Southwest Airlines - Case Study Example

Some actions required for Southwest Airline during that period were decreasing income, market share, intensifying competition, and degrading operational effectiveness. Reason In 1978, after deregulation of Airline industry in U.S. the entire airline industry become too competitive as many of the privet companies tried to grab the market share by expanding their coverage and by reducing the service price significantly. In the mean time, Shuttle by United becomes the biggest threat for Southwest Airlines.

In fact, Shuttle by United competed with Southwest Airline by matching the latter’s price and services. However, suddenly United BY Shuttle decided to incorporate two major changes that left the management of Southwest airline in state of confusion. Firstly, it discontinued its services from the most wanted markets i.e. California, Oakland-Ontario. Secondly, it also increased first class coach fare by $10. State objectives To respond against intensifying competitive forces specifically, rivalry among the market players likes Shuttle by United.

To increase the revenue through an effective promotional and pricing strategies To expand the services coverage in the most profitable market areas. To enhance the operational performance in comparison to market leaders. Market Research After the deregulation U.S. airline industry, the entire market became highly attractive and degree of competition also increased significantly. By 1994, the U.S. airline markets turned into giant sectors as all types of carriers including major, national regional was accounted more than 2 billion annual revenue per year.

The big five companies excluding Southwest Airline held more than 80% market share. One the hand, with increasing completion, the industry operating performance kept enhancing. Comparing to 1974, in 1994, there had been significant growth in revenue passengers-miles, available seat-miles, load factors etc. Since, 1990 till 1994, Southwest Airlines was the best performer as it significantly enhanced its operating performance and income. Market Segmentation Southwest along with Shuttle by United used to compete directly in same markets mainly, in California regions.

The news of United’s withdrawal from a major route i.e. Oakland-Ontario might indicate that low fare strategy negatively impacted operational performance and United tried to avoid such situation. However, it kept focusing on California market. Therefore, this markets was also the best suited for Southwest airline. Southwest Airline also did not offer its services in many markets of California like in San Francisco. This would have a highly profitable. Southwest Airline did not compete with Shuttle by United on basis of fare classes like first class, business and economy class.

By focusing on fare classes it was possible to specify and define customers’ marker segment. Price During that period, the competition in Airline industry was also based on pricing strategy. Southwest Airlines started to focus on low fare pricing strategy and it emphasized on its discounting offers. Southwest airline found difficult to compete with Shuttled by United. However, in order to compete with the key rival, Southwest reduced its fare price causing diminishing yield factor. Promotion Southwest mainly focused on creative marketing and promotional activities was meant to create brand differentiation.

The prime agenda for