The strengths of Southwest Airlines include continuous growth and profitability. Further, unique and a cooperative culture, teamwork, and efficiency of operations are also strengths of Southwest Airlines. The company can achieve success in new markets as well as in existing market if it continues to maintain its strengths, and focus on modifying its boarding policy, and using cost effective planes, which will also enable the company to achieve competitive advantage in the marketplace. Weakness of company, however, include the fact that the company is now not ensuring proper management, as a result of which customers are not much satisfied as they were before. The company can achieve sustainable growth by ensuring improvement in management, and it can also attain its objectives in other countries also.
However, it is useful for the company as it can make predictions about the future, and can ensure proper functioning in order to achieve competitive advantage in future. Opportunities for Southwest are that it can expand its operations in other countries such as in Mexico, Caribbean, and Canada, where it can facilitate customers with its services. Threat for Southwest Airlines is increasing cost of fuel because of which customers avoid taking services of the company. Additionally, competitors that provide low cost service to customers are also a threat for Southwest Airlines. The company can manage cost of fuel with the help of a fuel hedging program. Southwest Airlines can, however, purchase fuel on the basis of rack prices that comprises of cost of location of transportation to several destinations. Southwest Airlines can also use instruments meant for financial hedging in order to decrease volatility linked with movement of fuel price. Hedging fuel price risk is also beneficial for the company as it allows the company to mitigate the volatility of cash flow, and it also provides protection against the short term increase in price, and also against long term increase in price (Daffir & Gajjala, 2016). It helps in ensuring that the company remains competitive for fuel. For Southwest Airlines, actively managed fuel hedging program is effective as it makes it easy for the company to adapt to new and changing market conditions, and this adaptation is any compromising the strengths, protective elements and aspects of the starting or initial position.
Southwest does not have any major or serious problems with management of working capital. This is because current ratio of company has shown almost consistent behavior in the year 2005 and 2006. The current ratio of the company for year 2005 is 0.95, while it is 0.90 for the year 2006. It is mostly considered that adequate current is 2.0. But, it is also a fact that airlines indicate current ratio 1 or even less than 1. From, the current ratio, it is evident that the cash inflow of the company is steady, and it is capable of meeting its liabilities. The company is capable of paying its current liabilities, and is also capable of selling its unproductive assets, which is again pointing out towards the fact that the company does not have any issue associated with working capital management. The company is properly managing its working capital, and is capable of meeting its future operational expenses as well as meeting its short term debts.
Consistent current ratio of company is representing that the company is managing its account receivable, and accounts payable. Further, the balance sheet of the company is also indicative of the fact that the company has satisfactory and almost constant debt ratio, inventory turnover, and asset turnover. Further, operating revenue of the company has shown significant increase, which is again representing that the company is not facing any serious concern regarding working capital management. The company can expand its operations, and can also improve its existing operations with the help of its resources because of adequate working capital management. Further, company has also sufficient funds, with the help of which it can ensure future growth, and can also excel in future operations of the company (Lorenzetti, 2014). The company, however, has adequate liquid resources in order to satisfy its short term liabilities, and to fulfill its operational expenses.
The modifications in the boarding procedure are not effective enough to resolve complaints about boarding policies. This is because, the company is paving the way to creation of inequality as it is reserving seats for passengers who are willing to pay more, while others remain deprived of seats. Even the company cannot earn more profits on the modified boarding arrangement. Southwest should reserve just few seats, and provide other seats on regular basis to customers so that they can be facilitated in an effective as well as in a timely manner. Customers are conscious about price, as they want to avail low priced products and services (Kumar, 2009). In the same manner, customers have considered Southwest Airlines because of low price, and now the company is offering seats at high price, which is unattractive for customers. The company has to offer affordable fares in order to attract more and more customers to get benefit from their services.
