Nucor big 11 success factors

An Analysis of Southwest Airlines and the Airline Industry

Prepared for:

Prepared by:

Date: March 15, 2018

Table of Contents

Executive Summary

Industry and Competitive Analysis

Defining the Industry…………………………………………………………………………………………………………………5

General (Macro) Environment Analysis……………………………………………………………………………………..5

Porter’s Competitive Forces Analysis…………………………………………………………………………………………6

Driving Forces……………………………………………………………………………………………………………………………6

Key Success Factors……………………………………………………………………………………………………………….....7

Strategies of Major Players………………………………………………………………………………………………………..8

Industry Prospects and Overall Attractiveness…………………………………………………………………………..8

Company Analysis

Mission, Objectives, and Strategies……………………………………………………………………………………………8

Financial Analysis……………………………………………………………………………………………………………………….9

Resourced Based View Analysis………………………………………………………………………………………………….9

SWOT Analysis………………………………………………………………………………………………………………………...10

Competitive Strength Assessment…………………………………………………………………………………………...11

Developing a New Strategy

Present Mission……………………………………………………………………………………………………………………….11

Present Strategy………………………………………………………………………………………………………………………12

Strategic Issues………………………………………………………………………………………………………………………..12

Implementation

Process for improving………………………………………………………………………………………………………………13

Process for making a profit (SWA)……………………………………………………………………………………………13

Appendix A

PESTEL Model…………………………………………………………………………………………………………………………15

Appendix B

Porters Five Forces Model………………………………………………………………………………………………………16

Appendix C

Driving Forces Model………………………………………………………………………………………………………………17

Appendix D

Strategic Group Mapping Model………………………………………………………………………………………………18

Appendix E

Financial Analysis……………………………………………………………………………………………………………………..19

Appendix F

VRIN Model……………………………………………………………………………………………………………………………..21

Appendix G

SWOT Analysis…………………………………………………………………………………………………………………………21

Appendix H

Comparative Strength Assessment…………………………………………………………………………………………..22

References

Strategic Management, 21e, Thompson, et., al., University of West Florida, Management

Southwest Airlines in 2016: Culture, Values, and Operating Practices C-311

Executive Summary

Southwest Airlines has been able to climb their way to the top of the domestic market for the last 43 years. As the years went on, Southwest Airlines faced many different challenges from their rivals, while focusing on a strong culture and a Low-cost provider strategy. As the domestic market leader, Southwest Airlines has built their brand name exceptionally well. Now that they have decided to move in to the international market, strategies need to be in place to organize a new structure. This may be challenging when implementing the Low-cost provider strategy and having to curtail their strong culture.

Throughout the case, many different factors were analyzed. Understanding the industry through General Macro Analysis, Porter’s Five Forces Model, Driving Forces Analysis, and Attractiveness are just a few of the factors when evaluating Southwest Airlines in the industry. Analyzing Southwest Airlines specifically was completed through Financial Analysis, Resourced Based View Analysis, SWOT, and Competitive Strength Assessment. Using all the information provided in the case study, I have determined implementations needed to ensure the company is successful in their goal to enter the international market.

Implementing new strategies can be difficult when changing such a successful model. At this time Southwest Airlines has only captured 3% of the international market. To build on their current strategy, they will need to focus on buying new assets for their international line of planes. Technology will be a must when attracting customers to their brand. Customers will expect leg room along with free WIFI or tasteful meals. Southwest Airlines will also need to structure their culture when dealing with new foreign markets. They must become attractive to terminals in other countries to build on their destination availability. Finally, they must think green when implementing the new structure. With the amount of pollution that the airline industry produces, Southwest Airlines needs to be at the forefront when implementing environmental strategies.

Industry and Competitive Analysis

Defining the Industry

Ever since the Wright brothers successfully completed their flight at Kitty Hawk, North Carolina on 17 December 1903, planes have evolved at a rapid pace. From single engine planes to fighter jets to passenger planes, the industry has been moving at an astounding rate. Now the skies are the roads to anywhere. In the last four decades Southwest Airlines has become one of the four dominating companies in the industry, which includes American Airlines, Delta Airlines, and United Airlines. Delta Airlines in industry terms can be seen as the industry leader when it comes to most passengers. In 2015 they had over 180 million passengers, including joint and regional venture partners. However, Southwest Airlines took the industry lead when it came to domestic flights.

