Type: Evaluation Essays
Sample donated: Florence Shaw
Last updated: September 17, 2019
EXECUTIVE SUMMARYTheCompanySouthwest Airlines is a major airline companythat provides air transportation in the United States and nearby internationalmarkets. Founded in 1967 by Rolling King and Herb Kelleher, Southwest commencedservice on June 18, 1971, with three aircrafts and 25 employees with flights aslow as $20 one-way fares to Dallas, Houston, and San Antonio. Southwest has been ranked #8 onFortune’s list of World’s Most Admired Companies for 23rd consecutiveyears. In its 47th year of service, Southwest Airlinescontinues to provide exceptional customer service delivered by more than 55,000employees with 115 million passengers annually. Southwest Airlines serves 100destinations in the United States and operates international flights to Mexico,Latin America, and the Caribbean.
Goals Southwest’smission is to provide excellent customer service delivered with warmth,friendliness, individual pride, and company spirit. Southwest’s goals for thecoming five years are the following:· Maintain the brand image as low-fare travel· Expand services to Canada particularly to themost populated cities like Toronto, Montreal, Calgary, Ottawa, Edmonton,Winnipeg, and Vancouver.· Improved customer service by improved RevenueManagement · Provide first-class seating to attract morebusiness and leisure travelers who are willing to pay more for convenience. · Increase profit by 80% per year and $100million in the first quarter of 2020. SituationalAnalysisBased on the IATA 2017 Mid-year report, airlineCFOs and heads reported in April 2017 that they were positive about futuregrowth in the airline industry. The airline industry is a huge market and thestrongest financial performance is being delivered by the airlines in NorthAmerica.
The capacity being offered by the airlines in North America isexpected to grow by 2.6% (IATA, 2016). Despitethe potential growth, the airline industry has been historically volatilesubject to numerous socio-economic forces, regulations, and detrimental eventssuch as terrorism, weather, and natural disasters. Southwest Airlines is not exempted from thesevarious factors that can hinder growth and success in the marketplace. Southwestmust continue to expand and re-create valued services for its customers tomaintain its competitive lead in the airline industry. The SWOT Analysis thatwas conducted is the main source of the key points for both internal andexternal components that aid to the development of Southwest’s marketing plan. Marketing ObjectivesIn January 2017, Statistics Canada showedCanadians visits to the US surged to the highest level with 3.
6 million tripssince 2015, a 7% increase from December’s level. (Bureau of TransportationStatistics, 2016). In response to the growing demand forInternational flights to/from Canada, Southwest Airlines will begin to expandinternational services to popular cities in Canada particularly in Toronto(Toronto Pearson International Airport), Montreal (Montréal–Pierre ElliottTrudeau International Airport), Calgary (Calgary International Airport), Ottawa(Ottawa Macdonald–Cartier International Airport), Edmonton (EdmontonInternational Airport), Winnipeg (Winnipeg James Armstrong RichardsonInternational Airport, and Vancouver (Vancouver International Airport). Theexpansion in the international market will also include the upgrade of theexisting reservation system that will support code sharing for internationaland connecting flights. In addition, Southwest will launch first-class seatsthat are more appealing for both leisure and business travelers.
Theacquisition of the AirTran Airways in 2011 has provided Southwest a directaccess into foreign markets. The acquisition placed Southwest’s profit toincrease by 75% per year to $946 million in the first three quarters. (SouthwestAirlines Co.
, 2016). Based on the equation used in the salesforecast, the new international market to Canada and new services will putSouthwest on the path of growth and diversification; increasing profit by 80%per year and $100 million in the first three quarters of 2020. The acquisitionof the AirTran Airways proved an immediate success and endless possibilities ofgrowth in the international market and is projected to have a similar outcomefor a new market in Canada. Target MarketsSouthwest Airlines will target male and femaleadults aged (18-25, 26-45, and 46+) who travel from/to US and Canada using allother forms of transportation including motor vehicles, personal vehicles, andrailroads.
Southwest will also increase the market share of customers thattravel for business between the United States and Canada. This segmentation isfor price-conscious business consumers who travel for professional reasons. Marketing Mix This section will explain indetails the decisions for marketing mix and selected strategic planning for anew market and services for a 5-year period. The 4Ps will cover the coming yearup to 2023. Southwest Airlines will emphasize itsexcellent customer service, friendly and fun to fly, “no frills”, no luggagefee which customers love ensuring the highest level of dedication to customerservice.
The company will still compete with all other forms of transportationincluding automobiles by providing alow-cost fare to/from Canada without compromising the high level of customercare. For promotion strategy, Southwest will use different media,advertisement, and programs to promotedifferent destinations in Canada. “Fly with Southwest, Eh?” ad campaign will promote the launch of thenewly added destinations to Canada bringing a fun element of using the word”Eh”. The message of the “Fly with Southwest, Eh?” campaign ad conveys thatSouthwest understands and listens to the needs of its customers by providingservices to Canada and the decision has been made and agreed upon by itsconsumers. Southwest tickets can still be purchaseddirectly through the company’s internet website, Southwest.
com. In addition,mobile users can access the mobile application for any time for both iOS andAndroid users to transact with Southwest Airlines.The price model for the first-class seatingwill be added to the company’s existing price segmentation like “Wanna GetAway”, “Anytime”, and “Business Select.” The price segmentation carriesadditional benefits such as priority boarding, bonus reward points, meals,beverages, and seating with more comfort and convenience. Southwest willcontinue to promote many reasons to fly with Southwest from its low fares,network size, exceptional care for the people first.Implementationand ControlSouthwest’s head of Marketingand Advertising will be responsible for the implementation of the marketingplan, strategic planning, and decision making. The department heads will be incharge of the campaigns organization and sales promotion.
Internal audit willbe conducted to analyze operating results in order to control performancemetrics and quality. Assessment tools will beprovided in the evaluation of the marketing mix, the rationale is to ensurethat performance does match the outlined objectives. The control on performancecriteria will be based on the weighted score for each criterion shown in Table17. Performance Improvement Plan will be generated from the performance resultsand a plan of action will be discussed should there be any challenges that mayhinder the success of the marketing plan. The estimated marketing cost is $1 billion and will bedistributed to Advertising, Training and Development, Channel Development,Compensation, and other expenses.
Southwest’s low debt to equity ratio willallow debt strategy to be more feasible. The cost of the new fleets for the newmarket in Canada is not added to the financial cost analysis because of theexisting acquisition of the Boeing 737 Max 8 on October 1, 2017.