Effectiveness of Low Cost Pricing and Innovative Logistics Solutions as Business Strategy for Southwest Airlines in Australian Domestic Airline Industry

This report analyses the effectiveness of Southwest Airlines' business strategy of low cost pricing and innovative logistics solutions in the Australian domestic airline industry. It includes a PESTLE and VRIO analysis, identification of challenges faced by the company, and recommendations for success through training and development of personnel. The challenges identified are technological advancement and intense competition. The report concludes that the company can thrive in the industry by using its resources and capabilities effectively.

Business Strategy

EXECUTIVE SUMMARY
The business report is performed for determining effectiveness of business strategy of low
cost pricing and innovative logistics solutions used by Southwest Airlines to conduct practices in
Australian domestic airline industry. Qualitative PESTLE Analysis and VRIO Analysis
frameworks are used in the report for finding key strategic challenges faced by company in an
industry. The company is recommended to provide training and development to its personnel for
dealing with strategic issue of technological advancement. At same time, to mitigate challenge of
intense competition, it is advised to company to use its capabilities and resources effectively
while thriving in Australian domestic airline industry.

Contents
EXECUTIVE SUMMARY...............................................................................................................
Contents.............................................................................................................................................
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Choices of strategic frameworks and appropriateness to domestic airline sector.......................1
Use of strategic frameworks for critically analysing strategy of Southwest Airlines in the
sector............................................................................................................................................1
Identification of two problems in Australian Domestic Airline Industry and the ways the
company will be affected.............................................................................................................5
Recommendations which Southwest Airlines could implement for successfully entering along
with thrive in Australian domestic airline sector.........................................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Business strategy is delineated to a clear set of plan, strategies, goals and timeline which
outlines the ways wherein a company will compete in specific markets with its offerings. It
encourages venture for introspect and offers guide on the ways a company is performing
internally and externally. The purpose of the report is to analyse whether strategy of low cost
pricing along with innovative logistics solution is effective for Southwest Airlines to achieve
success in Australian domestic airline industry with introduction of alternatives to customer
needs. Southwest Airlines is major airline company in United States. Its headquarters are
established at Dallas, Texas since 1967. The company operates with business strategy of low cost
pricing and innovative logistics solutions to attain determined business goals (Southwest Airlines,
2021).
The business report covers choices of strategic frameworks along with appropriateness to
domestic airline sector. It further highlights use of strategic frameworks to analyse strategy of the
company and identification of two issues within the industry along with impacts on company.
MAIN BODY
Choices of strategic frameworks and appropriateness to domestic airline sector
Airline sector of United States includes more than 2300 establishments with combined
annual revenue of nearby $190 Billion. Demands of airline is highly dependent on health of
economy that impacts spending on business as well as leisure air travel. For analysing
appropriateness of Southwest Airlines in Airline sector of Australia, chosen frameworks are
VRIO analysis and PESTLE analysis. Choice of VRIO analysis states assessment of situations
within the company to determine that available resources allows it to attain competitive
advantages (Han, Yu and Kim, 2019). At same time, PESTLE Analysis is selected as to conduct
evaluation of organisational strategy in domestic environment.
Use of strategic frameworks for critically analysing strategy of Southwest Airlines in the sector
To analyse strategy of Southwest Airlines in airline industry of Australia, managers make
use of PESTLE Analysis and VRIO Analysis that are as mentioned for the company:
PESTLE Analysis
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It refers to a framework that business managers opt for analysing together with
monitoring macro environmental elements which have possibilities to impact on a company and
its strategies. For Southwest Airlines, factors of PESTLE Analysis are defined below:
Political: Regulations of political system have deeper influences on operations and
profitability of company in an industry (Sarker, Mohd-Any and Kamarulzaman, 2019). In
Australia, political environment wherein airline businesses operate is highly regulates as well as
favors passengers over airlines. However, airlines operating in the country faces tight regulations
of operations that can impact adversely on Southwest Airlines to perform working with low price
strategy.
Economical: Performance of domestic economies has direct impact on strategies of
venture in a country. In Australia, fluctuations in demand and supply of products can cause an
airline business to face serious threats. Moreover, ongoing economic slowdown results in
struggle of airlines to content with declining passenger traffic and competition from low cost
carriers, labor demands, operating costs, etc. All these can impact adversely on business strategy
of Southwest Airlines to perform in the Australia airline market.
Social: Demographic factors and choices of population of a nation impacts business
strategy (Lazonick and Shin, 2019). Within Australia, emergence of Millennial generation into
consumer class reflects that social changes of population used for entitlement, more demands and
instant gratification resulting in airlines to have balance in cost with demand from populations.
For Southwest Airlines, working with business strategy of low cost pricing along with innovative
logistics solution can impact positively as to meet preferences of the profile of passengers
causing higher sales volume for the establishment.
