SOUTHWEST AIRLINES

Local Business Strategy Review by Kortney Fisher

Evaluating a Company’s External Environment

1. What are the industry’s dominant economic characteristics?

2. What kinds of competitive forces are industry members facing, and how strong is each force?

3. What forces are driving industry change, and what impact will these changes have on the competitive intensity and industry profitability?

4. What market positions do industry rivals occupy—who is strongly positioned and who is not?

5. What strategic moves are rivals likely to make next?6. What are the key factors of competitive success?7. Does the industry outlook offer good prospects for

profitability?

7 Questions

Strategy

✈Low Cost

✈Low Fare

✈Highest Quality of Customer Service

✈Aggressive Marketing Campaigns

Keep it Simple

AdvertisementsDistinctive & Unconventional

National Strategy Initiatives

✈Southwest has several planes with special liveries that they use as a promotional tool, each with its own special name✈Tinker Bell One✈Fred J. Jones✈Shamu✈Slam Dunk One✈The Spirit of Hope

Special Liveries

Local Strategy InitiativesLone Star One

✈Lone Star One ✈Nolan Ryan Express

Airline Industry’s Driving Forces and Impact

✈Driving Forces ✈Changes in long term

growth rate✈Increasing globalization✈Emerging Internet

capabilities ✈Changes in cost and

efficiency

Driving Forces

Fuel Costs 2005-2010

Year Cost (Millions) Average Cost Per Gallon

% of Operating Expenses

2005 $1,470 $1.13 21.4%

2006 $2,284 $1.64 28.0%

2007 $2,690 $1.80 29.7%

2008 $3,713 $2.44 35.1%

2009 $3,044 $2.12 30.2%

2010 $3.620 $2.51 32.6%

Strategy Changes Needed

✈Expand through merger and aggressive marketing

✈More international flights

✈Rebuild of website

✈Fuel Derivative Contracts

Impact Preparation

Three Tests of a Winning Strategy

✈Does the strategy fit the company’s situation?

✈Has the strategy yielded a sustainable competitive advantage?

✈Has the strategy produced good financial performance?

Current Strategy Evaluation