southwest airlines case study
Instructions: Prepare a 500-word financial analysis (excluding tables, figures, and addenda) of a chosen company following the nine-step assessment process detailed in Assessing a Company’s Future Financial Health.
In this topic, apply the next two steps of the nine-step assessment process to develop a 500-word analysis of your chosen company: SOUTHWEST AIRLINES
STEP 3 – Investments to Support the Business Unit Strategy or Strategies
STEP 4 – Future Profitability and Competitive Performance
Solution.
southwest airlines case study
Southwest Airlines Company is one of the most famous low cost carrier flights entities in the United States of America. Recently, the entity has openly stated its ambition to expand its operations to increase its market share in the airline industry and eventually increase its profitability. The company intends to seek equity finance from willing and potential investors in order to achieve its long-term strategy. Southwest Airlines pose a good and stable future financial health that investors can rely on making their decisions to invest in the company.
Southwest Airlines Company has identified three broad market segments for its services. The company has categorized its market along geographic lines, psychographic lines, and behavioral lines. Along geographical lines, the company has different customers that take international flights and those that operate in the domestic flights. These two groups of flight services have been distinguished to serve the purpose of the specific segment they operate. The international flight customers require flights that can cover a long distance with ease. Customers taking international flights pay more travel fees than other flight users. The company also recognizes the customers taking domestic flights and ensures it has services that serve their needs. Domestic users of the flight services take flights for relatively shorter distances as compared to their international counterparts. The company offers airline services that cover short distances within the country at affordable costs. The entity also offers extra services such as immediate booking and late cancellation of tickets to facilitate the efficiency of traveling on the users in this segment. Along psychographic lines, Southwest Airlines Company has segmented its markets into the customers taking flights for leisure activities and those that make for business purposes. The company offers immediate bookings and last minute cancellation of tickets to the business category. Along behavioral lines, the entity has segmented its market into segments that are result oriented. These segments include the seasonal or occasional customers and the rapid reward customers (“Forbes Welcome”, 2016).
As a low-cost carrier cost Flight Company, the company’s target market is the business class customers. This group of customers constitutes the largest portion of the company’s revenue. Business class customers are the most frequent users of the airline services in the company and concentrating in the group would increase the entity’s profit. The company’s competitor such as Delta Airlines does not concentrate in this group of customers implying that targeting the group will give the company a comparative advantage. The company has been long in the airline industry making it have sufficient resources to serve this group of clients. The concentration of the business class customers will serve as a service differentiation I the company making the increase the demand for its services (Milisavljevic, 2013).
The airline industry is an aggressive industry requiring frequent innovations to meet the industry standards. The entity should not allocate all its resources in the new target market but also allocate to its existing target market to do a multi-segment marketing. The airline service industry is a delicate industry and overconcentration in one target market may lead to the downfall of the existing targets. Southwest Airlines Company should combine both the new target markets and existing target markets to facilitate an overall growth of the company (McGee, 2015).
References
Forbes Welcome. (2016). Forbes.com. Retrieved 6 April 2016, from http://www.forbes.com/sites/stanphelps/2014/09/14/southwest-airlines-understands-the-heart-of-marketing-is-experience/#27f97e886060
McGee, T. (2015). Southwest Heart Flies On Social. Target Marketing. Retrieved 6 April 2016, from http://www.targetmarketingmag.com/article/social-worked-southwest-airlines-got-new-heart-ground/
Milisavljevic, M. (2013). Value oriented strategic marketing. Marketing, 44(4), 299-309. http://dx.doi.org/10.5937/markt1304299m
