Southwest airlines final

“Southwest Airlines just plane smart”
A Case Analysis
of
Southwest
Airlines
12 April 2012 – Longview Hall, LeTourneau Univeristy
CONTACT US
2100 S Mobberly Ave
Phone: 123-456-789
Email: entre@domain.com
© 2012 Entre- All Rights Reserved.
ENTREKiya Gage, Cullen Griffin, Josh Puryear

01. Overview and Current Performance
02. Key Issue Identification
03. Analysis of Vision, Mission and Objectives
04. Corporate-Level Strategies
05. Functional Strategies
06. Evaluating the External Environment
07. Marketing Analysis
ENTRE
Items to Discuss 01
© 2012 Entre - All Rights Reserved.

08. Financial Analysis
09. Evaluating Company’s Resources
10. Ability to Compete
11. Competitive Strength Assessment
12. Core Competency
13. Organizational Efforts for Good Strategy Execution
14. Ethics and Social Responsibility
ENTRE
Continued… 02

15. Culture
16. Analysis of Strategic Alternatives
17. Recommendation
18. Justification
19. Christian Leadership Distinctives
ENTRE
Continued… 03

ENTRE
Overview of Southwest Airlines 04
2 Scores and 6 years ago ….1966
2 Scores and 1 year ago….1971
Lamar Muse was hired as CEO to
begin the operations of Southwest Airlines.
June 18, 1971, Southwest flew
out their first flight.
The primary goal of Rollin King was to begin
A low cost and low fare airline that would
Allow passengers to fly between San Antonio,
Dallas, and Houston.

ENTRE
Overview of Southwest Airlines 05
Profits since 1973
Expansion
In 1981, the company expanded to 14
Destination cities. As of today, Southwest flies
To 72 cities in 37 states.
Southwest Airlines has continued to earn a
Profit even through the crisis of 2008.

ENTRE
Key Issue Identification 06
Cost of Operations Varied Company Factors
Social TrendsEconomic Conditions

ENTRE
Cost of Operations
Rising Labor Costs . In response to the war on terror
this would induce special training, increased awarareness,
passenger security upgrades, air marshals etc. Potential costs, such
as anti-weapons systems will increase expenses to the airlines.

ENTRE
Varied Company Factors
Competitive factors that impact Southwest Airlines
are fare sales, and capacity decisions made by
the company and its competitors.

ENTRE
Economic Conditions
The economic downturn directly affects people’s will
to travel by changing consumer ticket purchasing habits
such as, visiting friends and family during the holidays.

ENTRE
Social Trends
The ability to eliminate the need for businessmen to make
deals in person increases everyday. Skype, OoVoo, and
Cisco have made it possible to interact , peer-to-peer
or B2B to conduct sales, initiate and close contracts.

ENTRE
Mission Statement 11
The mission statement of Southwest
Airlines is dedication to the highest
Quality of Customer Service delivered with
a sense of warmth, friendliness, individual
Pride and company spirit.

ENTRE
Mission Statement to Employees 12

Best Place to work
Convenient Schedule
Desirable
Destinations
Safest, Most Efficient,
Most Reliable
ENTRE
13
Objectives
Do all in a way that that maintains a low cost
Structure and the ability to offer low fares.

ENTRE
Corporate Level Strategies 14
Broad Differentiation
Love Campaign
Ten minute turnaround
Low-Cost
1971 - $10 fare
Cut prices in half
Best-Cost
Regular priced ticket w/
Free gift

ENTRE
We‟d like to match their new fares, but we‟d have to raise ours! 15
$59 - 2 checked bags
Fees total $37
Actual Price $22 Actual Price $49
Fees total $10
$59 – 1 checked bag
United AirlinesSouthwest Airlines

ENTRE
Functional Strategies of Southwest Airlines 16
Herb Kelleher
Cofounder and longtime CEO
You’ve got to take the
Time to listen to
People’s ideas.
Colleen Barrett
President - 2001
Primary goal was to
Ensure employees felt
Good about what they
Were doing.
Gary Kelly
Current CEO
Continues managing the
Company the same ways
Previous.

ENTRE
Porters „ 5 ‟ Forces 17
Potential New Entrants
Substitue Products
And Services
Bargaining Powers
Of Suppliers
Bargaining Power of Buyers
Competitive Rivalry

ENTRE
Competitive Rivalry
American Airlines
United Delta
US AIR
Jetblue
Southwest

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Bargaining Power of
Suppliers
Aircraft Manufactures
Aircraft Leasing
Fuel Companies
Airports
Food Service Companies

ENTRE
Potential New
Entrants
Foreign Carriers
Regional Startups

ENTRE
Bargaining Power of
Buyers
Travel Agents
Business Travelers
Pleasure Travelers

ENTRE
Substitute Products
and Services
Alternate Traveling
Videoconferencing
Private Transportation

4 P’s Price
Product
Place
Promotion
ENTRE
Marketing Analysis 23
Product: No frills airline service.
Customer Service
Place: Locations across
The United States. Flying into
Smaller airports.
Price: Low fares, Free bags,
Biggest Strategic Advantage.
Promotion: Clever print and
Advertisements. Runs promotions
On certain flights. Rapid Rewards.