Southwest Airlines was able to climb their way up in the industry by doubling their customer base in just five years. During this time the industry faced many different negative factors. Jet fuel was a major issue for all companies due to rising prices and lack of hedging the price. There was also the impact of terrorist that had people worried. It seemed like every time you turned on the television, a plane was being held for ransom. This was a major concern for the industry as they tried to figure out how to combat these tough problems. Southwest Airlines was able to get over these hurdles and gain record breaking profits of $2.2 billion in 2015. Indicators that Southwest Airlines had become the domestic leader is the astounding passenger count of 142,408,000. The closest competitor at the time was Delta Airlines with only 114,408,000. (Gamble & Thompson, 2016).

As the decades have gone by the industry has learned to adapt to the customer’s needs and wants. The industry has to be sensitive to how the customer perceives their practices and policies. With the world at their hands, the industry must maintain good relations with their customers while moving forward with technological advancements and new innovations. The Airline industry currently strives to be more efficient by controlling turnover times to guarantee fast and prompt service while getting the customer to their destination on time.

General (Macro) Environment Analysis

Macro environmental factors are commonly found in the airline industry just as you would find them in any other industry. Using the PESTEL model we can evaluate the industry strategically and competitively while using well-validated concepts and analytical tools. Beginning in Political the industry is regulated by policies governed through the Federal Aviation Administration. They provide the industry with the safety and controls that all companies must abide by. These policies are in place to ensure that companies are up to code and standards to ensure planes do not fall from the sky. Economic conditions affect the airline industry in a major way. Prices are controlled through this factor when decisions are made on how much to charge a passenger for a flight. Gas prices, inflation, stock prices, and economic growth rates are just some of the factors that push the industry to make smart decisions.

Sociocultural forces can be seen as one of the most important forces in the industry. Learning and listening to what the consumer wants is what makes a company great. Understanding the customers values, attitudes, and lifestyles helps the industry to curtail their customer service to the customers’ needs and wants. Sociocultural forces will begin to push the market towards how a customer feels they will represent themselves in a new culture while learning about a new culture directly. Technological factors are an ever-changing force in the industry. Keeping up with new advancements and innovations allows for better and safer planes flying through the air. Technology has become such a force that some planes can almost fly themselves. Environmental forces impact the airline industry in negative ways. If there is too much wind, too much rain, or too much snow, planes can be grounded causing delays and loss of revenue. The airline industry is taking strides to incorporate meteorological instruments for predicting weather along with building strong relationships with current weather stations to keep the information as up to date as possible. Finally, we come to Legal and Regulatory factors. These factors are the governing body of the industry. Laws are put in to place to ensure that customers and airline companies are given a fair chance at getting what they deserve. These laws level the playing field for every company and guarantee that companies are transparent with the customer. An example of the PESTEL model can be found in the Appendix (fig 1).

Porter’s Competitive Forces Analysis

Using the competitive forces model the industry can gage how to move forward with decisions on how to grow their company. The analysis is broken up in to five points to address how to operate in an industry. Competition of rivals can be seen as the pressures from other companies in the industry. In the airline industry we see some of these pressures in the form of increased fees for baggage, seat selection charges, and points for free flights and extra services. Southwest airline was able to ignore most of these allowing them to compete in this area at a higher level. Competition of new entrants can be seen through mergers and acquisitions. Examples of this would be United Airlines owning Silver Airways or Southwest Airlines acquiring AirTran.

Competition from producers of substitute products is addressed by looking outside of the industry. Driving is a substitute that almost everyone has available all the time. If a customer thinks they can get to their destination for a cheaper price, sometimes time isn’t a factor. Customers can also take a train to their destination. This is much faster than a car but doesn’t allow for the customer to get directly to their desired location. Lastly, customers can take a ship if they are in no rush at all. Taking vacations are one of the pressures that the airline industry must compete with. Supplier bargaining power can be good and bad for the airline industry. Hedging fuel prices helps the industry to calculate and control the prices of tickets over an extended period of time. However, the oil industry has more power than the airline industry since it is a necessity.

