Southwest Airlines’ Strategic Initiative for Entry Into the Chinese Market

Cite this

Company Overview

Established in 1967 as Air Southwest Company by Herb Kelleher and Rollin King, Southwest Airlines Company is an American airline and the world’s largest low-cost carrier. The company adopted its current name in 1971 after commencing operations as an intrastate flight organization within Texas (Dinler & Rankin, 2018). It flies to 109 scheduled destinations in 40 states in the United States. The company also flies to Puerto Rico, Central America, Mexico, and the Caribbean.

On-Time Delivery!
Get your customized and 100% plagiarism-free paper done in as little as 3 hours
Let’s start
322 specialists online

The airline operates the point-to-point transportation model, flying directly to the scheduled destinations instead of going through a central hub. This system provides various benefits to the organization, including reduced operational durations since there are no connections or traffic to be managed, enhanced timeliness, minimized value-added services, and relatively low labor costs (Marti et al., 2015). Consequently, Southwest Airlines can afford to provide massively discounted airfares.

SWOT Analysis

As a large-scale low-cost carrier, Southwest Airlines has a robust commercial aviation brand name, which attracts passengers and supports the firm’s ability to venture and penetrate new markets. The organizational culture emphasizes friendliness, which creates employee buy-in and motivation, translating into excellent customer service (Roberts & Griffith, 2019). The scalability of the point-to-point operating model can allow the firm to enter new routes with minimal strain on the current activities. However, the organization has thin profit margins due to the adopted cost leadership strategy, which allows the provision of low airfares (Chishty-Mujahid, 2017). The concentration of its operations in the United States also limits the firm’s profitability by failing to venture into the considerably lucrative global commercial airline industry.

Southwest Airlines has the opportunity of expanding into other routes outside the United States to grow its revenues and base. Partnerships with organizations that provide complementary services, such as ticketing, can also support the firm’s expansion into new markets such as China. The airline faces the threat of aggressive competition from emerging and existing firms, which adopted similar cost leadership. Additionally, the commercial aviation industry, in which the organization operates, has limited opportunities for cost-cutting. This implies that the firm’s ability to reduce its costs is significantly restrained.

Analysis of the Chinese Airline Industry

China is the world’s largest aviation market, with passenger traffic registering year-on-year progression (Wu & Man, 2018). Southwest Airlines is guaranteed a ready market if it successfully ventures into the country. Over the years, the recorded growth in passenger traffic implies that the demand for flight services in China has outstripped the offer. The consistent economic growth in the country illustrates that businesses should not be engaging in price wars but should be actively seeking markets with unmet consumer demands. The airline can also partner with other organizations which provide complementary services, such as online ticketing, to enhance their competitive advantage in the country. China is a technology powerhouse and the airline would not need to import providers of such services.

Rationale for Presentation

China is the leading carrier of airline passengers in Asia, a trend that has consistently grown as a result of the economic boom. The country also has a positive outlook, especially in tourism and business travel. These two components immensely promote and nurture the entry of new airline operators in the market to enhance the mobility of people in and out of the country. The increasing passenger volumes also necessitate the entry of new operators or the expansion of the capacities of the operating airlines to enhance the movement and convenience of people. Southwest Airlines can capitalize on this trend and exploit the opportunity by entering the Chinese airline market.

Challenges and Limitations

China already has established low-cost airlines such as Spring Airlines, which poses a major entry challenge for Southwest Airlines into the Chinese aviation market. Competing with the local firms is a demanding venture, which would require innovative strategies to enable the firm to compete effectively. For instance, the firm can introduce value-addition services as an initiative to promote and popularize the airline.

Yes, we can!
Our experts can deliver a custom Southwest Airlines’ Strategic Initiative for Entry Into the Chinese Market paper for only $13.00 $11/page
Learn More
322 specialists online

The U.S. and China are distinctly different countries, each espousing a wide array of varying lifestyles, beliefs, languages, customs, and norms. This is a major challenge as the company would be compelled to rely on the local people before the transferred employees can learn the basics. Additionally, this venture would expose the firm to completely new compliance issues, including taxation and environmental subjects. In recent years, the U.S. and China have had strained bilateral relations, which have impeded the ability of the two countries to engage in business with one another.

References

Chishty-Mujahid, N. (2017). Southwest Airlines’ successful economistic, cost-leadership strategy examined in light of Paul Lawrence’s renewed Darwinian theory: An analysis. International Interdisciplinary Business-Economics Advancement Journal, 2(2), 115–123. Web.

Dinler, N., & Rankin, W. B. (2018). Assessment of the evolving low-cost business model for the future importance of U.S. secondary airports. International Journal of Aviation, Aeronautics, and Aerospace, 5(4), 1–35. Web.

Dong, X., & Ryerson, M. S. (2019). Increasing civil aviation authority in China requires harmonizing the physical and human components of capacity: A review and investigation. Transport Research Interdisciplinary Perspectives, 1, 1–7. Web.

Marti, L., Puertas, R., & Calafat, C. (2015). Efficiency of airlines: Hub and Spoke versus point-to-point. Journal of Economic Studies, 42(1). Web.

Roberts, D., & Griffith, J. C. (2019). A tale of two airlines: A comparative study of high-road vs. low-road strategies in customer service and reputation management. International Journal of Aviation, Aeronautics, and Aerospace, 6(2), 1-35. 13-17. Web.

Wu, X., Man, S. (2018). Air transportation in China: Temporal and spatial evolution and development forecasts. Journal of Geographical Sciences, 28(10), 1485-1499. Web.

Cut 15% OFF your first order
We’ll deliver a custom Company Analysis paper tailored to your requirements with a good discount
Use discount
322 specialists online

Cite this paper

Select style

Reference

BusinessEssay. (2022, July 1). Southwest Airlines’ Strategic Initiative for Entry Into the Chinese Market. Retrieved from https://business-essay.com/southwest-airlines-strategic-initiative-for-entry-into-the-chinese-market/

Reference

BusinessEssay. (2022, July 1). Southwest Airlines’ Strategic Initiative for Entry Into the Chinese Market. https://business-essay.com/southwest-airlines-strategic-initiative-for-entry-into-the-chinese-market/

Work Cited

"Southwest Airlines’ Strategic Initiative for Entry Into the Chinese Market." BusinessEssay, 1 July 2022, business-essay.com/southwest-airlines-strategic-initiative-for-entry-into-the-chinese-market/.

References

BusinessEssay. (2022) 'Southwest Airlines’ Strategic Initiative for Entry Into the Chinese Market'. 1 July.

References

BusinessEssay. 2022. "Southwest Airlines’ Strategic Initiative for Entry Into the Chinese Market." July 1, 2022. https://business-essay.com/southwest-airlines-strategic-initiative-for-entry-into-the-chinese-market/.

1. BusinessEssay. "Southwest Airlines’ Strategic Initiative for Entry Into the Chinese Market." July 1, 2022. https://business-essay.com/southwest-airlines-strategic-initiative-for-entry-into-the-chinese-market/.


Bibliography


BusinessEssay. "Southwest Airlines’ Strategic Initiative for Entry Into the Chinese Market." July 1, 2022. https://business-essay.com/southwest-airlines-strategic-initiative-for-entry-into-the-chinese-market/.