Southwest Airlines Case in strategic management

Introduction
Southwest airline is a Dallas-based company that serves more than 100 destinations in 41 states. The low-fare carrier is different from other low-fare carriers because it offers its customers value for their money through excellent customer service, timely departures, and loyalty schemes. Southwest airline also serves near-international destinations, such as Puerto Rico and the District of Colombia. The company commenced service in 1971 with three Boeing 737 serving Dallas, Houston, and San Antonio. The company exceeded the billion-dollar revenue mark in 1989 and in 2011 marked the 39th year of consecutive profitability
. The company has remained profitable since its formation in 1971, except for the first two years of operation. Southwest airline has made it possible for millions of people to use air travel across economic classes.
Southwest Airline SWOT Analysis
Strengths
Southwest airline has a strong employee-oriented culture and a mission statement that focuses on every aspect of the business to ensure both employee and customers are contented. Hardships that the company faced during the early years enabled it to adopt a cost leadership strategy that ensure operating cost for the company is 15-20% below industry averages. The company uses Boeing 737s only, which enables low operational and training cost. The company has also embraced computer technology that enables ticketless travel. Southwest airline does not assign anyone a seat, nor does the company handle baggage. There are no meals during a flight and there is no central reservation. Customers can reserve or change their reservations at anytime. Customers also take a seat where they prefer in a plane rather than an assigned seat, which is the norm in other airlines (Teasley & Robinson, 2011).
Southwest has a reputation for offering quality services to its customers. The company has developed a route system that ensures reliability. The company operates in 52 airports across the country and services more than 50 million customers every year using 243 Boeing 737s. The airline offers credit based on the number of trips rather than miles travelled, which is the norm in other airlines (Teasley & Robinson, 2011). The company was the first to offer discounts to senior citizens, parcel delivery, and paperless booking. The company scrutinizes each applicant carefully to ensure he or she can offer excellent services to customers.
Weaknesses
The company has a remarkable model, which is the reason for its success; however, other companies are emulating its model, enabling them to be as competitive as Southwest airline. The companys competitors are also offering shuttle services and forming alliances with regional carriers to increase their competitiveness. Southwest employs a steady growth plan that ensures the company enters a market only if it can maintain regular flights to a destination. The strategy results in numerous untapped domestic markets. The rising fuel cost and the increasing salary and benefits packages demands by the pilots and flight attendants unions is increasing the companys operational cost. The rising operational cost is making it hard for the company to maintain low cost per seat, which is the companys whole mark as a low fare carrier (Teasley & Robinson, 2011).
Opportunities
Southwest has many opportunities for expansion into new markets. The new Boeing 737, which is the companys aircraft of choice, can fly further for longer. The company can access distance markets across North and South America using the new aircrafts. Southwest focuses on low prices and reliability, which is a trend that most of the population favors because the consumers seek convenience. The company has an opportunity of increasing domestic market share because its competitions are looking to exploit international markets. The company can improve its computer technology to facilitate ticketless reservations using mobile applications and personal computers. The company can expand its services to include those travelling for leisure. Southwest can also consider skilled applicants even if they lack the level of enthusiasm the company desires in its employees (Teasley & Robinson, 2011).
Threats
Southwests cost leadership position is threatened from many different angles. Labor is the largest cost component, which could influence the cost upwards because of union actions. More than 85% of southwest employees belong of pilot and flight attendants work unions. Fuel is the second largest cost component, which could influence the companys position negatively because of the rising fuel cost. New government regulations focusing on safety could increase operational cost because of the expensive retrofits required (Teasley & Robinson, 2011). The government is also increasing tax rates, which will result in higher costs. Proposed regulations, if passed, will limit the companys ability to respond to under-pricing by new entries. Improved telecommunication is reducing the demand for air travel because business meetings can be done through email and teleconferencing. The development of alternative means of transport that offer similar advantages, such as high-speed rail, could weaken demand for Southwest services.
Events in Southwests first 10 years that molded the company and developed its strategy
Some of the challenges that Southwest faced during its early years reinforced its competitive strategy and molded the company into the low-fare carrier it is currently. Two years after its inception, the company was facing a legal battle, which forced the company to sell one of its jets to meet the increasing legal fees. Although the company sold one of its jets, it managed to maintain same routes and maintain schedules by limiting aircraft turnaround time to 10 minutes. Short turnaround time is an important part of low-cost strategy because it lowers operational cost and increases efficiency. In the legal battle, Southwest was fighting to maintain its operations in the downtown Love field in Dallas. After winning this legal battle, the company continues to operate in downtown airports where possible because they are more convenient for businesspeople (Teasley & Robinson, 2011).
The Wright Amendment restricted Southwest airline from operating as an interstate airline, this enabled the company to focus on short-haul services, which is an important component of the companys competitive strategy. The company has frequent and direct flights to its destinations, despite its low-cost strategy and continues to remain profitable. Southwest airline management believed that more people desired to travel by air; however, the high cost of air travel discouraged them. To tap this market, the company offered tickets at 60-70% the cost of other airline tickets. The strategy attracted frequent travelers who travel between relatively close cities. During its early years, the company did not use travel agents or reservation systems because they have high overhead cost, which has direct effect on the cost of travel. The company does not reserve specific seats to save on the turnaround time (Teasley & Robinson, 2011).
Conclusion
Southwest airline has the lowest operational cost in the industry, which translates into low price per seat for the customers. The company maintains its relative advantage in short haul point-to-point travels by controlling its growth and offering exceptional customer service. Southwest uses the latest reservation technology available in the market and has one of the youngest fleet in the industry to ensure fewer breakdowns and lower maintenance cost. The low cost strategy will ensure the company remains competitive in the near future despite the many challenges facing the aviation industry.

References
Teasley, W. R., and Robinson, R. (2011). Case Study1: Southwest Airline.