Southwest Airlines is a company that represents the revolutionary changes in the air industry. The introduction of low-cost airliners is threatening the existence of some of the older companies, especially considering that younger companies have adapted to these changes (Boyd, 2017). For this reason, the travel charges for Emirates Airways are relatively higher than Southwest Airlines, and this is another possible reason for the rapid growth of the latter. There is a number of resource-efficient decisions and strategies implemented in the company that allows it to achieve a competitive advantage.
The resources that underline the strong position of Southwest Airlines in the US Airline industry include labor efficiency, cheaper maintenance, as well as fuel and back-office operations expenses. Such an organization allows the company to save costs and, as a result, offer lower prices in the market. Therefore, the strong positions are granted by the orientation at low-cost price range orientations, which does not have as many competitors.
Increased efficiency of Southwest Airlines is achieved through the use of a point-to-point approach. Southwest airlines currently employ the leadership cost strategy. In this strategy, the company competes for customers based on the value of services and goods presented. The company’s policies are visible through low-cost plans. For instance, point-to-point deliveries, thereby providing more flights. Also, Southwest uses secondary airports to reduce travel delays, thus cutting the company’s airport operation costs (Knorr and Arndt 150). Joining the international market would mean a change of strategy as the new long-haul aircraft would mean more expenses. The company would use larger airports and offer services during the flight. Also, joining the international market would mean more customers and profits as the company already has vast customers. The performance of Southwest would have a positive influence due to new routes and an added number of customers in the international market. Also, the positive influence will be a result of strategic change.
There are numerous expenses involved in the operations of the aircraft industry. However, more than half of the expenses are divided between the four main categories. According to the Federal Aviation Administration report, the largest expense of the airline industry is labor, which constitutes 32.3 percent of the overall operating costs (Federal Aviation Administration, 2019). It is worth noting that nearly two-thirds of the air industry expenses are fixed. The largest non-fixed expense is labor, as it constitutes around 75% of non-fixed costs. Hence, by decreasing its expenses, the company is able to achieve a competitive advantage.
According to the VRIO approach, the resources of Southwest airlines can be categorized as follows. The company sells tickets to flights, which is a valuable product. However, the cost of those tickets is much lower than among competitors, which makes the price of tickets a rare resource. Cheap flight tickets are inimitable in the case of Southwest Airlines because the price is ensured through unique operational strategies that ensure efficient flow at a low expense rate. Finally, the company’s resources are well-organized. This can be seen through a well-established system of point-to-point flights and the reliance on a highly productive workforce. Ensuring high productivity needs are a well-organized code of conduct and operations.
Southwest company serves customers on point-to-point services over short distances, and to grow, the company should focus on dealing with its weaknesses. The weaknesses of the company include narrow profit margins due to cost leadership and a slender presence in the international aviation market. These weaknesses indicate that Southwest has strategies that restrict its growth. Southwest, therefore, should expand its business margin into the international aviation market and establish new partnerships to grow.
By acquiring new and vast partners, the company would be able to dominate the international market share. Southwest should also expand into the long-haul market and add long-range aircraft. Long-haul service would enable the company to reach its global market; therefore, an increased profit. In addition, the company would incur lots of costs when it uses its long-range aircraft on regional routes. Thus, to operate economically, Southwest would have to venture into long-haul markets (Fu et al. 37). The company also should expand its international services as these are some of the indications of business growth. Through expansion to international services, the company’s current strategy would have impacts requiring alteration.
In conclusion, Southwest Airlines is an example of a company that introduced a revolutionary approach to the air industry. By cutting its expenses on nearly all possible areas of operations, the company managed to gain a competitive advantage by offering flight tickets at the low-cost segment. Besides, according to the VRIO framework, the resources that Southwest Airlines possesses match all the parameters of a competitive product. Therefore, the company may invest in the expansion to the international markets. Although this transition may pose numerous challenges to a company, with the right marketing and managerial approach, the possible outcomes of such expansion may provide new opportunities. With such opportunities, the company may enjoy larger revenue and profitability.
References
Fu, X., Jin, H., Liu, S., Oum, T. H., & Yan, J. (2019). Exploring network effects of point-to-point networks: An investigation of the spatial patterns of Southwest Airlines’ network. Transport Policy, 76, 36-45.
Knorr, A., & Arndt, A. (2018). Most Low-Cost Airlines Fail (ed): Why Did Southwest Airlines Prosper?. In Competition versus predation in aviation markets (pp. 145-170). Routledge.
Ren, J. (2020). Fare impacts of Southwest Airlines: A comparison of nonstop and connecting flights. Journal of Air Transport Management, 84, 101771.