Internal Analysis and SWOT Analysis of Southwest airlines - Term Paper Example

? Internal analysis and SWOT analysis of Southwest airlines [Supervisor’s Internal analysis and SWOT analysis of Southwest airlines Executive Summary: Southwest Airline started its operation in 1971 in the United States of America, and their aims have been focused on being different from the other airlines and to provide better services at a lower cost. Southwest airline is a healthier and a more composed airline company in the United States which has gained a large amount of revenues even in the hard times of recession. The weaknesses include the absence of Southwest airline in the international market and the unavailability of the business class seat arrangements. The strengths of the company overpowers its weaknesses therefore, the company is far ahead of its competitors in the competition race. It is recommended to the Board of Directors and the CEO that Southwest Airline has the leading market share in the competition but it cannot solely compete on the basis of low cost but it has to develop some further core competencies in order to compete in the market. The airline firm must always make their employees productive and fuel hedging should be avoided. Introduction: Southwest Airline began its operation in 1971 in the United States of America, and their aims have been focused on being different from the other airlines and to provide better services at a lower cost (Southwest Airline, 2012). This report is a proposal to the Board of Directors and CEO of the Southwest Airline which focuses on the internal analysis of the Southwest Airline. The paper would accomplish the task of analyzing the performance of the company and synthesizing the internal analysis with the external analysis of the Southwest Airline. Finally, the paper provides the results and findings about the company’s overall SWOT analysis and provides recommendations to the responsible authorities about Southwest Airlines performance. Strengths Rating Southwest airline is the low-cost carrier operating in the United States 5 The company remains higher ranked airline in terms of customer satisfaction 4 The airline hires the best people, best people for the best job 4 It was the first airline to introduce online ticket 5 Southwest has over 550 Boeing aircrafts which reduces training cost 4 Fuel hedge contract helps in managing the fuel cost effectively 4 Total 26 Weaknesses Rating The absence of Southwest airline in the international market 5 The seating arrangements are not classified for the business class 3 The aircrafts could not carry a large amount of freight 3 The airline tickets are directly available through the internet without intermediary 3 The flexibility in the fare is limited 3 Total 17 Results and Analysis: Southwest airline is a healthier and a more composed airline company in the United States which has gained a large amount of revenues even in the hard times of recession. The airline has innovated many processes as online ticketing and airfreight delivery and has been operating domestically in 42 states but however the company has not achieved its greater heights because of showing resistance in expanding the business internationally. Apart from that, the Southwest airline is considered to be the leading airline in terms of revenues and customer satisfaction (Lauer, 2010). Resource-based view framework: This is a management technique which is used to determine the competitive advantage of a company. In order to achieve success, a company must have operations and resources which should be distinctive from its competitors. In the first step, resources of Southwest airline should be identified in order to understand the core competencies of the company (Gittell, 2003). Tangible Resources: Southwest airline consists of 550 Boeing aircrafts which are operated in 97 destinations domestically. The company has a large amount of expert managers and technicians which are considered to be their assets. The company has a total assets worth of $18 Billion (Southwest Airline, 2012). Intangible Resources: Southwest airline has a greater value for its customers and it is a leading airline company in terms of customer satisfaction and low fares. The goodwill of the company is highest among its competitors because the company has survived the recession period with profits. The company has hired expertise in every field which are responsible for their task performed. The company is considered to be the first priority for the US citizens to travel domestically to different cities which thrust a large amount of trust on the airline. The company has a fuel-hedging contract which makes it more superior from its competitors. The company has total revenue of $15.7 Billion annually (Southwest Airline, 2012). Competitive advantage and Core competencies: Southwest Airline achieves a competitive advantage on the basis of organizational efficiency and over the years. The culture of the company has always been innovative, as Southwest airline was the first airline that introduced the concept of online ticketing and introduces the concept of discount offers to the citizens. The company is focused on increasing the productivity of the employee by employing the right employees for the right job. The other great competitive advantage of the company is the fuel hedging contract with the oil refineries which sells them oil at a constant price which avoids uncertainty (Ireland, Hitt, & Hoskisson, 2009). Porter’s value chain Model: Inbound Logistics: Route rationalization Acquisition of Boeing Fuel hedging Flight scheduling Operations: Acquiring experts Online ticketing Baggage handling In-flight training Pilot and safety training Outbound logistics: Hotel reservation system Flight connection Baggage system Marketing and Sales: Websites through the internet TV commercials Frequent flyer program Services: Lost baggage service Virtual hold queuing technique Solving complaints Internal Analysis Component: A. Primary activities Production: The Company is operating as a low-cost carrier competing domestically. More than 3,300 flights operate in a day and millions of customers are recorder to travel annually. This figure is predicted to rise because the company is focusing in further improvement of the customer relationship. Marketing Sales: The Company has positioned itself as a low-cost airline for the economic passengers. The company differentiates itself by the short-hauls and the airplane type which are specifically used by the company. Customer service: Southwest airline is the highest ranked company to have achieved the customer relationship awards in the airline industry (Lauer, 2010). B. Support Activities Materials Management: The airline purchases the only Boeing aircrafts which are managed by their experts in the field also reduces their training cost. Human Resources: The Company has a unique process of hiring the individuals which have right expertise for the right job. The manager from a particular field hires an employee from the same field. Information system: Southwest airline operates 90% of its business through websites. As the company was the first to introduce e-ticketing, the majority of their process is based on the internet. The company uses virtual hold queuing solution to contact with the customers (Lauer, 2010). Synthesis of Internal Analysis: As the airline have much of the tangible and intangible resources available, the company can expand its operation internationally to meet the demand for low-cost carriers due to the recessionary period all across the globe. Southwest airline are considered to have innovated the online ticketing, they could have much better use of the internet and target the potential customer through that medium. As most people argue that southwest is just a second class carrier, so bearing that in mind the company can diversify its operation and can offer fleets particularly for the business class passengers (Lauer, 2010). Conclusion: Southwest Airline has survived many challenges related to recessionary period, high fuel cost and competitive pressure from the local and as well as International companies. Southwest has a great advantage for being cost effective and their competitors are unable to grow much quickly than Southwest because of the same reason. If the company stays true with its mission which is to provide the people a low-cost travelling with a better service, than the company would be more successful as it is now (Gittell, 2003). Recommendation: It is recommended to the Board of Directors and the CEO that Southwest Airline has the leading market share in the competition but it cannot solely compete on the basis of low cost but it has to develop some further core competencies in order to compete in the market. The airline firm must always make their employees happy and make them productive. Over the years the company has faced a problem that a customer perception is created that southwest is a second class airline (Gittell, 2003). The airline must indicate the fact that other airlines cost them more in terms of value. Fuel hedging is a bit risky process in which other airlines have lost their money, so the company should avoid the risk because in future the company might not have fuel hedging as a competitive advantage (Associated Press, 2006). References Associated Press. (2006, September 04). Some Airlines Turning To Fuel Hedging Again. Retrieved May 2012, 25, from www.komonews.com: http://www.komonews.com/news/archive/4196026.html Gittell, J. (2003). The Southwest Airlines Way: Using The Power Of Relationships To Achieve High Performance. New York: McGraw-Hill Professional. Ireland, D., Hitt, M., & Hoskisson, R. (2009). Strategic Management: Competitiveness and Globalization : Concepts & Cases. Canada: Cengage Learning. Lauer, C. (2010). Southwest Airlines. California: ABC-CLIO. Southwest Airline. (2012, February). Fact sheet. Retrieved May 25, 2012, from www.southwest.com: http://www.southwest.com/html/about-southwest/history/fact-sheet.html Read More