Southwest Airline

Southwest Airline

Situation Analysis

Company Structure - At Southwest Airlines it’s corporate structure are decentralized, meaning that decision makings can come from any employee and not just the top level management. This resulted in a more responsive company. It was the company employees that decided that building their own computers can save some money. It resulted in over $ 1 million saving by building their own computers. It was also an idea from their employee to switch to “E-Tickets” instead of print based tickets. This allows Southwest Airlines to be more “proactive” to changes rather than reactive. That shift to ticketless travel accounted for over 95 per cent of all ticket sales by 2007. This also allows Southwest Airlines to cut down intermediaries such as travel agents further reducing the price of their tickets.

Decentralized corporate structure allows the firm to become very responsive to changes in environment. Responsive firm often that are able to adapt to change quickly will have better chance of success in the market.

External Environment Analysis

PEST Analysis

Political Force

The aviation industry is in a highly regulated environment by the government or the union which the passenger favor is always the priority. The reason behind is in aviation industry customer safety is paramount and top priority this lead to increase of limitation and regulation in the demand side and from the industry characteristic on the supply side it's characterise by deregulation mean that there will be more competition among the firms and fliers will be the beneficial in terms of prices and amenities.

Economic Forces

The aviation industry never really recover from the aftershock of 911 attacks and also the economic recession in the past even make it worst. The fluctuation of global aviation fuel price and the imminent of downslope of global economic make it harder to survive in this industry.

The current situation is airline now have to deal with declining in passenger, fluctuat fuel price, competition from low cost player and high operate and maintenance cost all of this factors have make the airline loss their profit and sometime just take them out of the game.

This lead to greater consolidation between the airline as they now seek to integrate into a more efficient strategy from the EOS and strategic alliance also help the airline to share their resources effectively.

Social Forces

In today’s society, the emergence of millennial generation in the customer class is the main social change that aviation industry should be focusing. Customers are now demand more on the services. Therefore, in order to meet the customer satisfaction, the airline will need to able stabilize its cost.

Retire of baby boomer generation also result in losing a lucrative source of income.

Another important social factor is that customer mind are shifting into an economically mindset customer and less of business class passenger due to the developed communication technology people no longer have to travel for miles just to have a meeting.

Technological Forces

Technology do play a very important role in this industry. The latest technology can be adapt and use in both aircraft and its operation system in order to achieve lower fuel consumption and more efficient in operation function such as ticketing and distribution aspect and also customer relationship management will be a critical part in the future market as the global trend shift.

Bottomline

From the analysis of global aviation industry, we can see now the industry is now quiet a mess which had already result in wave of airline bankruptcies and closure for airline worldwide. The reason behind is what we had analyse above the increased costs of doing business, strict rules and regulations imposed by regulators, competition from low-cost airliners, changes in passenger profile, in addition to the recent airline related deaths, all have affected the viability and profitability of the global airline industry badly.

Porter’s Five Forces Analysis and the Sixth Force

Bargaining Power of Supplier Power (High)

The power of supplier in this industry is immense (high). Due to the fact that main input of airline fuel, aircraft and labour are all affected by the external environment which airline company could not control. Which overall will affect to the company cost forecast