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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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
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It is a well established firm in the airlines industry that maintains stable profitability. From (Airlines renew debate over low-cost model, 2011).Nowadays, it is becoming difficult for low cost airlines companies to confront with market competition due to different factors.
Southwest Airlines is a Dallas and Texas based Airlines Company and the largest one in the United States. It deals with domestic passengers. At the same time, Lufthansa is the largest airline in Europe in terms of its passenger carrying capacity. As in the case of any other Airlines Company, Southwest Airlines and Lufthansa give great emphasis on the checking procedures on the ground of increasing terrorist activities.
It combined the basics of low cost leadership and differentiation strategy to devise its own rules of governing the airline industry. As a result, it enjoys the Numero Uno status of being the low cost airlines of US for more than 30 years and the legend is still continuing.
This organization provides car rental facilities to its customers and the company has made arrangements for booking the car online. The company also arranges hotel facilities to its customers according to their requirements. Different vocation packages and cruises are other attractive services offered by Southwest Airlines.
First of all, it sets the tone for management and governance at all levels of the organization. Secondly, controllership determines to long-term growth and survival of the company. Thirdly, controllership provides the background for a company to provide the best services to all the people concerned with its operations and existence.
Furthermore, the hub-and-spoke system as well as costly reservation system along with price wars and heated competition all made it difficult to fragment the network of airlines. However, owing to deregulation and the resultant fall in fares the industry saw an influx of a host of new entrants, including Southwestern Airlines (Inkpen 1).
Therefore, the company focuses at their mission by extremely careful hiring of workforce who fits within the corporate culture believing that spirited workforce and fun loving bring superior customer service through their intrinsic attitudes. The employees at the company are trained to help customers and serve them genuinely with care in order to make customers happy; thus, the company philosophy is translated into stockholder and customer happiness.
However, in the present scenario, the latter group, led by the vibrant Southwest airlines has provided some relief to shareholders by posting an uninterrupted profit for the 36th consecutive year (Jody