SouthWest Airlines 1

SOUTHWEST AIRLINES

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•History of Southwest Airline•Goals •Business Philosophy•Single type of planes•Culture of the Organization

Proposed Mission Statement

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Proposed Mission Statement

To be a leading airline by providing safe, reliable, frequent, low-cost air transportation topped with the

outstanding service to our customers. Leading the way in technology innovation, we strive to expand at a

rigorous pace. We are the world’s only short haul, low fare and point to point carrier. We believe our

employees to be our ultimate resource for maintaining high quality and realizing potential profits. We aim to expand our services from 58 cities by maintaining its identity of a low fare airline by keeping the costs low.

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Proposed Vision Statement

To expand our services to potential locations by being the most profitable airline while maintaining low costs. It aspires to reach the highest possible level of customer and employee satisfaction through an uncompromising commitment to safety, reliability, and efficiency.

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Input

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Internal Factor Evaluation Matrix

Strengths Weight Rating Weighted ScoreAmong the top 5 of all major carriers for one time performance, best baggage handling, fewest customer complaints

0.09 4 0.36Wall Street Journal (2002)-first among airlines for customer service satisfaction 0.05 4 0.204th largest domestic carrier in terms of customers boarded 0.04 3 0.12Highest Standard and Poor’s credit rating in the industry (A) 0.01 3 0.03The lowest cost per available seat mile among all the major airlines, 15-25% below its rivals

0.02 4 0.08Southwest Airlines has the fastest turnaround time of 20 minutes 0.04 4 0.16Southwest has new automated systems and technologies that have streamlined the check-in process

0.03 3 0.09

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Internal Factor Evaluation Matrix

Strengths Weight Rating Weighted Score

High employee productivity 0.02 4 0.08

Employees feel secure and have a strong sense of loyalty. 0.01 4 0.04

The airline gets its passengers on time and closer to their destinations because it uses nearer airports

0.05 40.20

Offers non-stop flights 0.03 3 0.09The “look to book” ratio is twice than that of its competitor Travelocity and higher than any web traditional retailer

0.04 4 0.16

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First airline to establish a home page on web. Southwest’s website is the top ranking website for customer satisfaction among major travel sites (Harris Interactive) and among top e-businesses in the U.S

0.02 4 0.08

It uses the same type of planes, Boeing 737, which reduces its training, maintenance and inventory cost

0.06 4 0.24

Southwest has 59% cost advantage over bigger competitors at flights of 500 miles and 35% lead for flights of 1500 miles

0.07 4 0.28

The lowest cost airline in its markets 0.12 4 0.48

Internal Factor Evaluation Matrix

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Internal Factor Evaluation Matrix

Weaknesses Weight Rating Weighted Score

Does not engage in formal, documented strategic planning. No mission and vision statements

0.10 1 0.10

Southwest provides service to only 58 cities

0.07 2 0.14

The airline does not subscribe to any centralized service

0.02 1 0.02

Southwest does not transfer baggage to other carriers

0.03 2 0.06

Conservative growth tactics and lack of innovation in the business model

0.08 10.08

TOTAL SCORE 3.09

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External Factor Evaluation Matrix

Opportunities Weight Rating Weighted Score

The prospect of going long haul is open. 0.07 2 0.14Competitors like MetroJet, Vanguard and National Airlines, offering low fares have ended operations because of failure to compete with existing low-fare lines. This is a market share that can be captured.

0.09 3 0.27

United Shuttle has ceased operations, this has created a vacuum for other airline to fill 0.05 3 0.15

Other airlines have made schedule cut backs, opening doors for low fare carriers to profit 0.08 4 0.32

Over 100 cities require services from a low fare airline, so there is an opportunity for expansion

0.10 2 0.20

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External Factor Evaluation Matrix

Threats Weight RatingWeighted

ScoreIncreased terrorism has decreased consumer air travel 0.06 4 0.24

Industry downsizing 0.06 4 0.24

Rising energy costs 0.06 3 0.18Geo political tensions in the country affects profitability 0.05 4 0.20Strained current economical and political environment 0.05 3 0.15Incorporation of a tax that includes a flat, per segment fee which hits low fare carriers harder

0.07 3 0.21

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External Factor Evaluation Matrix

Increasing competition by low fare units in the short haul core markets 0.06 2 0.12

Major airlines are developing low fare flight programs and expanding 0.07 2 0.14

Short haul lines (JetBlue, Spirit, ATA etc) are decreasing the profitability of all the players in the industry

0.06 3 0.18

Intense and head to head competition in the industry 0.07 3 0.21

TOTAL SCORE 2.95

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    SOUTHWEST DELTA WEST JET BLUECritical Success Factors Weight Rating Score Rating Score Rating Score Rating Score

Market Share 0.10 4 0.40 3 0.30 3 0.30 3 0.30

Innovation 0.08 1 0.08 3 0.24 3 0.24 1 0.08

Customer Loyalty 0.10 4 0.40 3 0.30 3 0.30 4 0.40

Price Competitiveness 0.08 4 0.32 4 0.32 4 0.32 4 0.32

Marketing 0.05 3 0.15 3 0.15 4 0.20 3 0.15

Human Resource Management

0.08 4 0.32 2 0.16 3 0.24 4 0.32

Employee Productivity 0.07 4 0.28 2 0.14 4 0.28 4 0.28

Financial Position 0.06 4 0.24 2 0.12 1 0.06 3 0.18

Growth 0.06 4 0.24 4 0.24 3 0.18 4 0.24

Credibility 0.06 4 0.24 4 0.24 4 0.24 4 0.24

E-Commerce 0.08 4 0.32 3 0.24 3 0.24 4 0.32

Customer Service 0.10 3 0.30 4 0.40 3 0.30 3 0.30

Cost 0.08 4 0.32 2 0.16 3 0.24 4 0.32

 Total 1.00   3.61 3.01 3.14 3.45

Competitive Profile Index

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Product Development

Market Development

Market Penetration

Diversification

New

Mar

kets

Exis

ting

Mar

kets

New Products Existing Products

SWOT Matrix

-6 -5 -4 -3 -2 -1 0 - +1 +2 +3 +4 +5 6

+5

+4

+3

+2

+1

-1

-2

-3

-4

-5

(1.3 , 3.1)

