Strategic Alternatives Assessment-Southwest Airlines
Southwest Airlines SWOT Analysis
Southwest Airlines has achieved significant growth over the years by leveraging the airline industry’s opportunities and consistently providing high-quality services to its customers. The company also has various advantages over its competitors. One of the advantages is high brand value. According to Brown (2022), Southwest Airlines is ranked at position four among the most valuable airline brands in the world. The second advantage is low operating cost because the company uses a single aircraft. Therefore, it is able to set lower prices than other airlines, thus attracting and retaining more customers. The third advantage is the company’s service strategy. Southwest Airlines offers direct, non-stop flights to its customers through the point-to-point service, thus reducing flight delays and increasing convenience for its customers.
Southwest Airlines can benefit from various opportunities in the airline industry. One of them is expanding into global markets. The demand for affordable air travel is high in most countries worldwide, thus creating markets for airline companies such as Southwest Airlines. The company can use its low-cost strategy to gain a large market share in developing countries. The second opportunity is expansion into cargo transportation. Southwest Airlines can expand its freight business by transporting cargo to different parts of the world rather than only offering passenger transportation. The third opportunity is the increase in the demand for long-distance flights. Southwest Airlines can focus on long-distance flights to increase revenue and create a competitive advantage.
The main competitors threatening the company’s growth are American Airlines, Delta Air Lines, Frontier Airlines, and Spirit Airlines. The main risk these competitors pose is reduced market share, which could lead to reduced revenue and profit. Southwest Airlines should work on its weaknesses to increase its competitive advantage. One of the weaknesses is the lack of diversification. The company has maintained a single source of revenue since it was established, posing a risk of massive losses in case of an economic downturn. The second weakness is overdependence on the United States market. Southwest Airlines mainly operates within the United States, thus limiting its growth potential due to stiff competition in the United States airline industry.
Strategic Alternatives That Create Value for the Company
The main strategic alternatives that create value for Southwest Airlines are market development, market growth, and product development. Firstly, market development includes using intelligence to expand its market share and increase its competitive advantage. On the other hand, product development includes improving the quality of a product to attract more customers. Thirdly, market growth includes expanding into new markets to increase profitability and competitive advantage. Market growth and development focus on external growth, whereas product development focuses on internal growth. Market development and expansion enable a company to gain a competitive advantage by expanding its customer base. The main drawback of market development is that it requires a high capital investment. Market development also poses a risk of incurring losses when the development efforts do not pay off. The main drawback of market expansion is uncertainty about the business’s success due to the complexity of adapting and operating in compliance with the business laws and regulations in the new market. The main drawback of product development is the risk of evolving markets, which could lead to changes in customer needs and preferences. Therefore, the company could incur a lot of money developing its product but be unsuccessful in the market.
Using a Decision Matrix to Identify the Leading Alternative
I would use a decision matrix to brainstorm the most appropriate criteria to evaluate the leading alternative. For example, I can get ideas from customers and business people with experience in airline operations to determine the most suitable alternative. I would also use the decision matrix to assign a relative weight to every criterion selected to evaluate the leading alternative based on the criterion’s importance to the situation. According to Egelhoff & Wolf (2017), assigning weight to every criterion can be done by distributing ten points among every criterion based on team consensus and discussion and requesting every member to assign weights to every criterion. I would determine the values used to distinguish between each point by considering the consequences of each option based on the impact on stakeholders. The decision matrix would be essential in selecting the best option, but the difficulty in determining the proper criteria limits its value to a decision maker. For instance, less important criteria may be included, thus distracting decision-makers from settling on the right decision.
Factors Inhibiting the Success of the Optimal Strategic Alternative Identified and How the Issues Can Be Addressed/Corrected
The optimal strategic alternative that Southwest Airlines should use to create a competitive advantage and expand its growth is market expansion. The alternative can help the company achieve long-term success by expanding its market share. However, there are some factors that might inhibit the success of this alternative. The main factors include government regulations in the new markets and high capital investment. The issue of government regulations may be addressed and corrected by forming strategic alliances with companies that have been operating in the market to better understand government regulations and acquire the relevant licenses and business permits. The issue of high capital investment can be addressed and corrected by first focusing on emerging economies that do not have stiff competition because they would not require high capital investment since extensive marketing would not be needed. The revenue generated from emerging economies can fund the expansion into developed economies.
Elements That Lend Themselves to a Firm’s Growth and How Each Might Be Achieved
According to Burns (2016), a firm’s growth is categorized into organic, partnership, strategic, and internal growth. Organic growth arises when a business creates the right conditions that promote expansion, such as increasing the physical space where the firm is located and increasing product categories. A partnership arises when a company merges with another company to create more market opportunities. Strategic growth occurs when a company focuses on specific initiatives to achieve long-term growth. Internal growth arises from maximizing internal processes to expand the business and increase revenue. One of the elements that lend themselves to a firm’s growth is increasing productivity and efficiency. A firm may pursue growth strategies to increase efficiency in its production process by reducing production costs and increasing productivity by increasing the number of products produced per production session. Increasing productivity and efficiency can be achieved by using technology. The second element is diversification. A firm may pursue growth to diversify its products or services portfolio based on the level of competition in the market. Further, diversification might be achieved by creating new products and services based on customer needs and preferences. The third element is trying out new business models. A firm may pursue growth to change how it does business based on the changes in the business environment. This element can be achieved by changing operations within the firm. For example, a firm may automate its operations to increase efficiency and adapt to the technological changes in the business environment.
References
Brown, J. (2022, July 13). How Southwest Airlines has won over travelers. Investopedia. Retrieved March 5, 2023, from https://www.investopedia.com/articles/investing/061015/how-southwest-different-other-airlines.asp.
Burns, P. (2016). Strategies for growth. Entrepreneurship and Small Business, 328–357. https://doi.org/10.1007/978-1-137-43034-2_13.
Egelhoff, W. G., & Wolf, J. (2017). Decision-making within Matrix Structures. Understanding Matrix Structures and Their Alternatives, 131–160. https://doi.org/10.1057/978-1-137-57975-1_6.
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Question 
Strategic Alternatives Assessment
The purpose of this assignment is to analyze a company’s strengths and weaknesses in order to recommend feasible value-enhancing alternatives.
Consider the publicly traded company your CLC group analyzed in the Environmental and Industry Analysis assignment. In a paper of 1,000-1,200 words, discuss potential growth opportunities and strategies for your selected company and compare the advantages and disadvantages of each opportunity.
Strategic Alternatives Assessment-Southwest Airlines
Conduct a SWOT analysis for your selected company and discuss your findings. What advantages does your company have over its competition? What opportunities exist in the industry from which your company can benefit? Who is your company’s competition, and what types of risks might they pose? What weak areas could your company improve to compete with its strongest competitors?
Identify strategic alternatives that create value for the company. Which ones are focused on internal growth and what do they offer to the company? What are the drawbacks of these strategies? Which ones are focused on external growth, and what do they offer the company? What are the drawbacks of these strategies?
How would you use a decision matrix to identify the leading alternative? Explain how you determined the values used to distinguish between each option. What about the matrix, if anything, may be limited in its use value to an analyst or decision maker?
What factors might inhibit the success of the identified optimal strategic alternative? How can the issues you identified be addressed and corrected?
Growing an organization is not always about increasing the size of the firm. If expansion is not the main focus, what other elements lend themselves to growth of the firm? How might each be achieved?