Strategic Positioning of Southwest Airlines - Assignment Example

Introduction The world of the 21st century presents a global scenario which is powered by rapid change, ever evolving business environment and high productivity of the masses. The fast evolution and penetration of the internet in various corners of the globe along with the speedy acceptance of various kinds of sophisticated technological gadgets by the global masses has brought in a tremendous change in the nature and means of communication all over the world. The highly advanced level of development on the lines of communication has transformed the planet Earth into a single and highly connected entity. It is important to mention the fact that because of tremendous connectivity, the spreading and diffusion of various kinds of global trends which are emerging in various advanced and established markets are happening at a much faster rate. The fast diffusion of global trends are creating a steady demand among the consumers located in various parts of the world, which is automatically paving the way for the emergence of many new markets from various corners of the world. While studying the trend of emergence of new markets, it has been realised that majority of the new markets are emerging from young and growing economies, which are spread all over the world. Trend analysis and subsequent research has pointed out the fact that the new markets that are emerging from the developing economies will be the centre point of future growth. As a result, there has been a growing trend which highlighted the fact that the businesses organizations, that are located in both the developing as well as developed economies are aggressively trying to enter into many new markets for the purpose of generating significant competitive advantage as well as solidify their future growth prospects. The entrance of many new players in various new markets, along with the fact of high level of internet powered connectivity has resulted in the evolution of a highly competitive business environment all over the world, where the only constant variables are the factors of change, which happens on a regular basis. For the purpose of developing an edge in the marketplace with regards to the existing as well as new entrants, business organizations significantly needs to focus on the process of studying, analyzing and churning out new strategic choices for the company. It is important to mention that for the effective handling of this particular assignment, the case of discussion that has been selected is the United States based business organization Southwest Airlines. This particular aviation sector based company has been selected, since it has been found that this particular organization provides a broad scope for doing an in depth strategic analysis of the choices as well as the position of the company in regards to its existence in the ever changing and fast evolving global aviation. Competitive Business Environment It has to be said that the business environment for the aviation sector is highly critical in nature. It is relevant to mention that the reason for the criticality of the business environment is mainly because the global aviation sector is highly integrated with a lot of macro level factors, which has to be taken into consideration while judging the business prospects associated with this sector. The high and tremendously complex level of integration of the multiple numbers of macro factors of various regions and countries has significantly pushed up the risk quotient that is associated with doing business in this particular sector. While studying the trends that have existed in the aviation sector all around the world, it has been found that the competitive scenario in the last decade shared an inverse relationship for the growth of the airline business all over the world. The analysis of the performance of the airline sector in the period of 2000 and 2009 revealed that the sector of global aviation was subjected to a net loss of more than 52 billion USD. The expert analysts of the aviation sector cited that the issues related to fragmented nature of the airlines sector all over the globe as well as mismatch in terms of demand and capacity are the main reasons for the loss based upshots. The experts have predicted that with the continued existence of these factors, there will be a significant impact in the global airline sector. It has to be said that these factors will trigger a loss of more than 52 billion USD in the next couple of years (Brueckner and Lee, 2010). While talking about the competitive scenario of the global aviation sector, the name of International Air Transport Association (IATA) has to be mentioned. The IATA is the trade association which acts as a representative of around 84% of the total airline business all over the world and plays a major role in drafting new policies and frameworks for the airline sector (Iata.org -1, 2013). Source: Iata.org, 2012, p. 10 The IATA’s analysis of the airline sector however, shows that on a global note, the airline sector has grown at the rate of 4% and 5% over the period of last 2 years. This clearly shows the indications that the airline sector has emerged over the years, and has been quite successful in beating the slowdown that emerged in the wake of global slowdown of 2008 (Iata.org, 2012, p. 10). It is quite significant to mention that the reports of IATA also highlights that the airlines around the world had a tough time, in terms of achieving significant profit margins as a resulf of direct impact emerging from frequent upward movement of the global oil prices as well as highly expensive aviation fuel (Iata.org, 2012, p. 10). Talking in terms of route management, IATA also reported that there were over 800 direct routes that have been added in the global aviation network for the purpose of providing smooth transportation of air traffic all over the globe (Iata.org, 2012, p. 10). Discussing for the purpose of predicting the future trends in the airline sector, it can be said that the global fluctuation in the oil prices as well as the aviation fuel and the prolonged economic pandemonium surrounding the Euro Zone will contribute towards the formation of a possible threat to the global airline sector (Iata.org, 2012, p. 10). Organization Overview Southwest Airlines is recognized as one of the world’s most popular low cost airline carrier. The airline company is based in Dallas in the United States and it can be said that this location acts as a home base for the company’s multiple flight operations. Talking about the origin of the low cost airline company’s