Environmental Analysis: Southwest Airlines Essay

INTRODUCTION southwestern Airlines Co. began its operations in 1971 and has been serving the industry for the past 43 years at a time ( southwestward Airlines, n.d.). It is the major domestic stripline, and ranked issue forth one in 2014 by the Bureau of Transportation Statistics (United States Department of Transportation, 2014). Back in 1971 the air lane began its services in Texas in the cities of Houston, San Antonio, and Dallas. The participation has been ranked as the nations largest low cost carrier (Mergent, 2012). It offers the lowest fargons, and has the lowest cost structure in the industry.Southwest Airlines Co. also acquired AirTran Holdings Inc. in 2011 and now owns AirTran Airways. The company has been ranked 9th among the 50 most admired companies in the world according to a survey by set magazine (Fortune Magazine, 2013). Southwest uses the exchange symbol LUV on the New York Stock Exchange (NYSE).This paper get out summarize an environmental s understructure of Southwest Airlines to allow an analysis of the most important external environmental factors in the remote, industry, and external operating environments, the most important strengths and weaknesses of the organization, an assessment of the companys competitive position, and canvass the structure of the organization and how this affects organizational performance (University ofPhoenix, 2013).POLITICAL FACTORSThe Airline and Aviation industry underwent government activityal Regulations by the passage of the Civil Aeronautics Act of 1938 and the coincident creation of the Civil Aeronautics Board (CAB). This Act enabled the CAB to control the service f atomic number 18s, the entry of new air lanes from the market and the exit of existing airlines from the same, and the assigning of air routes to different airlines. Then the Federal Aviation Act was passed in 1958 and led to the shaping of the Federal Aviation Administration in August 1958. The rule do was shifted to the FAA and it had control of the air routes, the airline safety and air traffic controls.The Airline Deregulation Act was passed in 1978 and falls in the category of Federal Law. It eliminated the political authority over determination of service fares and control of routes and new airlines entry into/exist from the airline industry. As a result of the act, the CAB was dissolved in 1984. The FAA was not eliminated and it remained in control of airline safety and air traffic control (United States Government Accountability Office, 2006). This Amendment came into force in 1979 and comes within the category of federal law.It manages the air traffic at Dallas Airfield in Texas. Initially, this amendment posed such restrictions on nonstop flights that their routes got express mail to Texas and its neighboring states only. However, the restrictions were taken off in 1997 and 2005. The Amendment was revoked in 2006 but some restrictions will expire in 2014. Soon after the passage of the Airlin e Deregulation Act of 1978, Southwest was about to begin interstate flights. But restrictions were imposed by the Congress and the airline was disqualified to ticket/operate flights beyond Texas and the states touching its borders.ECONOMIC FACTORSA number of scotch constraints are also there in the environment that have their relative usurpations on Southwests operations. These includeHigher unemployment rates, which Southwest had been challenging by refusing to direct off employees even during surging unemployment.Increase in operating costs.Instable credit market and capital market.Declining demand for air travel.Economic Recession in the ground (Southwest Airlines, et al., 2013).SOCIAL FACTORSSocial factors influencing performance include an summation air pollution caused by the airline industry as a whole gases are emitted in upper atmosphere causing an increase of around three percent of greenhouse emissions globally. Also, fuel efficiency has increased significantly from the past three decades. The airline industry has been divided into labor unions which include several types of unions such as the Flight Attendants Unions, the Machinists Unions, and the Pilots Unions. The majority of the employees are part of such unions which has led to an increase in labor costs for the entire airline industry. TECHNOLOGICAL FACTORS Fuel efficiency is increasing. Aircrafts that are more fuel efficient are being developed and the engines are being redesigned to cater to this change.The Air Transportation System has been reformed by the introduction of the Next Generation Air Transportation System (NextGen). This system is supposititious to be implemented in the country by 2025. The system revises air routes and updates it to satellite system management the promotion of usage of GPS technology for navigation, route length shortening, time reduction, and fuel saving, etc.The JPDO (Joint Planning and Development Office) has been setup to facilitate the development of NextGen. Apart from that, the tracking system has beenupdated and routes have been improved significantly. Airline calculate and algorithms have