ISCA

FS

ES

Conservative Aggressive

CompetitiveDefensiveSPAC

E M

atrix

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Question Marks

Cash Cows

STARS

Dogs

Indu

stry

Sal

es G

row

th R

ate

Relative Market Share Position

+20

0-2

01 0.5 0High

Medium

Low

High Medium Low

BCG MATRIX

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Rapid Market Growth

Slow Market Growth

WeakCompetitive Position

StrongCompetitive Position

Quadrant IQuadrant II

Quadrant III Quadrant IV

The Grand Matrix

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I3.

0 to

4.0 II III

VIVIV

VII VIII IX

2.0

to 2

.99

1.0

to 1

.99

3.0 to 4.0 2.0 to 2.99 1.0 to 1.99

High

Medium

Low

Strong Average WeakThe IFE total weighted Score

The

IFE

tota

l wei

ghte

d Sc

ore

Internal

External

Matrix

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KEY FACTORS WEIGHTMARKET

DEVELOPMENT IN 100 CITIES

CONCENTRIC DIVERSIFICATION

Opportunities AS TAS AS TAS

The prospect of going long haul is open 0.07 4 0.28 1 0.07Competitors like MetroJet, Vanguard and National Airlines, offering low fares have ended operations because of failure to compete with existing low-fare lines. This is a market share that can be captured

0.09 4 0.36 1 0.09

United Shuttle has ceased operations, this has created a vacuum for other airlines to fill

0.05 4 0.20 1 0.05

Other airlines have made schedule cut backs, opening doors for low fare carriers to profit

0.08 3 0.24 2 0.16

Over 100 cities require services from a low fare airline, so there is an opportunity for expansion

0.10 4 0.40 3 0.30

QSPM

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ThreatsIncreased terrorism has decreased consumer air travel 0.06 1 0.06 4 0.24Industry downsizing 0.06 1 0.06 4 0.24Rising energy costs 0.06 2 0.12 3 0.18Geo political tensions in the country affects profitability 0.05 2 0.10 1 0.05Strained current economical and political environment 0.05 2 0.10 1 0.05Incorporation of a tax that includes a flat, per segment fee which hits low fare carriers harder

0.07 2 0.14 3 0.21

Increasing competition by low fare units in the short haul core markets 0.06 3 0.18 4 0.24Major airlines are developing low fare flight programs and expanding 0.07 4 0.28 3 0.21Short haul lines (JetBlue, Spirit, ATA etc) are decreasing the profitability of all the players in the industry

0.06 3 0.18 4 0.24

Intense and head to head competition in the industry 0.07 4 0.28 3 0.21Sum Total Attractiveness Score 1.0

QSPM

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StrengthsAmong the top 5 of all major carriers for one time performance, best baggage handling, fewest customer complaints

0.09 4 0.36 3 0.27

Wall Street Journal (2002)-first among airlines for customer service satisfaction 0.05 4 0.20 3 0.154th largest domestic carrier in terms of customers boarded 0.04 4 0.16 2 0.08Highest Standard and Poor’s credit rating in the industry (A) 0.01 4 0.04 3 0.03The lowest cost per available seat mile among all the major airlines, 15-25% below its rivals 0.02 4 0.08 3 0.06Southwest Airlines has the fastest turnaround time of 20 minutes 0.04 4 0.16 1 0.04Southwest has new automated systems and technologies that have streamlined the check-in process

0.03 3 0.09 2 0.06

High employee productivity 0.02 3 0.06 2 0.04Employees feel secure and have a strong sense of loyalty 0.01 3 0.03 2 0.02The airline gets its passengers on time and closer to their destinations because it uses nearer airports

0.05 4 0.20 1 0.05

Offers non-stop flights 0.03 3 0.09 1 0.03The “look to book” ratio is twice than that of its competitor Travelocity and higher than any web traditional retailer

0.04 3 0.12 2 0.08

QSPM

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First airline to establish a home page on web. Southwest’s website is the top ranking website for customer satisfaction among major travel sites (Harris Interactive) and among top e-businesses in the U.S

0.02 3 0.06 2 0.04

It uses the same type of planes, Boeing 737, which reduces its training, maintenance and inventory cost

0.06 4 0.24 3 0.18

Southwest has 59% cost advantage over bigger competitors at flights of 500 miles and 35% lead for flights of 1500 miles

0.07 4 0.28 2 0.14

The lowest cost airline in its markets 0.12 4 0.48 3 0.36

QSPM

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Weaknesses

Does not engage in formal, documented strategic planning. No mission and vision statements

0.10 1 0.10 2 0.20

Southwest provides service to only 58 cities 0.07 4 0.28 2 0.14The airline does not subscribe to any centralized service 0.02 1 0.02 2 0.04Southwest does not transfer baggage to other carriers 0.03 2 0.06 3 0.09Conservative growth tactics and lack of innovation in the business model

0.08 2 0.16 1 0.08

QSPM

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QSPM RESULTS

Sum Total Attractiveness Score

Market DevelopmentIn 100 Cities

Concentric Diversification

6.25 4.72

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CONCLUSION