operations, it can be highlighted that the airline company first commenced its operations for the aviation sector in the year 1971. The first flight of the low cost airline originated from Dallas Love Field Airport. Ever since the commencement of its airline service, the low cost airline has achieved steady growth over the years. While discussing the recent statistical figures for the airline company, it has to be mentioned as of today’s date, the low cost airline operates around 120 flights on a regular basis from the home base of the company, Dallas Love Field Airport (Kelly, n.d.). Talking about the mission objectives that are followed by Southwest Airlines, it can be said that the core theme that is practiced and preached by the airlines is fact of providing the highest quality of customer service to the passengers and stakeholders of the organization. Talking in a little elaborate manner about the commitments that are preached by Southwest airlines, it can be said that the focus is highly on the issues of providing secured services to the passengers as well as building a highly trusted based relationship among the various stakeholders of the low cost airline company (Southwest.com -1, 2013). Talking on the lines of intra company statistics, it can be said as of the recent times, the low cost carrier services more than 100 million customers on annual basis by employing over 46,000 employees (Southwest.com -2, 2013). Current Strategy of the Company It has to be said that the US based low cost airline carrier for the purpose of sustaining in the market focuses on the process of implementing a series of strategies as of the recent times. Cost Structure One of the key strategies that are followed by the airline carrier is the process of developing competitive advantage in regards to implementing a low cost model. It can be said that the Southwest airlines try to attain profitability while charging highly competitive and low fares to the customers. For this purpose, the airlines focuses on using Boeing 7373 aircrafts, since they have high level of efficiency while operating on point to point based route structure. It is highly important to mention the fact that as a result of usage of this particular aircraft, the airline company can ensure high level of productivity of the employees as well. Better Asset Management and Utilization A very important strategy that is being implemented by the company in the recent times is its high focus on issue of better asset management. Talking in more details about this particular strategy that is being practiced by the company it can be said that the company’s focus on using a single kind of an aircraft helps in better and easy maintenance of the airline’s key resources. Also, it is highly relevant to mention the fact that the airline’s focus to operate on point to point based routes, while connecting various secondary natured airports has resulted in the process of minimum amount of ground time. As a result of better fleet management through the usage of various kinds of optimization techniques, there has been a significant increase in the level of productivity per employee that has been achieved because of attaining an increase in the number of passenger per each aircraft owned by the airline (10k, 2012, p. 3). Pricing Structure For the purpose of promoting the airlines as a low cost carrier it has to be said that Southwest airlines has to continue to offer its services at the lowest cost in the entire aviation market. For this purpose, the airline has to keep on revising its price structure on a regular basis. However, as of the recent times, it can be said that the airline follows a very unique pricing strategy for the purpose of generating significant amount of value to the end consumers. The airline promotes a price structure which categorizes airline’s fares on the basis of competitive rates as well as lower rates that are available for a limited time period. The airline focuses on bundling its service offerings for the consumers. It can be easily said that by opting for this kind of a strategic pricing structure, the airline is highly instrumental in targeting the various segments of masses who have highly diverse needs. Optimization of route network It has to be said that for the purpose of maintaining operational efficiency while focusing on the process of providing low cost aviation services, Southwest airlines continuously focuses on implementing various optimization strategies for effective route and network management. Talking in an elaborate manner, it can be said that the company focuses on using various secondary airports since it provides low network congestion in regards to air traffic. Also, it has to be said that the low cost carrier continuously evaluates its air transports services in various evolving as well as established regions, while taking in to account the critical factor of consumer demand. It is important to mention that by studying the consumer demand arising from various regions, the low cost airline company continuously focuses on adjusting the frequency of flights to various regions. Strategic options analysis of Southwest Airlines It has to be acknowledged that the global aviation sector presents a very risky scenario for conduction of airline business operations because of its high level of linkage with various kinds of macro level factors all around the globe. It is important to mention that the Dallas based low cost airline carrier has focused on designing the recent strategies, while consciously analyzing the various options available to the company. It can be said that the central theme that was focused by the low cost airline carrier while designing the strategic choices to be implemented by the company is the fact of effective revenue management as well as better utilization of essential resources . Talking in a descriptive manner, it has to be said that the core offering of the airline to its targeted consumers are efficient travel services at the lowest cost (Ferrell and Hartline, 2008, p. 16). Hence, for the purpose of attaining sustainability in the market while continuing with the conduction of low cost based services, it was very important for the airline carrier to effectively manage its financial resources. The strategy of developing and maintaining a fleet comprising only of Boeing 737 outlined the airline company’s efforts to simplify the process of maintenance of the operational resources (Hill and Jones, 2007, p. 75). The simplified maintenance process was highly instrumental in putting a cap on the amount related to maintenance based expenditure. Another strategy option