Case Study Description of Southwest Airlines: Singin' the (Jet)Blues
This case details the history of Southwest Airlines from its inception, in 1971, until 2004. The case provides details of Southwest's business model and reasons for success. It ends with a description of the company's competitive pressures in 2004. The case can be used for a course in service operations or strategy.
Swot Analysis of "Southwest Airlines: Singin' the (Jet)Blues" written by Elliott N. Weiss, Marlene Friesen includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Southwest Blues facing as an external strategic factors. Some of the topics covered in Southwest Airlines: Singin' the (Jet)Blues case study are - Strategic Management Strategies, Supply chain and Technology & Operations.
Some of the macro environment factors that can be used to understand the Southwest Airlines: Singin' the (Jet)Blues casestudy better are - – increasing commodity prices, increasing energy prices, wage bills are increasing, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%,
competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Southwest Airlines: Singin' the (Jet)Blues
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Southwest Airlines: Singin' the (Jet)Blues case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Southwest Blues, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Southwest Blues 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: Singin' the (Jet)Blues can be done for the following purposes –
1. Strategic planning using facts provided in Southwest Airlines: Singin' the (Jet)Blues case study
2. Improving business portfolio management of Southwest Blues
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 Blues
Strengths Southwest Airlines: Singin' the (Jet)Blues | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Southwest Blues in Southwest Airlines: Singin' the (Jet)Blues Harvard Business Review case study are -
Strong track record of project management
– Southwest Blues is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Southwest Blues 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: Singin' the (Jet)Blues HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Southwest Blues is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Elliott N. Weiss, Marlene Friesen can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Sustainable margins compare to other players in Technology & Operations industry
– Southwest Airlines: Singin' the (Jet)Blues firm has clearly differentiated products in the market place. This has enabled Southwest Blues to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Southwest Blues to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Southwest Blues 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.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Southwest Blues digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Southwest Blues 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.
Low bargaining power of suppliers
– Suppliers of Southwest Blues in the sector have low bargaining power. Southwest Airlines: Singin' the (Jet)Blues has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Southwest Blues to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of Southwest Blues in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Southwest Blues 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: Singin' the (Jet)Blues - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Southwest Blues is present in almost all the verticals within the industry. This has provided firm in Southwest Airlines: Singin' the (Jet)Blues case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Organizational Resilience of Southwest Blues
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Southwest Blues does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Southwest Blues has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Southwest Blues to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses Southwest Airlines: Singin' the (Jet)Blues | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Southwest Airlines: Singin' the (Jet)Blues are -
High cash cycle compare to competitors
Southwest Blues 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Elliott N. Weiss, Marlene Friesen suggests that, Southwest Blues 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.
Low market penetration in new markets
– Outside its home market of Southwest Blues, firm in the HBR case study Southwest Airlines: Singin' the (Jet)Blues needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Skills based hiring
– The stress on hiring functional specialists at Southwest Blues 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.
Interest costs
– Compare to the competition, Southwest Blues 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Southwest Airlines: Singin' the (Jet)Blues, is just above the industry average. Southwest Blues 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.
Slow to strategic competitive environment developments
– As Southwest Airlines: Singin' the (Jet)Blues HBR case study mentions - Southwest Blues takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Slow decision making process
– As mentioned earlier in the report, Southwest Blues 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 Blues 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Southwest Airlines: Singin' the (Jet)Blues has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Southwest Blues 's lucrative customers.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Southwest Blues supply chain. Even after few cautionary changes mentioned in the HBR case study - Southwest Airlines: Singin' the (Jet)Blues, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Southwest Blues vulnerable to further global disruptions in South East Asia.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Southwest Blues is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Southwest Airlines: Singin' the (Jet)Blues 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: Singin' the (Jet)Blues | 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: Singin' the (Jet)Blues are -
Developing new processes and practices
– Southwest Blues 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.
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 Blues 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 Blues 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Southwest Blues 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 Blues to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Southwest Blues is facing challenges because of the dominance of functional experts in the organization. Southwest Airlines: Singin' the (Jet)Blues 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.
Creating value in data economy
– The success of analytics program of Southwest Blues has opened avenues for new revenue streams for the organization in the industry. This can help Southwest Blues to build a more holistic ecosystem as suggested in the Southwest Airlines: Singin' the (Jet)Blues case study. Southwest Blues can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Southwest Blues in the consumer business. Now Southwest Blues can target international markets with far fewer capital restrictions requirements than the existing system.
Learning at scale
– Online learning technologies has now opened space for Southwest Blues 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.
Manufacturing automation
– Southwest Blues 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Technology & Operations industry, but it has also influenced the consumer preferences. Southwest Blues can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Southwest Blues to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
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 Blues can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Buying journey improvements
– Southwest Blues can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Southwest Airlines: Singin' the (Jet)Blues 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.
Building a culture of innovation
– managers at Southwest Blues 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.
Threats Southwest Airlines: Singin' the (Jet)Blues 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: Singin' the (Jet)Blues are -
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.
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 Blues.
Technology acceleration in Forth Industrial Revolution
– Southwest Blues has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Southwest Blues 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.
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 Blues 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.
Environmental challenges
– Southwest Blues 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 Blues can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
High dependence on third party suppliers
– Southwest Blues 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.
Stagnating economy with rate increase
– Southwest Blues 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.
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 Blues needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Southwest Blues with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Consumer confidence and its impact on Southwest Blues 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.
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 Blues business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of Southwest Blues
– 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 Blues.
Shortening product life cycle
– it is one of the major threat that Southwest Blues is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Southwest Airlines: Singin' the (Jet)Blues 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: Singin' the (Jet)Blues 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: Singin' the (Jet)Blues 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: Singin' the (Jet)Blues 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: Singin' the (Jet)Blues 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 Blues needs to make to build a sustainable competitive advantage.
