1.0 Introduction
Operating in a constantly changing business environment is a challenging task. Therefore, those organizations are most likely to develop and expand that take strategic initiative and avail opportunities available to them. However, the expansion could be international or regional where decision is made on the basis of target market and competing regions. This paper overviews case of Southwest Airline and proposes a marketing plan for expansion in a new market.
2.0 Overview of South West Airlines
South West Airlines is one of the largest low-cost airline in the world. The airline was founded on 1967 by Rollin King and Herb Kelleher. However, presently the company is being operated under the leadership of Gary Kelley. The idea behind the formation of South West Airline is to offer cut-rate air fares to the customers with convenient flying schedules, reach destination on time and ensure that the passengers have good travelling experience. In addition, the airline is well known for its innovation in strategic human resource management and business models. Even though the airline faced many challenges in the past; however, the efficient leadership drive the organization to success in the competitive environment (Teagarden, 2008). Presently, Southwest Airlines serves highest number of passengers in the United States as compared to any other airline. Moreover, it serves 41 states of US and seven countries internationally (Southwest, 2016).
3.0 Organization’s Internal and External Analysis
The internal and external analysis of South West Airline is discussed with the help of SWOT and PESTLE Analysis.
3.1 SWOT Analysis
SWOT tool is used for internal analysis that help to identify weaknesses and strengths of an organization along with the identification of threats and opportunities (Ferrell and Hartline, 2012).
Figure 1: SWOT
3.1.1 Strengths
The first discounted airline in the history.
The first to introduce online ticket purchase through SWABIZ (Southwest 2016).
Strong emphasis on customer requirement and satisfaction
Fly to all the destinations on time or according to schedule
Strong organizational culture (team effort, fun, and family orientation, etc.) and employee commitment due to its efficient HR polices and consideration of human resources at priority.
Strong Financial position with high profits for most consecutive years.
Best safety records
Flexibility for flight schedules and employees.
Technologically advanced airline with constant focus on innovation
Provides no cancellation fees, no change fees, facility to reuse unused funds of traveler with no penalty (Southwest 2016)
3.1.2 Weaknesses
Small room for strategic management.
2001 terrorist attack and economic slump affected profitability of the airline
Owns Few carriers
Focus on limited region in US and globally
3.1.3 Opportunities
Focus on regional and international expansion
Adapt latest technology and fuel efficient carriers to increase profitability
Expand its low cost airline strategy due to increasing people’s preferences.
3.1.4 Threats
Increasing cost of fuel
Increasing labor cost and labor issues
Terrorism
US tax system and government regulations
High competition due to adaptation of similar low cost strategy by competitors.
3.2 PESTLE Analysis
PESTLE Tool considers several aspects of external environment analysis such as political, technological, economic, legal, social and environmental (French and Gordon, 2015).
Figure 2: PESTLE Analysis
3.2.1 Political Factors. The local operations of the Southwest Airlines are mainly affected by the Federal Aviation Administration and government bodies (FAA, 2015). However, previously Southwest Airlines was bound to follow the law of Wright Amendment that governs traffic at an airport in Dallas, Texas; however, the law ended in 2014 (Maxon, 2014). Nevertheless, the political government and other factors support the airline industry.
3.2.2 Economic Factors. One of the major economic factor that affects the airline industry is the cost of fuel. The increase in the fuel price increases the expenditure and reduces the profitability of the Airline. Moreover, the previous economic slump has also affected the operations of Southwest Airline due to decrease in number of passengers. However, as the company offers low cost services; therefore, it is less affected by the economic factors.
3.2.3 Social Factors. The price sensitive nature of customers in USA and other parts of the world encourage Southwest Airlines to expand its business. Moreover, as the US economy has recovered from economic slump; therefore, the demand for low cost carrier for tourism purpose has increased. In addition, the international arrivals of tourists in America has also grown by 4% during first six months 2015 (World Tourism Organization UNWTO 2015).
3.2.4 Technological Factors. The development in technology creates both threats and opportunities for the airline industry. The constant change in technology, increased communication network, fuel efficient carriers and availability of several technological facilities encourage customers (such as purchase of online tickets through SWABIZ, etc.) to travel without any hesitation.
