Southwest Airlines International Expansion | free trial sample (2023)

Abstract

Southwest Airlines is one of the most successful airlines in the US market. Southwest Airlines has successfully differentiated its services from those of its competitors. The company strives to replicate its success in the local US market in the international market. Southwest Airlines' highly motivated employees would give the company a competitive advantage in the international market. Additionally, effective cost management by Southwest Airlines would give the airline a competitive advantage in the international marketplace. However, successfully entering the international market requires Southwest Airlines to change their strategies. Code sharing is one of the strategies Southwest Airlines is using to venture into the international market. Southwest Airlines plans to use William P. Hobby Airport as a hub for international flights.

introduction

Southwest Airlines is one of the leading airlines in the US domestic market. Since its founding in 1967 by Herb Kelleher and Rollin King, the airline has pursued several strategies that have enhanced its competitiveness. Air Southwest was the original name of Southwest Airlines during the airline's inception. In 1971, Lamar Muse, then president of the airline, issued promissory notes that helped raise $1.25 million in additional capital. This provided the company with capital for rapid expansion. Shortly after the issuance of the promissory notes, the company changed its name to Southwest Airlines (Lauer, 2010). Southwest's business model strives to improve service quality and reduce customer service costs. Operating a single fleet of Boeing 737s allows the company to increase efficiency and reduce maintenance costs (Doganis, 2006). Southwest has pursued multiple strategies that have resulted in the creation of a niche market in which the company is the dominant player. The airline achieved this by reducing some operations and modernizing others. The company's success in the domestic US airline market forced the company to consider replicating its domestic success in international markets.

Features of the aviation industry

Airlines differentiate their services based on the size and type of cargo carried. Low-cost carriers, air cargo carriers and regional airlines are the main categories of airlines. Low-cost carriers use their ticket prices to differentiate their services. On the other hand, regional operators use the convenience and quality of their services to differentiate their services. Air carriers specialize in the transportation of cargo. Airlines in each category can use different strategies to differentiate their services. A common feature of the above categories is the fact that all airlines have a hub from which to base their operations (Vasigh, Tacker & Fleming, 2008). The above characteristics refer to local and international airlines.

Some of the key competitive factors in the airline industry are airline cost structure, service reliability, service locations and workforce. People generally expect low-cost providers to deliver low quality. On the other hand, airlines that charge high prices for their tickets need to provide quality services (Vasigh, Tacker & Fleming, 2008). Although Southwest Airlines is a low-cost airline, the company offers quality services. This improves the airline's competitiveness. Southwest Airlines' ability to provide quality service at low cost would increase the airline's competitiveness as it ventured into the international market. The company can create a niche market to attract loyal customers. However, the company would face stiff competition from other airlines already in the market.

organizational structure

Southwest Airlines has a lean organizational structure. The ease of the organizational structure facilitates cross-functional communication between the company's employees and management. Southwest Airlines lean organizational structure allows employees to share their opinions with their supervisors or even the President of the company. In addition, the lean organizational structure of airlines facilitates easy monitoring of employees by their department heads, who maintain direct contact with employees (Jones, 2012).

Southwest empowers its employees to make decisions that improve the efficiency of their operations without asking their supervisors for permission. Empowerment increases employee motivation and productivity. In addition, Southwest Airlines offers its employees access to unlimited information about the company's operations and financial viability (Jones, 2012). Access to information allows employees to get a clear picture of airline operations. This allows them to determine how their performance affects the overall performance of the organization. It makes employees feel important to the company.

Human Resources Management Policies

Southwest Airlines strives to find innovative ways to serve multiple stakeholders while ensuring the airline remains profitable. The company's human resources department has several policies to help select the right people for the company. Southwest Airlines hires employees based on their attitude and then trains them to acquire the necessary skills that would enable them to work effectively within the company. Southwest Airlines strives to keep employees happy so they can be more productive. In keeping with the Southwest Airlines philosophy, meeting the needs of employees enables them to meet the needs of customers. The airline puts the interests of its employees before the interests of customers. Southwest Airlines strives to create a harmonious work environment where employees feel part of a big family. The airline has several programs that reward high-performing employees (Hayton, et al., 2012).

Because the airline industry is a service industry, employees are a key competitive factor. This requires companies to have highly qualified employees. In addition, airlines make sure that they have strategies in place that improve employee motivation. These factors improve the quality of service offered by airlines (Belobaba, Odoni & Barnhart, 2009). Southwest Airline has several employee programs aimed at improving employee engagement. Improved employee motivation enables them to provide quality services. Southwest Airlines' ability to motivate its employees while controlling its operating costs can give the airline a competitive advantage over other airlines in the international marketplace.

marketing strategies

Southwest Airlines employs a risk mitigation marketing strategy. The company guarantees that they promise their customers what they have to offer. As a result, customers do not have false expectations. The airline promises cheap tickets and quality services. Southwest often under-promises and over-delivers on many services. The low price of Southwest Airlines tickets has led customers to associate the company with low fares. The airline uses ticketless travel to simplify its services (Wood, 2008).