Finally, we come to Customer buying power for which the industry has most of the power. Competition is based on the industry and not the customer. Airline industries are aware that customers will pay for the convenience of fast access to their destination. Most of the time prices only change if flights are short of passengers or the price of fuel drops. An example of the Five Forces Model can be found in the Appendix (fig 2).

Driving Forces

Driving forces are developments that can affect an industry enough that the change is pressured in to action. These forces have the ability to reshape the industry and alter competitive conditions. In this study we will look at a few of the driving forces that affect the industry. A more detailed example of the driving forces can be found in the Appendix (fig 3). Increasing globalization is a driving force that everyone wants to have a positive effect. Even though the industry is usually based in a specific country, the industry is always looking for a way to get their brand around the world. Moving into new markets allows for an airline industry to offer new and better products to the customer. Shifts in buyer demographics is how the industry impresses the customer while in flight. Using items such as televisions to show movies is one of them. Accessibility to phones while on a plane is one of the biggest shifts to date. There are other shifts such as in-flight meals and alcohol that also affects how they are seen in the customers eyes.

Diffusion of technical know-how across companies and countries is of great importance in the airline industry. When you can land in any airport in the world, you should expect the same service no matter the language. This includes how the plane does turnover and how mechanics prepare the plane for the next flight. Changes in cost and efficiency fall into the category of fuel and innovation. Most flight prices are controlled by the price of fuel. However, innovations and new technology can also factor in the price especially when it is new. Newer and faster planes cost a lot of money and prices can be set to cover the costs of upgrading the planes. Changing societal concerns, attitudes, and lifestyles is where the industry can advertise how they are better than the competition. If you have a product that everyone wants you can tell them how it is in their benefit to get it through your company. Whether it be a cheaper flight, more leg room, or free WIFI, there is always something that a demographic will want.

Key Success Factors

Key success factors are the competitive factors that affect the industry the most. This can either hinder or allow for the ability to survive or prosper in the marketplace. Key success factors are exceptionally important when competing that all companies pay attention to them. Otherwise they risk failing and losing the competition to another company. In the airline industry some of the factors that they follow are superior product differentiation, superior firm size and branding capabilities, superior price control, and superior customer service.

Beginning with superior product differentiation, airline companies do their best to find a niche to show how they are different. Everyone is aware that they fly from A to B, but how you get there is the key. Comfort can be seen when companies offer more leg room or better meals in flight. This factor has a huge impact on travelers that are taking long flights. Next, superior firm size and branding capabilities can be seen as how they get the message to the consumer. When you see an advertisement for United Airlines, you know exactly what the plane looks like in your mind. Branding helps to ensure the consumer knows exactly what they will get before they even board the plane.

Superior price control is a measure of how well the company can accomplish their mission and still turn a profit. Hedging fuel, filling full flights, and controlling operating costs is just a few ways the industry can help the consumer stretch their dollar. Airline companies do their best to find every cut that they can make to fill a flight. Unfortunately, this isn’t always a great option if they aren’t doing it correctly. Finally, we come to superior customer service. This is where the industry shows they customers how much they appreciate their business. Customer service is a make or break factor when it comes down to whether a customer will use that product again. Flight attendants know that once they close the doors and the plane takes off, it is their duty to make sure the customer enjoys all facets of the flight. This gives the customer a reason to remember where they had the best experience and why.

Strategic Group Mapping

A strategic group map can be revealing in its own right. Knowing which industry members considered close rivals and which are distant rivals is paramount when they are close on the map. This tells the company that if they are closely related in position they will need to find other ways to be more attractive. Looking at the map in Appendix (fig 4), you can see how Southwest Airlines is extremely attractive in the domestic market but falls short in the international market with great distance. Delta Airlines and American Airlines are positioned in the middle giving them advantage to both markets. This allows them to be efficient with both markets and helps with globalized branding as well as domestic. United Airlines pushes well in to the international market making them the industry leader in that position. Even though they don’t make as many domestic flights, their international flights are longer and require more money for the customer to pay which controls their operating costs.

