Contemporary Development in Business Management
Added on 2019-10-08
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CONTEMPORARY DEVELOPMENT IN BUSINESS MANAGEMENTNAME: JOHNSON JEFF STUDENT ID: 139017773 MODULE TUTOR: MATTHEW TEALEMODULE CODE: SIM 337WORD COUNT: 4000 WORDS EXCLUDING EXECUTIVE SUMMARY, ORGANIZATION PROFILE, TABLES, DIAGRAMS, APPENDICES OR REFERNCES. Hand in date: 6THJANUARY 2016
Table of ContentsExecutive Summary ................................................................................3Task 1..................................................................................................4External environment diagram...................................................................4PESTLE Analysis ..................................................................................4PESTLE diagram...................................................................................5Political Factors ....................................................................................5Economic Factors ..................................................................................5Socio-cultural Factors.............................................................................6Technological Factors............................................................................6Improved Efficiency of new generation jet planes diagram..............................7Ecological Factors .................................................................................7Role of reducing Technology diagram ........................................................8Industry Analysis ..................................................................................8Porter five forces diagram........................................................................9Force 1: Industry Rivalry.........................................................................9Force 2: Barrier to Entry and Exit..............................................................9Force 3: The Threat of Substitutes............................................................10Force 4: Supplier power..........................................................................10Force 5: Buyer power .............................................................................10Task 2..................................................................................................11The Effect of Barriers to Globalization on Airline industry and policies ..............11Relevance of Barriers to Globalization to Southwest .....................................12Southwest Resources and Competencies diagram .....................................13Southwest strategy overview diagram.........................................................14The Effectiveness of Southwest Response to the Barriers to Globalization..........14Porter Competitive Advantage Diagram .......................................................15Cost Leadership Strategy ........................................................................151NAME: JOHNSON JEFF STUDENT ID: 139017773 MODULE TUTOR: MATTHEW TEALEMODULE CODE: SIM 337WORD COUNT: 4000 WORDS EXCLUDING EXECUTIVE SUMMARY, ORGANIZATION PROFILE, TABLES, DIAGRAMS, APPENDICES OR REFERNCES. Hand in date: 6THJANUARY 2016
Strategic clock tool diagram .....................................................................16Differentiation Strategy............................................................................16Market Focus Strategy.............................................................................17Combination of Strategies.........................................................................18Recommended Areas for Improvement for Southwest ....................................18Conclusion.............................................................................................20Harvard Referencing................................................................................21Appendix 1- Company profile.....................................................................28Appendix 2- Swot Analysis table .................................................................31Appendix 3- Additional Pestle Analysis.........................................................32Appendix 4- Additional Porter five forces Analysis ...........................................342
Executive Summary This report seeks to critically assess the influence of external businessenvironmental factors and porter five forces on southwest and this report is only in aposition to assess the opportunities and threats of southwest.Because of the wordconstraints on the assignment additional information on pestle and porter five forceswill be in appendix 3 and 4. Pestle model is used to evaluate the macro-economic factors, connectopportunities and threats which are evident in swot analysis table in Appendix 2.The disapproval of pestle factors is that it is out of date and not suitable for todaycompetitive environment. (Heckroodt, 2014). The competitive position of southwest will be evaluated with the Porter’s (1980)model by evaluating changing elements, rising markets which might influence thefuture progression of the company which has been criticised by a lot of scholars thatthe model was based on past times which was based on intense rivalry and cyclicalprogression which has altered in recent years due to advancement in technology.