Case study of

Southwest Airlines
LEAD WITH LUV

Group Members:
Ammara Ashfaq 10-NTU-1011
Gulnaz Abad
10-NTU-1020
Fatima Arshad 10-NTU-1018

OVERVIEW
Major domestic airline that provides short haul,
high frequency, point-to-point, low fare service.
Incorporated in Texas and commenced
Customer Service on June 18, 1971 with 3
Boeing 737 aircrafts serving 3 cities Dallas,
Houston, and San Antonio.
SW operates over 483 Boeing 737 aircrafts in
over 63 cities and 32 States.
Lowest operating cost structure in the domestic
airline industry and consistently offers the
lowest and simplest fares.

OVERVIEW
1st airline to offer a profit-sharing plan to
employees beginning in 1979, employees
now own about 10% of company stock.
1st major airline to offer ticketless travel
system-wide.
1st major airline to enter information
superhighway by creating its own web page.
1st airline to offer online booking.

SOUTHWESE 2010s Awards

and Recognitions
Ranked 4th on Fortunes Worlds most
Admired company List
Listed in Computer Worlds Best places to
work in IT
Named BEST LOW COST AIRLINE IN NORTH
AMERICA by Business Traveler Magazine
Awarded with Logistic Magazines Quest for
Quality Award

HISTORY
Key Dates:
1967:

Company is incorporated as Air Southwest Co.

1971:

Airline launches first route, connecting Dallas, Houston, and San Antonio.

1973:

SWA posts first profit and begins RUSH cargo service.

1975:

Southwest had expand its operations to eight more cities in Texas.

1976:

Company is renamed Southwest Airlines Co.

1977:

Shares migrate to the New York Stock Exchange.

1978:

Herb Kelleher becomes Southwest's outspoken new chairman.

HISTORY
1979:
SWA flies outside Texas to New Orleans.

1981:
Kelleher is named company president and CEO.

1982:
SWA begins flights to West Coast.

1990:
Revenues exceed $1 billion, making SWA a major airline.

1994:
Morris Air and Arizona One are acquired.

1996:
Online booking site is launched.

2000:
SWABIZ corporate booking tool is introduced.

2005:
SWA offered a downloadable desktop application (DING).

HISTORY continued
2010: ranked first among Airlines for
Customer service satisfaction
2011: merged with Air Tran, Florida
2011:hedged 40% of its fuel needs

MISSION STATEMENT

Proposed Mission Statement

The mission of Southwest Airlines is to provide
excellent customer service and timely air travel
at an affordable price among markets in the
United States. We commit ourselves to the
highest standards of integrity in doing what is
best for our passengers, the airline industry, our
employees and our stockholders.

Proposed Vision Statement

To be the famous, mature and new
generations Airlines Company that
provides the most affordable, reliable and
comfortable flight transportation in both
domestic and oversees markets.

h
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Strategy-Formulation Analytical
Framework
External Factor
Factor Evaluation
Evaluation
External
Matrix (EFE)
(EFE)
Matrix

Stage 1:
The Input Stage

Internal Factor
Factor Evaluation
Evaluation
Internal
Matrix (IFE)
(IFE)
Matrix

Competitive Profile
Profile Matrix
Matrix
Competitive
(CPM)
(CPM)

External Factors Evaluation

(EFE Matrix)

Weight
Weig
ed
Ratin
ht
Score
g

Opportunities
Global Expansion

.10

.10

Space in Market

.11

.44

Long-term Industry Growth

.10

.30

Merger or Acquisition

.09

.36

.10

.10

.12

.48

Terrorist Attacks & Safety issue

.11

.33

High Cost of Fuel

.09

.36

Alternative Forms of Transportation

.10

.30

Inflation Rate

.08

.24

Growth in freight business

Increase Domestic Flight in USA

Threats

TOTAL

1.00

3.01

Internal Factor Evaluation

(IFE Matrix)

Weig
ht

Ratin Weight
ed
g
Score

Strengths
Cost leadership

.11

.44

Team Spirit Approach

.12

.48

Sensible Expansion Policy

.06

.18

E Business

.10

.40

Financial Positions

.12

.48

Hedge position on fuel

.06

.18

Excellent Public Image

.06

.18

Customers Service

.08

.32

Depend on Single Producer

.10

.10

Lower load factor

.06

.12

High Labor Costs

.05

.10

Lack of International Flights

.08

.08

Weaknesses

Competitive Profile Matrix

(CPM)

Critical Success
Factor

Southw AMR corp.

est

Weigh Rating Score Rating

t

Score

United
Rating Score

Management

.10

.40

.30

.30

Organizational Structure

.05

.15

.15

.15

Customer Service

.10

.40

.30

.30

Consumer Loyalty

.08

.24

.16

.16

Security Precautions

.05

.10

.10

.10

Market Share

.10

.40

.30

.20

Advertising

.12

.36

.36

.36

E Business

.10

.40

.20

.20

Global Expansion

.06

.06

.18

.18

Financial Position

.15

.60

.60

.30

Price competitiveness

.09

.36

.27

.27

TOTAL

1.0
0

3.4
7

3.0
2

2.5
2

Strategy-Formulation Analytical
Framework
SWOT Matrix
Stage 2:
The Matching
Stage

