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2010CASE STUDY ON SOUTHWEST AIRLINECHUOP Theot Therith

TABLE OF CONTENTTable of Content1. Case Abstract . 12. Propose a Vision Statement. 23. The company mission statement and mission statement proposed . 24. List the corresponding Mission Statement components . 25. Perform an External Audit. 36. Competitive Profile Matrix (CPM) . 57. The EFE Matrix . 58. Perform an Internal Audit . 79. The IFE Matrix . 810. TOWS Analysis . 1011. The SPACE Matrix .1112. The Grand Strategy Matrix .1213. The IE Matrix. 1314. The Matrix Analysis and TOWS summary .1415. The QSPM .1416. The EBIT/EPS Analysis . 1817. The Recommendation . 20REFERENCES

REFERENCES1. Fred R. David, Strategic Management, 9/e, 2003 by Prentice-Hall, Inc., A PearsonEducation Company, Upper Saddle River, New Jersey 074582. Dr. V.V.R. Seshu Babu, Strategic Management hand out, 2010, BBU, Phnom Penh3. Strategic Management Club Online www.strategyclub.com4. Shahzad Trading & Consulting FZE: www.shahzadtc.com5. MindTools: www.Mindtools.com/subscribe.htm6. Web site: www.maxi-pedia.com7. Southwest Airlines: http://www.southwest.com/8. Web site: www.iflyswa.com9. Wikinvest: www.wikinvest.com/stock/Southwest Airlines Company (LUV)/Data/EBIT

Strategic Management1. CASE ABSTRACTSouthwest is an Airline Company, based in Dallas, TexasHerbert D. Kelleher, Chairman, President, and CEOSince 1987, when the Department of Transportation began tracking Customer Satisfactionstatistics, Southwest has consistently led the entire airline industry with the lowest ratio ofcomplaints per passengers boarded. Many airlines have tried to copy Southwest’s business model,and the Culture of Southwest is admired and emulated by corporations and organizations in allwalks of life. Always the innovator, Southwest pioneered Senior Fares, a same-day air freightdelivery service, and Ticketless Travel. Southwest led the way with the first airline web page—southwest.com, DING! the first-ever direct link to Customer’s computer desktops that delivers liveupdates on the hottest deals, and the first airline corporate blog, Nuts About Southwest. OurShare the Spirit community programs make Southwest the hometown airline of every city weserve.In 2007, Southwest Airlines signs a ten-year contract with Galileo to make low faresavailable to all Galileo-connected travel agencies in North America. We returned to SanFrancisco International Airport in the Summer and expanded to have an eighth crew baselocated in Las Vegas. In keeping with customer demands, we kept our open seating policy butadopted a new boarding procedure to make the process quicker. Our gate areas are alsoundergoing makeovers and we’ve added a new Business Select fare for our most frequentbusiness fliers.Southwest's current strategy is to position itself as a cost leader with a focus strategy. Thecompany’s management and employees aim to cost-effectively and reliably fly large number ofcustomers on short, non-stop flights, and to have fun doing it. They are devoted to making flyingavailable to everyone. The company has been successful in implementing this strategy, havingexperienced strong growth and profitability. Southwest is now the largest carrier in the U.S. intotal customers. It has operated profitably for 32 consecutive years in an industry with a volatileearnings history. The main strategic issue facing Southwest at this time is to evaluate this strategyand determine its future course of action.CHUOP Theot Therith: Southwest Airlines (2010)1

Strategic Management2. PROPOSE A VISION STATEMENT FOR SOUTHWEST AIRLINESSouthwest Airlines’ Vision (proposed) is to be the famous mature and new generationAirlines Company that provides the most affordable, reliable and comfortable flighttransportation in both domestic and oversees.3. THE COMPANY’S MISSION STATEMENT. The currently mission statementThe mission (existing) of Southwest Airlines is dedication to the highest quality of CustomerService delivered with a sense of warmth, friendliness, individual pride, and Company Spirit. The mission statement proposedA better Mission Statement proposed is ―to provide quality service for the everyday person.Southwest services air travel to cities all around the U.S with the latest technology and the mostluxurious planes. Through the search for the greatest advantage in today’s busy world, wecompetitively provide the lowest air-fare price with ensuring high company sprit and long termfinancial prosperity. Southwest is committed to offers the highest standards of safety/integrity forall our customers at an affordable/reasonable price. We ensure all processing is respect to thegovernmental regulations and we also have the policy for annual donation regularly to variouscharities throughout the United States. Since the first flight of Southwest in 1971, our employeeshave been the vital asset in making Southwest the most recognized airline today.4. LIST THE CORRESPONDING MISSION STATEMENT COMPONENTSThe mission statement is the most public and visible part of the strategy managementprocess, it must include the 9 elements: Customers, Products or Services, Markets, Technology,Survival growth and Profitability, Philosophy, Self-concept, Concern for public image andConcern for employees. Therefore, the corresponding mission statement components to the missionstatement proposed for Southwest are shown below:1.Customer: the Southwest’s customer is the everyday person, ―to provide qualityservice for the everyday person ‖2. Products or Services: the major service of the Southwest is air travel, ― Southwestservices air travel ‖3. Markets: the geographically where the Southwest compete is cities all around theU.S, ― Southwest services air travel to cities all around the U.S ‖4. Technology: the technologically current of Southwest is the latest technology,― with the latest technology and the most luxurious planes ‖CHUOP Theot Therith: Southwest Airlines (2010)2

