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  • 1. “Southwest Airlines just plane smart”A Case AnalysisofSouthwestAirlines12 April 2012 – Longview Hall, LeTourneau UniveristyCONTACT US2100 S Mobberly AvePhone: 123-456-789Email: entre@domain.com© 2012 Entre- All Rights Reserved.ENTREKiya Gage, Cullen Griffin, Josh Puryear
  • 2. 01. Overview and Current Performance02. Key Issue Identification03. Analysis of Vision, Mission and Objectives04. Corporate-Level Strategies05. Functional Strategies06. Evaluating the External Environment07. Marketing AnalysisENTREItems to Discuss 01© 2012 Entre - All Rights Reserved.
  • 3. 08. Financial Analysis09. Evaluating Company’s Resources10. Ability to Compete11. Competitive Strength Assessment12. Core Competency13. Organizational Efforts for Good Strategy Execution14. Ethics and Social ResponsibilityENTREContinued… 02© 2012 Entre - All Rights Reserved.
  • 4. 15. Culture16. Analysis of Strategic Alternatives17. Recommendation18. Justification19. Christian Leadership DistinctivesENTREContinued… 03© 2012 Entre - All Rights Reserved.
  • 5. ENTREOverview of Southwest Airlines 042 Scores and 6 years ago ….19662 Scores and 1 year ago….1971© 2012 Entre - All Rights Reserved.Lamar Muse was hired as CEO tobegin the operations of Southwest Airlines.June 18, 1971, Southwest flewout their first flight.The primary goal of Rollin King was to beginA low cost and low fare airline that wouldAllow passengers to fly between San Antonio,Dallas, and Houston.
  • 6. ENTREOverview of Southwest Airlines 05Profits since 1973Expansion© 2012 Entre - All Rights Reserved.In 1981, the company expanded to 14Destination cities. As of today, Southwest fliesTo 72 cities in 37 states.Southwest Airlines has continued to earn aProfit even through the crisis of 2008.
  • 7. ENTREKey Issue Identification 06© 2012 Entre - All Rights Reserved.Cost of Operations Varied Company FactorsSocial TrendsEconomic Conditions
  • 8. ENTREKey Issue Identification 07© 2012 Entre - All Rights Reserved.Cost of OperationsRising Labor Costs . In response to the war on terrorthis would induce special training, increased awarareness,passenger security upgrades, air marshals etc. Potential costs, suchas anti-weapons systems will increase expenses to the airlines.
  • 9. ENTREKey Issue Identification 08© 2012 Entre - All Rights Reserved.Varied Company FactorsCompetitive factors that impact Southwest Airlinesare fare sales, and capacity decisions made bythe company and its competitors.
  • 10. ENTREKey Issue Identification 09© 2012 Entre - All Rights Reserved.Economic ConditionsThe economic downturn directly affects people’s willto travel by changing consumer ticket purchasing habitssuch as, visiting friends and family during the holidays.
  • 11. ENTREKey Issue Identification 10© 2012 Entre - All Rights Reserved.Social TrendsThe ability to eliminate the need for businessmen to makedeals in person increases everyday. Skype, OoVoo, andCisco have made it possible to interact , peer-to-peeror B2B to conduct sales, initiate and close contracts.
  • 12. ENTREMission Statement 11© 2012 Entre - All Rights Reserved.The mission statement of SouthwestAirlines is dedication to the highestQuality of Customer Service delivered witha sense of warmth, friendliness, individualPride and company spirit.
  • 13. ENTREMission Statement to Employees 12© 2012 Entre - All Rights Reserved.
  • 14. Best Place to workConvenient ScheduleDesirableDestinationsSafest, Most Efficient,Most ReliableENTRE13© 2012 Entre - All Rights Reserved.ObjectivesDo all in a way that that maintains a low costStructure and the ability to offer low fares.
  • 15. ENTRECorporate Level Strategies 14© 2012 Entre - All Rights Reserved.Broad DifferentiationLove CampaignTen minute turnaroundLow-Cost1971 - $10 fareCut prices in halfBest-CostRegular priced ticket w/Free gift
  • 16. ENTREWe‟d like to match their new fares, but we‟d have to raise ours! 15© 2012 Entre - All Rights Reserved.$59 - 2 checked bagsFees total $37Actual Price $22 Actual Price $49Fees total $10$59 – 1 checked bagUnited AirlinesSouthwest Airlines
  • 17. ENTREFunctional Strategies of Southwest Airlines 16© 2012 Entre - All Rights Reserved.Herb KelleherCofounder and longtime CEOYou’ve got to take theTime to listen toPeople’s ideas.Colleen BarrettPresident - 2001Primary goal was toEnsure employees feltGood about what theyWere doing.Gary KellyCurrent CEOContinues managing theCompany the same waysPrevious.
