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Southwest airlines’ PORTER Five Forces

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by

Chu Sio Mei

on 10 December 2013

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Transcript of Southwest airlines’ PORTER Five Forces

Southwest airlines’ PORTER Five Forces
Competitive Rivalry-HIGH
Southwest’s direct competitors are the seven major low-carriers operating domestically with similar services, such as

Delta Air Lines (DAL)
United Continental Holdings (UAL)
American Airlines (AMR)
US Airways Group (LCC)
JetBlue Airways (JBLU)
Allegiant Travel (ALGT)
AirTran Holdings (AAI)

Threat of New Entrants-MODERATE
-New low cost carriers Airline companies could enter this industry and attract passengers

-Outstanding services and low cost strategy

Bargaining power of
Supplier-HIGH
-Planes suppliers: Boeing and Airbus
-Fuel : unpredictable and extremely volatile
-An embargo of gas from the Middle East, as with the 1973 Oil Crisis

Bargaining power of buyer-HIGH
-Most of the low cost carriers offers similar services and limited differentiation
-Decide on:
Lower price
less cancelations
fewer delays
more amenities at no additional charge

Alternative another vehicle, like car, train, Ship but not significant compete with airplane
Speed!
Comfort!
Time!

Threat of Substitute Products-LOW
Airline Industry Market Share in U.S.
Source: http://www.transtats.bts.gov/

Southwest Airline Strategy
Point-to-point, short-hub


No-frills approach
-No baggage transfers, first class seating, an leather seat


Limited on plane service
-No meals service, live entertainment


Automation
-the boarding passes, and self-service boarding pass kiosks


No assigned seating
-reduced boarding time


Single aircraft type
-Using Boeing 737 for all its flight
-Keep its training costs low and manpower
-Allow for quick turnaround


Planes are flight in the air for 12 hours per day
-Compare to the rival airline, they flight 8hours
-Can flight more times

External
Internal management
CEO Herb Kelleher

Employees
Customers
Shareholders
Internal management
CEO Herb Kelleher

-“Hire for attitude and train for skills”
-NO HR department, but People Department
-Penchant for laughter and fun
-Casual-dress policy
-Celebration: Spirit party, cultural party…
-Activities: Gong show, talent show...
-Lower wages V.S. Competitors
-Share Stock
-NO fired employees in financial crises

Conclusion
Key Success Factors

Recommendation

Key Success Factors
Low cost
Main short flights, no long flights and international flights

Employee first
--Give each employee to provide a stable work to make money
--become company to family of love for everyone.

Lower fare and Convenience
--Low cost make the ticket prices can compete with the coach

--Every hour has flights

Operational efficiency
--less flight delays
--no need find seat number, save boarding time

Strategic competencies
--The main operational second line airports
--more fights make more profit

Recommandation
Expand geographically
--open new route

Do streamlining and automation
--use IT to achieve operating efficiencics

Dose "LUV" last
Background
-Founded in 1967

-46000employees

-3400 flights per day

-Run a profit since 1973

Low-cost/ Low-fare Airline

-Attract passengers by flying convenient schedules,
arrive the destinations on time.
-Point to point system.

-Charge fares competitively low.

-Target market: Business travelers and Price-sensitive leisure travelers.

Vision
-If it matters to you, it matters to us.
-Excellent customer satisfaction ratings.
-One of the 10 safest airlines in the world in 2012.
-Being the market share leader in domestic air travel.

Mission
&
S
W
O
T
Strength:

Point to Point scheduling
Operating of only one type of aircraft(Boeing 737)
25mins average turn around time.
Good strategies in expanding the business.

Weakness:

-No establish alliances with other airlines.

-No international flights.

Opportunities:

A big number of passengers welcome low prices.

The development of technology to create the IT innovation.

Threats:

-Rising costs.(labor, fuel.)
-Competitors provide the similar services.
-New entries.
-Government regulations.

Strength-Opportunity:

-Operating the other type of Boeing.

-Still focus on low-cost carrier.

Weakness-Opportunity:

May ally with other airlines.



Strength:

Weakness:

Opportunities:

Threats:

Strength-Threat:

-Keep promoting to attract the new customers.
-Stabilizing the services.
-Try to cut cost by finding some new suppliers.

Weakness-Threats:

- Create “barriers to entry” with
implement innovative strategies.

Outline

-Introdcution
-SWOT
-Five Forces
-Southwest Strategy
-Internal management
-Conclusion
-Recommandation
BB002852 Jimmy
BB001514 Alfred
BB101348 Meimei
BB001484 Canna
ZZZ...
Full transcript