Strategic Management5. Concern for survival, growth, profitability: the Southwest committed to growthand financial soundness is the lowest air-fare price, ― we competitively provide thelowest air-fare price with ensuring high company sprit and long term financialprosperity ‖6. Philosophy: it is, ― Southwest is committed to offers the highest standards ofsafety/integrity for all our customers ‖7. Self-concept: the distinctive competence or major competitive advantage isreasonable price, ― all our customers at an affordable/reasonable price ‖8. Concern for public image: the Southwest responsive to social is governmentalregulation and annual donation, ― We ensure all processing is respect to thegovernmental regulations and we also have the policy for annual donation regularlyto various charities throughout the United States ‖9. Concern for employees: it is, ― our employees have been the vital asset in makingSouthwest the most recognized airline today ‖5. PERFORMANCE OF AN EXTERNAL AUDIT (RESULT)An evaluation of the external opportunities and threats – based on the case study(Southwest Airlines, 2002) and additional references (by 2009) is as follows:Opportunities: There are opportunities for growth markets share, and expansion to new markets1. More than 100 new cities have encouraged Southwest to offer flight service (2003)2. There is an increased demand for international travel3. Increased demand for cities that are currently (by 2009) without Southwest airlineflights such as New York, Atlanta4. With an increase of nearly 3 million people in the US there is an expansion ofdeveloping cities across the United States5. Increased amount of upper level business travelers has led to greater demand forbetter seats. Technological competency and its popularity of Southwest6. First airline on the web7. Booked online 13.6% more than American Airlines (in 2004)8. Top-ranked web site in customer satisfaction among travel sites (by 2004)9. Increase popularity of internet leads to an expected rise of 22 percent from 2006 inflight booked onlineCHUOP Theot Therith: Southwest Airlines (2010)3

Strategic Management There are barriers to entry for other competitors in the airline industry, the bankruptcy,and decline.10. There is a decline of 11 percent in airline companies with funding leading to usedplanes being able to be purchased11. Each year, airline companies (such as Delta and Northwest in 2006) are declaringbankruptcy leaving more cities existing allowing more airlines to fly to12. Decline of 11 percent in airline companies with funding leading to experiencedworkers being laid off.Threats: Jet Blue Airline1. Specialization expertise of Jet Blue using one plane model allows them to provide lessexpensive mechanics to maintain planes.2. Jet Blue is the only airline to carry satellite televisions on planes. Southwest's ability to hold the line on costs will impact its cost leadership position.3. The largest cost component (36.9% of expenses) is labor. This cost could be impactedby union actions, which cover 84% of Southwest's workforce.4. The second largest cost component is fuel (11.2%), which could be negativelyimpacted by economic or political events, high cost of fuel leads to increase in ticketprices Other threats5. New tax system, higher ticket taxes.6. Increase in airport security due to possible terrorism, terrorists’ attacks7. Many companies such as AirTran Airways are offering a business class in their B717jet.8. Competing airlines offer satellite radio in their passenger jets, newer and moretechnologically advanced jets with luxury items and some of competitors offer inflight meals adding luxury9. Alternative forms of transportation, such as a high-speed railway, could weakendemand for air travel. Also, if the economy weakens, people may choose to driverather than fly10. Southwest would be hurt if the public perception were that low price equates tolow quality. An incident like the ValuJet crash could reinforce this perception.CHUOP Theot Therith: Southwest Airlines (2010)4

Strategic Management6. COMPETITIVE PROFILE MATRIX (CPM)Based on the case study and some extra information, it enables to prepare a CompetitiveProfile Matrix (CPM) as following:South WestCritical Success sing0.1430.4230.4220.28Global Expansion0.0710.0730.2130.21Market Share0.1220.2440.4830.36Price competitiveness0.0940.3630.2730.27Financial Position0.1130.3310.1110.11Consumer 30.27Security Precautions0.0930.2730.2720.18Customer Service0.1440.4820.2810.14Organizational ngScoreRatingWeightedWeight2.67Score2.127. EXTERNAL FACTOR EVALUATION (EFE) MATRIXAccording to the result of performance an external audit above, the EFE matrix ispresented as below:Key External Factors (KEF)WeightsRatingWeighted0.0 to 1.01 to ities1. More than 100 new cities have encouraged Southwestto offer flight service (2003)2. There is an increased demand for international travel3. Increased demand for cities that are currently (by2009) without Southwest airline flights such as NewYork, Atlanta4. With an increase of nearly 3 million people in the USthere is an expansion of developing cities across theCHUOP Theot Therith: Southwest Airlines (2010)5

Strategic ManagementUnited States5. Increased amount of upper level business travelers hasled to greater demand for better seats.6. First airline on the web7. Booked online 13.6% more than American Airlines (in2004)8. Top-ranked web site in customer satisfaction amongtravel sites (by 2004)9. Increase popularity of internet leads to an expected riseof 22 percent from 2006 in flight booked 10.030.1030.300.0420.080.0930.2710. There is a decline of 11 perc

28.07.2010 · Southwest's current strategy is to position itself as a cost leader with a focus strategy. The company’s management and employees aim to cost-effectively and reliably fly large number of customers on short, non-stop flights, and to have fun doing it. They are devoted to making flying available to everyone. The company has been successful in implementing this strategy, having experienced .