Southwest has done a terrific Job of keeping its costs low relative to other major U. S. Airlines. The company has enjoyed steady growth, and has been profitable every year since 1973. It does not appear that any major airline competitor can duplicate or imitate Southwest’s low-cost strategy. (savings in maintenance, general administration, operating expenses) Wide Geographic Presence Through continuous expansion, more and more cities were added to their list, giving flyers more and more options. They also offer many flight times throughout the day to aka it more convenient for flyers.
Low Fares Southwest has incredible pricing power, it can charge low fares and still make money. This gives Southwest it’s competitive edge. Southwest also does not charge for the first 2 bags, where rivals are. Strong Focus on Employees and Customers Southwest listens to the customers and employees and in turn in able to minimize cost and act as efficiently as possible. Management believes that employees are the company’s most important assets, therefore they have a lower employee turnover, and an overall “happy’ staff that is able to keep customers happy.
Weaknesses: Doesn’t Offer First Class Treatment For those customers looking for a more luxurious experience, Southwest really has nothing to offer them. There are no special privileges for their frequent flyers to enjoy in the terminals, like other airlines offered. There is also not baggage transfer service offered for those with connecting flights on airlines outside Southwest. Opportunities: Ability to Offer Non-stop Flights With so many flights offered per day in each destination, travelers are able to enjoy non-stop flights.
As long as the hub strategy that other airlines use isn’t implemented y Southwest, they have the advantage of offering direct flights. Investment in Employee Training and Satisfaction Increased training and education of employees increases their efficiency as well as their attitude towards their Job. Their rivals do not offer the family like atmosphere that Southwest does, which brings them stronger applicants in search of this desirable work environment. Threats: Salaries Pilot, stewardess salaries at competitive airlines are higher.
Differentiation of Planes Competitors have larger planes available, making it possible to earn more per flight. South West SOOT analysis By statesman Rivalry: Strong. There are many options for travelers, and there are many airlines that are in direct competition. People have many choices when they are choosing their transportation to and from a destination. Southwest does offer a larger number of destination, and more departure time options than other airlines, making it a more convenient option. Potential New Entrants: Weak 1 .
Traveler confidence would not be high for a new airline entrant, a reputation of safety would need to be established before a new entrant would be taken seriously. 2. There is already an established airline market, new entrants would have to be able to offer. 3. Federal laws and the FAA regulation make it hard for new entrants. Bargaining Power of Suppliers: Strong. Southwest’s procurement channels are limited to predominantly Boeing. Boeing is also a service provider, therefore Southwest does not have any bargaining power over it’s suppliers.
Bargaining Power of Buyers: Weak. No other airline has matched the low-fares and “bags fly free” advantage of Southwest. Buyers who are looking for the economical travel experience don’t mind the coach style planes. In this economy vacations have a luxury and Southwest offers travel specials to help the budget conscious travelers. Substitute Products Moderate. Travelers who are not time sensitive can travel by other means of transportation. However, most travelers are time sensitive and require the quickest route of flying.
Strategy: LOW-COST Hire people and treat them like family Care for our customers warmly and personally, like they’re guests in our home Keep fares and operating costs lower than anybody else by being safe, efficient and operationally excellent Stay prepared for bad times with a strong balance sheet, lost of cast, and a stout fuel hedge Operate only one type of aircraft Boeing ass’s Introduced tickles travel to eliminate paying commissions to travel agents
Deemphasized flights to congested airports stressing instead serving airports near major metropolitan areas and in medium sized cities Point to point scheduling of flights was more cost efficient than the hub-and-spoke systems used by rival airlines. Seat assignments were not practiced, passengers could check themselves in and bypass the check-in counter No layoff policy kept morale high Employees enjoyed substantial authority and decision making power Recommendations: Make sure to incorporate Raritan into the Southwest standard of business, train Raritan employees in Southwest policies, procedures and operating practices.
Try to avoid layoffs in both Southwest and Rattans post merge in order to keep moral up. Continue to advertise free baggage and no change of flight fees to make travelers Absolutely, Southwest has continuously been profitable even during the rough years of 2007-2010. Total passengers has increase from year to year, revenue passengers carried has increased continuously. Revenue increased 16. 9% from FYI 2009 to FYI 2010. Operating income between 2009 to 2010 increased from $262 million to $988 million. Net Income also increased in 2010. The number of aircraft has also increased, increasing their potential to increase revenues.