Industry Attractiveness

The airline industry can be seen as really attractive if you just think about how many flights are flown in a day. The airways are full of jets going from city to city on a daily and hourly schedule. Customers are always looking for the fastest path of travel to their destination. With technological advancements and new innovations being put in place in the airline industry, companies have seen growth and profitability rise every year. Technology changes in the manufacturing process has seen an increase in the last few years. Cost efficiency is one of the factors that has helped the airline industry to gain ground without interruption. Streamlined manufacturing has brought costs down allowing airlines to order new airplanes with newer technology in large numbers.

Another factor that has made the airline industry attractive is the amount of disposable cash customers have to spend for going on vacation. Customers want to see the world if not only the other side of the country. They are willing to pay to go places they will never go to again. To enjoy these benefits flying is the way to go since you can arrive quickly and go home just as fast. The international market has grown exponentially since economies have prospered in the last decade. International destinations have advertised how strong they are when appealing to the customer base. This has made an impact on customers and their wants to see other cultures and experience new ideas and places.

Company Analysis

Mission, Objectives, and Strategies

Southwest Airlines mission is a basic understanding of their core values. “Dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and company spirit” (Gamble & Thompson 2016). The objectives are based off of five key elements that they have followed since the beginning. These objectives are: Be the best place to work, Be the safest, most efficient, and most reliable airline in the world, offer customers a convenient flight schedule with lots of flights to lots of places they want to go, offer customers the best overall travel experience, and do all of these things in a way that maintains a low cost structure and the ability to offer low fares. Using their strategy in the domestic market they have found a great foothold. Costs are low, flights are plenty, and turnover is quick and efficient. Using these strategies have help Southwest Airlines to be the market leader to this day.

Southwest will want to implement these objectives in to the international market soon. As they are building on their international flights, they will implement their objectives and strategies while curtailing them to fit other cultural norms. Southwest Airlines is aware that culture isn’t always the same when looking outside the company. Culture adversity is always a two-way road and needs to be addressed respectfully. In doing this it will allow for easy and successful relations with international partners.

Financial Analysis

After analyzing their financial status in Appendix (fig 5), it is shown that Southwest Airlines has a net profit margin of 6.55%. Though this number may seem low, Southwest Airlines net profit margin is slightly greater than the industry average; Southwest Airlines is keeping their costs low while also bringing in more revenue. The ROA for Southwest Airlines is at 0.9, meaning that they are only earning 90 cents worth of revenue per dollar that they own in assets. This ROA rate can be attributed to the fact that the airline industry is asset intensive, causing most participants of the industry to invest a lot of money into assets just to compete with industry demands. The liquidity analysis shows that Southwest Airlines has more current debt obligations than its value in assets and cash, however, the airline industry is a debt intensive industry as a whole. Southwest Airlines annual growth rates are healthy and a sign that they are continuing to be a successful company earning more value every year.

Resourced Based View Analysis

Southwest Airlines can relate many of their competencies to show a competitive advantage, both temporary and sustainable. The main sustainable competitive advantage Southwest Airlines holds on to is their unique ability to control low operating costs. Whether they use price hedging to secure a future price for fuel, keeping maintenance costs low due to easily transferable skills from one plane to another, or keeping their positive culture to set them apart from the other firms in the industry. Their culture can be seen as their most important view since they believe customer awareness has been the main focus since their inception. They also believe that low fares coincide with this focus understanding that finding a low-price product with great customer service is rare in any industry.

To help understand how Southwest Airlines can maintain their sustainable competitive advantage we can use the VRIN test to gage the performance. An example is available in Appendix (fig 6). Following this model there are four basic tests that are evaluated which are Valuable, Rare, Inimitable, and Non-sustainable. Using seven competencies we can evaluate whether or not the competencies can sustain a competitive advantage. The seven competencies are as follows: Brand recognition, customer service, pricing, low operating costs, supplier relations, staffing, and culture. While these are not all of the competencies that Southwest Airlines are the best at, they do stand out when differentiating them from the rest of the industry.

Beginning with valuable, we see that all seven of the competencies are important and need to be maintained at all times. The value added by performing these tasks are extremely important in sustaining advantage. Rare is the next test that we focus on in the model. We ask the question of is this something that the rivals lack. In Southwest Airlines case we see that there are a couple of competencies that are not rare to other companies. Brand recognition and supplier relations get a no since the other companies can easily achieve these competencies. Next, we focus on inimitable as a competency that is hard to copy. For the most part, most of these competencies can be copied so Southwest Airlines only has superiority in low operating costs and culture. Finally, we move on to non-substitutable. With this test it falls in correlation with inimitable. Once again Southwest Airlines is only able to control two of the competencies which are low operating costs and culture. In conclusion we can see that these two competencies are placed in the sustainable competitive advantage category.

