel haven added woes to the already stressed out airline industry. This price hike has affected the overall pattern of expenditure of the airline company. The company is spending more of operational costs and profits have seen a decline in recent years. Because of the growing recession, foreign investments have started to decline. Because of this, the government is not able to provide sufficient capital to the airline organizations in terms of loans and other government funds. This will negatively affect the long terms growth strategies of the airline organization (“Beating low-cost rivals”). Sociological Economic recession has turned consumers more sensitive towards price. After the recession, companies have seen a gradual shift from brand consciousness to price sensitive consumers. Now people are ready to compromise on quality of services and goods for a lesser price. This will affect the pricing strategy followed by the low-cost airline. Though the situation might help the airline in gaining customers who were less sensitive to price, the company might have to enter price wars with other competitors. The company might not have profit advantage in the current social scenario but with constant effort in making marketing strategies and providing affordable travel opportunities for the customers, the company gains a sustainable growth in the long run. Technological Technology plays a crucial role in impacting the overall performance of airline industry. Since the sector is highly dependent on technology, the cost of operations is significantly huge. Airline organizations need to constantly update themselves with the latest technological advantages. Airline organizations can provide innovative and distinguished services with the help of advance technologies. For example, offering in-demand movies during flight, providing internet services while flying as well as in the terminals, can surely differentiate an organization’s operations with that of the competitors (Laszlo 92-94). Apart from that, a faster growth in technology will help the airline industry in terms of cutting cost, and increasing speed and convenience. Demographic The country of US is an established country. Most of the cities where the airline company operates are big and developed cities. Apart from this, the major vision of the airline is to provide low cost services to its customers. This will go hand in hand and prove to be profitable. As more and more number of students is opting for overseas universities for educational purpose, this will increase the demographic profile of the target customers of the airline sector (Kippenberger 38-39). Global Changes in the currency rates, infiltration of people from other countries, especially emerging economics and developing countries are the few global factors which influence the marketing activities and strategies of the airline sector. Analysis of Company Strategies and Policies Marketing Objectives Figure 1 The Strategy Canvas of Southwest Airlines (Source- Harvard Business Review 2002) The above figure is a diagrammatic representation of the marketing and service strategies followed by the organization. Southwest Airlines are following a low price, low cost and low-frills strategy for a strong positing in the market. The airline company runs on the mission of highest quality customer service and total dedication towards the need of the consumers. The company aims to deliver this mission with a sense of friendliness, warmth, company spirit and individual pride. The airline operates with employees who are highly productive and absolute low cost strategies (Bunz and Maes 164-168). Apart from this, their basic business strategy revolves around low cost of operations, providing lowest possible prices to the customers and growth management. These strategies have helped the low cost airline brand create a niche in the airline industry and gain constant profit for 40 years. Southwest Airlines is regarded as one of the most successful companies in airline industry and with the help of a solid and strategic business strategy, they have gained a substantial competitive advantage. Southwest Airlines provides specific products created for exact target demographics and a simplified ticket pricing so that the passengers are aware of exactly what they are getting for the price paid. Strategic Expansion Policies Southwest airlines have developed a quiet sensible and strategic expansion policy, while paying special attention to the budget and not straining the company expenditures (Carpenter and Sanders 101-210). Started with seven aircrafts in three cities, the company has come a long way with airline base in almost 59 cities and having more than 700 Boeing aircrafts. Within 40 years of its establishment, the airline company has become an organization of national importance and is considered as a national airline on the region (Raynor 31-34). Due to the current change in demographic profile and current economic situation, many companies have been facing a decline in the number of travelers opting for first class and business class seats. Since Southwest Airlines are already an industry leader in low cost, it will see an increase in passengers who have shifted from luxury travel to convenient travelling options. This will increase the customer base of the airline company which in turn increase the overall profits generated by the