Southwest
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Southwest Airlines
1. At the beginning, what forces in the environment most affected Southwest Airlines, and what opportunity was Southwest founded to take advantage of?
In order to see the clear picture of which forces affected Southwest Airlines the most in the beginning, we will analyze the environment or external factors by applying SPEELT.
SPEELT ANALYSIS
Social Factors.
The social attitude towards the air travel has changed. Not only the rich people could travel by plane, but the rest of people also could fly if the price of air ticket was affordable, people would think of the airplane when they would like to travel. This factor attracted more people to be the customers of low-cost airlines.
Political factors
The United States of America has an open policy towards the airline industry. There is not any policy to block or hamper any airline. Therefore, there are many competitors and new comers in the industry. In order to capture the majority of market share, each airline has to provide and develop the service to satisfy customers.
Economic factors
The economic is increasing so the people have more income and more power to choose the products. They spend money more easily. Moreover, if the economic is growing, it also attracts the investors to enter in the industry.
Environment factors
The environment factors also affect the airline industry. Some airports have set the airport restriction to limit noise as well as the restriction of aircraft
to use. This environment regulation can increase the cost of Southwest and limit the ability to expand its operation to the mentioned airports.
Legal factors
Before the deregulation, Southwest Airlines has been blocked by the competitors to come into the industry. King and Kelleher fought very hard to make their company are operated. After the deregulation, there were more entrants in the industry. Consequently, each airline has to develop themselves to reach customer satisfaction.
Technology factors
Technology can help the company reduce cost and maximize profit. In the airline industry, At the beginning, Southwest Airlines did not provide much technology to help them save cost. However, several years later, Southwest Airlines has implemented the Automated Boarding Pass and Rapid Check-in self service. This technology can serve the passengers faster and save the labor cost.
In conclusion, at the beginning, legal factors affected Southwest Airlines the most because it took many years for Southwest Airline of legal struggle to get permission to offer passenger service again. During that time, it cost Southwest Airlines a lot of money and made Southwest lose opportunity to generate revenue. Before obtaining the consent, competitors used the legal and regulatory means to ensure that Southwest would not take off from the ground
Finally, in 1971, Southwest began to fly again and generate profit two years after that.
In the very first period of operation, Southwest Airlines implemented these following planning:
At first time from the establishing period on May 13,1970, they faced the problem about the feasibility of this project which is the law and regulation of the Civil Aeronautics Board, CBA, that not only allow them for opening new airlines intrastate but also for interstate airlines. For this reason, They have to fight for their business in finally they come up with their litigation for running business after establishing the company for three years (1973) because there are no word for local or intrastate airlines of Texas law at that time that take for long time to start their business and they loss many capital to handle this case. On the other hand, they examine for overall market share for a commercial airline serving Texas three largest markets (Dallas, Houston, San Antonio) can make the profit in the future. In addition, they observe that there is no one to stare the intrastate in Texas state except at California so this could be the barrier for them to enter this market share for newest airline at that time follow the five force model analysis.
Secondly, when the founder look over the market share of this industry and he looking forward the former company like Pacific Southwest Airlines, PSA, in California which is successful to offer low fares and frequent flight and still make the reputation of itself. Therefore, PSA still make the most highly profit in the world and for another reason, they attempt to find the truth demand which is the fares that the customer can afford and not too high but they can meet the destination by the same way not only for interstate traveling but also include intrastate traveling. Consequently, the customer would prefer this method and turnaround or swift directly to be the passenger of low cost airlines more than normal airlines. Moreover, If they can provide the frequent for all flight to serve everywhere in U.S.A. for transportation then they will make a huge profit in the near future from many of passengers only travel in the country in one years
Thirdly, when they come up to started their firm, they found that they still have nothing for running airline business such as airplanes, management team, a lot of employees but they can manage all suddenly by seeking the best choice which are hired M. Lamar Muse as the president and setting the management team from who come from the same industry or retirement people who have strong experience anyway and southwest recognized the 737 as the perfect aircraft for their mission in modern style, fuel-efficient, twin engine configuration all of them can found in Texas state or in U.S.A where the largest plane producer in the world and the financial support always available like especially the financial agreement of 90% new plane cost and also the workers who had to be excellence people. This could be the suppliers of key inputs for the southwest airline so they can run this business as well in the short time
Finally, Southwest Airlines avoid to be interstate airlines at the first establish but when running this business. It s not easy for doing it for alone and they face the problem later that is the competitors because they want to race at California state so they need to complete with Pacific Southwest Airlines ,PSA,