SWOT Analysis

To evaluate a company’s overall situation, the question becomes whether the company is in a position to further pursue an attractive market opportunity. This also means that the company will need to defend against external threats to its well-being. Using the SWOT analysis we can define the strengths, weaknesses, opportunities, and threats that Southwest Airlines faces every day. A detailed example can be found in the Appendix (fig 7).

Strengths are things that companies are good at doing or an attribute that enhances their competitiveness in the marketplace. Southwest Airlines strong company culture has proven to benefit the employee’s satisfaction along with the customers satisfaction as well. Culture has been the back bone of the company since the beginning and has proven to be their strongest asset. Other strengths can be seen in hedging fuel prices to allow for lower costs. Another strength can be seen in their maintenance program. Using the same planes, they are able to easily transfer skills from one plane to the next.

Weaknesses are considered competitive deficiency’s when a company lacks or does poorly in certain criteria. Southwest internal weakness could include that they are not a large international firm, yet. Although Southwest Airlines has begun expansion, they currently only have about 3% of the market share for international flights. This could be seen as a weakness moving in to the future. Even though the culture of Southwest Airlines is considered a strength, it can also be seen as a weakness. Cultures can be hard to change when merging or acquiring new markets. There is a possibility that Southwest Airlines culture could be hindered when moving in to the international market.

Opportunities can be a big factor when shaping a company’s strategy. Southwest Airlines opportunity to move in to the international market can be a huge opportunity if it is successful. Managers need to figure out how to implement their low-cost strategy when adding longer routes to their schedule. This means they need to focus on fuel costs along with customer service. Longer flights need to be handled with more finesse then short stops from city to city. If Southwest can achieve sustainability regarding resources such as fuel, this would allow for more supplier relations due to high volume purchases.

Threats are considered certain factors of a company’s external environment that pose danger to its profitability and competitive well-being. For Southwest Airlines, cost increases or industry demand for assets is a large concern. Controlling their fleet is smart but also requires new planes in the future. Prices for new innovative and technologically updated planes are fast outpacing the cost of maintaining the older fleet. Once the demand for new planes is forced, Southwest Airlines will need to upgrade. With their older planes the cost for parts and maintenance will become a huge factor in the near future. As these planes get old, they will ultimately come to a point of not being able to be repaired.

Competitive Strength Assessment

The competitive strength assessment is a snapshot of specific measures for companies in the industry. Using these measures gives a company the ability to see where they rank in certain key areas against their rivals. Weights are applied to how the company feels each measure should be viewed and then they are calculated to see which company is providing a better outcome. With so many different measures that a company can measure I have used the following: Culture, price, domestic flights, international flights, manufacturing capabilities, technological skills, and customer service capabilities. These measures ensure that all companies have a fair leverage when presenting the outcomes. An example of the Competitive Strength Assessment Matrix is found in Appendix (fig 8).

After calculating these specific measures Southwest Airlines is able to see that they are the current leaders in this scenario when focusing on the domestic market. The majority of their power comes from culture, price, domestic flights, and customer service. They truly believe that these factors have always played a significant role in their growth as a company. This also allows them to provide guidelines for designing smart offensive and defensive strategies. If one company is stronger in a measure, Southwest Airlines can look at this and implement changes to their structure of the process to see if changes will be fruitful.

It is the understanding that a competitive company should utilize the scores when deciding on a strategic move. In this case Southwest Airlines is building a foothold on becoming the true market leader across the board. Although their international flights will take quite a bit of time to grow and expand there are other options to help their scores rise. The other three airlines are stronger when it comes to manufacturing processes at this time. If Southwest Airlines could expand their fleet and include more newer planes, customers would become interested to see what new and exciting things those planes have to offer. Technological skills are directly correlated to this issue. Southwest Airlines is ordering newer planes at a slower rate than the other companies. This means that the other companies are using updated technologies that make the consumer happier. Whether it be WIFI on the plane or smarter computer chips helping the pilot efficiently get them to their destination. This assessment can change anytime if managers believe that other measures are important enough to recognize.

