Risk of entry by potential competitors. The airline industry is a revolving door for airlines. The question is not who the next competitor will be but when will the next competitor enter an already congested industry. While many established companies view the entry of potential competitors as a threat to their profitability, Southwest Airlines has superbly utilized economies of scale by fuel hedging and utilizing one aircraft type to keep airfares low. Southwest Airline’s passengers are brand loyal and would prefer to fly Southwest Airlines than any other airline. What also differentiates Southwest Airlines from other carriers, is the culture which has been embedded in the organization and in its employee’s. Southwest views the risk of entry
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Changes in regulations and laws impact the political and legal forces. The changes in the political and legal arena from our society greatly affect companies and management strategy (Hill & Jones, 2010). Fuel prices may be affected by political factors, such as imports of crude oil. The limited options of domestic oil refineries or oil pipeline availability. Changes in government policies on transportation, taxes, marketing, and currency exchange rates can each impact the airlines revenue (Southwest Airlines, 2015). Technological forces. The technological advancement being made in our world is quickly converting today’s phenomenon, into yesterday’s old news. Technical advancements have made established products obsolete almost overnight while creating many new products (Hill & Jones, 2010). Technology is viewed as both creative and disruptive. Therefore, technological forces are both an opportunity and a threat (Hill & Jones, 2010). Southwest Airlines is increasingly dependent on advanced technology to run its …show more content…
In reviewing Southwest Airlines opportunities and threats, the threats facing the airline are limited. The bargaining power of Southwest Airlines suppliers appears as a threat, and while it is a legitimate concern the relationship between Boeing and Southwest Airlines has remained strong and is not viewed as a threat to them. There are always concerns regarding threats of entry by potential competitors but any new carrier entering the market is far behind the economies of scope Southwest has implemented. Threats from substitutes are existent within markets that are close in proximity to the originating destination but as the distance increases, the threat decreases as airline travel is often preferred because it is less expensive and faster. The intensity of rivalry between airlines will always be there. Southwest Airlines may face threats from competitors trying to imitate what Southwest Airline is doing but it is highly unlikely. Southwest Airlines is already positioning itself to take advantage of the social and demographic forces by adding markets to existing routes. Southwest is also in position to make a technological leap by implementing a new reservation system which will also add additional revenue streams by 2017. The major weakness facing Southwest Airlines is internal. During the last 12 years that current CEO Gary Kelly has been
Changes in regulations and laws impact the political and legal forces. The changes in the political and legal arena from our society greatly affect companies and management strategy (Hill & Jones, 2010). Fuel prices may be affected by political factors, such as imports of crude oil. The limited options of domestic oil refineries or oil pipeline availability. Changes in government policies on transportation, taxes, marketing, and currency exchange rates can each impact the airlines revenue (Southwest Airlines, 2015). Technological forces. The technological advancement being made in our world is quickly converting today’s phenomenon, into yesterday’s old news. Technical advancements have made established products obsolete almost overnight while creating many new products (Hill & Jones, 2010). Technology is viewed as both creative and disruptive. Therefore, technological forces are both an opportunity and a threat (Hill & Jones, 2010). Southwest Airlines is increasingly dependent on advanced technology to run its …show more content…
In reviewing Southwest Airlines opportunities and threats, the threats facing the airline are limited. The bargaining power of Southwest Airlines suppliers appears as a threat, and while it is a legitimate concern the relationship between Boeing and Southwest Airlines has remained strong and is not viewed as a threat to them. There are always concerns regarding threats of entry by potential competitors but any new carrier entering the market is far behind the economies of scope Southwest has implemented. Threats from substitutes are existent within markets that are close in proximity to the originating destination but as the distance increases, the threat decreases as airline travel is often preferred because it is less expensive and faster. The intensity of rivalry between airlines will always be there. Southwest Airlines may face threats from competitors trying to imitate what Southwest Airline is doing but it is highly unlikely. Southwest Airlines is already positioning itself to take advantage of the social and demographic forces by adding markets to existing routes. Southwest is also in position to make a technological leap by implementing a new reservation system which will also add additional revenue streams by 2017. The major weakness facing Southwest Airlines is internal. During the last 12 years that current CEO Gary Kelly has been