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Southwest Airline Strategic Formulation Case Study Analysis

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Outline

  • Introduction
  • BCG CHAT/SPACE Matrix
  • SWOT analysis
  • Possible strategies and their impacts on the organization (Grand Strategy Matrix)
  • Alternative Strategies (Corporate, Business, and Functional)-Bundles of Strategy
  1. Introduction

Despite a variety of corporate bottlenecks, such as Southwest Airline, few airline sectors have been as effective strategic. It has nevertheless pulled from them to be a resounding airline company, despite having gone through some legal battles. There is a need, though, for a hallmark of policies within the domestic ridership model. These approaches can be customised to provide travel luxuries such as flight meals and amenities and to provide multiple seating choices such as first and business class accommodation (Jackson, 2011). This will help to include what Karami (2003) considers to be a significant component of the achievement of a business. His view of strategic management involves the creation of an organization’s groundwork priorities, the identification of the right targets for those goals and the effort to achieve them in time (Karami, 2003).

The strategic formulation should be the only way ahead for Southwest Airline Business to recognise and boost competitiveness for key customer groups, namely: travel agents, corporate travel managers, as well as individual customers (Jackson, 2011). Of course, marking them in the line would contribute to the introduction of policies that take care of that, which would definitely go along with what Karami refers to as…” prioritising strategies to pursue ” (Karami, 2003). For him, the strategic formulation includes the interpretation of any strategy formulation phase that has specified stages that are time-bound (Karami, 2003).

Southwest Airline Strategic Formulation Case Study Analysis

  1. SWOT Analysis

SWOT analysis has seemingly been important in Southwest Airline’s strategic formulation for the assessment and recognition of a variety of regions. In general, SWOT is used in mapping an organization/business entity’s study of strengths and weaknesses. In addition, it is used to focus on the possibilities and risks exposed by data typically gathered by assessment analysis, the environmental climate and comparative studies. The staff members in an organisation as well as the supervisors use it in the creation of a strategy in this manner (Bohm, 2008). In reality, in the situations of having to devise a strategic plan, or often times, it is used to develop a strategy to remedy a situation. (From Bohm, 2008)

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Then how can SWOT review make Southwest Airline useful? First of all, its utility in internal review entails the study of the strengths and limitations of the company in a variety of technically conceived forms (Bohm, 2008).

a. Management Capabilities

One of them is the hierarchical structure, where the emphasis is generally on evaluating whether the structure restricts or strengthens knowledge flow and customer receptive processes are in place (Bohm, 2008). When their travel delays or a risk of a flight not taking off due to weather conditions, Southwest has also shown swift reaction to customers. In comparison, the organisational organ gramme is such that the pecking order is transparent and so the flow of data to the right individuals is easily encouraged for action (Daft, 2008).

In comparison, the strength of connectivity is further compounded by the presence of Southwest Airline on the Internet. It was one of the first airlines to have a website, indeed. One of the drawbacks of its website, though, is that rates are not illustrated only by clicking ‘mouse’ to encourage consumers to know in advance. Regardless of this, it is reported that it is so far the largest in terms of `unique’ visitors visiting the site, besides being the highly ranked airline with the highest operating online revenue. Also, its website has a magazine for its online readers (Daft, 2008).

The second method of analysing internal strength and vulnerability analysis is by looking at the preparation of the organisation. Daft (2008) points out that the point here is to examine the ‘feasible long and short term’ arrangement or map of action concerning say, staff. Here, we see Southwest Airline on top of its game. One is that it usually plans its flight operations well in advance and appropriately communicates that to the respective customers (Daft, 2005).

Beyond this, the airline has an incredible risk management plans. Bohm (2008) notes that, it is common knowledge that Southwest Airline embodies what is commonly referred to as “outside the box thinking” in its risk management. This entails the scheme of preventing/minimizing fuel cost from fluctuating by use of `fuel hedging’. This has however been seen to be a weakness in some fronts. For instance, pundits have argued that instead of ‘hedging’ on risks that are business-related, the airline was simply predicting energy prices without a valid reason for such (Daft, 2008).

