Case #7 Final

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    Southwest Airlines Zoe Atlas Amanda LaSala Ann Marie Vail Dr. Hartman MG 610 02/16/14  1.   At the beginning, what forces in the environment most affected Southwest Airlines and what opportunity was Southwest found to take advantage of? Southwest owes its successful start to the Civil Aeronautics Board (CAB). In 1970, CAB regulated competition in the interstate U.S. airline market and would not allow any new airlines into the U.S. market. Many major airlines were uninterested in intrastate travel. They believed it was only an appendage to interstate operations. Therefore, intrastate flights were expensive, inconvenient and often had poor service. Due to this environment, Kelleher and his colleagues saw the opportunity for efficient in-state service between Dallas, Houston and San Antonio. Therefore, they established Southwest to meet the needs for cheap flights in Texas. The major airlines in Texas, American Airlines and Braniff, recognized the potential threat from this new airline. They launched a legal battle in an attempt to stop Southwest. They successfully stopped the airline from running for two years, but in 1971, the first Southwest flight took off. Even though the major airlines lost the legal battle, they did start a price war against Southwest, in an attempt to drive the cash-strapped company out of business. However, Southwest successfully fought back and survived this war. The case demonstrates the uncertainty of the organization’s birth. Southwest  did enter the market late with a K-specialist strategy, however, since then, they have been expanding into many market niches using the K-generalist strategy. 2. Chart the development of Southwest’s strategy over time. Southwest began as a simple intrastate operator in Texas offering competitive rates and reliable service that would be perfect for local travelers. They began flying but were operating without profit. They had only three planes to fly routes but operated under the “10 minute   turnaround” at each gate. This was the start of Southwest’s success in January 1973. With the  Dallas to San Antonio route not profitable fares were cut to $13 and for $26 you could get a   bottle of premium liquor in flight. Southwest’s change of tactic produced media attention and they were the largest liquor distributor in Texas for two months. 1973 became Southwest’s first   profitable year. In 1979 Southwest became an interstate airline. Southwest wanted to differentiate themselves in the market from the traditional airlines and offer value, reliability and quick service for their customers with no undue frills or undue amenities offered. Their biggest strength is functioning with low operating costs. They have shown their resilience in the marketplace when they took over the gates Northwest leased in Chicago. They have grown from three 737s to more than 220 planes today operating under a full Boeing fleet of aircraft. They now have had over 23 consecutive years of profitability and changed the face of the airline industry. They have been named one of the 10 best companies to work for in America and have  proven themselves in the airline industry. (Jones, 462) 3. How would you describe the airline industry after deregulation? Once the Civil Aeronautics Board (CAB) was stripped of this strong power and influence on the airline industry under the Airline Deregulation Act of 1978 there have been both benefits and consequences. The benefits of this have been that cost of airline tickets has steadily decreased over time because the carriers are now subject to increased competition. All the airlines are forced to keep their fares competitive if they want to operate with full capacity. However, this can prompt more people being able to enter the market because the barriers to entry are decreased. The increased competition is good, however; the focus on service and quality has dwindled. Carriers are more concerned with overbooking flights and not as concerned with operating on schedule. Passengers are becoming dissatisfied with the increase of lost baggage, lack of availability for last minute bookings, and decreased amenities offered in flight. The airline industry service has severely decreased with deregulation.  4. What do you think the future holds for Southwest? We believe that the future looks very bright for Southwest. Their growth beginning from when they opened their doors in 1971 up until their 25 th  anniversary in 1996 was unparalleled by any other airline of its time. By 1996, they had increased their air fleet to over 220 planes and expanded their routes to cover most of the Southwest and Midwest, dominating the Texas and California intrastate markets (Jones 462). They have also won countless awards for their efficient, reliable, and safe services as well as their first-rate working environment for employees, being called the “principal driving force behind dramatic fundamental changes” in the US airline industry (Jones 462). They also have an impeccable record for overcoming any challenges that come their way, whether legal or competitive. In the late 1990’s, United, the  biggest airline in the world at that time, saw Southwest as a formidable threat and did anything, including impersonating Southwest with their 1-800-SOUTHWEST telephone line, to try to stunt or eliminate their rapid growth (Jones 462). These attempts, however, proved to be fruitless due to Southwest’s strong base of loyal customers. All of these triumphs prove that Southwest is a successful and powerful company that can still grow despite unfavorable environmental conditions. Their loyal customer base and high profitability lead us to believe that they will continue to expand and dominate the intrastate market in Florida and beyond. Eventually, we think they will have routes to all major cities in the US while still providing the efficient and reliable service they are known for.


Jul 23, 2017


Jul 23, 2017
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