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Assignment focuses on the complete analysis of the different determinants focusing upon the threats in Southwest Airline

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Introduction 

With the growing period, airlines industry has turned out to be highly successful and has grown over time. In addition, it can be said that it is necessary for all the organisations to determine the threats of macro environment. The threat of new entrants, however, exerts great impact in the companies in order to generate profit. The current assessment aims to focus on analysing the external analysis of an American airlines company, Southwest Airlines, which is considered to be, a lost cot carrier. The assessment aims to deal with the some of the determinants that can posses a great threat to the company.       

Overview of Southwest Airlines’ new entrant threats 

From the global statistics (2016), it has been identified that Southwest Airlines was considered to be, the world’s second largest airlines concerning the total passengers it carries. From the provided case study, it can be analysed that the competition in the airlines industry is very high. This organisation faces severe competition from both the national as well as international airlines. As influenced by the idea of Belton (2017), it can be stated that there is a need to constantly focus on the different ways to implement better and unique strategies in order to stay in the competition and to attain an effective competitive advantage. 

Determinant 1: High Capital Cost 

It has been analysed from the case study that the competition in the market is in its height. However, it can be analysed that building an efficient position in the airline industry is very difficult. This industry involves a huge lot of investment and the organisation can hardly be self-owned as it requires huge amount of capital. In the viewpoint of Barros & Wanke (2015), it can be stated that the US market already has too many airlines organisation, who are struggling hard in order to be in the rat race. In this context, Southwest Airlines stands firm and carry second largest passengers. In terms of the high capital cost, it can be, stated that the entry of the new entrants in this sector is very low. Within this industry, it is very essential to have a proper investment and financial backup to be out of the different crisis that can happen. This industry gets impacted from the hike in the fuel prices and at the same time, there is a need to provide the cheapest possible rates to the passengers in order to attract them. Hence, it can be stated that this organisation has a low threat in terms of new entry considering high capital cost (Southwest.com, 2018).

Determinant 2: Cost of Switching 

Cost of switching can be a potential determinant in terms of customers or the passengers. In the context of Southwest Airlines, it has been identified that the passengers are very loyal towards this brand (Skilton & Bernardes, 2015). This brand is considered to be, one of the few airlines, which provides the cheapest possible rates. This strategy makes the organisation to attract the most number of passengers. Hence, the customers will not switch their brands, as the new entrants will not be able to provide the cheapest possible rates. The existing airline organizations are possibly far behind, in the race of providing the cheapest rates in comparison to Southwest Airlines. Hence, the threat in this sector for the new entrants is low as well.

Determinant 3: Acquisition of technology and skills 

It can be stated that in an airlines industry, the technology plays a very efficient role. It has been analysed that all the employees are required to possess a very hardcore technical knowledge in airlines sector. In the viewpoint of Min & Min (2015), it can be stated that this industry invests a lot in research and development in order to bring out the most innovative technology either to reduce the fuel costs or to bring out the most innovative models. Southwest Airlines is very technologically advanced and it takes great care and invests high for making the maximum usage of the fuel. Hence, the threat from this determinant can be considered to be, medium (Czerny & Zhang, 2015).

Determinant 4: Legal and Government Created Barriers 

Southwest Airlines considers all the taxation and environmental laws that are required to be followed. There is a need to focus on the passenger safety, failing which might lead to total ban of the organisation. There are numerous laws and regulations that, an airlines organisation has to follow. In the viewpoint of Dresner et al. (2015), there is a need to effectively, concentrate on the environmental standards in order to reduce the carbon emission. For this, there is a need to invest high in the research and development and also to have suitable employees, who will inspect regularly regarding following of such environmental standards. Hence, it will become very difficult but not impossible for any new entrant to gain entry in the market. Thus, the threat can be considered to be, medium (Barros & Wanke, 2015).

Conclusion 

After complete analysis of the different determinants focusing upon the threats in the context of new entrants, it can be stated that Southwest Airlines is required to increase its innovative skills in order to be in the competition as it can be taken into consideration that a new organisation will be much better if it gains entry. Hence, there can be possible chances of customers switching their brands and it is better to be ahead rather than waiting other competitors to pounce upon the opportunities. 

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