3.2.5 Legal Factors. While operating in US, Southwest Airlines meet all the legislative rules and regulations including Consumer Protect Act, Airline Deregulation Act, Health and Safety Laws, Environmental Protection Regulations, etc. The compliance of legal factors within US encourage other countries and states within US to allow expansion of Southwest Airlines.
3.2.6 Environmental Factors. The significant factor that causes damage to the environment is the emission of the aircrafts. Moreover, the noise generated from airline also creates noise pollution. The concerned environmental protection authorities encourage airline industry to take adequate measures to protect the environment and community.
4.0 Strategic Option and Marketing Plan
On the basis of strategic analysis, the best strategic option available to Southwest Airlines is market development strategy (ANSOFF’s model). The market development strategy will enable the Southwest Airline to explore new regions for development and expansion by offering existing services.
With reference to market development strategy, Southwest Airlines should expand its international flight destinations to Canada which offers great opportunity for the company. Moreover, as large cities and provinces of Canada has great potential and attracts large number of tourists; therefore, increasing destinations to this region will allow tourists from US and other regions of its served destinations to travel with low cost carrier. Moreover, the near international location of Canada will support the airline to fly to region while maintaining low cost structure. In addition, acquisition of AirTran that was earlier made in 2011 (MacLennan, 2015) will benefit the strategy by using its big aircrafts to serve Canadian market. Moreover, Southwest Airline’s planes, Boeing 737-800s will help to fly to long distances.
4.1 Marketing Objectives
On the basis of above internal and external analysis the following are the objectives for Southwest Airlines to expend in Caribbean and Canadian market:
Initially Fly to Canada’s two big provinces, i.e., Alberta and Quebec by the end of 2016. However, two more large provinces, i.e., Columbia and Ontario will be served by the end of 2017.
Develop and increase market share in Canada by 10% in the first year of strategic implementation.
Increase profitability by 15% by flying to proposed country of expansion and reduce fuel expenditure by 10% by using fuel efficient aircrafts.
4.2 Competitor Analysis
The major competitors of Southwest Airlines includes United Airlines, Delta Airlines, Continental Airlines and American Airlines. According to US Air traffic share of 2015, each Southwest Airline and Delta Airline has 21.2% share in the market, followed by United Airline with 15.6%, American Airline with 13/5%, US Airways with 11.9% Alaska Airlines with 4.3%, Jet Blue Airways with 3.8%, Spirit Airlines with 2.2%, Hawaiian Airlines with 1.5% and Frontier Airlines with 1.4% (Clark, 2015).
4.3 STP Strategies (Segmentation, Targeting and Positioning)
Figure 3: Segmentation, Targeting and Positioning (STP)
4.3.1 Segmentation. Canada has three territories and ten provinces where the majority of the country’s population lives in the areas near U.S. border. This provides great opportunity to Southwest Airline to take advantage of Canadian market. The country has four large provinces with most population, i.e., Alberta, Columbia, Ontario and Quebec. The total population of Canada is 36,201,790 as of 2016 (Wordometers, 2016). The nature of Canadians is to move frequently from one city to another on account of business travelling, tourism or employment. However, increasing number of immigration in Canada further increases the use of air carriers in the country. Moreover, the air traffic statistics shows that in 2014, 130,589,685 passengers deplaned and enplaned in Canada (Statistics Canada, 2015).
4.3.2 Targeting. On the basis of market segmentation, Canada will serve Alberta, Columbia, Ontario and Quebec in the first two years of strategic implementation of market development strategy. Most of the travelers using the services of Southwest Airlines will be businesspeople and tourist in Canada. Moreover, people from both the genders will be accommodated. In addition, the people flying from US and other countries to Canada could also take opportunity of using low cost airline services.
4.3.3 Positioning. In order to position the airlines services of Southwest Airlines in Canadian market, the different positioning strategies will be used. The different strategies are discussed in relation to the marketing mix or 4Ps, i.e., product, place, price and promotion (Lamb, Hair and McDaniel, 2008).
