[pic] Colorado Technical University Southwest Airlines: Porter’s Five Forces Term Project - Final Professor Hanji Wu Submitted in Partial Fulfillment of the Requirements for ECON 616 Applied Managerial Economics By Larry Rodgers, Brent Packard, Leanne Marks, James Ladwig Colorado Springs, Colorado September 2012 Southwest Airlines: Porter’s Five Forces Analysis Southwest Airlines continues to show their strength in this tough industry. With the company’s main focus in keeping costs down, they are in a much better position than the rest of the airline industry in continuing to make profits during this current recession with customers being careful with their money. In fact, while most airlines strongly compete for their fair share of the market which has an impact on their ability to make a profit, Southwest’s focus has been on discovering new ways of increasing their profit. (Bundgaard, et al, 2006) Rivalry Among Existing Firms The threat of rivalry is high. Price competition has been the primary focus of the rivalry among airline companies.
(3 ( Established in 1998 and started service in 2000 ( Goal has been to establish itself as a leading low-fare, low-cost passenger airline by offering customers high-quality customer service and differentiated products. ( Focus on underserved markets. ( 108 flights in 2002 and 316 in 2005 serving 32 destinations. ( By mid 2005, fleet of 77 new Airbus A320 Aircraft ( Stock price $20 in 2002 and peaked at $26.4 in 2005. • 4.
The major networking airlines in the industry are united, Northwest, American Continental, and Delta. Their combined revenue in 2005 made up of about 82 percent of the total $25.3 billion revenue generated by the 10 largest airlines. Low-cost carriers operate at a low-cost business model, they use the point-to-point flight system. the largest carrires in the model are Southwest and JetBlue. Regional carriers specialized in short-haul flights that caters to small towns and communities using small jets.
The A380 made its first commercial flight in 2007. Capable of flying over 8000 nautical miles without refuelling, the A380 would be ideal for long-haul passengers and freight applications. By 2009, A380 production was several years behind its contracted delivery schedule and some airlines cancelled their orders. The survival and future success of Airbus, including the employment of 52,000 people at 16 sites in France, Germany, UK and Spain, depended critically on A380 meeting its sales targets over the medium and longer term. Airbus and Boeing focus on medium and long-haul jet aircraft with 100+ seats.
Easy jet is the largest air line in terms of passengers volume – ‘59 million’ (Easy Jet corporate media file, p.3) in UK and internationally across 30 countries with flight scheduled services of ‘600 routes’ as well as the fourth largest short-haul carrier in Europe with a market share of ‘8%’ (Easy jet annual report, 2012, p.12). In order to promote efficient service to customers, they introduce speed boarding that gives passenger’s greater choice over their seat arrangements. Furthermore, the volumes of passenger’s turnover have increased their financial performance to ‘£317 million’ (p.9) profit before tax and after tax of ‘£255 million’ (p.19). Their annual report can be assess at http://2012annualreport.easyjet.com/downloads/PDFs/Full_Annual_Report_2012.pdf and http://corporate.easyjet.com/~/media/Files/E/Easyjet-Plc-V2/pdf/content/press-info-kit.pdf a. Table: The vocabulary of strategy in Easy jet airline (2012 annual report) Term Definition Example (including why chosen and evidence Mission Overriding purpose in line with values or expectations of stakeholders Their mission statement is to ‘leverage cost advantage, leading market position, and brand to deliver point-to-point low fares with operational
Beaucratic Control Southwest Airlines makes good use of bureaucratic control methods in very positive ways. Because of the effective management of the airline, Southwest “has not experienced a loss since its 2nd year of operation” (Butler, 1993). Southwest was the only major airline to earn a profit in the first quarter of 2008, and they plan to continue growth while other major airlines are downsizing to lower costs (Koenig, 2008). This is a testament to the bureaucratic controls that Southwest Airlines have
7 P’S and STRATEGIES OF SOUTHWESTERN AIRLINES PRASHANT CHATURVEDI ROLL NO.80303120009 SOUTHWEST AIRLINES INTRODUCTIONSouthwest Airlines Co. , operating as Southwest Airlines, is the largest low-cost carrier in the United States and is headquartered in Dallas, Texas. The airline was established in 1967, adopting its current name in 1971. It is the largest airline in the United States based upon domestic passengers carried as of June 5, 2011. Southwest has more than 46,000 employees as of August 2012 and operates more than 3,400 flights per day. As of August 2012, Southwest Airlines operates scheduled service to 77 destinations in 40 states.
HARVARD BUSINESS SCHOOL 9-201-028 REV: APRIL 26, 2004 BENJAMIN ESTY Airbus A3XX: Developing the World's Largest Commercial Jet (A) Aviation is a great business to be in, provided you have limitless money at your disposal, limitless confidence in your ability to get everything right the first time, and limitless resolve and iron nerve,' EADS (Airbus) is betting the company on this aircraft. 2 On June 23, 2000, Airbus Industrie's Supervisory Board approved an Authorization to Offer (ATO) the A3XX, a proposed super jumbo jet that would seat from 550 to 990 passengers, have a list price of $216 million, and cost $13 billion to develop. Before the Board would commit to industrial launch, the point at which significant expenditures would begin, it hoped to secure orders for 50 jets from as many as five major airlines. While Airbus had been courting potential customers for many years-in fact, development had been underway since 1990-the ATO gave the sales force permission to begin taking firm orders for the plane with delivery starting in 2006. Airbus management announced the first orders for the A3XX at the bi-annual Air Show in Famborough, England, in July 2000.
1.0 Introduction The airline industry has undergone enormous changes over the past decade through liberalisation and deregulation. Due to this, new airlines have been able to enter and grow within the market. Some have been a success and some have failed. The airline industry has had to face and accept the new airline business concept, called low cost or no frills airlines. The low cost airlines have developed their value chains so effective in low cost operation that they are hard to imitate, especially for traditional airlines.
The remodeling of the airline has created a more pleasant atmosphere for the customers. They have specifically targeted business travelers. Southwest’s policy allowing customers to change flights without penalty appealed to customers. But what really made Southwest stand out to both customers were its frequent flights serving a ton of cities at convenient times and low prices. Though