I – RATIONALE

In today’s era, many have become competitive that it allowed service firms to
survive with innovative strategies, process, and physical evidence that could vary their
existing services from their competitors.Southwest Airline Company was founded in
1967 by Rollin King and since then, it became is a low fare, employee friendly
company that has become a substantial leader in the airline industry. Throughout
their service, southwest airline experienced a downfall from the existing competitors in
the airline industry. Market competition became one of their existing dilemmas and
addressing to it was a crisis. In this study, it comprises factors that could attribute to the
success of the airline which involves embarking into strategies, components that will be
utilized for addressing those difficulties like compelling and showcasing technique plans
for its survival in the industry.

II- PESTEL ANALYSIS

a) Political
1. Deregulation
2. Mandatory employee benefits
3. Political inference and control
4. Political stability and importance of Regional Airlines sector in the
country’s economy

b.) Economical

1. High volatile fuel prices

2. Labour costs and productivity in the economy
3. No lay offs
4. Under favourable economic conditions such as people looking for cheaper
travel options.

c.) Social

1. Seasonality of demand
2. Culture
3. Leisure interest
4. People and employee trust Southwest airlines

d.) Technological

1. Use of e-tickets
2. Using of internet for comparing prices and looking for best options for tips.
e.) Legal

1. Consumer Protection Regulation

2. Health and Safety law
3. Employment law

f.) Environmental

1. Weather
2. Climate change
3. Laws regulating environmental pollution

III- POINT OF VIEW

The CEO of Southwest Airlines Company, Mr. Gary Kelly

IV- OBJECTIVES

This study aims to:

 Discover what causes the company’s low rate in growth and development
 Come up with a good solution on how to increase the growth rate of their
company

V- STATEMENT OF THE PROBLEM

 How can Southwest Airlines Company address market competition crisis?

VI- ALTERNATIVE COURSES OF ACTION

a.) Market Expansion

Advantages
 Increase of profit
 Increase company growth
 Earn more customer patriotism
 Disadvantages

 Increase in operation cost

 Have more employees to pay with their salaries
 Security in the competition guaranteed to be favourable in their part.

b.)Improvement of services

Advantages
 Invite more customers
 Increase profit
 They can compete to other company who serves frills because their prices
are still low.

Disadvantages

 Increase operation cost

 Increase in services means increased in member of employees and
compensation
 Increase in operation cost means increased in piece as well.

c.) Cost Minimization.

Advantages
 it can increase net profit
 cost strategy is developing
 expenses decrease as well

Disadvantages

 it will degrade the kind of service they offered

 it may discourage customers
 low customer trust and patriotism
VII- COST AND BENEFIT ANALYSIS FOR EVERY ACA

Southwest Airlines Benefit-Cost Analysis

Costs ACA 1 ACA 2 ACA 3

Marketing & Other Cost
 Marketing Cost $ 221,700
Related
 Other Costs 135,300
Operating Expenses
 Salaries, wages, 3,052,000 3,052,000 3,000,000
benefits
 Fuel & Oil $ 2,284,000 $ 2,284,000 $ 2,100,000
 Maintenance Cost 468,000 468,000 400,000
 Aircraft Rent & 158,000 158,000 158,000
Purchase
 Landing Fees 495,000 495,000 450,000
 Depreciation & 515,000 515,000 515,000
Amortization
 Others 100,000 100,000 90,000
Enhancement Cost
 Foods & Beverages $ 800,000
 Other Frills 500,000
Total Cost $ 7,429,000 $ 8,372,000 $ 6,713,000

Benefits:
 Passenger $ 8,750,000 $ 8,750,000 $ 7,000,000
 Freight 134,000 134,000 100,000
 Other 202,000 202,000 150,000
Total Benefits $ 9,086,000 $ 9,086,000 $ 7,250,000
Total Cost (7,429,000) (8,372,000) (6,713,000)
Revenue $1,657,000 $ 714,000 $ 537,000

Benefit-Cost Ratio 1.22 1.09 1.08

VIII- RECOMMENDATION

In the Alternative Courses of Action listed above, we have come into an

evaluation and came up with a decision to choose the main and primary course of
action which is the Market Expansion. It is because this alternative action can increase
the rate of growth of development of their company. If the company would engage into a
new market having a latest and innovated system, many would prefer to fly with them
with a great demand. Aside from that, with the recognitions and good image in terms of
customer’s relationship that they had received and established people will easily trust
them. Moreover, Southwest Airlines Company offers a low price and fast services,
which most customers are seeking. Having strategies of free offering could patronize
customers more because they are also fond of being accommodated with frills.

IX- IMPLEMENTATION

Market expansion is a business growth strategy. Market expansion strategy could boost
sales, uplift and help the company to grow against competition in the airline industry.

 Step 1: Market Penetration

It is an attempt to carry out a strategy by lowering the price or by increasing
marketing efforts to lure customers away from competitors.
 Step 2: Organizational Restructuring
It is changing market needs as well as a new market innovation for the company
to adjust to new strategies.
 Step 3: Determining who the competitors are
It can help in growth of the business. Knowing the customers strength and
weaknesses, and understanding how the services differ from what is available on
today’s charter flight market. It can also help find new ways to gain larger market
share.
 Step 4: Build Foundation
Communication is a key to good relationship of how to promote the business and
listening to customers is equally important.