A Strategic Plan for Southwest Airlines

Logan Brewster
Department of Business, Missouri Southern State University
MGMT 452: Strategic Management
Dr. Paula Carson
May 8, 2023
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Introduction

Southwest Airlines is an airline company that primarily services the United States and

has a vision “To be the world’s most loved, most efficient, and most profitable airline,”

(Southwest). From a more grounded viewpoint, the firm’s purpose (mission) is “To connect

people to what’s important in their lives through friendly, reliable, and low-cost air travel,”

(Southwest). As described by NewsBank author Iain Murray, during the recent debacle,

Southwest Airlines’ “…antiquated crew-scheduling system collapsed, leaving the airline with no

idea where its crews were and forcing agents to try to schedule crews manually, (NewsBank). In

response, Southwest Airlines drew up an action plan that entails them taking the following steps,

“Improve winter operations…Accelerate operational investment…Enhance cross-team

collaboration (Southwest path). The following analytical models detail the fundamental

components of the firm such that conclusions and recommendations may be drawn.

Strategic Models for Analysis

Stakeholder Analysis

1. Customers: Southwest Airlines’ customers are a critical stakeholder group. They expect

safe, reliable, and affordable flights. The company’s low fares, point-to-point flights, and

excellent customer service have contributed to its loyal customer base.

2. Employees: Southwest Airlines’ employees are a valuable stakeholder group. The

company’s culture emphasizes employee empowerment, which leads to high job

satisfaction, low turnover rates, and a motivated workforce. The company’s success is
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also tied to its employees’ ability to maintain operational efficiency and provide high-

quality customer service.

3. Shareholders: Southwest Airlines’ shareholders are an essential stakeholder group as they

invest in the company and expect a return on their investment. The company’s financial

performance, stock price, and dividend payments are all critical to shareholder

satisfaction.

4. Suppliers: Southwest Airlines’ suppliers are a significant stakeholder group. The

company relies on suppliers for various goods and services, including fuel, aircraft,

maintenance, and catering. The company’s ability to maintain good relationships with its

suppliers is essential to ensure the reliable and efficient operation of its flights.

5. Government: Southwest Airlines’ relationship with government stakeholders, including

the Federal Aviation Administration (FAA), Transportation Security Administration

(TSA), and other regulatory bodies, is crucial. The company must comply with various

regulations and laws to ensure safe and secure operations.

6. Communities: Southwest Airlines’ operations have an impact on the communities it

serves, including noise pollution, traffic congestion, and concerns about the environment.

The company must consider the interests and concerns of these stakeholders to maintain

good relationships and minimize negative impacts.

Recommendations

Overall, Southwest Airlines’ stakeholders are diverse, and the company must balance the

stakeholders’ interests and concerns to maintain its success. The company’s emphasis on

employee empowerment, customer service, and operational efficiency has helped to maintain its
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positive reputation among its stakeholders. Shifting focus to customers’ perceptions of value

may prove more significant in another situation like that of December 2022.

PESTEL Analysis

1. Political Factors: Southwest Airlines operates in a highly regulated industry and is subject

to various political factors. The company is impacted by federal and state regulations

related to aviation safety, security, and environmental issues. Any changes in government

policies related to taxation, trade, or foreign relations could also affect the airline

industry. Moreover, political instability or conflicts in some regions could impact

Southwest’s operations.

2. Economic Factors: The airline industry is susceptible to economic conditions, and

Southwest Airlines is no exception. The company’s financial performance is affected by

factors such as economic growth, inflation rates, fuel prices, interest rates, and exchange

rates. The global economic downturn, such as the recent COVID-19 pandemic, had a

significant impact on the airline industry’s operations and financial performance.

3. Sociocultural Factors: The airline industry’s success is highly dependent on the social and

cultural factors in the markets it serves. Southwest Airlines targets a broad range of

customers, and its operations and marketing strategies reflect the diversity of its customer

base. The company has to consider factors such as demographics, lifestyles, and

consumer preferences while developing its services and marketing campaigns.

