Southwest Airlines: In a Different World SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Technology & Operations
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Southwest Airlines: In a Different World
This is the fourth in a 35-year series of HBS cases on an organization that has changed the rules of the game globally for an entire industry by offering both differentiated and low-price service. The focus of the case is on whether Southwest Airlines should buy gates and slots to initiate service to New York's LaGuardia airport, which does not fit the airline's profile for cost, ease of service, and other factors. The bigger issue is how the organization should deal with competition that has successfully emulated more and more of what it does in an operating environment that has changed significantly. Hence the subtitle, which was suggested by Herb Kelleher, Southwest's Chairman and CEO, Emeritus.
Swot Analysis of "Southwest Airlines: In a Different World" written by James L. Heskett, W. Earl Sasser Jr. includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Southwest Emulated facing as an external strategic factors. Some of the topics covered in Southwest Airlines: In a Different World case study are - Strategic Management Strategies, Decision making, Organizational culture, Supply chain and Technology & Operations.
Some of the macro environment factors that can be used to understand the Southwest Airlines: In a Different World casestudy better are - – increasing commodity prices, increasing transportation and logistics costs, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, there is increasing trade war between United States & China,
challanges to central banks by blockchain based private currencies, technology disruption, etc
Introduction to SWOT Analysis of Southwest Airlines: In a Different World
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Southwest Airlines: In a Different World case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Southwest Emulated, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Southwest Emulated operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Southwest Airlines: In a Different World can be done for the following purposes –
1. Strategic planning using facts provided in Southwest Airlines: In a Different World case study
2. Improving business portfolio management of Southwest Emulated
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Southwest Emulated
Strengths Southwest Airlines: In a Different World | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Southwest Emulated in Southwest Airlines: In a Different World Harvard Business Review case study are -
Training and development
– Southwest Emulated has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Southwest Airlines: In a Different World Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Effective Research and Development (R&D)
– Southwest Emulated has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Southwest Airlines: In a Different World - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of Southwest Emulated in the sector have low bargaining power. Southwest Airlines: In a Different World has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Southwest Emulated to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Southwest Emulated is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Southwest Emulated is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Southwest Airlines: In a Different World Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Southwest Emulated has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Southwest Airlines: In a Different World HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Southwest Emulated is one of the most innovative firm in sector. Manager in Southwest Airlines: In a Different World Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Sustainable margins compare to other players in Technology & Operations industry
– Southwest Airlines: In a Different World firm has clearly differentiated products in the market place. This has enabled Southwest Emulated to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Southwest Emulated to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Southwest Emulated in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Technology & Operations field
– Southwest Emulated is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Southwest Emulated in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Southwest Emulated has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Southwest Emulated to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Southwest Emulated has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Southwest Emulated has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Cross disciplinary teams
– Horizontal connected teams at the Southwest Emulated are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Weaknesses Southwest Airlines: In a Different World | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Southwest Airlines: In a Different World are -
Slow decision making process
– As mentioned earlier in the report, Southwest Emulated has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Southwest Emulated even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Lack of clear differentiation of Southwest Emulated products
– To increase the profitability and margins on the products, Southwest Emulated needs to provide more differentiated products than what it is currently offering in the marketplace.
Aligning sales with marketing
– It come across in the case study Southwest Airlines: In a Different World that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Southwest Airlines: In a Different World can leverage the sales team experience to cultivate customer relationships as Southwest Emulated is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of Southwest Emulated, firm in the HBR case study Southwest Airlines: In a Different World needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Southwest Emulated is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Southwest Emulated needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Southwest Emulated to focus more on services rather than just following the product oriented approach.
Interest costs
– Compare to the competition, Southwest Emulated has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Southwest Airlines: In a Different World, it seems that the employees of Southwest Emulated don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Southwest Airlines: In a Different World, is just above the industry average. Southwest Emulated needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Workers concerns about automation
– As automation is fast increasing in the segment, Southwest Emulated needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High cash cycle compare to competitors
Southwest Emulated has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Need for greater diversity
– Southwest Emulated has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Opportunities Southwest Airlines: In a Different World | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Southwest Airlines: In a Different World are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Southwest Emulated can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Southwest Emulated can use these opportunities to build new business models that can help the communities that Southwest Emulated operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Developing new processes and practices
– Southwest Emulated can develop new processes and procedures in Technology & Operations industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Southwest Emulated in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Technology & Operations segment, and it will provide faster access to the consumers.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Southwest Emulated can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Southwest Airlines: In a Different World, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Southwest Emulated is facing challenges because of the dominance of functional experts in the organization. Southwest Airlines: In a Different World case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Buying journey improvements
– Southwest Emulated can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Southwest Airlines: In a Different World suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Learning at scale
– Online learning technologies has now opened space for Southwest Emulated to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Better consumer reach
– The expansion of the 5G network will help Southwest Emulated to increase its market reach. Southwest Emulated will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Creating value in data economy
– The success of analytics program of Southwest Emulated has opened avenues for new revenue streams for the organization in the industry. This can help Southwest Emulated to build a more holistic ecosystem as suggested in the Southwest Airlines: In a Different World case study. Southwest Emulated can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Southwest Emulated to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Southwest Emulated to hire the very best people irrespective of their geographical location.
Manufacturing automation
– Southwest Emulated can use the latest technology developments to improve its manufacturing and designing process in Technology & Operations segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Low interest rates
– Even though inflation is raising its head in most developed economies, Southwest Emulated can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Threats Southwest Airlines: In a Different World External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Southwest Airlines: In a Different World are -
Environmental challenges
– Southwest Emulated needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Southwest Emulated can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
Easy access to finance
– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Southwest Emulated can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Southwest Emulated
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Southwest Emulated.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Southwest Emulated in the Technology & Operations industry. The Technology & Operations industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Stagnating economy with rate increase
– Southwest Emulated can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Southwest Emulated business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Southwest Emulated high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Southwest Emulated.
Technology acceleration in Forth Industrial Revolution
– Southwest Emulated has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Southwest Emulated needs to keep up with the evolution of technology in the Technology & Operations sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Southwest Airlines: In a Different World, Southwest Emulated may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
Consumer confidence and its impact on Southwest Emulated demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Weighted SWOT Analysis of Southwest Airlines: In a Different World Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Southwest Airlines: In a Different World needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Southwest Airlines: In a Different World is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Southwest Airlines: In a Different World is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Southwest Airlines: In a Different World is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Southwest Emulated needs to make to build a sustainable competitive advantage.