that was implemented by the Dallas based low cost carrier is the factor of providing point to point airline services to various secondary airports. It has to be said that this particular move is highly designed on the lines of gaining significant amount of financial mileage. For the purpose of generation of revenue, the Dallas based airlines had to focus on the process of generating volume. The strategy of providing airline connectivity services to various secondary airports in the domestic region helped in a great way in reducing the amount of ground time that was applicable for every aircraft. This resulted in an increase in passenger volume which also helped in automatically boosting up the rate of productivity (Hill and Jones, 2009, p. 105). It can be said that the boosting up of productivity has automatically helped in the process of effective revenue generation for the company. Another important strategic choice that was implemented by the low cost airline carrier for the purpose of boosting up revenue is on the lines of making significant changes in regards to its price structure at a regular basis. It has to be mentioned that the company’s strategy of offering bundled service offerings to suit the needs of a wide range of consumers has significantly helped in the process of revenue generation for the company. It also has to be mentioned that for the purpose of effective management and utilization of the company’s assets, the airline has focused on adjusting the frequency of flights to various domestic regions on the basis of consumer demand. This was a great strategic move by the company, as this provides the airline with the ability to manage its operations as well as resource allocation to various routes on the basis of consumer demand. A unique strategic move that was implemented by the low cost airline carrier for attaining a significant reduction in operating costs is the process of maintaining a labour force with packages which are lower than the industry standards. However, it is very interesting to mention that despite having a low package the employees are highly motivated to work in the company. Analyzing the strategic move in a little broad manner, it can be said that the company’s focus to operate on point to point network has provided the opportunity to the employees to spend their free time at home. Hence, this strategy helps in keeping the employees highly motivated. Also, it has to be said that this move of the American leading low cost carrier helps in a great way in reducing and eradicating the overhead expenses associated with arranging overnight accommodation for the airline employees (Shaw, 2007, p. 209). Strategic positioning of Southwest Airlines Talking with regards to data for the number of passengers carried, it has been found that the Southwest airlines are ranked as the number one airline in the domestic front (Iata.org -2, 2013). Hence, it can be said that the airliner has the highest number of passenger traffic in the domestic market. While discussing the strategic positioning of the low cost airlines in the market, it can be said that Southwest Airlines has positioned itself by implementing the overall low cost strategy. The effective feature of this strategy increasingly highlights the issues of offering quality services at the lowest possible cost. Combined with it are the factors like effective product and service bundling, ease of acquisition of services (Kaplan, 2004, p. 322). While discussing in a detailed and combined manner about the relation between the low cost strategy and Southwest airlines, it can be said that the Dallas based airlines has increasingly positioned itself as a value for money airlines, which provides safe aviation services at the lowest cost. The airlines also has the image of providing desired levels of customer services while maintaining the time factor which is highly crucial in the overall sector of aviation (Shaw, 2007, p. 233). Conclusion Talking on a concluding note, it has to be said that for the purpose of gaining competitive edge in the marketplace, the leading low cost airline carrier of America in regards to number of passengers transported had to implement a series of strategies. It is highly important to state that the strategies designed by the company to fuel its low cost based competitive edge is mainly on the lines of generating efficiency in regards to revenue and profit management. It is utterly relevant to mention the fact that the strategies also try to optimize on the performance of the high value assets and resources that are acquired and maintained by the low cost carrier for smooth conduction of its day to day operations. Reference Iata.org, 2012. Annual Review 2012. [Online]. Available at: http://www.iata.org/about/Documents/annual-review-2012.pdf. [Accessed Mar 18, 2012]. Kaplan, Robert. S, 2004. Strategy Maps: Converting Intangible Assets Into Tangible Outcomes. USA: Harvard Business School Publishing Corporation Shaw, S., 2007. Airline Marketing and Management. Sixth ed. USA: Ashgate Publishing Ltd. Hill, C., and Jones, G.R., 2009. Strategic Management Theory: An Integrated Approach. USA: South Western Cengage Learning. Hill, C., and Jones, G.R., 2007. Strategic Management: An Integrated Approach. USA: South Western Cengage Learning. Ferrell, O.C., and Hartline, M.D., 2008.Marketing Strategy. 4 ed. USA: Thomson Higher Education. Kelly, n.d. Our Proud Home: Dallas Love Field [Online]. Available at: http://www.southwest.com/assets/pdfs/about-southwest/garys-greeting.pdf [Accessed Mar 18, 2012]. Brueckner, J.K., and Lee, D., 2010. Key Policy Issue [Online]. Available at: http://www.iata.org/publications/economics/market-issues/Pages/competition.aspx [Accessed Mar 18, 2012]. Iata.org -1, 2013. About Us. [Online]. Available at: http://www.iata.org/about/Pages/index.aspx. [Accessed Mar 18, 2012]. Iata.org -2, 2013. Scheduled Passengers Carried. [Online]. Available at: http://www.iata.org/publications/Pages/wats-passenger-carried.aspx. [Accessed Mar 18, 2012]. Southwest Airlines, 2012. 10K. [Online]. Available at: http://app.quotemedia.com/data/downloadFiling?webmasterId=101533&ref=8699698&type=PDF&symbol=LUV&companyName=Southwest+Airlines+Co.&formType=10-K&formDescription=Annual+report+with+a+comprehensive+overview+of+the+company&dateFiled=2013-02-07 [Accessed Mar 18, 2012]. Southwest.com -1, 2013. About Southwest. [Online]. Available at: http://www.southwest.com/html/about-southwest/ [Accessed Mar 18, 2012]. Southwest.com -2, 2013. Company Profile. [Online]. Available at: http://southwest.investorroom.com/?int=GFOOTER-ABOUT-INVESTOR [Accessed Mar 18, 2012]. Read More