Marketing Plan; Southwest Airlines

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Table of Contents

Executive summary
Situational analysis
Target market
Marketing strategy
Marketing budget
Action program
Implementation and control
Works Cited

Executive summary

Southwest Airlines was established in 1967 and incorporated in 1971 in Dallas, Texas as a low cost airline company. The firm has developed an optimal market position over the past decades. By the end of 2012, Southwest Airlines had a fleet of 576 aircrafts and operated in 89 destinations. The firm is committed in providing customers with unique experience.

One of the ways through which it achieves this is by nurturing a warm and friendly working environment. Furthermore, the firm ensures that its customers are provided with high quality services. This has played a critical role in developing a high level of customer loyalty.

In an effort to maximize its level of profitability, the firm intends to launch a new service which will entail establishing a new route. The new route will entail travelling between Atlanta, GA to New York LaGuardia.

The firm intends to dominate the new route by offering high quality services. The route will be characterized by short turnaround duration. This will ensure that consumers achieve a high level of flexibility with regard to air travel.

Southwest Airlines intend to achieve the following objectives by launching the new route.

To offer competitive low cost carrier services to consumers in the US airline industry.
To increase the firm’s sales revenue by 20% within one year after launching the new route.
To increase the firm’s market share by 15% within one year after launching the new route.

Situational analysis

According to Hitt, Ireland and Hoskisson (65), it is critical of firms to analyze the environment in which it operates by taking into account the internal, customer and the external environments. Therefore, firms should consider conducting a comprehensive environmental analysis by integrating the Porters five forces, PESTLE analysis and the SWOT models.

The Porters’ five forces

Rivalry

The US airline industry is experiencing an increment in the intensity of competition. This has made the industry very volatile. The firm faces intense competition from a number of low-cost carriers such as JetBlue, Easyjet, United Airlines and the American Airlines. These firms have adopted similar operational strategies to those of Southwest Airlines.

Threat of entry

The low- cost carrier airline market in the US is experiencing an increment in the number of new entrants as a result of its high profitability potential. New firms are venturing the industry in an effort to exploit the prevailing market potential.

Consequently, the degree of industry concentration is increasing at an alarming rate. Moreover, the Deregulation Act of 1978 has made it easier for foreign low-cost carriers to enter the industry.

The threat of new entrant has made it difficult for Southwest Airlines to successfully differentiate its services. This arises from the fact that most of the entrants are focusing on price as their market competitive variable. As a result of the high threat of new entrant, the industry is experiencing a decline in its profitability.

However, the threat of new entrant is likely to decline as a result of the high cost of operation and high start-up cost (Hawkins, Misra & Tang 13).

Threat of substitute-low

The transport industry in the US is experiencing an increment in the intensity of competition arising from emergence of alternative means of transport such as railway and road. Consumers are increasingly using these modes of transport when travelling over short distances (Hitt, Ireland & Hoskisson 65).

Furthermore, increment in baggage fee and the high fuel cost in the US airline industry are motivating consumers to consider rail transport as a viable substitute to their travelling needs. Despite this, these modes of transport cannot rival the airline.

Supplier power-high

Previous studies show that “the primary sources of supplier bargaining power in the airline industry include labor, jet-fuel and aircrafts” (Hawkins, Misra &Tang 15). Jet-fuel and aircrafts are considered to be the main source of supplier bargaining power in the US airline industry.

Southwest Airline depends on Boeing for the supply of its aircrafts. This gives Boeing substantial supplier power. Thus, the firm may increase the price of the aircrafts.

Buyer bargaining power-low

The large number of low-cost carriers in the US airline industry has led to a significant decline in buyer power. Most low-cost carriers in the industry depend on price as the core source of competitive advantage. Thus, the consumers have the capacity to push the prices down.

Below is summary of the Porters’ five forces with reference to Southwest Airlines.

Summary of the Porters’ five forces with reference to Southwest Airlines.

Source: (Hitt, Ireland & Hoskisson 65).

PESTLE model

Firms operations are affected by changes in the external business environment such as the economic, social, legal, environmental, technological and political environments. Below is a PESTLE analysis of the US airline industry.

Political environment	Terrorist attack;terrorists are increasingly targeting the airline industry in an effort to communicate their political views. Such activities may adversely affect the firm’s competitiveness. Political stability; the US has experienced a high level of political stability hence minimizing the political risk faced by organizations.
Economic environment	–Increase in jet fuel may limit the firm’s competitiveness. -Occurrence of a global economic recession may limit the consumers’ purchasing power and hence their ability to afford air tickets.
Social environment	-The 2008 global economic recession has forced most consumers to develop a saving culture. Therefore, consumption has declined significantly. However, the low-cost strategy may lead to increment in the rate at which consumers’ consume the company’s services.
Technological environment	–The high rate of research and development in the airline industry presents a perfect opportunity for the firm to attain its desired growth. Technological innovation will lead to improvement in the firm’s effectiveness in developing a high level of customer satisfaction.
Legal environment	Failure to comply with the set laws may cause the firm to experience huge legal cost.
Environment	The US has implemented strict regulations aimed at compelling airline companies to reduce their carbon dioxide emission. The firm should consider integrating alternative forms of energy such as bio fuel.

SWOT analysis

Below is a summary of the firm’s strengths, weaknesses, opportunities and threats.