Customers will like to fly at low price, and this will help the company to reap more benefits in monetary terms. Goodwill and good repute of company will be established, which is helpful for the company to earn more revenues. Furthermore, the company needs makeover of technology in order to ensure efficiency in reservation system. Improvement in reservation system will make the company capable of serving customers in accordance with their needs and wants, and become capable of ensuring proper management. Further, this will also help the company to ensure efficiency of operation and attain desired targets.
Consideration of Southwest Airlines for Canadian, Mexican, and Carribean destinations has several advantages as well as disadvantages. The advantages in this regard include expansion of company, and creation of awareness about Airlines among people living in Canada, Mexico, and Caribbean. Further, it is also effective for the company as it will allow the company to achieve future growth. The company will become capable of facilitating customers with low cost airline. However, it will also help the company to establish international relations. It is because expansion of business allows organizations to make associations at international level, which make conduction of business easy for the company. It will also help the company to understand local culture properly before conduction of business so that failure can be avoided and success can be ensured. This is to say that this expansion will allow the company to go international, and conduct business at international level in order to get more benefits. This will also help in ensuring sustainability of the company. But, there are some disadvantages of this expansion. In order to start routes to Canada, Mexico, and Caribbean, Southwest Airline has to modify and bring necessary changes in traditional business model. This is because at some places, traditional business model do not work, and the company has to adapt new trends that are prevailing in the society.
The company has to be careful in doing this because improper modification will pave the way to failure of the company. Business plan is one of the most important documents that ensure success of the business. The company has to conduct research on market situations and trend prevailing there, and have to note peak timings during which customers in these countries like to travel. Failure is certain if the company fails to consider market situations.
Southwest Airlines is more profitable as compared to other main airlines in the United States. This is because it is performing in a batter manner those other airlines conducting their business in the United States. The business model of Southwest Airlines allows it to achieve efficiency in operations, consider customer demand, facilitate customers with low price, and focus on ensuring growth in future. The company, however, focuses on active forward thinking, and for this it has ensured hiring of skilled employees and associates. Further, the company has ensured friendly and cooperative environment, and also ensured supportive culture so that employees can work in an effectual manner, and ensure innovation and creativity in the organization.
The culture of company can be described in terms of setting right expectations, being humble and efficient, setting SMART and flexible goals and objectives, focusing on revenues as well as on costs, and being selective regarding market that they serve. Southwest Airlines is also enjoying cost advantage over its competitors as a result of which profitability of the company is more than other airlines (Tully, 2015). The company has maintained its position in the marketplace, and achieved leadership. Financial stability of the company is allowing the company to expand its business at international level, so that it can successfully make and facilitate customers in an effectual manner. The company is growing faster as compared to competitors because its service level is best, its cost is low, and its brand is putting customers in prime position. The company is even in favor of modest profit for not compromising on quality and efficiency. Additionally, the success and profitability of Southwest Airlines can be described in terms of combination of disciplined financial management and higher level of customer service. The company becomes capable of achieving its strategic goals by ensuring consistency in profitability via minimization of cost. Analysis of financial ratios of the company is also showing satisfactory condition of the company. The company was concerned with short routes, but now it is also focusing on introduction of long routes in order to further expand its business and facilitate customers. The profitability of company can also be described by its capability of hedging. The company focuses on hedging in order to make plans for profitability, for planning cash flows, and for lowering expense incurred for fuel. This is enabling the company to implement its cost leadership strategy in an effective manner, and provide cheap and convenient flight to passengers.
References
Daffir, S.M., & Gajjala, V.N. (2016). Fuel Hedging and Risk Management: Strategies For Airlines, Shippers And Other Consumers. John Wiley and Sons, New Jersey
Lorenzetti, L. (2014). Southwest now cleared for international departures. Fortune. Retrieved from:
http://fortune.com/2014/07/01/southwest-goes-international/
Tully, S. (2015). Southwest bets big on business travelers. Fortune. Retrieved from:
http://fortune.com/2015/09/23/southwest-airlines-business-travel/
Kumar, A. (2009). Southwest bets big on business travelers. Fortune. Retrieved from:
http://fortune.com/2015/09/23/southwest-airlines-business-travel/
