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Southwest Airlines: Competitive Advantage and Strategy
Introduction
Advantages that may assist an organization in outperforming its rivals are referred to as competitive advantages in business. In addition to being the largest low-cost airline globally, Southwest Airlines Co. is based in Dallas, Texas. When other airlines have struggled for the previous two decades, Southwest Airlines has emerged as a profitable business. Southwest Airlines has built a solid reputation for reliability and value for its passengers over the years. Compared to its competitors, the company has maintained success throughout the past decade (Cote, 2018). For the corporation, its competitive advantage and strategy have been significant sources of differentiation. Southwest Airlines relies on a sound strategy that emphasizes customer service and a long-term outlook to remain relevant in an ever-changing environment.
Competitive Advantage and Strategy
Southwest Airlines is a successful airline company that has expanded its operations worldwide. It carried more passengers than any other airline in America in 2008. As a result, it is the worlds most profitable airline. High fuel prices have exacerbated the difficult economic conditions, resulting in losses for many businesses. Despite this, several companies recovered from their losses as crude oil prices dropped. Southwest Airlines has performed very well despite the difficulties that US airlines have been experiencing. Although Southwest Airlines had a productive year, its profits were close to breaking even at this time. Since 1980, US airlines have not made more money than they have lost (Kim et al., 2021). This suggests that the US airline industry as a whole has been underperforming.
Southwest Airlines has garnered the most considerable portion of the market in the US airline business. Since its inception, it has sustained a high rate of customer growth. Passenger numbers have grown from about 59,000 in 1998 to 102,000 in 2008 (Fu et al., 2019). There is no doubt that this company has achieved a high growth rate. Because of this, Southwest Airlines has been able to sustain consistently high performance. The corporation has undercut its rivals prices in the airline industry. This suggests that the business can offer low costs while remaining a viable option in the marketplace.
The companys ability to retain long-term personnel has also contributed to its advantage in the business. This group of workers is well-versed in dealing with a wide range of issues because they have been through many hardships in the beginning stages of their careers. Recruiting high-potential personnel is made easier because of the companys novel approach to the process (Kim et al., 2021). For example, the organization believes hiring untrained employees with excellent attitudes is preferable to employing skilled people with negative attitudes. To put it another way, the corporation places a high value on an employees capacity to think outside of the box. The organization has attracted and retained new talent because of this strategy.
For the organization to be successful, it needs to be prepared for any eventuality. Because of this, the corporation has maintained an edge over its competitors in the marketplace. As a result, shocks like a rise in oil prices do not affect the company (Fu et al., 2019). Southwest Airlines has devised a plan to increase its market share by introducing freight services in locations where its competitors are discontinuing them.
Operating costs are one of Southwest Airlines most critical challenges. The amount of money the corporation has spent on its operations has been enormous. For example, the amount it spends on fuels is still extremely high. As a result, the companys profitability has been harmed to some degree. Organizations are primarily concerned with cutting costs while increasing earnings. Several lawsuits have also been brought against the corporation in recent years, which have majorly threatened the organizations ability to perform (Cote, 2018). Due to several maintenance issues, Southwest Airlines has lost a lot of money. For example, the company was forced to cancel some shipments after discovering minor underlying cracks in many of its jetliners. The organization has also been cited on numerous occasions for having issues with maintenance. Such concerns are fundamental to the business since, among other things, they can harm the companys reputation in the eyes of the public.
Customers may be displeased with the airlines decision to cancel their flights because of inadequate plane maintenance. Southwest Airlines Boeing 737-300 ruptured minutes after takeoff due to a loss of pressure, and this incident may disclose maintenance issues at the airline. Considering a forced landing near Yuma Air Force Base was an option due to this issue. The aircraft was flying at the height of 35,000 feet when this incident occurred (Fu et al., 2019). No one was gravely hurt, but it could have been worse. The companys safety record might be jeopardized if another incident occurs as cracks have been observed in several other planes owned by the business. Legal and regulatory issues have also plagued Southwest Airlines.
Rules and sometimes penalties have consumed Southwest Airlines finances because of underlying restrictions. For example, when the corporation began serving towns in rural Texas, it was met with legal challenges. They contended that the area had already been occupied and that the arrival of another enterprise would result in expensive overcapacity. Despite the companys earlier success, this set back its goals. Southwest Airlines also had trouble expanding its service to new locations with vehement opposition from its rivals and local politicians. There is a fear that its low prices will drive away all its competitors clients. Southwest Airlines has racked up a slew of fines over the years due to shoddy maintenance work (Cote, 2018). A fine of over $ 10 million was imposed for failing to inspect the fuselage for fatigue cracking on time, for example, by the FAA.