Strengths
Financial stability; the firm has managed to develop a strong financial capital base hence enhancing its operational efficiency.
Flight-schedule-Southwest Airlines has adopted an effective point-to-point flight system. This provides consumers with a high degree of flexibility.
Short turnaround duration; this strategy has enable the firm to be effective in utilizing its aircrafts.
Effective marketing and customer relation; the firm is focused towards ensuring that customers achieve a high level of customer satisfaction. This has led to improvement in the company’s reputation.

Weaknesses
Sustenance of services; the firm is experiencing a rampant growth rate. This presents a major challenge in its quest to provide customers with high quality services.
International destinations; the firm has not incorporated international flights. This limits the firm’s competitiveness in the global market.

Opportunities
Increase in its customer base; customers are increasingly appreciating low cost carriers because of their low pricing strategies. Consequently, the firm may develop a strong market position by attracting low income consumers.
Customer service;the firm can develop customer loyalty by integrating emerging internet-based technologies such as satellite-enabled Wi-Fi. This will improve the level of customer satisfaction(FierceWireless par.1)
Acquisition; the firm can improve its market growth by acquiring other low-cost carriers in the US. The acquisitions will lead to market expansion by venturing into new routes.

Threats
Rising fuel and labor cost; the firm’s competitiveness may be affected by high fuel and labor cost.
Competition; the firm faces intense competition from EasyJet and JetbBlue amongst others. The profitability potential of the industry may lead to entry of new firms hence reducing the growth potential.
Terrorism; Southwest Airlines faces a threat emanating from the changing face of global terrorism.
Rules and regulations; integration of strict aimed at enhancing environmental sustainability regulations may hinder the firms effectiveness in competing on the basis of price. Such regulations may relate to price.
Economic recession; occurrence of a global economic downturn may adversely affect the firm’s competitiveness.

Target market

Southwest Airline will target different customer groups. The first group will be comprised of business travelers and middle income consumers. The second group will be comprised of price conscious consumers and the travelers who are dissatisfied with the full-service airlines in the US.

The third customer group will include the leisure family travelers. The firm projects that the target market will enable the firm achieve the desired level of profitability.

Marketing strategy

Southwest Airlines is committed towards attaining an optimal market position despite the intense competition from other low cost carriers such as EasyJet and Jetlink. To attain the desired market position, the firm will focus on providing customers with high quality services (Stevens par. 3).

Marketing mix

Product strategy

Southwest Airlines will ensure that the targeted customers achieve a high level of satisfaction. This will be achieved by offering customers optimal in-flight services. Some of the services that will be integrated include offering free Wi-Fi services. Moreover, the firm will design an effective flight schedule so as to accommodate different customer groups.

Pricing strategy

To successfully penetrate the new market, Southwest Airlines will adopt penetration pricing strategy. The firm will set the price of air tickets at a lower point compared to other low-cost carriers serving the same route. This will enable the firm to attract the price conscious travelers.

Promotion

Southwest Airlines will ensure that customers are aware of its operation in the new route. This will be attained by adopting the Integrated Marketing Communication strategy. Different methods of marketing communication, which include advertising, sales promotion, direct marketing and public relations will be adopted.

Moreover, the firm will utilize both traditional and emerging marketing communication mediums such as print media and online mediums. This will contribute towards creation of an adequate level of market awareness.

Distribution

The firm will partner with renowned travel agents in order to ensure that a large number of travelers are aware of the new route.

People and process

In line with its commitment to provide customers with high quality services, the firm will train its employees on customer service. This will enable the employees to offer personalized services hence increasing the level of customer satisfaction.

Marketing budget

Southwest Airlines projects that it will incur substantial cost in its quest to achieve market the new service. The marketing budget below illustrates the projected cost.

Cost item	Amount in US $
Cost of market research	500,000
Cost of marketing communication	1,500,000
Total estimated cost	2,000,000

Action program

To successfully launch the new service, Southwest Airlines will engage in a number of activities as illustrated below.

December 2013; the firm will conduct a comprehensive market research in order to understand the prevailing market conditions and trends. The research will be focused on two market variables, which include the consumers and the competitors.

January 2014: Launching a comprehensive marketing campaign. The campaign will be conducted on different mediums in order to create sufficient level of awareness to potential customers on the firm’s operations in the new route.

February 2014: Conducting a pilot study by launching few airplanes to ply the new route. This will aid in gauging the prevailing market potential.

March 2014: Official launch of the new route. This will be achieved by holding an effective event in Atlanta.

Implementation and control

The firm will conduct a continuous evaluation on its performance in the new route. Some of the elements that the marketing manager will evaluate include the firm’s market share, the size of its customer base and the change in its sales revenue.

These elements will aid the firm in determining the extent to it has gained market acceptance in the new route. Furthermore, undertaking such a review will enable the firm’s marketing department to identify areas that require adjustment. Consequently, the firm will be able to develop its marketing strategies.

Works Cited

FierceWireless: Southwest Airlines and Row 44 announce milestones in Wi-Fi partnership 2013. Web.

Hawkins, Owen, Misra, Rahul and Tang, Hao 2012, Southwest Airline Company. PDF file. Web.

Hitt, Michael, I. Duane and R. Hoskisson. Strategic management: competitiveness and globalization, Mason, OH: Cengage Learning, 2007. Print.

Stevens, Suzanne. Alaska, Southwest Airlines rank high in quality. 2012. Web.

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