The other tenet is on coordination and supervision. (Bohm, 2008) The organizational culture of in Southwest is remarkable. It is characterized by open communication in the workplace and team spirit when it comes to coordination. Daft (2008) notes that because of these, employee productivity has been enhanced besides and that as such the number of flight delays and customer complaints, are limited. Besides, the airline is known to deal with its employees humanely in the way it advances work-life balance, and maintenance of community ties (Daft, 2008).

b. Programme Capabilities

This is the second grand way to look at SWOT vis-à-vis Southwest Airline is in terms of weaknesses and strengths. Bohm (2008) sees this tenet in two ways: capacity and quality. Capacity, according to him, is measured in terms of the ability to offer services and if so, the measurement by which the activities therein facilitates that potential. On the other hand, quality is seen as the possibilities and the technical know-how and innovation by which quality can be enhanced (Bohm, 2008). Certainly, the ability for Southwest Airlines can be examined in many ways.

These include the fact that its headquarters is in Dallas, Texas and thereby able sufficiently look through its activities within the United States. It is also considered the largest airlines in the United States and as such is able to carry many passengers, besides offering those services at cheaper rates. Beyond this, it has succinct model of business, which entails flying one aircraft type (Boeing 737), usually on ‘high-density roots’ in the united states. The other weaknesses include that it does not fly outside the U.S.A, which can also be regarded as a strength because it then concentrates in domestic flights effectively (Daft, 2008).

c. Financial Capabilities

Financially, Southwest is able to foot its bills, runs it operations and get involved in social corporate responsibilities.

The second way to do SWOT is to carry out external analysis (Bohm, 2008). The opportunities for Southwest Airline Company are many. For example, the organization now enjoys positive media coverage, an insurmountable boost in finances accruing from its energy trading skills. Other opportunities should be seen in terms of its location, the prices it offers, and its relationship with the community in terms of social corporate responsibility, Internet presence, organizational culture, its advertisement slogans which are tailored with humor such as “it is the largest domestic airline in the whole of United States” (Daft, 2008).

The threats include among others is that it does not offer many services offered by other airlines due to its price, it has once in awhile been associated with safety violations, among others (Daft, 2008).

The SWOT analysis of Southwest Airline can be represented in a table as below

Positive Negative
Internal

 

 

Strengths

  1. Offers cheap flights ensuring greater  pull for clients
  2. Positive media coverage
  3. Largest domestic airline in the US
  4. Unique business model(flying one aircraft type)
  5. Huge amount of profit
  6. Good employee relation, coordination  and team spirit
  7. Acknowledged/acclaimed risk management strategy
  8. Involved in corporate responsibility
  9. Fewer flight delays and customer complaints
  10. Internet presence, with a online magazine
  11. proper organizational structure
Weaknesses

  1. Operates domestic flights only
  2. does not offer other luxury services offered by other modern flights
  3. Was once associated with violations of safety standards
  4. Does not indicate its prices on its website
  5. Has cheaper prices leading to lower profits
  6. Only flies one type of aircraft ,and so no variety in service
External

 

 

Opportunities

  1. Headquartered in Dallas, Texas
  2. Enjoys positive media
  3. Internet presence, with an online magazine
  4. Coordinates with other airlines operating outside the US
  5. Positive energy conservation strategy
  6. Sound advertisement
  7. Increases number of cities demanding its services
Threats

1.    Competition from other airlines offering more modern services

2.    Some of its flights are dilapidated and may invite negative sanctioning

3.    Blue airline

4.    New tax system

5.    Alternative mode of transport

  1. Boston Consulting Group (BCG) Matrix

Southwest Airline fits into this analysis. BCG Matrix is “a simple tool to assess a company’s position in terms of its product range” (Daft, 2005). The advantage of using it is that it aids a company or an organization in thinking about the products/services it offers. Based on that thinking the company can now make decisions and craft plans  on which plans/decisions to forego and which ones to adopt, besides which ones to implement further. Generally, the BCG matrix functions to plan and organize a business in two ways: “business growth rate and market share” (Daft, 2005).

