Internal Environment Analysis SW.doc

Running head: INTERNAL ENVIRONMENT ANALYSIS Internal Environment Analysis: Southwest Airlines Terra Thomson Ohio !omini an #niversity 1 INTERNAL ENVIRONMENT ANALYSIS Internal Environment Analysis: Southwest Airlines Southwest’s Income Statement This ortion highlights Southwest Airlines$ ro%ita&ility &ased on the %irm$s in ome statements and &alan e sheets' The in ome statements are %rom years ())*+(),) -Southwest. In ome Statement. (),,/' The airlines saw a slight dro in total revenue and g
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  Running head: INTERNAL ENVIRONMENT ANALYSISInternal Environment Analysis: Southwest AirlinesTerra ThomsonOhio !omini an #niversity 1  INTERNAL ENVIRONMENT ANALYSISInternal Environment Analysis: Southwest Airlines Southwest’s Income Statement This ortion highlights Southwest Airlines$ ro%ita&ility &ased on the %irm$s in ome statements and &alan e sheets' The in ome statements are %rom years ())*+(),) -Southwest. In ome Statement. (),,/' The airlines saw a slight dro in total revenue and gross ro%it %rom ())* to ())0 due to the #'S' re ession' Then in (),). Southwest re&ounded e1onentially with an in rease o% 2,.345 mill' in total revenue and 2633 mill' in gross ro%it' This in rease in overall ro%it an &e attri&uted to the way Southwest manages its strengths and imroves on its wea7nesses' One strength that Southwest used is the %irm$s suerior ustomer servi e' The value o% ustomer servi e is an imortant art o% Southwest$s mission and vision' A ording to the airline$s ustomer servi e manual. 88The mission o% Southwest Airlines is dedi ation to the highest 9uality o% ustomer Servi e delivered with a sense o% warmth. %riendliness. individual ride. and omany Sirit; -Ruel. ())0/' Southwest used its value o% high 9uality ustomer servi e to regain ometitive %ooting in the airline industry a%ter the re ession' <y utting the %o us &a 7 on ustomers. Southwest was a&le to lure new ustomers and maintain urrent ustomers &y &uilding ustomer loyalty' Also. with the in rease in ro%its %rom ())0. the airline was a&le to e1and on the ometitive low+ ost air%are that the omany already o%%ers' Southwest’s Internal Environment This se tions outlines the strengths and wea7nesses that e1ist in Southwest Airlines$ Internal Environment' Southwest %a ed many o% the same o&sta les that outer omanies in the airline industry are dealing with' The internal strengths and wea7nesses o% the airline are what have made the di%%eren e in dealing with these issues' <ased on in reased ro%it in%ormation 2  INTERNAL ENVIRONMENT ANALYSIS%rom the %irm$s &alan e sheet and in ome statements. it is evident that Southwest has emloyed astrategy %ounded on e1loiting internal strengths and redu ing internal wea7nesses' This was imortant to a omlish &e ause a ording to !avid$s arti le. 8 a strategi +management audit o% a %irm$s internal oerations is vital to organi=ational health; -!avid. ())0. g' ,>6/' The Internal?a tor Evaluation -I?E/ is one o% the &est methods used to er%orm strength+wea7ness evaluations' Southwest’s IFE Strength Results The %ollowing se tion highlights Southwest$s strengths %ound on the I?E and how the %irm has aitali=ed on those strengths' The to strengths %or Southwest are the %irm$s suerior ustomer servi e. %irm oerating strategy. and a&ility to o%%er the lowest ost %ares' Emhasis n theses strengths are what aided Southwest in a %ast and sound re&ound %orm the ())0 re ession' The oerating strategy allowed the airline to weather the re ession with minimal loss' Southwestdoes not invest an e1u&erant amount o% the %irms revenue in 8e1tras; that other airlines o%%er' @hen the re ession o urred. many airlines had to ut servi es or o%%er them %or a %ee' <e ause Southwest does not oerate &y o%%ering ustomers %ree e1tras. su h as &lan7ets. &aggage he 7. and sna 7s. the omany did not have to hange mu h I the way o% servi e to redu e oerating ost' This allowed Southwest to maintain the low+ ost air%are that &ene%ited ustomers also struggling %inan ially in the e onomi re ession'Southwest$s ustomer servi e is another strong oint the %irm %o used on to maintain a ometitive edge' Southwest has had unaralleled ustomer servi e in the low+ ost air%are mar7et %or years' !uring the re ession when many airlines were utting &a 7 and o%%ering ustomers less. Southwest strived to maintain a ustomer %o used servi e model where the ustomers still re eived e1 ellent servi e and &ene%its %orm the airline' The %irm was su ess%ul 3  INTERNAL ENVIRONMENT ANALYSISat maintaining its ustomer &ase and in reasing loyalty at a time when most airline ri es were low due to the e onomy' Although the airline o%%ered similar air%are as other low+ ost airlines. Southwest o%%ered ustomers a higher level o% servi e and are iation' Southwest’s IFE Weakness Results This ortion outlines the airline$s wea7nesses and how Southwest minimi=ed them so the %irm ould remain ometitive' The to two wea7nesses %a ing Southwest are the %irm$s heavy relian e on assenger revenue and low emloyee rodu tivity'A ording to !atamonitor$s ())0 S@OT analysis. 8The omany is highly deendent on assenger revenues' The omany derived ,'> and >'( o% its revenues %rom %reight and other oerations and 04'4 %rom assenger transort during ?Y())*; -!atamonitor. ())0. g'6/' This relian e on assenger+generated revenue was the main ause o% Southwest$s ro%it de line in ())0 during the re ession when eole were sending signi%i antly less on travel' Southwest also %a es the issue o% low emloyee rodu tivity' The ororate ulture at Southwest is &ased on %un. loyalty. and emloyee are iation' This o%ten leads to less time %o used on &usiness oerations and more time sent ultivating the ororate environment' ele&rations %or &irthdays. graduations. marriages. and holidays o%ten ta7e la e during omany time to show are iation and %oster &onding among the emloyees' This loss o% omany time to non+&usiness related a tivities de reases ro%its' Southwest’s Total IFE Score The remaining se tion e1lains the results o% Southwest$s I?E analysis and what they mean %or the airline$s %inan ial %uture' Southwest$s total weighted I?E s ore is (',6' The s ore is slightly &elow average. yet still omara&le with s ores o% other airlines in the industry' The dro in the total weighted I?E s ore an &e attri&uted to how greatly Southwest$s wea7nesses 4
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