Essay Southwest Airlines Strategic Plan

5054 Words Feb 16th, 2012 21 Pages
Southwest Airlines’ Strategic Management

Chungsun Park
Nonhanhla Nene
Mohit Khatri
Junbai Ma

HOS 407 – Strategic Management
Dr. Richard L. Valente
Table of Contents Executive Summary 3 Mission, Vision, Values, and Goals 4 Organizational Structure 5 Management Process and Roles 6 Porter’s Five Forces 6 Threat of New Entrants 6 Threat of Substitute Products 8 Bargaining Power of Suppliers 9 Bargaining Power of Buyers 10 Rivalry 11 The Roots of Competitive Advantage 12 Distinctive Competencies 12 Capabilities 15 Competitive Advantage, Value Creation, and Profitability 16 The Value Chain 19 Primary Activities 19 Support Activities 20 The Building Blocks of Competitive Advantage 21
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According to IATA, “the price of oil has been one of the decade’s biggest stories. In 2001, even with oil under $30 per barrel, the industry could not make a profit. Today, fuel consumes 30% of costs” (“IATA Annual Report,” 2011). In March, 2011, jet fuel was raised to $130 a barrel, meaning fuel costs rose to account for 33% of the industry’s operating expenses (“IATA Annual Report,” 2011).

(“Airline Industry Trend Update,” 2010) Another threat to new entrants is that the airline industry in the U.S. is a highly consolidated industry among the top ten airlines which account for over 90% of total U.S. air market share. Therefore, new entrants will face to strong barriers with economies of scale, gaining their own market share (post-entry competition), differentiating brand loyalty, and offering attractive fares to customers (Hill, 2010, p. 44).

(“Airline Industry Trend Update,” 2010)

Threat of Substitute Products

Generally speaking, substitutes for the airline industry are bus, automobile, train, and boat transportation. The automobile is the primary substitute for the airline industry in the U.S. because of the extensive interstate highway system. Even though the automobile would be the primary substitute for short distance travel, it does not heavily threaten the airline industry when it comes to long distance travel. In fact, “for most of the past 75 years, air travel has enjoyed a substantial

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