Southwest Airlines - External Environment Analysis Essay - 1

Southwest Airlines - External Environment Analysis - Essay ExampleThis paper give look at the Five Force manikin affecting the degree of competition as certain by Michael ostiarius and discuss the effect of each factor on the airline industry. We will excessively conduct a PEST analysis for Southwest Airlines as part of the airline industry. The Porter Five-Force Model Michael Porter put forth his Five Force Model in his groundbreaking work matched Strategy Techniques for Analyzing Industries and Competitors back in 1980. In the decades that followed, he has further 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 pass off (2) threat of substitutes (3) bargaining power of buyers (4) power of suppliers and (5) existi ng rivalry 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) develop (d) Declining and (e) Global (Porter, 1980). In fact, Porters analysis serves as a good theoretical official document to supplement a firms PEST analysis, which we shall now 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, base hit and security features. The high cost of aircraft and fuel is also affecting airline sustainability and the bottom line (Southwest website, 2012). Sources-threat of substitutes choice choices for air passengers would include fast trains, buses, automobiles and even ferry services. However, nothing beats the convenience of an airplane. Terrorist threats, luggage restrictions and natural rubber and security checks can also scare passenger away (Porter, 1980). Sources-bargaining power of buyers With the Passenger Protection portrayal 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 fundament on many counts (David, 2011). Club memberships and frequent flyer miles may be offered to regular passengers to help curb their loyalty, and there are often possibilities of an upgrade to a higher class if seating is available. Sources-power of suppliers McDonnell Douglas and Airbus Industries are ii of the most well-recognized aircraft manufacturing firms having a global recognition and reputation. Both of these firms take most of the worlds orders barely there are also a number of smaller firms that mak e smaller and lighter aircraft for other(a) purposes.