Business Studies

trategic Management Situational Analysis Presentation

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Strategic Management Situational Analysis

Southwest Airlines was established in 1967 in San Antonia, Texas, United States (Harvey and Turnbull, 2020). The company started with a low-cost strategy where their profitability depended on low-cost fuel as well as the willingness of the clients to purchase tickets. The mission and vision of Southwest Airlines focus on building reliable, profitable, efficient, friendly, and low-cost air travel.  Southwest Airlines relies on a point-to-point and low-cost business model. Over the years, the company has grown to one of the most recognized airlines that control the market share. The business model is based on low-cost pricing, extremely efficient operations as well as innovative logistics solutions. The Cost leadership strategy allows Southwest Airlines to create its competitive advantage. The trends in the market are leading to more pressure and competition in the market, which makes it necessary for Southwest Airlines to think of new strategies that will ensure they remain relevant and competitive in the market.

The general environment is analyzed through PESTEL analysis which focuses on the political, economic, social, technological, and legal factors that influence the operations and strategies of Southwest Airlines. The airline is influenced by regulations such as Workweek regulations and regulations governing airline routes, airfares, and entry. Southwest Airlines is influenced by economic factors such as business cycle stages, per capita income, economic performance and growth, and fuel costs. The airline industry is sensitive to economic changes since they greatly impact their profitability and operations. Shared beliefs and attitudes have impacted the culture of Southwest Airlines and improved understanding of clients and designing marketing messages. Technological developments have posed threats and opportunities for Southwest Airlines. Environmental standards have impacted the operations and profitability of the organization. For instance, they have to ensure that the planes have low emissions and that their customers feel safe.

The bargaining power of buyers is high due to the lack of differentiation in the services being offered by the company. The bargaining power of suppliers is high since most airline companies purchase their aircraft from Airbus and Boeing. The threat of substitutes is moderate since the customers have limited options, especially for low-cost carriers. The competitive rivalry among existing airline companies is very high due to the existence of large airline companies (Jean and Lohmann, 2016). The threat of new entry is low due to the strong brand image from existing firms, large capital investment, and economies of scale of the existing companies.

Southwest Airlines, Allegiant Airlines, and JetBlue Airways have differentiated themselves as low-cost carriers. The main competitors of Southwest Airlines are American Airlines, Delta Airlines, JetBlue Airlines, United Airlines, SkyWest Airlines, Alaska Air Group, and Virgin America. Allegiant Airlines and JetBlue Airways are threatening Southwest’s marketing share by offering low costs.

While choosing the most appropriate course of action, there is a need to realize organizational objectives and goals. Scanning the external and internal environment offers knowledge to document the direction and actionable steps. Combining the strengths, weaknesses, threats, and opportunities assessment allow evaluation of a proper plan of action to allow the organization to achieve its goals. The strategy formulation also relies on the competitive advantage, which allows leveraging the company’s potential during action planning.

The strategic alternatives for Southwest Airlines include strategic alliance, diversification, market development, and differentiation. Southwest Airlines should focus on diversification to be prepared for the future. Diversification is a key risk-reduction strategy. Diversification will also boost their aim to be one of the world’s most efficient, loved, and profitable airlines. The management can rely on diversification to create a competitive advantage by relying on their expertise to penetrate new markets and industries. The management can rely on diversification to create a competitive advantage by relying on their expertise to penetrate new markets and industries, thus increasing profitability and brand reach (Ansoff et al., 2019).

Diversification will require additional aircraft that will enable Southwest Airlines to fly longer distances outside the United States. The aircraft need to have the lasted technology to improve efficiency and boost the competitive advantage of Southwest Airlines. Southwest will also have to invest in ancillary products and services such as car rentals, taxi services, and hotels. These will facilitate customer service as well as increase revenue for the company. Training and development will be required for a new set of skills that will facilitate diversification. Since diversification requires huge capital investments, funding will be required to support diversification. The company can rely on venture capital funding to facilitate its diversification. Venture capital funding is the collective term for the support offered by venture capitalists to new or growing companies.

References

Ansoff, H. I., Kipley, D., Lewis, A. O., Helm-Stevens, R., & Ansoff, R. (2019). Strategic dimensions of internationalization. In Implanting strategic management (pp. 311-336). Palgrave Macmillan, Cham.

Harvey, G., & Turnbull, P. (2020). SOUTHWEST AIRLINES. Case Studies in Work, Employment and Human Resource Management, 80.

Jean, D.A. and Lohmann, G. (2016). Revisiting the airline business model spectrum: The influence of post-Global Financial Crisis and airline mergers in the US (2011-2013), Research in Transportation Business and Management, 21, 76-83.