Posted: June 27th, 2015

Internal analysis

Introduction

Internal analysis is a review of a company’s or organization’s strengths and weaknesses while mainly focusing on factors within the domain of the specific organization. The factors that are mainly put into consideration during the internal analysis are factors within the control of the organization (Wied & Ebers, 2007). Once a detailed internal analysis has been conducted, an organization is in a position to appreciate its abilities and competencies. The internal analysis also depicts the company’s desirable improvements, which can be inculcated to meet the customer requirements. The internal analysis mainly focuses on the strengths and weaknesses of an organization.

On the other hand, the external analysis focuses on the opportunities and weaknesses of the organization. When the two analyses are synchronized, they yield the SWOT analysis. In making various business decisions, the SWOT analysis is deemed as a vital tool. The SWOT analysis aims at providing insight into the potential venture that can lead to growth. Additionally, it facilitates a better understanding of the industry’s structure. The SWOT analysis enhances business people with the ability to identify and maximize on competitive advantage, as well as enabling them to view the looming threats and act accordingly (Pahl & Richter, 2009).

When conducting internal analysis, it is fundamentally important to focus on the strengths and weaknesses of an organization (Böhm, 2009). The strengths and weaknesses are considered from the customer’s or a competitor’s perspective. This analysis will provide a reliable framework, which can be used to review the strategy, position, or direction of an organization.

Internal analysis of the Southwest Airlines Company

The Southwest Airlines Company is currently the largest carrier airline in the United States with its headquarters located at Dallas Texas (Sartain, 1998) According to the fortunes magazine, the Southwest Airline was regarded third among the top ten admired corporations in the United States. Ten years in a row, Southwest Airlines has been able to maintain its reputation.

The Southwest Airline is committed to offering great service in relation to customer service with over four decades of operation within the industry (Sartain, 1998). The Southwest Airline has continually distinguished itself from other airlines. From its careful selection of routes, the company has been able to lead the industry in terms of low fare. In determining the success story of the company, the SWOT analysis had the following inferences.

The Southwest Arline has and still is an inspiration to other low cost carriers. The business model it uses has been repeated around the world. The competitive advantage model seeks to combine high level employees and the aircrafts productivity with relatively low unit cost. This is achieved through reducing the number of times that the aircraft turns particularly at the gate. This strategy commonly known as “the Southwest effect” has been applied by other players in the same industry. This has facilitated the Southwest Airline to continually charge lower rates even in times of economic turmoil (Strauss, 2010).

As of October this year (2012), the airline plied 77 different routes in the United States. Many major and established airlines prefer a hub and spoke system. However, the Southwest Airlines use the point to point transport system. This implies that the aircraft flies directly to a destination without necessarily going to a hub. This helps the airline to cut on costs that are related to using hub airports. In addition, at times Southwest uses secondary airports in cities where costs are exorbitant. On many occasions, the low cost airport’s are convenient to the majority of travelers as compared to major airports. Therefore, this gives the Southwest Airline competitive advantage over its competitors.

The Southwest Airline’s Boeing acquisition in 1984 greatly enhanced the airline in terms of efficiency (Southwest Airline, 2011). This move greatly led to minimized maintenance expense. Southwest Airline has implemented fleet standardization strategies. This has enabled the airline to maintain low fares. As of May 2012, the Southwest Airline was the greatest operator of the Boeing. The low fares are possible as the costs incurred in maintaining the Boeing are relatively low compared to other aircrafts. For instance, the new Boeing is fitted with electric flight decks and winglets that are blended (Ranson, 2010).

The Southwest Airline was among the first airlines to have a website in 1995. This technological advancement has been of great help to the airline over the years. Initially, the website was known as the Southwest Home Gate. The passengers were able to view the scheduled routes and general company information was available. According to Netstrings, Southwest.com is currently the leading airline website in terms of online revenue. As of 2006, 70 percent of the airline bookings were through the airline’s site. During the following year, more than 50 percent of the airline passengers checked online for their flight. The airline has hence reaped great benefits from maximizing the employment of internet for reservations.

In 1999 to the early 2000s, Southwest Airline was highly regarded for its ideal hedging strategy. This was claimed to be a proactive risk management technique and thinking strategically. The company engaged in fuel hedging and aimed to insulate itself against fuel price fluctuations. This hedging move against business risk earned the company huge returns. Though some analysts have criticized the move as being profit motivated in energy trading, Southwest Airline was simply speculating with no formal reason for doing so. From the spectacular energy trading skills, the Southwest Airline has enjoyed great financial returns, as well as positive press. However, the speculative strategy cannot be widely relied on for continuous profits due to the factor of speculation.

In 2008, Southwest Airline sought a pressure washing system that would use Ecopower water. The Ecopower system facilitated the cleaning of the plain as it is parked at the gate. The system also improved efficiency of the plane as it facilitated cleaning of the contaminants in the engine turbine blades. In return, this improves the aircraft’s fuel efficiency by 1.9 percent (Lunsford, 2008).

