Southwest Airlines Strategies

free essayThis publicly traded company is based in Dallas. Southwest Airlines operates the passengers’ airlines and offers a scheduled transportation by air. The company operates 694 aircrafts, performing about 3,200 flights daily (Gittel, 2005). Additionally, Southwest Airlines closely cooperates with hotels, car rental agencies, restaurants, and retail locations for offering a wider range of services to its clients. In the present time, the company has the customer support and service centers in Chicago, Albuquerque, Houston, Oklahoma City, San Antonio, and Phoenix. Customers do about 31,154 reservations every day, and more than 11 million reservations were done in 2012(Gittel, 2005).

A Business-Level Strategy of the Company

Southwest Airlines uses an integrated low-cost or differentiation strategy. The company successfully combines the low cost of passengers’ transportation and differentiation of the services offered.

Low prices attract numerous customers and increase a competitive position of the organization. Prices of the company are grounded on its internal efficiency, i.e. by the strict control over expenses, taking effective and efficient managerial decisions, and the close cooperation with related companies. Simultaneously, Southwest Airlines offers numerous services, such as passengers’ transportation, reservation of hotels and restaurants, as well as cars rent. The company provides a set of services and makes the travelling convenient, fast, easy, and in the same time affordable.

The combination of differentiation and low-cost strategies provides numerous advantages to this company. It can easily adapt to any changes in the market and save its competitive position. Moreover, a wide range of services offered allows the Southwest Airlines to develop while being successful in different fields (for example, passenger transportation, offering the car rent, hotel and restaurant reservation, etc.). People choose this enterprise because it offers a variety of services for low prices.

The integrated low-cost or differentiation strategy is the most important and prosperous one for the Southwest Airlines in a long-term perspective. On the one hand, this business approach brings availability to stand against any changes in the market. Differentiation gives the airline an ability to receive profits from several fields with respect to the services provided. In the case the company has some problems with offering the car reservation, cash receipts from the restaurant and hotel reservation, etc., it will cover the loss of money by means of another item from the service set.

Therefore, the strategy detailed above will provide the long-term success to the company because people always search for a low-cost but quality services provider.

A Corporate-Level Strategy

The corporate-level strategy of Southwest Airlines is based on diversification. This process enables an effective and efficient use of excess capabilities and resources described previously.

It is notable that the main part of Southwest Airlines’ revenues comes from the passengers’ transportation. The company has a medium diversification corporate-level strategy.

Furthermore, Southwest Airlines has the value of strategies created. Particularly, its reservation services add a value to the core operation – the transportation of passengers. Traveling becomes more convenient and cheaper to the customers. The business under analysis successfully implements the main idea of the value-creating strategy, i.e. the diversification into the real life. The company offers a wider range of services to more people within the market in order to place a dominant position. In addition, Southwest Airlines uses a growth-corporate strategy: it offers some services in different fields, expands the new markets, increases the revenue (on about 4 % in 2013) and creates new working places.

The strategy of diversification of the organization brings the success to the company in the present time. What is more, it will make the firm more profitable in the future. This marketing approach is a good choice for the biggest national and one of the largest international passengers’ transportation companies. In this way, it enables the firm with an opportunity to offer a wide range of services shortly and for low prices. Moreover, this strategy leads to the growth of the business inside the USA and in other countries. In a long-term perspective, Southwest Airlines will provide services of reservation for its customers all over the world. This will make the company stronger and more competitive in the global market of the air transportation.

Competitive Environment

The competitive environment of Southwest Airlines is rather complicated. In the US market of air transportation, its closest competitors are American Airlines Group, Inc., Delta Air Lines, Inc., and JetBlue Airways Corporation. However, the biggest and most significant competitor is American Airlines Group, Inc. The latter is a publicly traded airline holding company that was formed from a merger of the US Airways Group and AMR Corporation in 2013. Nowadays, American Airlines Group is the largest airline group in the world. Operating airplanes perform about 6,700 flights every day to more than 50 countries globally.