SWOT-Analyse

powers

Southwest Airlines uses a standardized aircraft fleet. The standardized fleet reduces aircraft maintenance and other operating costs (Doganis, 2006).

Southwest Airlines has a strong, easily recognizable brand. The company has been in operation since 1971 (Noble, 2007).

Southwest has a dedicated workforce. The airline puts the interests of its employees first. This improves their engagement and productivity (Simons, 2010).

weaknesses

Southwest Airlines does not have a First Class section. As a result, you lose customers who want top-notch service. In addition, Southwest Aircraft does not offer meals on board (Potts, 2002).

Southwest Airlines has several strategies to reduce labor costs. The airline requires its employees to perform multiple jobs at the same time (Hill & Jones, 2009). This creates a stressful work environment.

occasions

Southwest Airlines focuses on its niche market. The airline is not heavily involved in the cargo business. Expansion into this market segment would increase the airline's profitability.

The growth of the Latin American market promises rapid growth for Southwest Airline. The company benefits the most from the growth of this market due to its ability to offer low prices and high quality services.

threats

The aviation industry faces intense competition. United Airlines is one of the biggest competitors in the international market (Vasigh, Tacker & Fleming, 2008).

Entering the international market requires the airline to comply with the regulations of various governments. This can pose several challenges for the airline (Vasigh, Tacker & Fleming, 2008).

International expansion strategies

Despite success in the US domestic market, Southwest Airlines focuses on short-haul routes. The average flight duration of Southwest Airlines flights is 425 miles (Piercy, 2012). To support the airline's continued growth, Southwest Airlines must venture into long-haul and international markets. In doing so, however, the airline would venture into markets where other airlines dominate. American Airlines and United Airlines are among the dominant airlines in this market segment. In order for Southwest Airlines to effectively expand into international markets, it must form alliances with other companies. Alliances allow airlines to share airport facilities and integrate their services. Alliances are critical to profitability in international markets.

However, expanding into international markets can present several challenges for Southwest Airlines. Entering the international market forces the airline to use larger aircraft to ensure profitability. Southwest Airlines only uses Boeing 737 aircraft, which have a small capacity. A change in aircraft type can increase a company's operating costs. Due to the long flight times of international flights, Southwest would also need to introduce in-flight entertainment. This would force the airline to increase ticket prices. These factors can change the airline's image as a low-cost airline. In addition, the nature of international markets makes it difficult for foreign airlines to dominate domestic flights in another country. Entering international markets may force Southwest Airlines to use hub-and-spoke planning for international routes. This would pose several challenges for the airline as they use point-to-point scheduling on other routes.

Southwest is pursuing an expansion strategy through code sharing. The airline has entered into negotiations with Canada, England, Mexico and several island countries in the Caribbean. Volaris is one of the airlines that shares the code with Southwest Airlines (Esterl, 2009). Code sharing allows Southwest Airlines to share the routes of these airlines.

Penetrating international markets would be beneficial for Southwest Airlines. Code sharing would allow the airline to share customers with other airlines. This would reduce the company's need to establish its brand for new customers. Southwest Airlines could also use the acquisition to expand into international markets. Very few low cost airlines fly internationally. Therefore, there is limited competition on international low cost flights. Some of the low cost airlines that fly internationally are JetBlue and Virgin Atlantic. Therefore, Southwest Airlines would join these airlines to offer services to budget travelers.

Southwest Airlines plans to use William P. Hobby Airport as a hub for international flights. The airport meets federal standards for international airports. Additionally, the airport's expansion plans would facilitate further growth for Southwest Airlines. Southwest Airlines would use the airport to serve the Latin American market. This market has continued to grow over the past decade. Therefore, it presents a good opportunity for Southwest Airlines to profitably enter the international market. United Airlines is one of the leading American airlines serving the Latin American market. Therefore, Southwest Airlines has to adjust to strong competition from the airline. According to United Airlines, Southwest's presence in the international market could make some routes unprofitable.

Southwest Airlines has already submitted a proposal to the City of Houston detailing its expansion plans. If Southwest Airlines receives approval from the City of Houston, Customs and Border Protection will provide several resources to facilitate Southwest Airlines' international expansion. Operating international hobby flights would have a significant impact on Houston's economy. This can lead to a significant reduction in ticket prices. This is because Southwest Airlines usually offers cheap tickets. Southwest Airlines intends to increase traffic in the market with low fares.

Southwest Airlines intends to use the notion that it is an underdog in the airline market. This would improve the company's image with customers who do not prefer the often inefficient big airlines. This would help increase your competitiveness in the market.

Conclusion

Southwest Airlines intends to use its domestic success as a platform to enter the international market. The airline used various strategies to create a niche market from which to source its customers. However, success in the international market requires the airline to formulate different strategies. It is important for the airline to ensure that the strategies do not diminish the strength of the company's brand.

references

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