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Competitive Structure and Resources of Southwest Airlines - Research Paper Example

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COMPETITIVE STRUCTURE AND RESOURCES OF SOUTHWEST AIRLINES Market structure of Southwest Airlines industry The determination of the market structure of Southwest Airlines is coupled with a number of factors. Some of these factors could be said to include the number of sellers (competitors), number of buyers (air transport travelers), buyer entry barriers, market share and competition…
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Download file to see previous pages Even though it is common knowledge that Southwest Airlines has a very large share of the market, there are also as many buyers or air transport travelers as possible, who use the serves of other airlines within the market region where Southwest Airlines operate (Mazzeo, 2009). As far as buyer entry barriers are concerned, there are no buyer entry barriers for patrons of air transportation and this gives a very strong indication as to why Southwest Airlines is operating a perfect competition. Even more, regardless of all the successes that has been seen by the airline in its market segment, there continues to be fierce competition among other key competitors with no competitor having a market share of more than 30% (Prince and Simon, 2009). What this means is that market share is low and there are other substitute products in terms of other forms of transportation that consumer may fall on. Macro and international influences on the firm As an international company, the operations of Southwest Airlines are greatly affected by a number of macro and international factors, of which the company barely has no authority or control over. Whereas some of these macro and international influences are political, some are economical, whiles others are social. As far as political factors are concerned, it is on record that even though the American and Chinese governments have each tried as much as possible to keep taxes on air transport minimal, factors like homeland security, infrastructure enhancement and environmental protection have led to a situation whereby there are huge sums of taxes imposed on the traveling public (Mazzeo, 2009). These taxes are often translated into higher airline tickets, which generally affect the rate at which people choose to travel by air. The table below represents some of the special commercial aviation taxes that are paid in the United States, where Southwest Airline is very dominant. Type of Tax Rate Passenger ticket tax 7.50% Flight Segment Tax (Domestic) $3.8 Frequent Flyer Tax 7.5% International Departure Tax $16.7 International Arrival Tax %16.7 September 11th Fee $2.5 Customs User Fee $5.5 Federal Security Sub-charge $2.5 Passenger Facility Charge $4.5 Source: Airlines for America By provisions of the government, these are taxes that are inevitable to the airline and those influences its pricing, promotions and marketing style all together. The economic recession, which has over the years become unpredictable, and growing inflation problems are some macro economic factors that affect the company. What is more, demographics of travelers happens to be a majority macro social factor that influences Southwest Airlines given that air transport is fast becoming the preserve of the elite and that there has to be more of the higher social class emanating from society to get the market really booming. Changes in market structure Over the years, the market structure with which Southwest Airlines competed in has changed significantly. Most of these changes have actually taken place in terms of the availability of skill, labor and raw materials. For instance, with the advancement of technology, which is dominating almost every type of industrial sector in the global economic regime, the use of highly skilled labor force is no longer an optional choice for the ...Download file to see next pagesRead More
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