allowed progresss in prices and costs for airlines in the industry. The average age of an aircraft in the industry is around 13 years. The market is expected to grow and revenues are apt(predicate) to increase.HOW sou-west SHOULD CONFRONT THESE THREATSSouthwest should take active measures to deal with all the above measured threats. To combat with political threats of regulation, the Shelby agreement does help by providing elaborateness in a few routes. However, they are still less and the routes and areas served need to be expanded. Some sort of agreement should be made for that. To deal with its economic threats, Southwest is already implementing fuel cost saving strategies. It has already reduced its fares for the passengers, which provides it with a competitive abut. Southwest has adopted a no-layoff policy with reference to its employees, in the face of eminent unemployment rates. Therefore it should bunk to control and ultimately minimize its operating costs. To deal with the social issues present in the industry, careful negotiations and dealings with the motley kinds of unions should be done. Environmentally safe emissions of gas should be reviewed as well as alternate sources of energy.Technology is increasing in the industry. Southwest necessarily to be able to afford the latest technology so that it could offer superior quality of service than its competitors.SOUTHWESTS STRENGTHSSouthwest Airlines has a number of strengths. It uses the cozy urban center airports and focuses on point-to-point service, which reduces the connections and facilitates nonstop routing. That resultantly reduces the total flight time. This makes it easier for Southwest to charge low flight fares for its passengers. The airline also serves downtown airports including Houston Hobby, Chicago Midway, Dallas Love Field, Burb ank, Oakland, San Jose, Manchester, Baltimore-Washington International, Hollywood, long Island Islip and Providence airports. This way the airline can make good use of its assets and perform on time and be reliable. That ultimately shows up as an increase in market revenue (MarketLine, 2012). The company has also employed conquestful advertising methods. It has reduced its overall operating costs and has been profitable for 36 in series(p) years. It is known in the airline industry as being the best low cost carrier.SOUTHWESTS WEAKNESSESContractual obligations associated with the purchase of future aircraft, debt payment, and leasing arrangements resulted in a lowering of the companies credit rating in 2009. This has affected the companys ability to secure future financing (Tellex, 2012a).With increased technology, less companies are dependent on face-to-face meetings resulting in a lower demand for business travel. Reappearing downturn in the economy have also reduce the inwar dness of those who travel for leisure. The subsequent result in the overall decrease in travel is lower profit margins for the company (Tellex, et al., 2012b).The company continues to rely heavily on revenue generated by passenger travel, earning only one percent of its revenue through the transportation of freight and commitment. Considering that passenger travel is heavily dependent on price, fluctuations in fuel and security costs can expose profits to volatility (Tellex, et al., 2012c).The airline has always maintained a conservative growth strategy. It needs to develop a more aggressive, robust business plan in order to keep up with other industry leaders in the fresh economy. The company is currently limited to approximately 68 cities domestically and relies heavily on one aircraft manufacture (Boeing) to produce its fleet (Tellex, et al., 2012d).MAIN COMPETITOR wiz of the major competitors to Southwest Airlines is Delta Airlines, which is headquartered in Atlanta, Georgia, U.S. It has a few significant weaknesses such as the legal issues it has recently faced (including 2009s antitrust lawsuits) that have had their impact on the companys brand image. Also, the company is heavily indebted. In Fiscal Year 2011, the company had a long term debt of $11,233 million, and in FY2010 it was $12,553. The fire expense was also very high. That is why it is moreprone to recession and because of this financial depression it is also unable to acquire additional funds. That has become a threat to its liquidity. The company also faces increasing fuel costs, competitive threats, and extensive governmental regulation (MarketLine, et al., 2012).While it is difficult to combat governmental regulation, Southwest Airlines can build upon Delta Airlines weaknesses, because it has remained profitable and has also become fuel efficient in the recent past. Also, the company has been successfully able to reduce its overall cost structure and provide high customer service, which is why it is amongst the top ranked airlines in the industry. This automatically creates value for the stakeholders.SOUTHWESTS COMPETITIVE systemThe company follows a low-cost competitive strategy by offering low fares to its customers which happen because it has been able to reduce its operating costs. It focuses on inner city