A BCG matrix has four main components. These are Question Marks, Dogs, Stars, and Cash Cows. Question Marks are produce whose expansions are faster. Because of this they consume a lot of cash, while they generate little due to the fact that have low market share leading to large ‘net consumption’. It should however be noted that a question mark has the ability to mutate into a star when it gains market share, and later be a ‘cash cow’ when the augmentation in market slows downward. The idea that, in due course, it might become a dog after the turn down of business growth is worth noting here (Daft, 2008). In the case of Southwest Airline, in terms of first class grades, the aircraft may be the business itself (Daft, 2008).

The second ‘Dogs’ has a limited market share, and thus a low growth rate opportunity. The economic class here, which does not produce or spend a significant volume of cash and is a cash trap, can be considered. The diversification of this should be (Daft, 2008).

Stars are known to produce massive volumes of cash due to the fact that they have “strong relative market share besides consuming huge sums of cash” because of the fast growth rate they manage (Daft, 2008). Generally, then, the cash collected and approximately ‘net out’ invested. If a star is able to keep up its large market share, it then has the potential of becoming a cash cow whenever the market enlargement rate goes down.

Cash cows are the leaders in a mature market. They therefore exhibit a return on assets that is greater than the market growth rate. This means they generate more cash they consume. These units should be ‘milked’ extracting the profits and investigating as little as possible. They provide the cash required to turn question marks into market leaders (Daft, 2008).

The diagram below (on the next page) exemplifies what a BCG matrix is all about in the context of Southwest Airline.

Question Marks

(New ventures. Risky-a few  become stars, others are divested)-Analyze

  1. Cooperation with other airlines
  2. Leasing out planes
Stars

(Rapid growth and expansion)-Invest-

1. Luxury seats

2. Customer service

3. First class

Dogs

1.Economy class

Cash cows (Milk to finance question and stars )-Milk

1.Business Class

Relative Market Share                                                          —–High

4. Possible Strategies and Their Impacts on the Organization

The most viable strategies that Southwest airline should consider is two: Market Penetration and Product development strategy. One of the strategies in this would is offering different seating options such as first & business class accommodations. This is both a market and a product strategy. This option will function to facilitate airline flights to more cities within the United States and also outside the United states and attract much more customers especially when the right products are developed. This increases revenue. This grounding is informed by a number of factors such as increasingly empirical evidence for the need for international travel, and to cities that the airline has not initially penetrated to (Daft, 2008).

Moreover, offering luxuries on the aeroplane, such as in-flight meals and entertainment, such as a strategy would anchor this. Provided that the global population is rising, and the USA alone has recorder an increase of 6million additional people in the last half decade, such services would attract many passengers besides effectively competing with other airlines which offer the same. Beyond this, the demand for better seats has enormously increased and therefore, Southwest airline should consider bringing on board modern seats. The other way is to improve its internet services by slotting in price schedules among other attractive configurations (Daft, 2008).

Work Cited:
  • Bohm, A. (2008). The SWOT analysis. Nordestedt: Books on Demand.
  • Daft, R. (2008). New Era of Management. Beijing: Thompson South Western.
  • Jackson, S. (2011). Case of Southwest Airline. Southwest Airlines. Retrieved from http://docs.google.com/viewer?a=v&q=cache:k1Lr7Tgqs8QJ:www.rci.rutgers.edu/~schuler/mainpages/revised~southwest~airlines.doc+Case+of+Southwest+Airline&hl=en&pid=bl&srcid=ADGEESgB40wLwY4sLtHMUc_NlkSFGVjd1U-RsjmJSVkGGIG3susUuVDOWq1SJ48ITU8ZDW5HMYr7qwuyO9guaPsPW_VHzh1597-r-2sL8JATQD0-ZjwnIPRBtTgFsJO46RWVB1HatJvZ&sig=AHIEtbT2CtIkLOe4wlA8eWqN1pSjlwYGVQ&pli=1.
  • Karami, A. (2003). Strategic Management in Small and Medium Enterprises. OH: Cengage Learning.

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