Strategic Choices





Strategic Choices

Introduction

The Southwest Company's performance in the recent years has been siginificant, the company's ROI has been increasing sufficiently, Southwest has ranking of 1st in the market share in 80 to 90 % of 100 city paired routes.

Company has been profitable ever since the year 1973, the growth rate of the company has increasing in the past couple of years, the grwoth rate is 1.0% in the year 2000, increased from 0.5% in the year 1999.

The overall operating expenses of the company has increased from the year 2002 to $181 million, due to increase in capcity. The changes inoperating expenses is due to change in the available seat mile (ASMs). The table below represents the company's operating expenses as per ASM for the year 2002 and 2001(Southwest Airlines, 2006).

The vision statement of the company is “Open up the skies for ordinary people”, the goal of the company is to achieve profit, provide job security to every employee working for Southwest and to make airlines affordable for people. The company's core competencies are low fare, high frequency, no frills and short hall. The company should make its customer feel special rather than ordinary in a vision. The company has already accommodated a lot of passenger with feasible market strategy in years to come the company should concentrate on achieving a step higher; it should be “Achieve higher limits, with higher support from people”.

Thesis Statement

The Southwest has been a high achiever; the company has accomplished its position by analyzing the need and demand of the market and designing it strategies accordingly. The company is working hard to maintain the pace and achieve more.

Discussion

Internal Rivalry

There are numerous sellers in the airline industry with very little changes in the product. The result of these factors are current market conditions, the industry of airline is in a very weak position. There are four top ten airline companies who are in bankruptcy; Delta Airway Group Inc, United Airlines, ATA Airlines and Northwest Airlines Corporation. Southwest was the only airline to report profit. Price competition is primary source of rivalry in the airline industry; profit competition has reduced profits and cost price of major airline companies. There are a lot of airline companies who have tried to focus on the services provided in place of discounted cost but they have failed to convince the customers which led to increase in expenses. Southwest is a principal force driving its competition in the current market. It has the lowest cost per available seat mile (CASM) currently. This advantage allows the company to control prices to maintain a subsequent profit level. However, the cost has been duly increased due to labor cost and decrease in fuel hedging. There are majority of airlines trying to trim their cost margins, they might have lower CASM in comparison with Southwest.

Entry

This factor includes whether any barriers are present in regards to market entry or not. Southwest operates with a strategy of differentiation that gives competitors a hard time to enter the ...