SPACE Matrix
IE Matrix
Grand Strategy
Matrix

SWOT Matrix

Opportunities O
1)
2)
3)
4)
5)
6)

Global Expansion
Vacuum in Market
Long-term Industry Growth
Merger or Acquisition
Growth in freight business
Increase Domestic Flight in
USA

Threats T
1) Terrorist Attacks & Safety
issue
2) High Cost of Fuel
3) Alternative Forms of
Transportation
4) Inflation Rate

Strengths S

Weaknesses W

1)
2)
3)
4)
5)
6)
7)
8)

1) Depend on Single
Producer
2) Lower load factor
3) High Labor Costs
4) Lack of International
Flights

Cost leadership
Team Spirit Approach
Sensible Expansion Policy
E Business
Financial Positions
Hedge position on fuel
Excellent Public Image
Customers Service

SO Strategies
i. Market
Penetration (S3,
S5& O4,O6)
ii. Horizontal
Integration (S5 &
O4)

WO Strategies
i. Product
Development (W2
& O5)
ii. Market
Development (W4
& O1, O3)

ST Strategies
i. Backward
Integration (S3,S6
& T2)

WT Strategies

SPACE Matrix
Internal Strategic Position

External Strategic Position

Financial Strength (FS)

Ratin
g

Environmental Stability
(ES)

Ratin
g

5
6
6
4

Technological changes
Rate of inflation
Competitive pressure
Demand Variability
Price Range of Competing
Service

-3
-3
-2
-5
-1

Return on Investment
Working Capital
Net income
Price Earning Ratio

FS average

5.25

ES average

-2.80

Competitive Advantage
(CA)

Ratin
g

Industry Strength (IS)

Ratin
g

Market Share
Service quality
Customer loyalty
Competitions capacity
utilization

CA average

-1
-2
-2
-1

Profit potential
Growth potential
Financial Stability
Resource utilization

-1.50 IS average

Conclusion:Directional vector coordinates: X-axis -1.50 + 5.25 = 3.75

6
5
5
5

5.25

SPACE Matrix
Conservative

FS
+6

Aggressive
(3.75, 2.45)

IS

CA
-6

+6

-6

Defensive

ES

Competitive

(IE) Internal & External Matrix

IFE Total Weighted Scores (3.06)
EFE
Tota
l
Wei
ght
ed
Sco
res
(3.0
1)

Strong
4.0 to 3.0
Hig
h
3.0
to
4.0
Me
diu
m
2.0
to
2.9
9
Lo
w
1.0
to
1.9
9

Average
2.99 to 2.0

Weak
1.99 to 1

Grand Strategy Matrix

WE
RAPID MARKET GROWTH
EK Quadrant II
Quadrant I
CO
MP
ETI
TIV
E
Quadrant IV
PO Quadrant III
SIT
IO
N

SLOW MARKET GROWTH

ST
RO
NG
CO
MP
ETI
TIV
E
PO
SIT
IO
N

Strategy-Formulation Analytical
Framework

Stage 3:
The Decision Stage

Quantitative Strategic
Planning Matrix
(QSPM)

Possible Strategies
Market

Penetration:Expand into more cities in USA.

Market

Development:Begin international flights.

Quantitative Strategic Planning Matrix (QSPM)

Strategic Alternative

Internal Factor
Strengths

Market Penetration

Market Development

Weight

AS

TAS

AS

TAS

Cost leadership

.11

.44

.33

Team Spirit Approach

.12

.48

.36

Sensible Expansion Policy

.06

.18

.24

E - Business

.10

.40

.30

Financial Positions

.12

.60

.36

Hedge position on fuel

.06

---

---

---

---

Excellent Public Image

.06

.18

.06

Customers Service

.08

.24

.08

Depend on Single Producer

.10

---

---

---

---

Lower load factor

.06

.12

.06

High Labor Costs

.05

.10

.05

Lack of International Flights

.08

.08

.24

Weaknesses

TOTAL

1.00

2.82

2.08

Quantitative Strategic Planning Matrix (QSPM)

External Factors

Market Penetration

Market Development

Opportunities

Weight

AS

TAS

AS

TAS

Global Expansion

.10

.20

.40

Vacuum in Market

.11

.44

.22

Long-term Industry Growth

.10

---

---

---

---

Merger or Acquisition

.09

.36

.27

Growth in freight business

.10

---

---

---

---

Increase Domestic Flight in USA

.12

.36

.12

Terrorist Attacks & Safety issues

.11

.33

.44

High Cost of Fuel

.09

.27

.36

Alternative Forms of Transportation

.10

---

---

---

---

Inflation Rate

.08

.16

.24

SUB TOTAL

1.00

Threats

SUM TOTAL ATTRACTIVENESS SCROE

2.12

2.05

4.94

4.13

Recommendation
Based on QSPM, the best looking
strategy would be to expand into more
cities in USA, ( Market Penetration ).
The longer non-stop flights have more
of a competitive market and would be
hard to keep low cost flights.