4. Technological Factors: Technological advancements have significantly impacted the

airline industry, and Southwest Airlines has adopted several technologies to enhance its

operations. The company’s focus on operational efficiency has led it to invest in

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technology solutions such as online booking platforms, automated check-in kiosks, and

mobile applications. Southwest Airlines has also implemented advanced safety systems

to ensure the safety of its passengers and employees.

5. Environmental Factors: Environmental concerns have become a significant challenge for

the airline industry. Southwest Airlines has taken several initiatives to reduce its carbon

footprint and promote sustainable operations. The company has implemented fuel-

efficient aircraft, which emit fewer greenhouse gases and noise. Additionally, Southwest

has partnered with various organizations to reduce waste and promote recycling.

6. Legal Factors: Southwest Airlines is subject to various legal factors, including labor laws,

antitrust regulations, and consumer protection laws. The airline industry is also

vulnerable to litigation related to safety and security concerns, flight delays, and

cancellations. Southwest Airlines has to comply with various regulations and laws, which

could affect its operations and financial performance.

Recommendations

In general, Southwest Airlines operates in a highly competitive and regulated industry,

which is impacted by various external factors. A thorough analysis of the PESTEL factors is

crucial for the company to develop effective strategies and maintain its competitive edge.

Porter’s Five Forces

1. Threat of New Entrants: The airline industry is highly capital-intensive, and the barriers

to entry are relatively high. New entrants face significant challenges in terms of obtaining

the necessary capital to acquire aircraft, hire skilled personnel, and establish a broad

network of routes. Additionally, established airlines enjoy economies of scale and

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significant brand recognition, which further reduces the threat of new entrants. Therefore,

the threat of new entrants is relatively low for Southwest Airlines.

2. Bargaining Power of Suppliers: Suppliers of aircraft, fuel, and other key inputs to the

airline industry hold significant bargaining power due to the high switching costs

involved in changing suppliers. Suppliers can exert pressure on airlines by increasing

prices or reducing the quality of their products. However, Southwest Airlines has been

able to reduce its dependence on a single supplier by leasing rather than buying aircraft

and adopting fuel-efficient aircraft. Therefore, the bargaining power of suppliers is

moderate for Southwest Airlines.

3. Bargaining Power of Buyers: The bargaining power of buyers is high in the airline

industry due to the high level of competition among airlines and the availability of

substitute products. Buyers have access to multiple options, and they can easily switch to

another airline if they find better prices or services. Southwest Airlines has been able to

maintain its market share by offering low fares, high-quality services, and a strong brand

reputation. Therefore, the bargaining power of buyers is moderate for Southwest Airlines.

4. Threat of Substitute Products: The threat of substitute products is moderate for Southwest

Airlines. While there are no direct substitutes for air travel, customers can choose other

modes of transportation, such as trains, buses, and cars, for short-distance travel.

However, Southwest Airlines has a competitive advantage in terms of speed and

convenience, which makes air travel more attractive for customers.

5. Intensity of Rivalry: The airline industry is highly competitive, and the intensity of

rivalry is high. Southwest Airlines faces intense competition from other low-cost carriers,
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such as JetBlue and Spirit Airlines, as well as established legacy airlines, such as Delta

and American Airlines. The competitive pressure has led to price wars, which can impact

the profitability of airlines. However, Southwest Airlines has been able to maintain its

competitive advantage by offering low fares, operational efficiency, and high-quality

services. Therefore, the intensity of rivalry is high but manageable for Southwest

Airlines.

Recommendations

From a broad viewpoint, Southwest Airlines operates in a highly competitive industry

with a moderate bargaining power of suppliers and buyers, a moderate threat of substitute

products, a low threat of new entrants, and high intensity of rivalry. The company’s ability to

maintain its competitive advantage through low fares, operational efficiency, and high-quality

services is crucial for its long-term success.

SWOT Analysis

Strengths:

1. Strong Brand Reputation: Southwest Airlines has a strong brand reputation for offering

low fares, high-quality services, and operational efficiency.

2. Operational Efficiency: Southwest Airlines has a unique business model that emphasizes

operational efficiency, quick turnaround times, and point-to-point flights. This approach

has helped the company reduce costs and increase profitability.

3. Skilled Workforce: Southwest Airlines has a highly skilled and dedicated workforce that

is committed to delivering high-quality services to customers.

