Southwest Airline

The analysis of the forthcoming changes in the company’s industry is humongous. The airline industry is moving towards more complex strategy as price cutting strategy has no more meaning for the airline industry. Moreover, the rise in competition has given companies more scope of innovations in services and products which they are offering. The increasing prices of jet fuel, low prices offered by the competitors are some of the variables which are affecting the company (Lerrthaitrakul and Panjakajornsak, 2014). Thus: making it impossible for southwest and other rival organizations to survive in the industry. Southwest airline was the first airline in the industry to offer the online reservation system. This was done in order to reduce cost related to the commissions of the agents which were previously a direct upward line channel while targeting potential customers. Elimination of the agents reduced the cost for the airline, thus: making it possible to get profits from the skimmed market. Moreover, the commissions related to the agents i.e. expenses which were paid by the southwest airline to the agents, were thus reduced ultimately reducing cost for the company. Moreover, it has been observed that increasing jet fuel costs and labor union would likely affect the profitability of all the organizations working in the industry (Lee, 2013). However, Southwest is keen in improving its cost structure and converting damageable variables into profitable variables. Online reservation system is one its example. Labor union has been a threat for many organizations working in different industries. A group of people forming a union could be a potential threat for organization. However, Southwest has focused on such issues and would cover the weaknesses related to labor union. It has been observed that these trends i.e. increasing labor cost and fuel jet would likely have a strong impact on the company. Thus: such variables would give rise to increase in supplier powers (Sharma and Thomas, 2015). 

Southwest being a budget airline falls under the category where buyers are price sensitive. Products are price sensitive if their sales are dependent on the prices ^[a](Carter, Rogers and Simkins, 2004). Usually corporation or companies faces buyers sensitivity when the similar products or services are offered by different rivalry brands or organization, so the only way left to compete in the market/industry is through price, thus, making the product or services buyer sensitive (Sharma and Thomas, 2015).  Been a budget airline; southwest airline influenced passengers through its price strategy^[b]. Southwest airline been a budget airline and offering the same services as offered by its rival players, they are focusing more on prices, and keeping it as low as possible to attract more and more customers/passengers (Lerrthaitrakul and Panjakajornsak, 2014).  This strategy has helped Southwest airline by keeping prices low and providing minimal services and taking out profits from the industry’s skimmed profits. In fact Southwest airline was the first airline to adopt the online reservation system^[c], which eventually reduced the cost for the organization (Moss, 2010). However, observing the behavior and strategy of the Southwest airline, other rival players selected the similar strategy and applied online reservation system in their business just to reduce cost. In addition to this, when southwest airline observed that the buyers’ sensitivity is increasing day by day and the profit margins are becoming less, they started investing in online reservation sites such as Expedia, Orbitz, and Travelocity to make the competition healthier. This strategy has helped them to attract more customers, which are price sensitive and needs less priced tickets (Moss, 2010).