organization. The airline company has also benefitted from its branding. It is an established company in the airline sector and enjoys substantial awareness from the consumers. The short flying routes provided by the company have increased substantially after the introduction of turnaround of ten minutes between departure and arrival at the entrance. Strong Financials The balance sheet and market capitalization of Southwest Airlines is the strongest among its rivals. The current market capitalization of Southwest Airlines is 10 billion dollars which is more that many rival companies put together (“Company quotes”). In the present market which is highly volatile, a strong financial position will help southwest airline in overcoming the short-term demand downturns, better than its rival companies. The company has been able to achieve year on year growth with profit, which is a positive highlight among its arch rivals. Apart from this, the company has also changed its compensation policies in a positive manner. Southwest Airlines are considered as the highest paid employer in the aviation sector. The company boasts high4est paid mechanics, flight attendants and pilots. The unit labour costs that are the amount paid to employees for flying one seat for one mile increased 22 percent from 2002 to 2009, while the same labour cost saw a drop in various other airlines (“Pushing 40, Southwest Is Still Playing the Rebel”). Summary of Analysis The aforementioned environmental analysis and further analysis of the marketing strategies and policies throws some important lights. Even though the organization has developed a strong brand positioning; the company is facing issues with new companies coming in this sector. Because of the new entries in the airline market, the profits are decreasing as these new companies are eating away the market share. Also, with the easy availability of technology, it is very difficult to sustain on the basis of technological advantage. To overcome this issue, one strategy which the company can adopt is patenting the innovative technologies adopted by the company. Though it is not a guarantee of sustainable competitive advantage, it can surely provide the company with time and opportunity to make new strategies (Mennell 27-29). In the current market scenario, many airline companies have made strategic alliances with others in the industry to gain competitive advantage and equal profit sharing. This puts a huge amount of pressure on the companies which are running on smaller fleet. At present Southwest Airlines do not have any strategic alliance with other companies. This might become a weakness for the company in the long run. Strategic alliances also help in maintaining considerable profit and growth even in turbulent times. This, strategic alliance will be an important key factor in determine the long terms and consistent growth of Southwest Airlines in the long run (Mirabella and The Baltimore Sun). Another issue that might prove to be a challenge in future is employee retention. The rising volatile environment and uncertainty in airline sector can result in high attrition rate in this industry (Emerald 16-18). To combat these, the company can involve in strategies such as continuous educational programmes and training facilities for the employees. Performance based compensation and benefits and incentives can provide a huge boost to the morale of the employees and help in checking attrition rate. Conclusion From the above analysis it can be summarized that Southwest Airlines has come a long way in terms of strategic management and innovative marketing programmes. Most of its strategies have been successful in the market. But rapidly changing market conditions, demographics and socio-economic condition s have forced the organization to re-think on its established market strategies and implement those strategies which will provide sustainable growth and competitive advantage to the airline company. Works Cited “About us.” Southwest. Southwest Airlines Co., 2012. Web. 8 June 2013. “Beating low-cost rivals.” Emeraldinsight. Emerald. 2010. Web. 8 June 2013. Bunz, Ulla K. and Jeanne D. Maes. “Learning excellence: Southwest Airlines’ approach”, Managing Service Quality, 8.3(1998):163 – 169 Carpenter, M. A. and W. G. Sanders. Strategic Management: Concepts and Cases. Pearson: Prentice Hall, 2012. Print. “Company quotes.” Yahoo finance. Yahoo, 2013. Web. 8 June 2013. Emerald. “How corporate culture helped Southwest Airlines become the best: Employees are the No. 1 customer”, Strategic Direction, 21.4(2005): 16-18. Kippenberger, T. “Southwest Airlines: redefining relationships with customers”, Antidote, 3.5(1998):38 – 39 Laszlo, George P. “Southwest Airlines - living total quality in a service organization”, Managing Service Quality, 9.2(1999):90 – 95. Mennell, S. “Reach for the skies- HR strategy at Southwest Airlines”, Human Resource Management International Digest, 17.2 (2007): 27-29. Mirabella, Lorraine and The Baltimore Sun. “Southwest Airlines Sees Growth, Opportunities at BWI after Merger with Air Tran.” Baltimoresun. The Baltimore Sun. 2011. Web. 8 June 2013. “Pushing 40, Southwest Is Still Playing the Rebel.” Nytimes. New York Times. November 20, 2010. Web. 8 June 2013. Raynor, Michael E. “Disruptive innovation: the Southwest Airlines case revisited”, Strategy & Leadership. 39.4(2011):31 – 34 Read More