Technological: Technology and related factors impact business strategy in an industry in
terms of growth addition to competitive benefit. In Australia, airline industry uses technology
extensively in its operations. It can result positively for Southwest Airlines as to make use of
technological changes for front office along with customer facing functions. With search engine
optimisation and growing use of mobile apps to make bookings together with customer service,
Southwest Airlines can makes major updates to its messaging system for offering higher
convenient services and superior experiences to target customers that impacts positively on its
business strategy in the Australian airline industry.
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Legal: Within Australian airline industry, there are ample number of legislations and
regulations which influences working of business strategy. However, in recent times, there are
number of lawsuits against airline firms from customers and workers that can impacts adversely
on practicing business strategy. To work ethically in Australian Airline sector, it is essential for
Southwest Airline to conduct practices as per Australian National Minimum Wage, Aviation
policy & regulation, Federal Aviation Authority, etc for achieving success in business strategy.
Environmental: In Australia, climatic changes calls social consciousness in which
passengers are counting for carbon footprints that causes becoming more environmentally
conscious. In aspect to Southwest Australia, for working in the nation, airline can be forced for
adopting “green flying” as well as become responsive to environmentally conscious. The social
responsibility initiative can make the airline more pronounced as well as more under scrutiny to
achieve success in its business strategy.
VRIO Analysis:
In the functioning of a business entity, VRIO is considered as a major approach which is
helpful in development of internal analysis (Amini, Bienstock and Narcum, 2018) (Haffar and
Searcy, 2018). In the era of stiff competition between different companies it is essential for a
business entity to focus on implementation of VRIO framework in order to lead at the
marketplace. With the help of the framework, a company can gain competitive advantage in a
short span of time The VRIO framework is compulsory for a company to develop key resources
and utilize them in an optimum manner for better results. Most of the successful companies in
the international and national marketplace focus on VRIO framework in order to gain desired
success at the marketplace. The evaluation of VRIO frame work in context of Southwest Airlines
is as follows:
Resources and
capabilities
Valuable Rare Imitable Organized Competitive
implications
Distribution
management
No Yes No Yes Sustainably
competitive
advantage
HR management Yes No No Yes Moderate
competitive
advantage
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Service quality Yes No No Yes Less
competitive
advantage
Research and
development
Yes No Yes Yes More
Competitive
advantage
Product development
with design
Yes Yes Yes Yes Desired
Competitive
advantage
Valuable: These are the resources which are valuable and unique for the organization
(Vatankhah and Darvishi, 2018). The presence of these resources in case of Southwest Airlines
makes operations and functions of a company unique at the marketplace. In order to utilize the
valuable resources of a company in a precise manner, it is important for the management to
develop a professional approach. The service quality of Southwest Airlines is one of the major
valuable resource that is available at the marketplace. In recent times, valuable resources are also
considered as one of the key resources which also distinguish business of Southwest Airlines
from other companies. Delivering the best service quality to different customers, will help the
company to increase their satisfaction in a short span of time. This will also support company to
achieve its short-term and long-term goals for the target customers. Target customers are also
served in an advanced manner with the help of various valuable resources that are present in the
business. Also valuable resources make service of a company unique in the whole business
marketplace which leads to organizational success.
Rare: The rare resources are considered as limited number of resources that are available at
the marketplace. Rare resources are present in a business, which needs major focus and attention
of management as well as customers (Ross, Beath and Mocker, 2019). Presence of rare resources
also helps Southwest Airlines to develop a perfect strategy for utilization of unique available
resources. In the recent times, importance of rare resources is increasing due to the exploitation
of nature. The rare resources include raw materials that are supplied to a company in the
corporate world. It is one of the crucial role of operations management in a company to focus on
utilizing the rare resources with help of support.
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Imitable: The imitable resources are present in a business, which cannot be copied by other
business entity. These include products and services which are copyrighted by a company in
form of trademarks and patents. The imitable resources include intellectual property rights based
products that can be only supplied by a business entity. In the corporate world, imitable
resources are also considered as main resources which are unique for a business. In order to
utilize imitable resources in a better manner, it is compulsory for Southwest Airlines to develop a
professional approach and strategy. The imitable resources of Southwest Airlines include
company’s logo which cannot be copied by other organization. In order to develop imitability of
resources, it is significant for the company to take help of strategic and top level management. If
the resources of a company are copied by other organization, then a business can file legal claim
against that company.
Organized: The organized resources are handled by a company with the help and support
of a precise and organizes strategy (García‐Sánchez, Gallego‐Álvarez and Zafra‐Gómez, 2020).
These resources include resources which are well-defined and managed by a company. There are
basically four types of organized resources in Southwest Airlines which are human capital, raw
material and resources which include raw material. In order to utilize organized resources in a
crucial manner, it is necessary for the company to designed and formulate a focused strategy and
approach.