(Miller and Dess, 1993). Furthermore, the report analyses the relevance of barrier to globalization tosouthwest and how it influences policies and decision making in the company andthe airline industry in the form of foreign ownership laws and restrictive air serviceagreement. In addition, the report evaluate the efficiency of southwest in respondingto the barrier to globalization and this report uses porter competitive advantage inthe form of cost leadership, differentiation, focus strategy or a combination ofstrategies. Additionally, the report demonstrated some areas of improvement in reactions forsouthwest in the form of integrating Airtran onto its point- to-point strategy so theycan maintain its low cost structure and not lose its individuality; expand intointernational market and use more fuel efficient fleets. In conclusion, these policies in addition to dedication to consumer service andinvesting in technological advancement and research will allow southwest topreserve and increase its market position in the future3
MACRO ENVIRONMENTAL FACTORS AFFECTING SOUTHWEST AIRLINES Figure 1.1: The External Environment diagram Source: (Fee, 2013). Pestle Analysis A PESTLE analysis is an important model for identifying the ‘big picture’ of themacro environment in which a business is operating. The alterations happening inthe world creates an uncertain macro environment which has an influence on theobjectives of the company. (Harrison, 2009). This analysis will improvecomprehension of the dangers linked with southwest business growth or non-success, and also the targets and position of the business. Criticisms of PESTELanalysis is that it can be very subjective and the result can be misguided foranalysis. (Heckroodt, 2014). 4
Figure 1.2- Pestle Diagram Source: Hunger and Wheelen, (2001) Political/ Legal Southwest local activities are extensively controlled by Government organizations;mainly Federal Aviation Administration (FAA). For example, the 1979 ‘WrightAmendment’ banned southwest to fly non-stop or provide through-plane servicefrom Dallas Love Field to any other than 7 allowed cities. Recently, a law has beenapproved to retract the Wright Amendment to be in effect in 2014. Southwest cannow expand to international markets like Mexico and Caribbean which makessouthwest more profitable. (Hethcock, 2015). Southwest has on frequent circumstances won legal encounters against competitorsin the law court. (Gamble and Thompson, 2012). Economic FactorsAirline industry is rigorously affected by fuels prices. An increase in the fee of oil hasa key effect on Southwest productivity (BBC News, 2011). The potential trends of oilprice are volatile because fuel expenditure account for almost 30% of airlinesoperational overheads (PwC, 2013). Due to economic recession, the reduced economic development is having aninfluence on the buying clout of the customers which has reduced the demand forair travel across the US, but however the customer demand for inexpensive prices,5
no-frills air travel has stayed undeterred and certainly experienced development(Osborne, 2010). Socio-cultural Factors Southwest has interrelated well with its consumers and dealers which made thebusiness owns a training centre from where they give tutoring to the workers on howto fly an airline as well as additional carrier associated undertakings. The businessis deeply unionised so as to address the difficulties and distresses of the workers.Southwest offer management programs for their workers and also offer earningssharing plans and stock- based reimbursement. The new live TV and Wi-Fi has animpact on the customer satisfaction and experience. (Southwest, 2014). Technological Factors Technological improvement has been the motivating cause for improvement ofsouthwestoperational competence. Southwest decreased expenses by developingoperationsby means ofinnovative aeroplane engine expertise and mobiletechnology. (See fig 1.3) Technology improves connectivity and greaterpassengers’ travel experience. For instance, Southwest was able to introduceticketless travel through the use of technology; the new international reservationsystem will help Southwest boost its revenues. (Maxon, 2014)Emergence of information and communication technology has a negative impact onSouthwest because there are new technologies like conferencing and socialnetworks which has reduced the need to travel. (Lin, 2010). 6
Source: Adopted from Boeing cited from Market Realist Ecological Factors Southwest has used alternate fuel usage which aids to decrease the threat ofdamaging wildfires in western U.S. (Southwest, 2014). Airplane emissions causessignificant damage to the atmosphere and that is why southwest have purchasedrenewable energy for their Dallas and Houston operations. (Penner et al. 2001).(See fig 1.4). With projects like Evolve, which comprises of the remodel of thecabins on the craft to accommodate efficient waste disposal as well as decreaseweight from waste on the craft. Southwest recently contracted Pratt and Whitey tosupply southwest with Eco-power water pressure washing systems that allowedsouthwest to wash the grime of the engines turbine blades while their planes wereparked at the gate which permits southwest to involve in ecological sociableconducts. (DeWit et al, 2000). 7
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