There are numerous factors affecting the company’s performance in the market. It might appear to be challenging to pinpoint the exact aspect of the company’s strategy that is at fault in case of a crisis. However, a company might be able to determine its weaknesses and strengths that can be further examined through a value chain and financial analyses. In this essay, the data provided in the Southwest Airlines case study will be analyzed in order to reveal how the presented factors predict the company’s future performance.
Review of Factors Affecting the Company’s Strategy
The airline industry contains numerous nuances that can potentially damage a company’s standing if they are left unnoticed. However, Southwest Airlines has mastered almost all of the aspects of passenger airline service. Its success relies on the flexibility of its services, which is visible in the treatment of both customers and employees. However, there are factors from the external environment, such as fuel costs or new environmental regulations, that are out of the company’s influence. They present a significant weakness in the firm’s strategy.
Moreover, the aircraft fleet of Southwest Airlines can be viewed as both its strength and weakness. The company’s pilots have the luxury of not having to learn how to operate different planes, making them interchangeable and increasing their availability (Inkpen, 2017). However, it makes the company less competitive, as such companies as JetBlue can provide more services with their diverse fleets (Inkpen, 2017). The company’s success relies on its ability to respond to the changes in both competitors’ strategies, market fluctuations, and shifting operational costs.
Value Chain Analysis
The company is notorious for its optimization of many operations and the willingness to stray from the traditional practices within the airline industry. The input in this industry consists of costly materials such as fuel, planes, and high-skilled labor. Vehicle maintenance is also a significant part of the input. Through the use of such technologies as capacity optimization algorithms and well-calculated flight paths, Southwest can achieve the maximum output (Inkpen, 2017). As a result of these actions, Southwest Airlines has one of the lowest possible tariffs for its customers while providing a convenient way to fly without a significant amount of obstacles, such as numbered seats. Southwest Airlines has sufficient experience in exploiting its internal factors as a countermeasure for changes in the general environment.
The financial state of the company can be seen as positive and promising. Among the U.S. airline companies, Southwest Airlines has eradicated almost all weaknesses and manages the remaining few through optimization and maintenance. However, a part of its current success relies on governmental support due to the recent crisis (Unnikrishnan, 2021). The previous year was even worse, as the company reported a $1.5 billion quarterly loss in 2020 (Hoopfer, 2020). Despite this alarming fact, the company’s CEO has a positive view of the industry’s rapid recovery (Unnikrishnan, 2021). This crisis calls for new ways to increase the company’s profitability and resilience under duress, such as service differentiation.
In conclusion, Southwest Airlines has been able to keep its profitability high due to a series of innovative optimizations with the intention to attract more customers by providing the maximum possible value from its service. The company knows how to address the problematic factors in its strategy and continues to put effort into their alleviation. For example, Southwest Airlines recently experimented Airbus A220 and prepared for an influx of leisure travelers by expanding the available destinations to include more popular travel locations (Unnikrishnan, 2021). This willingness to change exemplifies the company’s flexibility and adaptability to the market’s fluctuations. Any company that operates in the airline industry is restricted by its high costs, but this highly efficient strategy makes the company a fierce competitor in this field.
Hoopfer, E. (2020). Southwest Airlines CEO discusses profitability streak, working from home. Houston Business Journal.
Inkpen, A. (2017). Southwest Airlines. Thunderbird: School of Global Management.
Unnikrishnan, M. (2021). Southwest Airlines reports a profit courtesy of U.S. taxpayers. Skift.