The airline is deemed as having excellent workforce relations. The airline had 37000 employees by the end of 2011. However, unlike most of its competitors, the airline maintains low fare charges and a relatively low cost business model, yet heavily unionized. The airline pilots, aircraft maintenance technicians, the customer service agents, reservation agents, flight dispatchers, flight attendants, ramp agents, and the operations agents all have their individual unions. These admirable relations that the airline has with its employees are usually transformed to excellent service and eventually higher sales. The Southwest Airline for many years has had an excellent customer service record. Compared to all other airlines, the Southwest Airline is ranked first in having the least number of customer complaints. This greatly facilitates the customer satisfaction derived from the excellent service (Bamber, Gittell, Kochan & Nordenflytch, 2009).

The airline has various strongholds that have propagated it to lead the airline fraternity. However, there are a number of weaknesses that should be given keen thought. The fact that the company uses a traditional development is in itself a weakness. In this case, though the strategy is efficient, it has been adopted by other airlines. This implies that the policy is easy to crack and implement, this will eventually amount to a shortcoming if not considered.

The airline’s route is restricted to a few cities. Southwest Airline has its headquarters in Dallas Texas. Since the 1970s, Airports in Dallas have been governed by a federal law known as the Wright Amendment. This traffic law originally limited many nonstop flights to the destinations in Texas and its environs. The Wright Amendment barred airlines from operating, and at times, ticketing passengers from the love field to destinations neighboring Texas. The regulation did not cover small planes with 56 or fewer amount of seats. Southwest has put a lot of effort trying to have the legislation amended. The fruits have been reaped with the Shelby Amendment. This has facilitated the airline to offer nonstop services between love field Dallas and some states such as Alabama. However, with some restrictions having been repealed, some like for instance those limiting the number of gates will be operational till 2014 (Southwest Airlines, 2012).

The Southwest Airline has inadequate cargo capacity. This implies that the airline has limited space to use for transporting cargo. This is closely linked with the airline’s reliance on one airplane manufacturer (Sickler, 2007). Boeing aircraft are commonly utilized for human transport. With the current modifications that have been implemented to enhance passenger comfort, the plane is deemed to have low cargo space. This leads to lower revenue as the business is not fully exploited. It is also a matter of concern that the airline has relatively low number of supervisory staff. Supervision is a vital issue in management. It not only deters employees from ill behaviors, but also serves as a source of organizational direction towards the attainment of its goals and objectives.

Conclusion and recommendations

The scope of the internal analysis limits the inferences to the internal factors facing a company. The Southwest Airline has achieved continuous and rapid growth since its initiation. The airline has been engaged in massive takeover bids, mergers, and partnerships. Through this, as well as the airline brand of affordable quality services, the airline has enhanced its competition with the major airlines. With various developments like the Wi-Fi initiative, implying that the aircraft will itself be a hot spot. In addition, there is an evolution of the interior of the aircraft with modern cabin designs and comfortable seats. The airline seeks to control a larger market share.

The reputation of the airline is remarkable and is being regarded as the safest in the world. This is because it is as yet not responsible for any of its passenger’s death. This tenets, coupled with cheap fare charges and quality service sphered the success story of the airline. However, the airline is faced with a number of situations that require detailed attention. Some of them include: the airline uses a traditional development strategy which is easy to duplicate by competitors. Due to governing restrictions, the airline only plies to a few cities. The airline also manages its own reservation service instead of outsourcing to an IT firm. The firm’s reliance on a single airplane manufacturer (Boeing) limits its cargo capacity. As such, the firm has to attend to the issues highlighted above in order to retain its relevance in the industry and its rapidly growing market share.

References

Bamber, G.J., Gittell, J.H., Kochan, T.A. & von Nordenflytch, A. (2009). Up in the Air: How Airlines Can Improve Performance by Engaging their Employees. Cornell University Press, Ithaca.

Böhm, A. (2009). The SWOT Analysis. München: GRIN Verlag

Lunsford, J. (2008). “Airlines Dip Into Hot Water to Save Jet Fuel.” Wall Street Journal. Pahl, N., & Richter, A. (2009). SWOT Analysis – Idea, Methodology And A Practical Approach. München: GRIN Verlag GmbH.

Ranson, L. (2010). Southwest to take delivery of first 737-800 in March 2012. Flightglobal.

Sickler, J. (2007) Chapter 7: Flight Arrival Flow: Southwest vs. Legacy Carriers. Retrieved October 2012 http://web.archive.org/web/20070409192200/http://www.erau.edu/research/BA590/chapters/ch7.htm

Southwest Airline (2011) Southwest Airlines Will Become Launch Customer for the New Boeing 737 Max Aircraft“. Retrieved October 2012.

http://www.swamedia.com/releases/7b1c6522-daf8-40be-98d4-ce354aa974d3

Southwest Airlines (2012). History of the Wright Amendment. Retrieved October, 2012. http://web.archive.org/web/20050507180104/http://www.setlovefree.com/historyofwright.html

Strauss, M. (2010): Value Creation in Travel Distribution, http://www.amazon.com/dp/0557612462

http://www.flightglobal.com/news/articles/southwest-to-take-delivery-of-first-737-800-in-march-2012-350977/

Sartain, L. (1998). Why and how Southwest Airlines uses consultants. Journal of Management Consulting.

Wied, S., & Ebers, M. (2007). SWOT Analysis Robert Mondavi and the Wine Industry. München: GRIN Verlag GmbH.