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The success of Southwest Airlines can be attributed to finding a niche, within the Industry, and managing its own growth within that niche. In creating a T.W.O.S analysis, one can begin to identify the direction Southwest needs to take in the future.
Threats
There is a risk in growing larger. By entering new markets Southwest Airlines will confront the larger carriers in their markets. While expanding the percentage of overhead cost could grow, opening the market they created to smaller carriers. America West is currently smaller in volume and aircraft in the markets in which Southwest calls home. By expanding into international markets, there will be new focus on international exchange and regulations. With international flights there may not be the ability to locate at no major airports and the culture may be different where foreign customers would expect the add-ons offered by other carriers. Air travel depends on economic factors such as government regulation and the United States economy. Due to the economy, all Airlines are reducing costs, in an effort to attract more customers, making the low cost differentiation of Southwest Airlines less noticeable. Improved telecommunications may lower demand for air travel, or may lower demand for discount airlines. Also, alternative forms of transportation, such as high-speed railway, could weaken demand for air travel.
Opportunities
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The financial health of the company suggests that investors would back growth into new ventures. Currently the lack of international and transcontinental markets are untapped by Southwest Airlines. The culture promoted and the established management will attract new experienced employees in growth. The desire from new markets, for their service, would suggest that entry into these markets would be welcomed. As other carriers focus on international markets, Southwest has the ability to enter the markets the larger companies have diverted their focus from. In a time of public consciousness about the workplace environment, Southwest Airlines can promote its recognized culture.
Weakness
Southwest Airlines has expanded its business to a point in which it must start to enter more markets where the larger carriers operate. Currently the lack of expansion into transcontinental markets and international markets will cause Southwest to purchase a variety of planes. As the company grows, it will become less able to react to threats of new entries into their market such as America West. Relying on a single type of aircraft and manufacturer, Southwest is susceptible to increase in cost or defects in their planes.
Strengths
Southwest has a strong, fun-loving, employee-oriented culture. The company's mission statement focuses on these aspects of the business. The result is a loyal employee base that is willing to work hard to achieve the company's goals. Southwest is able to gain loyal customers by offering low cost airfares. The founders held to beliefs that were outside of the competition, by resisting the temptation to expand rapidly, in both personnel and markets. By avoiding the transcontinental and international markets, allowed Southwest to concentrate on steady growth. The management identified that they were in a price sensitive market chose to cut out the extra amenities in airline travel, reducing costs and thus making it financially feasible to offer the lower cost to consumers. Southwest Airlines concentrated on internal strengths and efficiencies, such as rapid turnaround time, reusable boarding passes, and single style aircraft, to reduce overhead. Remaining a lean company allowed Southwest the ability to react to and seize opportunities. In fact, it has been that Southwest Airlines welcomes competition against their strategy believing that competition only makes them stronger. In maintaining a consistent management, Southwest has continued it's corporate and culture vision. Creativity in marketing and negotiation in the face of an obstacle has been proven in the history of the company.
Southwest Airlines strategy has been successfully implemented, and the above TOWS analysis does not indicate that a major shift in strategy should be made at this time. They should continue utilizing a cost leadership strategy to under price competitors and gain market share. This strategy has not only resulted in increased market share, but has also increased overall demand for air travel. Southwest should continue its market development strategy, focusing domestically. The opportunity to enter the international market is evident, but expansion should be avoided. The costs associated with an international plan could divert attention away form the current mission of offering the lowest domestic prices. There are numerous untapped markets in the U.S., many of which are actively seeking Southwest's presence. Additionally, competitors are now focusing on foreign markets, and deregulation there could result in price wars and increased competition.
In expanding domestically, Southwest should continue its focus strategy of providing frequent, point-to-point flights. If Southwest Airlines is to grow they must remain faithful to the process, which gave them success. Southwest should continue to promote its culture, as it has become one of the most recognizable in the industry. What has brought Southwest to the position it now enjoys, is the low cost of airfare. The expansion into new cities should be at a moderate pace to ensure adequate coverage of new markets. Ideal new cities will allow for non-stop flights. As the rage of the aircraft expands, the potential markets will also expand.
Southwest should continue to embrace new technologies such as ticket less travel and PC reservations. New technology also includes a commitment to new aircraft, which will result in a young, safe fleet of jets with longer range. All of these technologies will permit Southwest to contain costs, to expand to more markets, and to maintain its image as a safe and reliable carrier.
And finally, Southwest should continue to foster its remarkable culture. The company's fun-loving attitude and dedication to its employees have contributed both tangible and intangible benefits. It is a true competitive advantage. Since the beginning of Southwest Airlines, management has remained focused on their mission. A lesson to be learned from Southwest Airlines is that by remaining focused on your business, you can achieve great rewards.
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