Developing a New Strategy

Present Mission

Southwest Airlines mission is one of friendly and efficient flying. “Dedication to the highest quality of customer service, delivered with a sense of warmth, friendliness, individual pride, and company spirit”. The mission statement may bring a sense of comfort, but it does not fully depict “who we are, what we do, and why we are here” to Southwest Airline customers (Gamble & Thompson 2016). The mission statement never specifically describes what product they are offering, other than customer service. They do not specify completely the buyer’s needs or which market they serve.

On the other hand, they do a good job of giving the company its own specific identity. This is beneficial when differentiating themselves in the airline industry. One option for Southwest is to be more informative in their mission statement to include answers that their customers may have. They can specify the industry they operate in while including what products and services they offer to customers with reasons for doing so. Southwest Airlines has the ability to use their mission statement, to differentiate themselves from other players in the industry, and create awareness of how they can satisfy customer needs

Present Strategy

Southwest Airline’s generic strategy is a low-cost strategy. They try to maintain low operating costs for themselves, so that they can also offer the lowest costs to customers. Offering low fares to multiple cities while also offering curtailed times for open passengers with no time restrictions. This strategy helps them remain profitable in the long run, while also beating out competitors by charging less for their services. Though they are a low-cost provider, Southwest Airlines still focuses much of their efforts into customer service, which can increase the value that customer’s feel they receive in combination with the lower costs. This is maintained by enforcing their culture to all of the employees throughout the company.

This low-cost strategy is supported by a few other operational strategies that Southwest Airlines implements. One such strategy is their fare-structuring strategy which bundles their fares into different categories catered to different customer demands. Southwest Airlines also made strategic moves to sustain long term low cost operations, such as using a single aircraft type, structuring their routes to connect point-to-point rather than hub and spoke, and striving to perform all value chain activities cost-efficiently. In order to grow their business, Southwest Airlines added more daily flights to areas they already served and added new cities to its route schedule, while also putting effort into their promotional and marketing campaigns. Southwest Airlines has been fairly effective in establishing competitive advantages through their strategic moves, moves which have made them a profitable industry leader for 43 years.

Strategic Issues

Southwest Airlines has maintained long streaks of overall success within the industry. Pointing out any urgent strategic issues can be a difficult task to address with the limited information provided. The most obvious issue to address would be the fact that their expansion in to the international market came later than needed and is still only a small part of the overall business. Acquiring AirTran in 2014, was a successful business decision. However, the number of enplaned passengers on international flights by Southwest Airlines is still only about 10% of what competitors in the industry averaged in the year 2015. Southwest Airlines has always focused on leading the domestic market. Their strategy of expansion in to international markets needs to be adjusted to compete international as well.

Another issue that may need to be addressed will be how to include their culture with an international firm. Once they have built relationships with other countries that they are going to do business with, they will have to look closely to the culture of the other company. Although they have a culture that the United States agrees with they may not fit well if another international company sees this culture as rude or unnecessary. Mergers and acquisitions can be a double-edged sword when working in the international market.

Environmental issues are always at the forefront of successful companies today. Southwest Airlines can use this to their advantage when purchasing newer planes and implementing technology in to existing assets. Having the ability to monitor how they consume fuel could ultimately change the perception of how a foreign company sees their branding. When entering a new market, it is wise to show the potential business partners how you can leave less of an environmental impact on their soil. This factor is going to reshape most of the industry as we know it. With the innovation of longer lasting battery cells, vehicles are currently being tested on how they save fuel and extend the distance of a moving entity. This will be implemented in planes in the near future. Southwest Airlines will want to look in to how to implement these innovations in to their planes.

Implementation

Process for Improving

Implementing recommendations for Southwest Airlines should be viewed in strategic steps that focus on international travel, company culture, and environmental impacts. Southwest needs to focus more on their current expansion strategy and continually remain the low-cost provider. This strategy is what has made them one of the industry leaders in their market and customers see that as their brand recognition. Southwest Airlines will need to invest more in to the international expansion if they want to gain more of the market share. This includes advertising and bulking up their fleet of larger planes for long distance travel. Even though they dominate in the domestic market, they are relatively a new entrant in to the international market. This will require a smart adjustment to compete internationally as well.

