Assignment for Essays Guru

Porter’s Force: Southwest Airline Industry

Kevin Concilio

Porter’s force: Southwest Airline Industry

The airlines provide services that go beyond other industries in terms of timeliness and convenience. The industry is able to achieve its purpose by providing outstanding service to its clients as it offers transport services to people in need of effectiveness and expediency that cannot be provided by any other industry. Southwest airlines are one of the best airlines in the United States and derive its strengths from the higher profits it makes. Therefore, despite the challenges facing the industry, Southwest airlines is able to make viable decisions and adjust its policies as opposed to other greatly hampered airlines. Essentially, the services offered by the Southwest airlines are majorly limited to short-haul trips (Boguslaski, et. al, 2004).

The industry focuses on offering city to city services and has so far devised methods of cutting its operational costs. Some of the measures adopted by the airline to slash on cost include; cutting on training and maintenance cost by using the Boeing airplane, riddance of luxurious seats and eliminating meals on board while ensuring a high degree of customer satisfaction. Consequently, the Porter’s six forces enhance understanding of an institution’s position within an industry while analyzing its strengths and weaknesses (Morrison, 2001).

Threat of New Entrants

Due to the fact that Southwest airline is very successful in its functions, it is likely to face high risks in the form of competition from both the existing and the new industries that intend to enter the industry. For instance, the existing companies are likely to imitate southwest’s stratagems of cost efficiency, and also lowering their ticket prices in order to contend with the Southwest airline. The end effect of this threat to southwest airline is that it may not be able to enjoy the control of offering low fare in the industry. The other high threat to the southwest airline is that if a well developed company with more advanced technologies and facilities take over the airline market, there is a high possibility that the southwest airline’s services will be intruded and possibly surpass new corporation. On the other hand, there are key factors that limit the entry of new firms into the industry such as cost disadvantage, government policies and capital requirements among others. For that reason, threat of entry can be categorized as medium, since southwest airlines have readily available resources in terms of adequate revenue to equally compete the emerging and the existing firms (Caves & Porter, 1977).

Government policies regulate how and when the corporations can join and leave the market. At times, the policies may require product and service differentiation, so as to ensure fair competition in the industry. Consequently, the risk of Southwest airlines losing business to its competitors is reduced due to the existence of policies such as government regulations. Additionally, the government employs measures such as licenses and permits to guarantee clients safety, environmental protection and quality services. On occasion, the regime requirements may be very costly, thus discouraging new businesses from entering the market. Moreover, the period that it takes for a firm to get its operating license can be excessively long. Thus, the amount of money and time that the new firms will have to spend before joining the airline market is a factor that hinders many businesses from entering the industry (Jordan, 2002).

Threat of substitutes

The Southwest airline industry has a medium substitute risk level. A source of substitutes in the airline industry arises when the clients choose other forms of travelling such as train, ship and buses as a means of transport. However, these other forms of transport may be expensive in terms of time, convenience and effectiveness as compared to planes, thus, rendering the risk level in industry as average. Nevertheless, the risk is lowered given that planes are able to offer the fastest means of transport over short and long distances. On the other hand, telecommunication business is the greatest sector that contends with the airline industry. Many people opt to use online services such as the use of Emails in communicating since it is equally fast as the airline. Conversely, in cases where the parcels must be delivered in hard copies, the services of the airlines are still necessary, thus, making the airline sector safe from substitution threats (Porter, 2008).

The new developments in the railway sector have also formed the major sources of substitute threat to the airline industry. The well equipped electronic trains are able to offer fast and convenient services just like the airlines. In addition, the cost of train tickets tends to be lower as compared to the plane tickets. However, Porter notes that such developments are healthy since they encourage the skills of innovativeness and efficiency, thus improving the level of customers’ satisfaction. Nevertheless, Southwest airlines are not hindered with such advancements (Caves & Porter, 1977).

In conclusion, Southwest airlines delight themselves in their ability to offer timely services to their clients. The airline achieves this by reducing checking points and hiring highly competent staffs that perform their duties diligently. Therefore, the airline has managed to attain high customer satisfaction and loyalty which makes them the best option for the customers. Further, the risk of substitution and new entrants is minimal since customers tend to only choose the well known brand names. Given that Southwest airlines are well known for its low ticket costs and good customer care, customers will repeatedly choose them over other airlines and other means of transport (Boguslaski, et. al,2004).

References

Boguslaski, C., Ito, H., & Lee, D. (2004). Entry patterns in the southwest airlines route system. Review of Industrial Organization, 25(3), 317-350.

Caves, R. E., & Porter, M. E. (1977). From entry barriers to mobility barriers: Conjectural decisions and contrived deterrence to new competition. The Quarterly Journal of Economics, 241-261.

Jordan, W. A. (2002). Producer protection, prior market structure and the effects of government regulation. Journal of Law and Economics, 151-176

Morrison, S. A. (2001). Actual, adjacent, and potential competition: Estimating the full effect of Southwest Airlines. Journal of Transport Economics and Policy, 239-256.

Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard business review, 86(1), 25-40.

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