airports such as the Dallas Love Field. To minimize costs, Southwest doesnt provide meals in flights. It also uses Boeing 737 aircrafts which are technologically more fuel efficient. This makes its ranking high in customer services as compared to other airlines in the industry.RECOMMENDED MODIFICATIONS TO SOUTHWESTS STRATEGYAssuming that the United States economy is undergoing a downturn, Southwest Airlines will need to make a few amendments to its strategy. These include improving its cost efficient structure and maintaining its existing customer base as well as begin providing healthy meals on an economical basis without increasing the flight fares too muc h. It should focus on what it does best and also build upon its competitive edge of excellent customer service. That way it would be able to combat the effects of an economic downturn, partially or completely.IMPACT OF GLOBAL COMPETITION ON SOUTHWESTS STRATEGYIf viewed from a global perspective, the company needs to make several revisions to its competitive strategy. Although Southwest has a competitive edge in the local anesthetic industry because of its low fares and low cost structure, to be able to face global competition, the company needs to begin serving more routes, as the number of routes it serves currently is making it seem like a competitive disadvantage for the company. Also, the company should utilize its profits for the provision of healthy quality meals. An overall improvement in the operations should also be considered.ORGANIZATIONAL STRUCTURE AND PERFORMANCEPerhaps the most important element of Southwest Airlines success is the companys decentralized organization s tructure. The airline places a limited emphasis on organizational structure allowing employees and management committees to make decisions. The companys policies are developed by combining employee input and measuring all decisions against its own code of ethics.The company continuously demonstrates its ability to develop relationships through the formation of cross-functional teams that share goals and knowledge and build a mutual respect for one another rather than blaming. Focus on relationships is the fundamental driver of leadership, culture, strategy, and coordination at Southwest (Gittell, 2003, p. 177). Southwest defines leadership as a process that can occur at any level of the organization but is most productive on the front lines.Supervisors assume a position of servitude to their subordinates going beyond the traditional responsibilities of that role. Employees are viewed as internal customers who deserve nurturing and training. The company intentionally distorts the lin es between work and personal lives to enhance family and community relationships. The end result of such an organizational structure is improved flight departure performance, faster turnaround times, greater staffing productivity, fewer lost bags, and fewer customer complaints (Gittell, 2003).CONCLUSIONSince its inception in 1971, Southwest has continuously distinguished itself from other airlines in the industry. For 41 consecutive years, it is the only airline to sustain a profit. The companys organizational structure reflects its commitment to customers and employees alike. The benefits of this commitment have established the company as the benchmark for the industry in terms of loyalty and customer/employee satisfaction. Rankings such as number one in air transportation (United States Government Accountability Office, et al., 2006), number nine in _Fortunes Most Admired Companies_ (Fortune Magazine, et al., 2013), and number 12 on _Forbes Best Companies to Work For In 2013_ (For bes, 2013) also provide testament to the success of the companys business strategy.In order to sustain this level of success in the long-term and remain competitive within an industry that already has limited flexibility created by an unusually large amount of fixed costs, federal and union regulation, manufacturer dependency, and economy. The company must give consideration to developing a more transformational model. Fortunately for Southwest, the company has no need to reinvent itself. However, this model should include an cost-effective approach to fleet expansion and additional freight and cargo transportation services to generate more revenue while retaining their proven formula for organizational structure and customer service.ReferencesForbes. (2013). _The 25 Best Places to Work in 2013_. Retrieved June 8, 2014, from Forbes http//www.forbes.com/pictures/efkk45eddil/no-12-southwest/Fortune Magazine. (2013). _Worlds Most Admired Companies_. Retrieved June 8, 2014, from Fortune http//fortune.com/worlds-most-admired-companies/southwest-airlines-9/Gittell, J. (2003). _The Southwest Airlines Way Using Power of Relationshipsto Achieve High Performance._ New York McGraw-Hill. Retrieved June 8, 2014MarketLine. (2012, December 21). _ ram Analysis_. Retrieved June 8, 2014, from MarketLine http//advantage.marketline.com/PageForbidden?returnUrl=%2FProduct%3Fpid%3D345D3B5B-CDC8-4F13-AD68-8D79064FB08A%26view%3DSWOTAnalysisMergent. 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