Southwest Airlines will need to do market research on how international companies work when it comes to how the culture is understood. International flights will always have a diverse compliment of passengers. AirTran Airlines is already in this market and will have other ideas of how to implement a culture based on the one they already provide. Managers must sit down and collectively agree on how to merge ideas or blatantly control them. Whether they agree or not it all comes down to revenue. If the managers know something doesn’t work they should replace it with something that does. Company’s cannot rely on just going with the flow if they want to improve.

Southwest Airlines must begin to look to the future and the environmental impact they impose. Technology and innovations in green products are becoming more available every day. Research will need to be done to see how much waste will be made by their company alone. After compiling all of the research and in-depth studies are complete, Southwest Airlines can then adjust resources to implement greener products to their existing fleet. This implementation may also help to bolster their branding when moving in to the international market and increase their standing in the domestic market.

Process for Making a Profit

Southwest Airlines is currently doing a great job of staffing the organization with the right people. This gives them an advantage in the beginning to implement changes in their strategy. Managers will need to focus on hiring employees that will be sensitive to changes in perception of culture. Working in an international market will require the company to see through the biases of other cultures to ensure customer relations are excellent in the customers mind. This is how Southwest Airlines will be able to build the global recognition and get the customers on the plane more frequently.

Southwest Airlines culture is a very strong corporate culture and it has proven to bring them success over the years. The culture only needs to be stretched to the areas of expansion, to align new employees’ collective spirit with the corporation’s collective goals. Once implementing the preceding factors of change, Southwest will only need to do what they’ve already done so well. Exercising strong leadership to propel strategy execution forward, Southwest Airlines has historically been successful at implementing winning strategies.

Southwest Airlines will need to allocate their resources to the execution effort, meaning that they will need to fund new marketing campaigns and secure new terminals in the international market. Policies and procedures will need to be established to facilitate their execution in the international market. Implementing the new policies, Southwest Airlines will then need to drive continuous improvement by perfecting and adopting best practices for operating in new foreign international markets. Due to Southwest Airlines company being so big, they have existing information and operating systems in place that are capable of supporting a new strategy. This will only be effective if they are integrated in to the new areas of expansion.

In order to drive the achievement of their new strategy goals, Southwest Airlines will want to tie incentives and rewards to financial targets. Offering rewards and incentives to new customers will give them an opportunity to show how they have been a successful leader in their market. Once they can build relationships with international airports they will have more negotiation power to expand to other terminals with in each country. Using their competitive strategies, they can find ways to offer stronger incentives as to why they can out-perform other U.S. based companies. American companies carry a lot of weight around the world when it comes to advertising in new international markets. Southwest has the opportunity to enter with ease as long as they can do it openly and respectfully.

In the airline industry, environmental impact is becoming a factor that can no longer be ignored. Whether it be governmentally enforced or a strict company policy, environmental issues will become an emerging key success factor for companies in the future. Southwest Airlines needs to be the industry leader if they want to be competitive in the international market. Using this leverage will allow for Southwest Airlines to come to the bargaining table with a successful marketing plan.

Southwest Airlines will need to begin finding ways to include new environmentally sound devices in to their existing assets. Upgrades to fuel systems will be expensive at first but will allow for planes to ultimately become more fuel efficient and begin to pay for themselves. Southwest Airlines should also look in to recycle friendly packaging for their in-flight meals and drinks. Ensuring that waste is easily disposed of in a friendly manner when getting rid of it on international soil. It is imperative that Southwest Airlines include a positive impact when entering the global market in order to stand above the rest.

APPENDIX A

PESTEL Model

Political Factors

-Regulated by policies governed through the Federal Aviation Administration

-Provides control and safety regulations

-Codes and standards to ensure industry quality

Economic Conditions

-Factors that control pricing

-Gas prices, inflation, stock prices, economic growth rates

Sociocultural Forces

-Customer values, attitudes, and lifestyles

-Pushing market towards how the customer feels

Technological Factors

-New technologies for upgrading existing assets

-Innovations to give the customer a better experience

Environmental Forces

-Controlling delays due to weather

-Improving weather systems to combat delays

Legal and Regulatory Factors

-Following policies to ensure government adherence

-Abiding regulations to not pay fines for cutting corners

APPENDIX B

Porters Five Forces Model

Force

Strength

Reasoning

Power of Rivalry

High

-The rivalry in the airline industry is constant.

