Southwest Airlines - External Environment Analysis Essay - 1

Southwest Airlines - External Environment Analysis - Essay ExampleThis paper will tactile sensation at the Five Force Model alter the degree of competition as developed by Michael porter and discuss the effect of each agent on the air lane industry. We will also conduct a PEST analysis for Southwest Airlines as part of the airline industry. The ostiary Five-Force Model Michael Porter put forth his Five Force Model in his groundbreaking work Competitive Strategy Techniques for Analyzing Industries and Competitors back in 1980. In the decades that followed, he has go on explored the global business arena in terms of competition, the value chain, the competitive advantage of nations and even how to create and sustain superior performance in business. Porter maintains that the five forces that affect the level of competition among firms in an industry are (1) barriers to entry and exit (2) threat of substitutes (3) bargaining power of buyers (4) power of suppliers and (5) existing rival between firms. In the same work, Porter has also analyzed industries as falling into one of the following five groups (a) Fragmented (b) Emerging (c) Mature (d) Declining and (e) world(a) (Porter, 1980). In fact, Porters analysis serves as a good theoretical tool to supplement a firms PEST analysis, which we shall at present conduct for the airline industry in general and Southwest Airlines in particular. Sources-barriers to entry and exit The high cost of entry and exit in the airline industry globally include investment in equipment, infrastructure, buildings and facilities, an experienced workforce and aircraft maintenance and inspection, insurance, safety and tribute features. The high cost of aircraft and fuel is also affecting airline sustainability and the bottom line (Southwest website, 2012). Sources-threat of substitutes Alternative choices for air passengers would include fast trains, buses, automobiles and even ferry services. However, nothing beats the convenie nce of an airplane. Terrorist threats, luggage restrictions and safety and bail checks can also scare passenger away (Porter, 1980). Sources-bargaining power of buyers With the Passenger Protection Act in place to safeguard customers against price hikes, and insurance, safety and security measures that must be maintained at all times, and discount prices that are eagerly picked up by bargaining customers, this puts the buyers in the driving seat on many counts (David, 2011). Club memberships and frequent flyer miles may be offered to regular passengers to help retain their loyalty, and on that point are often possibilities of an upgrade to a high class if seating is available. Sources-power of suppliers McDonnell Douglas and Airbus Industries are two of the most well-recognized aircraft manufacturing firms having a global recognition and reputation. Both of these firms take most of the worlds orders but there are also a number of smaller firms that make smaller and lighter aircra ft for other purposes.