  • 18. ENTREPorters „ 5 ‟ Forces 17© 2012 Entre - All Rights Reserved.Potential New EntrantsSubstitue ProductsAnd ServicesBargaining PowersOf SuppliersBargaining Power of BuyersCompetitive Rivalry
  • 19. ENTREPorters „ 5 ‟ Forces 18© 2012 Entre - All Rights Reserved.Competitive RivalryAmerican AirlinesUnited DeltaUS AIRJetblueSouthwest
  • 20. ENTREPorters „ 5 ‟ Forces 19© 2012 Entre - All Rights Reserved.Bargaining Power ofSuppliersAircraft ManufacturesAircraft LeasingFuel CompaniesAirportsFood Service Companies
  • 21. ENTREPorters „ 5 ‟ Forces 20© 2012 Entre - All Rights Reserved.Potential NewEntrantsForeign CarriersRegional Startups
  • 22. ENTREPorters „ 5 ‟ Forces 21© 2012 Entre - All Rights Reserved.Bargaining Power ofBuyersTravel AgentsBusiness TravelersPleasure Travelers
  • 23. ENTREPorters „ 5 ‟ Forces 22© 2012 Entre - All Rights Reserved.Substitute Productsand ServicesAlternate TravelingVideoconferencingPrivate Transportation
  • 24. 4 P’s PriceProductPlacePromotionENTREMarketing Analysis 23© 2012 Entre - All Rights Reserved.Product: No frills airline service.Customer ServicePlace: Locations acrossThe United States. Flying intoSmaller airports.Price: Low fares, Free bags,Biggest Strategic Advantage.Promotion: Clever print andAdvertisements. Runs promotionsOn certain flights. Rapid Rewards.
  • 25. ENTREFinancial Analysis 24© 2012 Entre - All Rights Reserved.Southwest Airlines Finacncal AnalysisYear 2011 2007 2006 2005 2004 2003Profit RatiosOperating 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 Stockholders 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 RatiosCurrent Ratios 0.96 0.92 0.71 0.94 0.56 1.34Working Capital (in millions of $) -188 -395 -826 -228 -1676 590Leverage RatiosDebt-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 4.16Other Important Measures of Financial PerformanceDividend yield on common stock 21% 17% 12% 11% 11% 11%Price-earnings ratio 37.22 14.52 25.11 24.52 42.84 29.89Dividend 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
  • 26. Sensible ExpansionBusiness Model EffieciencyTeam SpiritENTRESWOT Analysis 25© 2012 Entre - All Rights Reserved.StrengthsNo FrillsImageProductInnovationSafety RecordCustomer ServiceFlexibility
  • 27. No AlliancesEasily mimickedNo baggage transferSmall Room for DevelopmentENTRESWOT Analysis 26© 2012 Entre - All Rights Reserved.WeaknessesMulti-country coverage
  • 28. Low-cost positionExpansionMergers or AquisitionsENTRESWOT Analysis 27© 2012 Entre - All Rights Reserved.OpportunitiesSocietal ValuesLong-term industry growthGrowth/smaller airports
  • 29. Cost of operationsWeatherVaried comp factorsENTRESWOT Analysis 28© 2012 Entre - All Rights Reserved.ThreatsTerrorist AttacksNumber of RivalsComp Economies of Scale
  • 30. ENTREValue Rareness Imitability Organization 29© 2012 Entre - All Rights Reserved.Competitive AdvantagesValue: through low-cost initiativesImitability: Highly Competitive.Rareness: One of the few companiesThat offer low-fares.Organization: Research and developmentVALUERARENESSIMITABILITYORGANIZATON
  • 31. Case Study 30
  • 32. ENTRECompetitive Strength Assessment 31© 2012 Entre - All Rights Reserved.Rating Score Rating Score Rating Score Rating ScoreKeySuccessFactors WeightAdvertising 0.05 3 0.15 3 0.15 2 0.1 2 0.1CostStructure 0.2 3 0.6 2 0.4 3 0.6 2 0.4ServiceQuality 0.1 3 0.2 3 0.3 2 0.2 1 0.1ContractedAirports 0.1 3 0.3 3 0.3 2 0.2 2 0.2PriceCompetitiveness 0.15 4 0.6 3 0.45 3 0.45 3 0.45Management/Culture 0.2 4 0.8 2 0.4 3 0.6 2 0.4FinancialPosition 0.15 4 0.6 3 0.45 2 0.3 3 0.45MarketShare 0.05 3 0.15 3 0.15 1 0.05 1 0.05Total 3.5 2.6 2.5 2.15Therating4=majorstrength,3=minorstrength,2=minorweaknessand1=majorweakness.Rival3Rival2Rival1SouthwestAirlines
  • 33. ENTRECore Competency 32© 2012 Entre - All Rights Reserved.Southwest Airlines has continuedTo make sure their employees areHappy which in return, keepsCustomers happy.
  • 34. ENTREOrganizational Efforts for Good Strategy Execution 33© 2012 Entre- All Rights Reserved.Southwest Airlinesis intereseted in peopleWho externalize.Southwest wants employeesWho work well in teams,Have good judgement, andWho are not selfish.The Federal AviationAdministration trainingcourses
  • 35. ENTREOrganizational Efforts for Good Strategy Executiion 34© 2012 Entre- All Rights Reserved.Employees who had been thereAnd done that understand whoWill be under them.Operation Kick TailManagers are to spendAt least 1/3 of their timeObserving employees.
  • 36. ENTREEthics and Social Responsibility 35Named in the top 50Southwest offers donations to organizations© 2012 Entre- All Rights Reserved.-Aid Families Facing Serious Illnesses-Provide Support for our Military and Families-Developing Youth Leadership Programs- Assist in Disaster Preparedness and ResponseRanked number 7 in 2009 for thePerformance of the company during theCrisis of 2008.
  • 37. Laid BackEmployeesEnjoyableCustomers 2ndENTREThe Culture of Southwest Airlines 36© 2012 Entre - All Rights Reserved.Culture
  • 38. ENTRERecommendation and Justification 37© 2012 Entre- All Rights Reserved.
  • 39. ENTREwww.entre.com© 2012 Entre - All Rights Reserved.Thank You !