ENTRE
Financial Analysis 24
Southwest Airlines Finacncal Analysis
Year 2011 2007 2006 2005 2004 2003
Profit Ratios
Operating Profit Margin 4.4% 8.0% 10.3% 9.6% 6.2% 6.4%
Net Profit Margin 1.1% 6.5% 5.5% 6.4% 3.3% 6.3%
Return on Stockholder's equity 2.6% 9.3% 7.7% 7.3% 3.9% 7.4%
Earnings Per Share 0.23$ 0.84$ 0.61$ 0.67$ 0.38$ 0.54$
Luquidity Ratios
Current Ratios 0.96 0.92 0.71 0.94 0.56 1.34
Working Capital (in millions of $) -188 -395 -826 -228 -1676 590
Leverage Ratios
Debt-to-assets ratio 61.9% 58.6% 58.6%
Debt-to-equity ratio 54.5% 30.1% 26.2% 29.9% 33.4% 30.4%
Long-term-to-equity ratio 45.2% 29.5% 24.3% 20.9% 30.8% 26.4%
Coverage ratio 3.57 6.65 7.30 5.94 4.59 4.16
Other Important Measures of Financial Performance
Dividend yield on common stock 21% 17% 12% 11% 11% 11%
Price-earnings ratio 37.22 14.52 25.11 24.52 42.84 29.89
Dividend payout ratio 7.8% 2.1% 3.0% 2.7% 4.7% 3.3%
Free cash flow (in millions of $) -20 1,679 707 -173 -481 -93

Sensible Expansion
Business Model Effieciency
Team Spirit
ENTRE
SWOT Analysis 25
Strengths
No Frills
Image
Product
Innovation
Safety Record
Customer Service
Flexibility

No Alliances
Easily mimicked
No baggage transfer
Small Room for Development
ENTRE
SWOT Analysis 26
Weaknesses
Multi-country coverage

Low-cost position
Expansion
Mergers or Aquisitions
ENTRE
SWOT Analysis 27
Opportunities
Societal Values
Long-term industry growth
Growth/smaller airports

Cost of operations
Weather
Varied comp factors
ENTRE
SWOT Analysis 28
Threats
Terrorist Attacks
Number of RivalsComp Economies of Scale

ENTRE
Value Rareness Imitability Organization 29
Competitive Advantages
Value: through low-cost initiatives
Imitability: Highly Competitive.
Rareness: One of the few companies
That offer low-fares.
Organization: Research and development
VALUE
RARENESS
IMITABILITY
ORGANIZATON

ENTRE
Competitive Strength Assessment 31
Rating Score Rating Score Rating Score Rating Score
KeySuccessFactors Weight
Advertising 0.05 3 0.15 3 0.15 2 0.1 2 0.1
CostStructure 0.2 3 0.6 2 0.4 3 0.6 2 0.4
ServiceQuality 0.1 3 0.2 3 0.3 2 0.2 1 0.1
ContractedAirports 0.1 3 0.3 3 0.3 2 0.2 2 0.2
PriceCompetitiveness 0.15 4 0.6 3 0.45 3 0.45 3 0.45
Management/Culture 0.2 4 0.8 2 0.4 3 0.6 2 0.4
FinancialPosition 0.15 4 0.6 3 0.45 2 0.3 3 0.45
MarketShare 0.05 3 0.15 3 0.15 1 0.05 1 0.05
Total 3.5 2.6 2.5 2.15
Therating4=majorstrength,3=minorstrength,2=minorweaknessand1=majorweakness.
Rival3Rival2Rival1SouthwestAirlines

ENTRE
Core Competency 32
Southwest Airlines has continued
To make sure their employees are
Happy which in return, keeps
Customers happy.

ENTRE
Organizational Efforts for Good Strategy Execution 33
Southwest Airlines
is intereseted in people
Who externalize.
Southwest wants employees
Who work well in teams,
Have good judgement, and
Who are not selfish.
The Federal Aviation
Administration training
courses

ENTRE
Organizational Efforts for Good Strategy Executiion 34
Employees who had been there
And done that understand who
Will be under them.
Operation Kick Tail
Managers are to spend
At least 1/3 of their time
Observing employees.

ENTRE
Ethics and Social Responsibility 35
Named in the top 50
Southwest offers donations to organizations
-Aid Families Facing Serious Illnesses
-Provide Support for our Military and Families
-Developing Youth Leadership Programs
- Assist in Disaster Preparedness and Response
Ranked number 7 in 2009 for the
Performance of the company during the
Crisis of 2008.

Laid Back
Employees
Enjoyable
Customers 2nd
ENTRE
The Culture of Southwest Airlines 36
Culture

ENTRE
Recommendation and Justification 37

ENTRE
www.entre.com
Thank You !

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