Comparison of American Airlines Group and Southwest Airlines

Characteristics

American Airlines Group

Southwest Airlines

Continents Served

Asia, Europe, North America, South America, and Africa

North and South America

Amount of daily flights

6,700

3,200

Amount of aircrafts

1264

694

Amount of employees

Over 100,000

Over 40,000

Revenue

$40 billion

$17.7 billion

In accordance with the comparative table, Southwest Airlines hoofers flights only to South and North America. It operates fewer aircrafts. Nevertheless, this company offers rental services to its customers. Southwest Airlines is directed on providing the low-cost transportation and reservation to its clients. Meanwhile, American Airlines Group’s operation is based on offering a wide range of international flights. The business strategy of American Airlines Group differs greatly from that of Southwest Airlines. The former does not put any emphasis on the low cost of services provided. It offers flights to more than 58 countries all over the world. The company has a strong differentiation business strategy.

The corporate-level strategies of Southwest Airlines and American Airlines Group have similar and different sides. Both companies have chosen the strategy of diversification. Nonetheless, Southwest Airlines diversifies its services, namely offers the car, hotel, and restaurant services. On the other hand, its competitor ensures international flights to numerous directions worldwide. It seems that Southwest Airlines will remain successful due to its long-term perspective in terms of the national directions and its flights to countries of South America. The company offers several related services to its customers. Moreover, these services have a low price. At the same time, it will be hard for this organization to be competitive in the market of the international air transportation. The business analyzed is not ready yet to work in the global level. This is due to the fact that it does not operate enough amounts of airplanes, has no strong relationships with numerous hotels, restaurants, and car rent agencies throughout other countries. In any case, Southwest Airlines can successfully expand the international markets only if it continues to offer the low-cost air transportation together with related rental services. It should be noted that, owing to the aforementioned fact, this expanding will be rather slow.

Nowadays, American Airlines Group places a strong position in the international air transportation. The company will be successful in this field in the nearest future because it operates a large number of airplanes providing flights to numerous airports all over the world. However, the cost of these services is rather high. Simultaneously, the corporation does not offer the related rental services. These aspects create a threat of losing a competitive position in both local and international air-flight markets.

Slow- and Fast-Cycle Markets

The market of passengers’ aviation is definitely a slow-cycle market. Aviation companies should have enough funds and experience to buy and operate aircrafts. Moreover, functioning of these vehicles, as well as airline companies and their employees’ performance should correspond to and comply with the local and international standards of safety to provide a safe transportation of passengers and cargoes. New organizations, which intend to come into this market, face a considerable competition from the already existing businesses and services they offer. Moreover, any innovative features of aircrafts are rather costly and require considerable time and funds spent for a preliminary testing. This will help to avoid any threat to the people’s lives. Also, companies make many efforts for opening new flights to new countries (signing contracts, finding aircrafts for new flights, recruitment, selection, and hiring of the new employees, etc.).

In the slow-cycle market, the choice of a competitor can be considered as follows. The main competitor of Southwest Airlines is American Airlines Group. At the same time, Southwest Airlines implements some unique features in terms of its services provided. As it has been described above, the company offers numerous rental services: restaurant, hotel, and car rent. Thus, these airlines implement some innovations in order to attract new customers and expand their market shares.

The company Delta Air Lines also offers the services of car and hotel reservations to its customers. What is more, this airline provides services of domestic (American) and international transportation of passengers and cargoes (Jones, 2003).Furthermore, this company offers flights to all continents (North and South America, Australia, Asia, Europe, and Africa). Today, the total amount of aircrafts of this company is approximately the same as that of Southwest Airlines. However, aircrafts operated by the latter has a lower average age. Hence, the fleet of Southwest Airlines is the youngest one. Most probably, aircrafts of this airline will require fewer funds for repair and modernization. Both companies propose some reservation services to its consumers. Delta Air Lines does not provide the low-cost transportation; however, it offers the flights all over the world. This business can be considered as one of the main competitors of Southwest Airlines in the short-cycle market.

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