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4. Strong Financial Performance: Year over year, Southwest Airlines has solid financial

performance with consistent profitability and high cash reserves.

Weaknesses:

1. Limited International Presence: Southwest Airlines has a limited international presence

compared to its competitors, which could impact its growth potential.

2. Dependence on a Single Aircraft Type: Southwest Airlines operates a single aircraft type,

which could limit its flexibility in terms of route expansion and other operational

decisions.

3. Limited Ancillary Services: Southwest Airlines does not offer a wide range of ancillary

services, such as baggage fees or in-flight meals, which could impact its revenue

generation.

Opportunities:

1. Expansion to International Markets: Southwest Airlines has an opportunity to expand its

presence in international markets, which could open up new growth avenues.

2. Strategic Partnerships: Southwest Airlines can form strategic partnerships with other

airlines or travel-related companies to offer a broader range of services and expand its

customer base.

3. Technology Advancements: Southwest Airlines can leverage technology advancements,

such as AI and big data analytics, to improve its operational efficiency and customer

experience.
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Threats:

1. Intense Competition: Southwest Airlines operates in a highly competitive industry, and

the intensity of competition is expected to increase with the entry of new low-cost

carriers and the expansion of legacy airlines.

2. Fuel Price Volatility: Fuel prices are subject to volatility, which can impact the airline

industry’s profitability and operations.

3. Economic Downturns: Economic downturns, such as the recent COVID-19 pandemic,

can significantly impact the airline industry’s operations and financial performance.

Recommendations

Largely, Southwest Airlines has a strong brand reputation, operational efficiency, and a

skilled workforce. The company faces challenges such as limited international presence,

dependence on a single aircraft type, and intense competition. However, it also has opportunities

for expansion, strategic partnerships, and leveraging technology advancements to improve its

operations. The company must continue to focus on its strengths, address its weaknesses, and

adapt to changing industry trends to maintain its competitive edge.

VRIO Analysis

1. Value: Southwest Airlines has several valuable resources and capabilities, including its

operational efficiency, low fares, and high-quality services. These resources and

capabilities provide the company with a competitive advantage and contribute to its

overall success.

2. Rarity: Southwest Airlines’ resources and capabilities are not rare, as other airlines also

offer low fares and high-quality services. However, the company’s unique business
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model, which emphasizes point-to-point flights and quick turnaround times, is relatively

rare in the airline industry.

3. Imitability: Southwest Airlines’ resources and capabilities are not easily imitated, as they

are the result of the company’s unique business model and skilled workforce. Other

airlines may attempt to replicate Southwest’s model, but it may be challenging to achieve

the same level of success due to the complexity involved in implementing such a model.

4. Organization: Southwest Airlines’ resources and capabilities are well-organized and

integrated into the company’s overall strategy and operations. The company has a strong

culture of customer service and operational efficiency, which supports its resources and

capabilities.

Recommendations

Overall, Southwest Airlines’ resources and capabilities provide the company with a

competitive advantage, and its unique business model acutely emphasizing customer service and

satisfaction is relatively rare and not easily imitated in the industry. The company’s resources

and capabilities are well-organized and integrated into its strategy and operations.

Conclusions

In conclusion, Southwest Airlines faced a difficult week during December of 2022, but

the firm showcased its vast abilities to recover from such a failure. Such abilities entail enhanced

customer service in recognition of the customer’s viewpoint on flight cancellations, updated

crew management systems to combat the main cause for the widespread flight cancellations

directly, and improved and up-to-date methods of internal communication in order to maximize

and ensure operational efficiency.

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References

About southwest: Southwest Airlines. About Southwest | Southwest Airlines. (n.d.).

https://www.southwest.com/about-southwest/?clk=GFOOTER-ABOUT-ABOUT

Murray, I. (2022, December 29). Southwest’s Debacle Should Cost It Dearly. National Review.

Available from NewsBank: Access World News: https://infoweb-newsbank-

com.ezproxy.mssu.edu/apps/news/document-view?p=AWNB&docref=news/

18EB73A580914B50.

Action plan: Travel disruption: Southwest Airlines. Action Plan | Travel Disruption | Southwest

Airlines. (n.d.). https://www.southwest.com/travel-disruption-action-plan/?

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