Question

1. Southwest Airline (SWA) is one of the most well-known low-cost airlines in the world. The company has been profitable for more than 40 years, a feat that no other airline has achieved.
   1. How would you characterize the generic business strategy followed by Southwest Airlines? Why? Provide evidence. If you think their strategy changed over time, state that as well.
   2. Your textbook mentions certain industry conditions under which each generic strategy is viable, as well as some risks associated with each. Based on your answer to part (a), are the conditions for that generic strategy to be viable satisfied in this case?
   3. Every generic strategy also comes with a list of risks or pitfalls to avoid. Do any of the risks for that generic strategy apply to SWA?

Answer 1

a) Southwest Airlines or LUV  become thriving airline company operating over a past decades in a time when most airlines have been struggling. This  airline most likely to survive the challenges of the coronavirus crisis.Southwest Airlines' business model is based on efficient services, operating under low-cost pricing and creative logistics solutions. their business strategy deals with on customer experience and looking ahead. Southwest airlines achieved multiple competitive advantages that have allowed them to stay relevant at this changing world.

Features of south west airlines

• The only large U.S. airline that is also a low-cost carrier.
• It is more flexible than most other large airlines.
• Continues to improve business model and innovative practices.
• Recruiting and retaining motivated employees.

The fall in the demand for flights during the pandemic put several airlines in loss or totally out of business, but Southwest survived; it is strong in both perspective - size and cost.

Measuring strength is based on size. According to this advantaged theory, large airlines will face fall, but they will not go out of business. LUV  is one of the big four airlines in the U.S like American Airlines ,Delta and United. Southwest has bigger reserves in the form of cash, credit, and other assets.

Bigger always not mean as better, but it usually does mean safer when it comes to investing.

Changing strategies of south west airlines

Southwest Airlines has set various strategies , policies and procedures that make them flying easy- one of these their cancellation policy-  it allow customers to cancel a reservation up to 30 minutes before the flight's departure also makes the funds from the cancellation are available for a future trip. This ensure that the customers of Southwest Airlines remain satisfied with them. This type of flexible policies help the airline to build high levels of brand loyalty.

b) according to Michael Porters 5 Generic Strategy.

1. Focus- Low Costs

2.Differentiation.

3. Best Value-Strategy.

4. Low Cost -Strategy.

5. Focus –Best value.

They are satisfying all this stategies. Southwest Airlines also offer one of the better rewards programs in the airline industry provide points to customers; They can use the points to purchase future flights. It also had a partnership with Chase Bank and offers customers a credit card.

c) risks of generic statergy.

Risks of Focus-:This strategy is imitated: The target segment becomes structurally unattractive; it erodes. Demand vanishes and competitors overwhelm the segment.

Differentiation risk- Cost proximity is lost then Differentiation focuses to achieve even greater polarity in the segments.

Risk in cost leadership - Technology changes causes this risk.

Here risk of focus is applicable to south west airlines .It can overruled by collusion , stategic alliances, mutual service etc.