Figure 4: Marketing Mix
Product
As Southwest Airline belongs to service industry; therefore, the nature of product is intangible. However, Southwest Airlines will continue offering its services of low cost carrier to its target market. Moreover, in order to provide timely services, the airline will use its range of large aircraft, i.e., Boeing 737-800s that will carry large number of passengers to their destinations. Moreover, the passengers will be given non-stop flight services with highest number of daily departures and arrival in large airports of Alberta and Quebec. Moreover, the customers will be offered flexible schedule of flights with no cancellation fees, no change fees and facility to reuse unused funds. In addition, the customers in Canada will be encouraged to purchase tickets online. Thus, differentiated services will be offered by Southwest Airlines in Canada.
Price
In order to expand and grab share in Canadian market, the airline will use penetration pricing strategy where initially price will be set lower that will differentiate Southwest Airlines with its competitors. Moreover, the customers will be offered various price discounts, such as seasonal discount (at the time of Christmas), quantity discount (for group travelers) and promotional discount (offer 10% on early purchase of ticket). Thus, different pricing approaches will be accompanied with the Southwest Airline’s services in Canadian market.
Place
Southwest Airlines will service its Canadian customers through several international airports located in two different provinces in Canada. Calgary International Airport, Calgary/Springbank Airport, CFB Cold Lake Airport, Coutts/Ross International Airport, Del Bonita/Whetstone International Airport, Edmonton International Airport, Lethbridge County Airport in the province of Alberta. However, the air passengers in Quebec regions will be served through Baie-Comeau Water Aerodrome Airport, Bromont (Roland Désourdy) Airport, CFB Bagotville Airport, Drummondville Water Aerodrome Airport, Drummondville Airport, Îles-de-la-Madeleine Airport, Lac-à-la-Tortue Airport, Lac-à-la-Tortue Water Aerodrome Airport, Lachute Airport, Montréal/St-Hubert Airport, Montréal-Mirabel International Airport, Montréal-Pierre Elliott Trudeau International Airport, Québec/Jean Lesage International Airport, Québec/Lac St-Augustin Water Aerodrome Airport, Rivière Rouge/Mont-Tremblant International Inc Airport, Sept-Îles Airport, Sept-Îles/Lac Rapides Water Aerodrome Airport, Sherbrooke Airport, St-Georges Airport and Trois-Rivières Airport (Wikipedia, 2016). However, later the region of Ontario and Columbia will be served through the international airports located in these two provinces.
Promotion
In order to meet marketing objectives, it is important to carefully market the services of Southwest Airlines through effective promotions. Several promotional and communication methods will be used to aware Canadian target market with the launch of low cost carrier’s services in their country. Fliers, brochures, magazine and newspaper ads could be used as print media. Moreover, television and radio advertisements could be used to inform people about Southwest Airline’s services, particularly in Quebec and Alberta provinces. Another important tool of communication is internet where several social media tools such as Facebook, Twitter and other social media websites will be used. Moreover, the Southwest airline’s website will also be used to inform customers along with several price discount offers. Thus, the proposed effective combination of promotional methods will enable Southwest Airlines to successfully reach its targeted customers.
5.0 Implementation, Monitoring and Control
6.0 Conclusions and Recommendations
In a nutshell, it could be said that Southwest Airline due to its strong profitability, low cost structure and high customer preferences have huge potential to expand in other regions. However, while maintaining its low cost structure, Southwest Airline could expand in Canadian market by serving two provinces initially. Moreover, the Canadian market shows great potential and opportunity to the company to explore the region and offer its services to the citizens. However, while heading towards the implementation of the proposed marketing plan, it is necessary to consider and carefully implemented all the strategies that were discussed in relation to marketing mix. Thus, Southwest Airlines is recommended to purse market development strategy by launching its services in Canada to enjoy high profits and increased market share.
References
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Wikipedia. (2016). List of international airports in Canada. Retrieved from https://en.wikipedia.org/wiki/List_of_international_airports_in_Canada
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