"SOUTHWEST AIRLINES"
SUMMARY
Southwest has been the most successful airline in the United States for 36 years, making it possible for customers to take advantage of convenient and affordable traveling. It began with only three aircraft
flying to Dallas, Houston and San Antonio, and today it is the largest domestic carrier operating more than 400 jets to 63 cities. In an industry where most of the airlines have been forced to either cut back or cease operations, Southwest has sustained its profitability in the face of severe obstacles.
By offering low priced, short, frequent and convenient services, Southwest has carved a niche for itself in the market and has gained an edge over its competitors. However, the company faces the threat of rival airlines trying to emulate its strategy and enter the low fare market. This could potentially reduce Southwest's market share and profitability, and risk the sustainability of its competitive advantage.
The airline industry is very competitive and Michael Porter's five-forces model can be used to explain why the potential for returns is so low in this industry. Firstly, the threat of new companies entering the industry is high and the entry barriers are low since banks, debt and equity markets provide access to funds and capital. Secondly, the bargaining power of customers is high since they are price sensitive and search for the best deals. The third force, bargaining position of suppliers, is strong since they are concentrated and this limits the control airlines have over suppliers to reduce prices and earn higher profits. The availability and threat of substitutes is another factor that can affect a company's competitive position. However, the degree of this threat depends on various factors such as time, m ...