Address the following:
2. Evaluate the company's financial performance by calculating and interpreting the profitability ratios (operating profit margin, net profit margin, return on total assets, and return on stockholders' equity).
3. Identify SWOT (Strength, Weakness, Opportunity, Threats) factors affecting Southwest
4. Make recommendations to maximize strength to opportunity pairings, and mitigate weakness to threat pairings.
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Southwest Airlines enjoys a successful corporate strategy. The SWOT analysis that follows illustrates significant internal strengths (financial resources, human resources, core competencies of market segmentation and corporate culture) that have been brought to bear against equally significant industry threats (most notably the threat of substitution).
Southwest leadership must objectively and periodically reevaluate the risk to their capital fleet. The tangible weakness of relying on a undiversified fleet from a single supplier for capital maintenance constitutes a conscious decision. While it currently operates as a strength through industry-best maintenance practices, this lack of diversification carries significant risk to Southwest operations.
In summary, Southwest leadership should recognize the success of the company's strategy over the past 10 years. Internal strengths (financial and human resources) must be preserved in order to avoid becoming over-extended in the near-term future. External threats (substitution, most notably) offer their most significant threat in distracting Southwest Airlines from its successful market segmentation.
Southwest Airlines is the most successful airline in the United States?it is the largest (as measured by customer volume) and most profitable with 38 consecutive years of profitability, (Southwest, 2010a). Southwest operates its airline under a winning strategy? shored up by several internal strengths, while being undermined by external threats. In order to keep Southwest Airlines profitable into the future, a SWOT analysis should be accomplished regularly. The following report illustrates several opportunities and threats for Southwest to configure their significant resource and competency pool to take advantage of, or mitigate over near- to mid-term time horizons in the Scheduled Passenger Air Transportation industry?NAICS code 48111, (NAICS, 2011).
OVERVIEW OF EXTERNAL THREATS AFFECTING SOUTHWEST
Threat of New Entrants? Very low
Supplier Bargaining Power? Very High
Customer Bargaining Power? Low
Threat of Substitute?Very High
Competitive Rivalry? High
OVERVIEW OF INTERNAL FACTORS AFFECTING SOUTHWEST
Tangible Resources (Physical)? Significant weakness
Tangible Resources (Financial)? Significant strength
SOUTHWEST AIRLINES: SWOT ANALYSIS 3
Tangible Resources (Human)? Significant strength
Intangible Resources (Technical)? Not applicable to industry
Intangible Resources (Intellectual)? Not applicable to industry
Intangible Resources (Goodwill)? Significant strength
Core Competencies (Architecture)? Significant strength
Core Competencies (Reputation)? Significant strength
Core Competencies (Innovation)? Neutral
Southwest Airlines currently operates under a moderate weakness as expressed through the physical capitalization of their airline fleet. This represents an area that should be cultivated for future improvement and growth?if for no other reason than to diversify risk to the corporation. Currently, Southwest Airlines operates a single type of airframe?548 of the Boeing 737, (Southwest, 2010b). ...
The 7 page, APA style paper includes a strategic analysis of Southwest Airlines in SWOT format. The intangible resources, and core competency sections should build a solid picture of Southwest Airline's corporate culture, and some of the external threats referenced lend themselves easily to several strategic decision points and recommendations. 11 references included on specific Southwest application, as well as overall strategic analysis and SWOT theory.