Industry & Market
The Southwest Airlines company is related to the travel and tourism industry; it is headquartered in Dallas, and the company primarily operated in the United States.
External Environment
The industry is highly regulated in the United States and other countries as the safety of passengers remains the primary value that needs to be emphasized; thus, there is a range of safety regulations for companies in the industry.
Internal Environment
The internal structure of the travel and tourism industry includes tour operators, accommodation services for tourists, tourist transfer services, and transport operators (including airline companies as well).
Financial Analyses
The travel and tourism industry can be listed among the largest industries in terms of sales. Nevertheless, there is a range of unsteady factors posing a threat to airline companies’ financial success (changing aviation gasoline prices).
Economic Condition for Industry
Nowadays, the airline industry in the United States continues to grow, and the company makes a significant contribution to this growth.
Key Trending Factors
- Demographic: The company’s services are beneficial to those who need to decrease traveling costs ( for instance, mothers with many children);
- Social: The advertisements are targeted at specific groups that can include low-income citizens, senior citizens, etc.);
- Economic: There is a steady demand for low-cost airline services in the United States and other countries;
- Environmental: The industry’s impact on the quality of natural resources; apart from the opportunity to use less dangerous biofuel, the safety of jets if compared to other means of transport remains important.
SWOT Analysis
- Strengths: The key strengths of the company include its pricing policy that allows many low-income people in the country to get services of an appropriate quality; it operates almost 700 airplanes, which allows it to pay enough attention to safety and replace airplanes in case of potential threats;
- Weaknesses: Nowadays, the company does not collaborate with foreign partners anymore; pricing policies that the company utilizes can hurt the experience of customers;
- Opportunities: it has enough resources to provide regular training to its personnel, improving the communication skills of the latter;
- Threats: Despite the financial success of Southwest Airlines, there are threats related to the presence of competitors who offer services at more attractive prices (nevertheless, the threat is relatively insignificant);
Key issues of the case
There were numerous cases throughout the company’s history when it had to comply with changing legal requirements, design strategies helping to minimize financial losses caused by fuel price instability, and improve its corporate values to highlight the importance of customer satisfaction.
The critical issue of the case that needs attention first
Even though Southwest Airlines does not face significant issues, some measures that would prevent customer attrition and the rapid growth of its competitors must be taken; in other words, the company needs to maintain its leadership and popularity among clients belonging to different social groups.
Assumptions in recognition of this critical issue
The management of the company still receives complaint letters that indicate the necessity to provide additional training to flight attendants; also, problems related to bonuses for standing clients can harm the company’s social image.
Alternatives to address this critical issue
- Create more entertainment opportunities for passengers to improve their experience;
- Improve the company’s reward program for frequent flyers.
An alternative to implement
The chosen alternative is to implement changes to the company’s reward program for frequent flyers to encourage more customers to collaborate with the company regularly.
The overarching strategy within which this alternative fits
To increase the number of ways that clients can earn points, the company will need to find new Rapid Reward partners in the United States. Finally, customers will have to be provided with an opportunity to give their points to other users (friends, relatives, etc.).
The plan to implement this alternative
To implement the strategy, the management of the company will need to provide new members with an opportunity to get at least 200 points (to attract more clients to participate). After that, the number of points that passengers in different classes earn when they buy tickets needs to be changed to take the different financial possibilities of passengers into account. In addition, the company is to add at least twenty partners in the largest cities where it operates. Finally, a set of rules that allow giving points to other people should be established.
The critical organizational functions of the organization needed for implementation
Promotion, budget.
The processes needed from each of these critical functions for implementation
- Promotion: Create an effective marketing campaign to tell about new benefits for members;
- Budget: Estimate the costs of the initiative.
The Balance Scorecard metrics to measure the success of this implementation
- Financial: Attract at least 400 new clients each month;
- Customer: Increase customer satisfaction by 10-15%;
- Internal business processes: Increase ticket sales by 5%;
- Learning: Design a survey to make sure that customers know how points are earned and spent.
Ethical concerns with this critical issue and plan implementation
The content of advertising materials should be strictly controlled (no obtrusive advertising).
Environmental concerns with this critical issue and plan implementation
The inability to use special credit cards anywhere can disappoint some members; the need to exclude speculative activities related to points.
Social concerns with this critical issue and plan implementation
Bonuses for high-class passengers will still be more substantial, and it can cause dissatisfaction.
Summary of the recommendation and the value this organization may gain from this implementation
The strategy helping the company improve its customer reward program will attract new clients and motivate standing customers to earn more points. The proposed strategy is based on introducing new options for key customers and increasing the number of ways to earn and use points.
Reference
Thompson, A., Peteraf, M., Gamble, J., & Strickland, A. J. (2018). Crafting & executing strategy: The quest for competitive advantage: Concepts and cases (21st ed.). New York, NY: McGraw-Hill Education.