Southwest Airlines has also struggled with the competition; many sellers in the aviation business usually are crumbling for a few buyers. Southwest Airlines has had its work cut out because of this rivalry. Providing services that are not differentiated is what many players in the sector do. Thus, shoppers may not be able to immediately determine which corporation offers the most outstanding items on the market today (Kim et al., 2021). Because of the lack of differentiation in the airline business, companies are forced to engage in price wars. As a result, the airline industry has seen a decline in profitability. It has also lowered the big carriers price-cost margins dramatically. The lack of differentiation in the airline business makes customers vulnerable to price increases.
With even the slightest shift in pricing, many passengers will fly with another less expensive carrier. This suggests that Southwest Airlines will have difficulty raising its prices to compensate for the high cost of gasoline. Charges are currently lower than that of its rivals in the market. A substantial number of customers could be turned away by even a small change in pricing (Fu et al., 2019). Many benefits and drawbacks exist for Southwest Airlines in pursuing multiple options. For example, lowering prices to attract more customers may jeopardize the companys profitability. They have had to operate near their break-even threshold because of this pressure.
Maintenance issues have weighed down the organization on several occasions. The corporation may keep up with plane maintenance and checkups if prices go up. As a result, many buyers will be drawn to the companys products. As previously said, the business has increased service in areas where its competitors have reduced it. This strategy is dangerous because it could face the same issues its competitors are fleeing. As a result, the corporation should conduct market research before designing a new venture or expanding its investment in the area. The attitude of Southwest Airlines personnel has been given more importance than the employees abilities (Cote, 2018). The problem is that it could cost the organization a lot of time and money to train new personnel.
Recommendations
Southwest Airlines should come up with innovative solutions to the underlying issues. As long as these issues are resolved, Southwest Airlines will keep as many clients as possible, which will increase its earnings. A considerable portion of Southwest Airlines revenue comes from fuel. As a result, the corporation should solve this issue amicably to ensure its long-term prosperity (Kryscynski et al., 2021). The expenditures of maintaining the companys fleets have been exorbitant. Consequently, the corporation should take the steps necessary to boost the productivity of its fleet; purchasing Boeing 737-700s is one option.
The corporation will save money on fuels by adopting high-capacity jets. As a result, the company will save a lot of money on operating costs. In addition, the corporation will be able to minimize its spare parts inventory. The organizations ability to accomplish its goals has been jeopardized because of the hefty expenditures of maintaining its planes (Rotondo et al., 2019). Expanding services in the region where Southwest Airlines has a large client base is another way to improve its performance. By so doing, the company will increase its revenue because of the decision.
Southwest Airlines also has to contend with a lot of competition. There are generally price wars among sellers, leading to significant losses for a corporation. Even though it has been able to improve on the services given by its clients, the corporation can still change and differentiate its products. The organization should implement improved maintenance processes to avoid future problems (Kryscynski et al., 2021). For example, a corporation could lose a lot of money if it fails to follow the correct procedures in dealing with the issue. The organization may also want to bring on more capable and experienced employees to tackle problems early.
Conclusion
Southwest Airlines has maintained a high rate of profitability in the US airline sector by undercharging its rivals. The organization has seen a massive increase in clientele during the past few years. To keep up with the growing demand, the airline has increased the number of flights it offers. Profitability is therefore high, and the corporation has maintained this. However, many issues have put the companys future at risk. For example, the companys jets have experienced safety difficulties because of poor maintenance, and several freights have been canceled. Customers may become dissatisfied, resulting in a loss of business. Therefore, Southwest Airlines should solve all underlying issues amicably to maintain competitive advantage and lasting prosperity.
References
Cote, R. (2018). Leadership analysis: Southwest Airlines-Herb Kelleher, CEO. Journal of Leadership, Accountability & Ethics, 15(1), 113-122. Web.
Fu, X., Jin, H., Liu, S., Oum, T. H., & Yan, J. (2019). Exploring network effects of point-to-point networks: An investigation of the spatial patterns of Southwest Airlines network. Transport Policy, 76, 36-45. Web.
Kim, D., Kim, M., & Tan, K. (2021). Tacit collusion and price dispersion in the presence of Southwest Airlines. Southern Economic Journal, 88(1), 3-32. Web.
Kryscynski, D., Coff, R., & Campbell, B. (2021). Charting a path between firmspecific incentives and human capitalbased competitive advantage. Strategic Management Journal, 42(2), 386-412. Web.
Rotondo, F., Corsi, K., & Giovanelli, L. (2019). The social side of sustainable business models: An explorative analysis of the low-cost airline industry. Journal of Cleaner Production, 225, 806-819. Web.
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