Case Study Description of Southwest Airlines--1993 (Abridged Update)
Southwest Airlines management is faced with increasing competition. It must decide which of several route extensions provide the appropriate competitive response while preserving the internal culture that has made the airline so successful.
Swot Analysis of "Southwest Airlines--1993 (Abridged Update)" written by James L. Heskett includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Southwest Airlines facing as an external strategic factors. Some of the topics covered in Southwest Airlines--1993 (Abridged Update) case study are - Strategic Management Strategies, Organizational culture, Supply chain and Technology & Operations.
Some of the macro environment factors that can be used to understand the Southwest Airlines--1993 (Abridged Update) casestudy better are - – central banks are concerned over increasing inflation, supply chains are disrupted by pandemic , increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, digital marketing is dominated by two big players Facebook and Google, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy,
increasing commodity prices, geopolitical disruptions, etc
Introduction to SWOT Analysis of Southwest Airlines--1993 (Abridged Update)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Southwest Airlines--1993 (Abridged Update) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Southwest Airlines, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Southwest Airlines 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--1993 (Abridged Update) can be done for the following purposes –
1. Strategic planning using facts provided in Southwest Airlines--1993 (Abridged Update) case study
2. Improving business portfolio management of Southwest Airlines
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 Airlines
Strengths Southwest Airlines--1993 (Abridged Update) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Southwest Airlines in Southwest Airlines--1993 (Abridged Update) Harvard Business Review case study are -
High switching costs
– The high switching costs that Southwest Airlines has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Learning organization
- Southwest Airlines 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 Airlines is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Southwest Airlines--1993 (Abridged Update) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Southwest Airlines in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Southwest Airlines
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Southwest Airlines does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Southwest Airlines has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Southwest Airlines to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Technology & Operations industry
– Southwest Airlines--1993 (Abridged Update) firm has clearly differentiated products in the market place. This has enabled Southwest Airlines to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Southwest Airlines to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Southwest Airlines has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Southwest Airlines 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.
Ability to recruit top talent
– Southwest Airlines is one of the leading recruiters in the industry. Managers in the Southwest Airlines--1993 (Abridged Update) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Southwest Airlines 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--1993 (Abridged Update) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– Southwest Airlines has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Southwest Airlines--1993 (Abridged Update) 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.
Low bargaining power of suppliers
– Suppliers of Southwest Airlines in the sector have low bargaining power. Southwest Airlines--1993 (Abridged Update) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Southwest Airlines to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Southwest Airlines digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Southwest Airlines has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Weaknesses Southwest Airlines--1993 (Abridged Update) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Southwest Airlines--1993 (Abridged Update) are -
Capital Spending Reduction
– Even during the low interest decade, Southwest Airlines has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
No frontier risks strategy
– After analyzing the HBR case study Southwest Airlines--1993 (Abridged Update), it seems that company is thinking about the frontier risks that can impact Technology & Operations strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High cash cycle compare to competitors
Southwest Airlines 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.
Interest costs
– Compare to the competition, Southwest Airlines 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--1993 (Abridged Update), it seems that the employees of Southwest Airlines 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Southwest Airlines 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 bargaining power of channel partners
– Because of the regulatory requirements, James L. Heskett suggests that, Southwest Airlines is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Need for greater diversity
– Southwest Airlines 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.
Slow decision making process
– As mentioned earlier in the report, Southwest Airlines 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 Airlines 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.
Skills based hiring
– The stress on hiring functional specialists at Southwest Airlines has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Southwest Airlines is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Southwest Airlines--1993 (Abridged Update) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities Southwest Airlines--1993 (Abridged Update) | 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--1993 (Abridged Update) are -
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Southwest Airlines can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Southwest Airlines is facing challenges because of the dominance of functional experts in the organization. Southwest Airlines--1993 (Abridged Update) 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.
Manufacturing automation
– Southwest Airlines 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.
Learning at scale
– Online learning technologies has now opened space for Southwest Airlines 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Southwest Airlines can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Better consumer reach
– The expansion of the 5G network will help Southwest Airlines to increase its market reach. Southwest Airlines 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Southwest Airlines can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Southwest Airlines can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Building a culture of innovation
– managers at Southwest Airlines can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Technology & Operations segment.
Developing new processes and practices
– Southwest Airlines 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.
Creating value in data economy
– The success of analytics program of Southwest Airlines has opened avenues for new revenue streams for the organization in the industry. This can help Southwest Airlines to build a more holistic ecosystem as suggested in the Southwest Airlines--1993 (Abridged Update) case study. Southwest Airlines can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Leveraging digital technologies
– Southwest Airlines can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Loyalty marketing
– Southwest Airlines has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Southwest Airlines 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--1993 (Abridged Update) 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--1993 (Abridged Update) are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Southwest Airlines with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Southwest Airlines in the Technology & Operations sector and impact the bottomline of the organization.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Southwest Airlines will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
High dependence on third party suppliers
– Southwest Airlines 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.
Shortening product life cycle
– it is one of the major threat that Southwest Airlines is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Southwest Airlines 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 Airlines can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Southwest Airlines needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
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 Airlines.
Regulatory challenges
– Southwest Airlines needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Technology & Operations industry regulations.
Increasing wage structure of Southwest Airlines
– 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 Airlines.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Southwest Airlines can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Southwest Airlines--1993 (Abridged Update) .
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Southwest Airlines 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.
Weighted SWOT Analysis of Southwest Airlines--1993 (Abridged Update) 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--1993 (Abridged Update) 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--1993 (Abridged Update) 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--1993 (Abridged Update) 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--1993 (Abridged Update) 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 Airlines needs to make to build a sustainable competitive advantage.
