Marketing for Southwest Airline Company - Case Study Example

Marketing case study for Southwest Airline Company Reasons why the airline industry is a death trap for investors There are several reasons that can be used in the justification of Warren Buffet’s assertion that the airline industry is a death trap for investors. One reason is that the industry is faced by the threat to entrant in that individuals and companies can easily buy their own planes and make them effective in transportation. As a result, many companies and private individuals are opting to buy their own planes as a result of instability in the prices of energy which causes the airline industry to inappropriately and poorly manage its pricing. Unpredictability of energy prices has also caused some companies and private individuals to substitute their means of transportation from using the airline industry to prefer driving their vehicles. The main reason for this is the dissatisfaction that the individuals and companies experience from the complex pricing strategy if the airline industry. This is a negative implication for the industry since it results to loss of customers and thereby placing it at a risk of making losses or yielding lower returns for the potential and existing investors. The industry is also at the threat of facing external attacks such as by the terrorists whose impact is negative on the operation of the industry. The attacks result to losses that take a long time to recover. They also result to loss of significant number of customers as some flights need to be canceled while others still need to be rescheduled. These inconveniences result to traffics experienced by customers which end up inconveniencing many, leading to dissatisfaction in the passengers. This inconvenience also results to many passengers shifting to the competitors of the industries and others substituting air transport to other means of transportation. This as well results to losses that are either irrecoverable or take some time to be recovered. This further ends up lowering returns for the investors both the existing and the potential (Rouse 4). An agreement to Buffet’s assertion is also based on the fact that the airline industry is highly competitive and profitability is highly sensitive to capital and operating cost changes. The industry therefore lacks stability in terms of expected profits. This also results from the threat of competitors who tend to set their fares and prices by reviewing the prices set by the industry. This leads to them engaging in unhealthy competition which is price based. This leads the industry to not being able to determine what it needs to stabilize its profitability. Despite the industry having a potential for growth, the fact that there is uncertainty on profits expectations is a negative indication. Instability in profits results to inability of industry to predict whether it is likely to make profits or losses. This is a threat to the potential as well as existing investors since they lack the certainty of the expected returns from investing in the industry. This places them at a risk of not getting any considerable returns from the funds that they have invested in the industry (Rouse 4). Southwest’s business strategy and the source of its competitive advantage Southwest Airline Company is a leading company in terms of the number of passengers that it serves as well as scheduling domestic departures operating in many airports in different states and cities. Its strategy is based on aim to providing services of high frequency, that are lowly priced, point to point and low hauled. The company has insisted on the need of not rushing to expand, and has encouraged the need for undertaking a market analysis before opening its operations in new areas. It has insisted on the need of conducting a market analysis and resources availability to determine the consumer needs and availability before the start of operation in new areas. It has set the minimum demand as being a minimum of 12 flights per day to guarantee the start of operations in a new location. The point to point flight service is aimed at remedying the delays caused by the traditionally used hub. The service is aimed at providing nonstop and direct flights and minimizing the total time taken by flights. The low fare service is aimed at remedying restrictions in flight and offering unlimited and simple fare service on flights. Its competitive advantage is based on offering low cost. It offers lowest cost compared to other companies on available seat mile (ASM) flown of passenger carriers. The company is able to offer the low prices due to its low reservation and ticketing, low costs on food and its quicker turnaround times that reduces the out of service number on aircrafts (Rouse 3). The company is also able to offer low cost service as a result of its ease in in offering the booking services to the passengers whereby they can book through the phone, on the internet or directly with the company. The sustainability of the company’s competitive advantage is based on the fact that the company is able to keep the cost of foods at a low level from the fact that if operates short distance flights and therefore only requires offering peanuts and drinks to the passengers. It is therefore able to save on cost that could have been used on food for the passengers. The sustainability of Southwest Airline Company is also based on the fact that the company is able to consider the social business goal of offering services of high quality to its customers, achieving their satisfaction in the best way and facing less customer complaints out of dissatisfaction. It also upholds the social function by maintaining good relationships with its employees and ensuring their security. The non -sustainability of its competitive advantage therefore is based on the fact that the company does not interline or even associate with other airlines. The company also lacks relationships with commuter feeders. These two situations imply that the company does not maintain good relationships with the community that operates which shows a failure in its social goal which should go hand in hand with the economic goal. Works cited Rouse, Maryanne. Southwest Airlines Co. Pearson Education, Inc. publishing as Prentice Hall. 2010. Print. Read More