Identification of two problems in Australian Domestic Airline Industry and the ways the
company will be affected
In Australian Domestic Airline Industry, one of problem that is faced is technological
advancement as technology is doubled edged sword that makes the whole industry vulnerable. In
airline industry of Australia, new technologies including Chatbots, Artificial Intelligence, etc are
revolutionising (Zhang and Et. Al., 2019). With investment in various technologies, Southwest
Airlines can make its flights more efficient together with eco-friendly which can impact
positively on its business strategy of low cost pricing and innovative logistics solutions as it can
make flight planning addition to operations more effective.
Another challenge that is faced in Australian Domestic Airline Industry is intense
competition as giant players including FlyPelican, Chartair, etc and hence forth that offers
similar benefits to target customers (Alaaraj, Mohamed and Bustamam, 2018). Competition in
domestic airline industry can impact on Southwest Airlines as it can spur invention of better
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offerings. With the business strategy of low cost pricing and innovative logistics solutions, the
company can maintain brand image and enhance standard of living to perform effectively.
Recommendations which Southwest Airlines could implement for successfully entering along
with thrive in Australian domestic airline sector
To successful enter and thrive in Australian domestic airline sector, managers of Southwest
Airline are recommended to use its resources and capabilities optimally. The entity is
recommended to carry out its practices with strategy of low cost pricing and innovative logistics
solutions through arranging training sessions and development programs for its employees to
conduct business effectively in Australian domestic airline sector. With this, the company can
enhance technical skills of its workforce to make communication with target audience better. The
managers will be able to send messages through emailing as well as social media in seconds
about organisational offerings to achieve success to enter and thrive effectively in Australian
domestic airline sector.
CONCLUSION
As per mentioned information, it is concluded that business strategy acts as guidance to
company for carrying out operations to achieve determined goals. It provides roadmap to a firm
for its business in domestic and international industry to show destinations and determine useful
stopping points in success way. VRIO Analysis categorises resources that are based on whether
they hold specific traits that are outlined in framework. PESTLE Analysis helps in determining
that company is performing strategic planning for achieving success with existing business
strategy. To enter and thrive in Australian domestic airline sector, managers of Southwest Airline
are recommended to provide training and development to its workforce for enhancing
capabilities to improve technical skills for combating challenge of technical advancement.
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REFERENCES
Books and Journals:
Alaaraj, S., Mohamed, Z. A. and Bustamam, U. S. A., 2018. External growth strategies and
organizational performance in emerging markets: The mediating role of inter-
organizational trust. Review of International Business and Strategy.
Amini, M., Bienstock, C. C. and Narcum, J. A., 2018. Status of corporate sustainability: A
content analysis of Fortune 500 companies. Business Strategy and the Environment.
27(8). pp.1450-1461.
Brochado, A. and Et. Al., 2019. Airline passengers’ perceptions of service quality: Themes in
online reviews. International Journal of Contemporary Hospitality Management.
García‐Sánchez, I. M., Gallego‐Álvarez, I. and Zafra‐Gómez, J. L., 2020. Do the ecoinnovation
and ecodesign strategies generate value added in munificent environments?. Business
Strategy and the Environment. 29(3). pp.1021-1033.
Haffar, M. and Searcy, C., 2018. Target‐setting for ecological resilience: Are companies setting
environmental sustainability targets in line with planetary thresholds?. Business Strategy
and the Environment. 27(7). pp.1079-1092.
Han, H., Yu, J. and Kim, W., 2019. Environmental corporate social responsibility and the
strategy to boost the airline’s image and customer loyalty intentions. Journal of Travel
& Tourism Marketing. 36(3). pp.371-383.
Lazonick, W. and Shin, J. S., 2019. Predatory Value Extraction: How the looting of the business
enterprise became the US norm and how sustainable prosperity can be restored. Oxford
University Press.
Ross, J. W., Beath, C. M. and Mocker, M., 2019. Designed for digital: How to architect your
business for sustained success. Mit Press.
Sarker, M. M., Mohd-Any, A. A. and Kamarulzaman, Y., 2019. Conceptualising consumer-
based service brand equity (CBSBE) and direct service experience in the airline
sector. Journal of Hospitality and Tourism Management. 38. pp.39-48.
Vatankhah, S. and Darvishi, M., 2018. An empirical investigation of antecedent and
consequences of internal brand equity: Evidence from the airline industry. Journal of
Air Transport Management. 69. pp.49-58.
Viswanadham, N., 2018. Performance analysis and design of competitive business
models. International Journal of Production Research. 56(1-2). pp.983-999.
Zhang, B. and Et. Al., 2019. Is the airline trustworthy? The impact of source credibility on
voluntary carbon offsetting. Journal of Travel Research. 58(5). pp.715-731.
Online:
Southwest Airlines. 2021. [Online]. Available through: <https://www.southwest.com/>
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