PEST Analysis



PEST Analysis

Introduction

An industry is a creature of its environment. Its very survival and all of its perspectives, resources, problems, and opportunities are generated & conditioned by the environment. Thus it is important for an industry to monitor the relevant changes taking place in its environment and formulate strategies to adapt to these changes.

The overall environment of the Airlines Industry in the USA as found in this case, could be described as that of bitter rivalry. The hostility between competitors were so harsh that two rivals -Texas International and Braniff joined hands to destroy Southwest Airlines even before it could begin its operation. Failed to stop its operation, the rivals began to put up obstacles at every step Southwest took. No wonder, they were dubbed as "predator" meaning an animal that eats other animals. This attitude of destroying the competitor is found in this case in all aspects of the environment of Air Line Industry-Political, Economic, Social and Technological. (McCabe 2009)

In the startup and early growth phases of an industry, the general guidance from Thompson et al. may be sufficient: "Only rarely are there more than five or six key factors for future competitive success." However, as an industry approaches maturity, rivalry among competing business units often increases. Consolidation of the industry often follows. As a rivalry increases and consolidation proceeds, the number of key success factors is likely to increase.

Although there are few purely domestic industries today, as rivalry increases in an industry, business units are increasingly likely to expand into foreign markets in order to grow. For several stakeholders—at least for customers, employees, and suppliers—additional key success factors may also be required as the business grows more complex, if only because of the increase in national and regional cultures to be considered.

Political Environment

In stable Governments, political trends may not be as important as in countries where Governments are week. Yet even in stable countries, political trends may have a significant impact on business. Governments around the world help their domestic industries strengthen their competitiveness through various fiscal and monetary measures. Political support can play a key role in the industry's search for markets abroad. Without it, an industry may face a difficult situation.

Scanning the Political Environment in this case we find that Southwest sought to make use of the opportunity created by Airline Deregulation Act passed by the US Congress in 1978. This law permitted inter-state air flights. But Southwest's attempt to becoming an inter -state airline soon faced political obstacles. Southwest wanted to operate all its inter -state flights from Love Field Airport, which was very close to downtown Dallas. On the other hand all other airlines operated their flights from Dallas Forth Worth (DFW) airport, which was far away from main city. Fearing that Southwest will be able to get larger number of passengers on inter-state routes, its rival airlines with the aid of Fort Worth Congressman Jim Wright tried to pass a law banning all inter state flights from Love Field ...