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The Strategy Analysis of Southwest Airlines Company

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  1. External Analysis
    1. General Environment
    2. Five Forces (Porter)
  2. Analysis of Southwest Airlines
    1. Ressources
    2. Capabilities and Core Competencies
  3. Strategic alternatives
  4. Conclusion

In 1996, Southwest Airlines was a successful and profitable low-cost airline company, operating in south-eastern US markets. After entering the Florida market, the company had to face certain strategic challenges. It was a big challenge to maintain the profitability while competing with all the north-eastern airlines in a highly competitive area.
In a bid to figure out the major challenges and strategic alternatives for the Southwest airlines, firstly, we studied the external environment of the company, in order to analyze their position and relation with the different players in the industry. Then, we analyzed Southwest Airlines' internal environment, such as its main resources and capabilities, in order to define the core competencies they could rely on to face their strategic challenges. Finally, we figured out what were the strategic alternatives they had, which would help them to maintain their successful position in the US market

[...] Considering the cost of maintenance and storage of the airplanes, we can affirm that SW evolves in a market where cut-throat competition rules Analysis of Southwest Airlines 1. Resources 1. Tangible resources 1. Financial resources With 23 consecutive years of profit, Southwest Airlines has a good financial position. The long-term credit rate of Standard's & Poors is which is exceptional in this field. Moreover, Southwest Airlines has a very low equity-to-debt ratio, which enabled it to invest and to borrow money if needed, and a high return on investment Physical resources First, the many cities serviced enabled the Southwest Airlines politics of short flights. [...]

[...] The bargaining power of suppliers The suppliers in the airline industry are roughly defined as such: the airplane manufacturers and all the services that derive from purchasing a plane (maintenance, repairs, etc.), the catering company and the oil firms. Regarding plane manufacturers, there is a special case to be taken into account; the major competitors in the industry are Boeing and Airbus. The fierce competition between these two leaves a margin for bargaining to the plane buyers. The suppliers are deeply concerned by suggestions and demands of the airlines, since they compete over their own productivity when it comes to closing a deal with an airline. [...]

[...] Socio-cultural changes had a huge impact on the attractiveness of the airline industry and led to an increasing travel demand Political/legal The Airline Deregulation Act, signed in the end 70sby the American President stands for a complete change in airline industry. Competition between airline companies and the number of new entrants in the market increased and as a consequence of high competition in the market, airline fares had to decrease. Travelling by plane became, as already mentioned, much cheaper than before and more interesting for the people. [...]

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