-There are low switching costs for Airline tickets

-Airlines often have baggage fee, seat selection fees that can deter customers when choosing an airline

-Some Airlines offer rewards programs for flying with them

Threat of New Entrants

Low

-The Airline industry is very expensive to enter

-There are often mergers/acquisitions that occur because of the power of the large airlines

Threat of Substitutes

High

-Substitutes are one of the biggest threats to an airline

-Switching costs are low

-If prices are too high, travelers can choose another airline

- Travelers can us alternate forms of travel such as driving, taking a train, or taking a bus

Power of Suppliers

High

-Aircrafts are a very expensive asset

-Top manufacturing companies like Boeing influence has influenced the industry

-Suppliers of fuel also have a great deal of power, if fuel prices are high then ticket prices industry wide increase

-Some companies hedge fuel to avoid volatile fuel cost prices

Power of Customers

Moderate

-Low switching costs

-Membership and rewards programs allow loyal customers to accumulate free rewards from airlines

-Airlines want customers to be loyal to their company so they will reward them with free flights or upgrades

APPENDIX C

Driving Forces Model

Increasing Globalization

-Making your company a global brand

-Move in to new markets seamlessly

Shifts in Buyer Demographics

-Impress the customer with services

-Accessibility to products of high quality, such as in-flight meals and alcohol

-Low cost fares to multiple destinations

-Fast arrival times

Diffusion of Technical Know-how Across Companies and Countries

-Conducting the same customer service across international borders

-Newer and faster planes

-Quick turnover rates to get the airplane in the sky again

Changes in Cost Efficiency

-Control fuel hedging by forecasting and buying far in to the future

-Continue to have maintenance know-how between all models

-Implementing new technology and innovations

Changing Societal Concerns, Attitudes, and Lifestyles

-Offer more incentives to get the customers attention like, points, and extra services

-Offer more international destinations to popular places

-Update lifestyle choices like more leg room and WIFI

APPENDIX D

Strategic Group Mapping

APPENDIX E

Financial Analysis

CURRENT DATA

DUPONT FORMULA

YEAR

2015

1298

19820

1298

21312

1298

NET PROFITS

1298

19820

21312

21312

7358

7358

NET SALES

19820

TOTAL ASSETS

21312

NET PROFIT

NET SALES

NET PROFITS

TOTAL ASSETS

NET INCOME

NET WORTH

7358

NET SALES

TOTAL ASSETS

TOTAL ASSETS

NET WORTH

NET WORTH

6.5%

x

0.9

=

6.1%

x

2.9

=

17.6%

LIQUIDITY ANALYSIS

COMPOUND ANNUAL GROWTH RATES

CURRENT RATIO

Period (2011 -2015)

CURRENT ASSETS

4024

=

0.54

ASSETS

21312

=>

4.21'%

CURRENT LIABILITIES

7406

18068

QUICK RATIO

SALES

19820

=>

6.1%

C/A - INVENTORIES

3713

=

0.50

15658

CURRENT LIABILITIES

7406

CASH RATIO

INCOME

1298

=>

64.3%

CASH

1583

=

21.4%

178

CURRENT LIABILITIES

7406

TIE

EQUITY

7358

=>

1.7%

EBIT

4116

=

58.8

6877

INTEREST

70

EPS (Diluted)

3.27

=>

94.2%

0.23

APPENDIX F

VRIN Model

Competency

Valuable

Rare

Inimitable/ Non-Sub

Advantage?

Brand Recognition

Y

N

N

Parity

Customer Service

Y

Y

N

Temporary Competitive Advantage

Pricing

Y

Y

N

Temporary

Low Operating Costs

Y

Y

Y

Sustainable Competitive Advantage

Supplier Relations

Y

N

N

Parity

Staffing

Y

Y

N

Temporary

Culture

Y

Y

Y

Sustainable Competitive Advantage