![]() ![]() Southwest Airlines has gone an extra mile to deploy computer reservation systems to permit its clients to make convenient reservations for support facilities including cars and hotels for its customers via an integrated website. In fact, “Southwest Airlines will compete with other companies to cooperate with the car rental and hotel firms to offer discounted travel packages” (Desai, Patel & Quach 2012, p.4). They range from hired vehicles and hotel industries among others. In case of complements, there are large numbers of companies that uphold the airline sector. When this strategy is combined with the convenience offered by air travel in comparison to rail travel, the threat is minimized. However, this challenge is not big since Southwest Airlines capitalizes on the low-cost strategy to drive her competitive advantage. Nevertheless, the introduction of high-speed trains has resorted to immense amplification of threats of trains as a substitute to air travel. ![]() Over time, the substitute of buses and cars as an alternative mode of travel to air travel has substantially dwindled. However, by 1993, many of these airlines were merged and consolidated to form eight major carriers indicating that the equation for economies of scale had changed so that the threat of new entrants into the airline market by small airlines became narrowed.Īs Desai, Patel, and Quach (2012, p.3) point out, “Substitutes for air travel include cars, trains, and buses”. This wave suggests that the airline industry had low and weak economies of scale in 1980s so that the industry could support many airlines. In the Southwest industry market, “22 new airlines had been formed with another 43 entering by1982” (Desai, Patel & Quach 2012, p.3). In the 10-year period of efforts to reduce government’s control of activities, a large number of new partners into the airline sector was experienced. The manner in which an organization organizes these factors determines the degree to which it gains a competitive advantage in comparison to its competitor. Other industry-specific environment factors that determine the degree of rivalry are fixed costs, price wars, availability of mean of price comparisons, the degree of the carrier capacity of the airlines operating in the industry, the degree of differentiation of the organization’s products and services, and the capacity to maintain fuel costs low. In the effort to counter rivalry to gain income in these hubs, Southwest Airlines resorted to providing flights, which are time elastic for a number of landing points. Such hubs are the ones, which possess the highest air travel demand. To survive in such an industry, airline companies must focus on gaining competitive advantage in the hubs, which are highly profitable. Southwest Airlines being one of the eight airlines encountered high degrees of rivalry from other companies in terms of route, hubs, and airports. Nevertheless, the first eight leading airlines controlled 92 percent of the market. One of the factors that influence rivalry in the airline industry is the degree of market concentration of each of the firms operating in the environment.įor Southwest Airlines’ operational environment, no individual airlines dominated the market as at 1989. The degree of competition in any business industry determines the general productivity of firms operating in the production. ![]()
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