Southwest Airlines is an example of a successful company that operates in the air travel market. Its state has over 50,000 employees and continues to expand both the number of available destinations and the number of planes (Inkpen, 2017). Its success was not left unnoticed, and many similar companies were created in the past few decades (Inkpen, 2017). This case study explores the general environment of Southwest Airlines, provides Porter’s five forces analysis, and reviews the company’s competitive landscape.
The general environment is represented by the seven key factors that can affect its performance. Southwest Airlines is well aware of its opportunities in the socioeconomic and demographic environment, as the company’s appeal focuses on accessibility through low prices, making it more viable to focus on low- and middle-class demographics. Its ethical treatment of its customers is an essential strength and must be focused further on.
Regarding the technological environment, Southwest Airlines keeps its planes well-maintained and updates its fleet to prevent the usage of any aircraft older than 10-12 years (Inkpen, 2017). While there are concerns about the economic environment due to the oil price fluctuations, the company remains profitable (Inkpen, 2017). The political environment trends lean towards higher market accessibility for foreign companies, which is a threat for Southwest Airlines (Inkpen, 2017). However, the firm also has plans to expand abroad to counter this notion (Klint, 2020). The state of the physical environment shows that there is a trend towards increased taxes for airline emissions (Inkpen, 2017). Southwest Airlines can use this trend to gain publicity through donations. In general, the firm maintains a focused vision on its target and continues to capitalize on opportunities presented by external factors.
Porter’s Five Forces Analysis
New entrants pose a significant threat to the company, as they demand new strategic moves to prevent market share loss. As an experienced airline travel provider, Southwest Airlines possesses a sufficient capacity to promote innovation and expansion to counter this threat. It is possible to trace a similar situation with the bargaining power of suppliers. As the majority of the expenses in the industry are fixed per customer, and the company focuses on the lowest possible cost, its primary concern is substitute services. The company’s strategy involves the usage of algorithms that allow it to maximize the load factor and gain the most out of its flights, giving it an edge over its substitutes (Inkpen, 2017). In turn, the bargaining power of customers provides a significant pressure on the company’s performance, as customers’ complaints, delays, and general dissatisfaction can easily ruin the reputation of any airline firm. There is a significant rivalry in this industry, especially considering the recent mergers and new entrants. Southwest Airlines uses all opportunities for expansion to prevent this factor from taking a substantial portion of the company’s market share.
The primary competitors of Southwest Airlines present a significant threat to the company’s future. Such companies as JetBlue, Alaska, and Spirit provide domestic flights at a lower cost than Southwest (Inkpen, 2017). In response to this threat, the company continuously expands the number of passenger planes to keep up with the increasing demands (Volkman, 2021). While many companies, including JetBlue, struggle to recover from COVID-19 lockdowns and have difficulties with keeping their market shares, Southwest uses this opportunity to claim the market back (Klint, 2020). Gary Kelly’s vision of the company’s future allowed him to successfully pass the troublesome period, leaving many other companies behind.
In conclusion, the success of Southwest Airlines on the airline market is defined by its measured actions and balance between steady progress and efficient response to industry fluctuations. It utilizes the opportunities presented by the general environment to expand its reach while keeping its target customer base in focus. There are several competitors on the market that pose a threat to Southwest Airlines, yet the company is able to keep its market share throughout the years by responding to the moves of other players.
Inkpen, A. (2017). Southwest Airlines. Thunderbird: School of Global Management.
Klint, M. (2020). Southwest’s latest growth opportunity in Southern California. Live and Let’s Fly.
Volkman, E. (2021). Southwest expects summer revenue Jump, orders 34 new Boeing 737 Maxes. The Motley Fool.