Strategic Management

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Strategic Management

South West Airlines

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Introduction

Strategic management is a branch of management science which deals with the

initiatives taken by the top management in order to met the organizational goals. It

involves the effective utilization of resources. It begins with formulating the

organizational mission, vision and objectives. Then it tends to develop the policies

and plans that would support the organization in meeting these organizational goals.

Later it implements these programs in the organization (Andrews 2003). This paper

deals with the analysis of the strategic management of South West Airlines.

Analysis of Southwest airlines external environment

As per the statistics Southwest airlines is the only major US carrier that

was reflecting a consistent profit. US commercial airlines lost more than $ 35 billion in

the year 2001 to 2005, it earned about $ 3.1 billion in the year 2006 and $50 billion in

the year 2007. Industry is facing a strong competitive force from its main supplier of

fuels whose price was raised dramatically which had effected the whole industry. This

force is very strong as it plays a very major part of the cost of the operations which

could not be controlled. Due to higher jet fuel costs experienced in the year 2008 the

airlines lost much money with only notable exception as southwest airlines. Economic

analysts projected that around $5 billion to $ 8 billion as losses for the US airline - 3 -

industry. During September 2008, there was a considerable drop in the price of the

crude oil below $ 100 per barrel which projected in the break even point. The

reason is the difference in purchase of the jet fuel when the crude oil was

approximately $ 147 per barrel during July 2008 to the crude oil $100 per barrel

during September 2008 which was equated to fuel cost saving across the industry to

the tune of $15 billion (Wright 2001). Hence it is clear that the price of the crude oil

is impacting the airline industry. Other competitive forces that are s affecting the

industry a lot due to which many of the airlines are running under loss are due to the

are energy crisis, people avoiding air transportation for the fear of terrorist attacks,

fare wars, economy wide recessions and industry downturns. Many other industrial

problems might be contributed to the customers dissatisfaction on the air service, the

strict rules and regulations of the government and congestion found in the air traffic

(Andrews 2003).

As per the record during the year 2005, number of passengers flew

(domestic and international ) by air carrier are American airlines 98, 007, delta airlines

85,