Signature Assignment: Strategic Plan - Implementation Plan, Strategic Controls, and Contingency Plan Analysis

Running head Strategic Evaluation

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[Shortened Title up to 50 Characters] 9

Strategic Evaluation

Babra Kamusinga

University of Phoenix

02/24/2020

STR/581

Lorelie Kaid, MBA, CSM, CSPO, CCMP, Pmp

INTRODUCTION

Barret (1994) states that at the Chicago conference in 1944, free trade aviation was rejected of the fear that the USA would dominate the market; therefore, a "system of bilateral air treaties was established." Hence, every international aviation market was served by two different airlines; that charged the same airfare with a predetermined market capacity. Government control over the airline was a formality. In 1978 there was the deregulation of the airline with the belief that there would be an improvement with the quality of the consumer service. Over the years, the airline industry has evolved, and many features and amenities have been developed and added as perks to the consumers' examples are “hub and spoke networks, computer reservations, frequent fliers, travel agencies commission overrides and many more (Richards, 1996).

Contestability theory was utilized in predicting the airline market structure. A contestable airline market is termed as a costless entry and exit, that would promote competitors to enter the market at any given time. However, Richards argues that airline markets are not entirely contestable. However, Southwest Airlines has managed to show that it is possible to "compete with the hub-and-spoke systems by offering low-cost, no-frills, and point to point service; this is depicted of how the airline thrived in the early '90s while most airlines were incurring heavy losses. Southwest Strategy of low cost and low fare helped change the dynamic in the airline market, with the belief that even the structure of the U.S airline industry would adapt to the southwest model. The model applied to short hauls and hub and spoke for long hauls (Richards, 1996).

This paper is an evaluation of Southwest strategic management for business-level strategy and corporate-level strategy.

Evaluate potential business level strategies for southwest airlines

Southwest Airlines has a business level strategy; the company "believes in a sustainable future with a balanced model between its consumers' shareholders and stakeholders. The company has maintained its mission of a low-fare passenger airline that provides services in the US and near international markets. Also, Southwest is primarily operated by one segment, which is the passenger and freight transportation services; the company provides point to point air transportation service. Therefore, the company is high frequency, short-haul routes with nonstop long-haul hauls for designated states and cities (MarketLine Industry Profile, 2017). 

Assess potential corporate-level strategies for Southwest Airline

Pidun (2019) states that an organization is capable of developing an excellent corporate strategy after matching its resources and core capabilities to the external environment opportunities. Southwest is an airline company that has shown its prowess by creating long-term value for its stakeholders. Southwest is a company that has been operating for decades; therefore, it has accumulated analysis of customers' competitors' market resources and care capabilities. Therefore, the company has the capabilities of expanding into other businesses such as expanding to a freight company, acquiring the duty-free shops with specific products; expand to airbus with destinations all over the world by joining a strategic alliance with another airline. Southwest will become diversified by operating all the different product markets to increase its revenues and organic market presence. Hitt et al. (2014) state that diversification produces a firm with the flexibility of shifting their investments to market with the highest returns rather than being dependent on one commodity in one market. therefore, southwest top management must keep a portfolio of “ businesses balances diversification costs and benefits

global strategies for Southwest Airline

Most airlines have strategic strike alliances that have eventually steered stiff competition to its non-members; also, with an added advantage of operating in an environment where competitors are under bankrupt protection, that creates unequal grounds for competition. "The alliances pose threats to routes within which they would fly"(Riwo-Abudho, 2013). However, Southwest has not established any alliances; as a result, the airline is under immense pressure and strain of maintaining its position within the industry the airline industry while operating a smaller fleet. Also, In 2018 Southwest freight transportation was limited when comparing its total revenue to all the airlines; its total revenue was $175 million, which was 0.8 percent of the entire company’s revenue (Southwest Airlines Co. SWOT Analysis, 2019). 

Recommendation

Kumar et al. (2020) state that "high growth companies become low growth all the time; many top managers know that it is an evitable sign of business maturity." Therefore, at this point, a company needs to stop looking for internal growth instead, needs to shift its attention for acquisitions and mergers of smaller companies and big companies. Southwest is a company that has shown continual growth for decades. Also, the company has managed to maintain its competitive advantage of low fares as well. Therefore, the company needs to generate “organic growth”; Southwest needs to innovate and implement new ideas. The company needs to explore opportunities by taking advantage of the dynamic global market. For example, Southwest airlines could offer more inflight amenities (as a choice with purchase option) to enjoy, especially during the long, non-stop flights. Also, Southwest Airlines needs to strike a strategic alliance with international airlines to explore more opportunities beyond the US borders or nearby international destinations and its freight fleet. The company will also benefit from bankrupt protection in place (Kumar,2020). Inconclusion, the market dynamics have changed to global; therefore, the organization needs to develop a global mindset to have the ability to contend with similar firms that are coming into the market on a global scale. Hitt et al. (2014) state that it is common for firms to differ in the amounts of resources accumulated or rather the type of resources’ which increase the competition within the market and a company’s competitive advantage may not be guaranteed without innovating (Hitt et al., 2014).

Reference

Barrett, S. D. (1994). Aviation and the Pursuit of Contestability. Economic Affairs, 14(2), 11. https://doi.org/10.1111/j.1468-0270.1994.tb00168.x

Hitt, M. A., Ireland, R. D., Hoskisson, R. E. (2014/01/01). Strategic Management: Concepts and Cases: Competitiveness and Globalization, 11th Edition [VitalSource Bookshelf version]. Retrieved from vbk://9781305217188

Kumar, R., & Kumar, A. (2020). Conceptualizing corporate entrepreneurship capability and its linkages towards firm performance. In Sustainable Business: Concepts, Methodologies, Tools, and Applications (pp. 1771-1796). IGI Global.

MarketLine Industry Profile: Airlines in North America. (2017). Airlines Industry Profile: North America, 1–42.

Richards, K. (1996). The effects of Southwest Airlines on US airline markets.

Riwo-Abudho, M., Njanja, L. W., & Ochieng, I. (2013). Key success factors in airlines: Overcoming the challenges.

Pidun, U. (2019). Corporate Capabilities. In Corporate Strategy (pp. 33-53). Springer Gabler, Wiesbaden.

Southwest Airlines Co. SWOT Analysis. (2019). Southwest Airlines Co. SWOT Analysis, 1–8.