Review Porter’s Five Forces model (Unit 3) and apply it to analyse the US airline industry
Review Porter’s Five Forces model (Unit 3) and apply it to analyse the US airline industry
Question 1
Review Porter’s Five Forces model (Unit 3) and apply it to analyse the US airline industry. This
is an industry-level analysis of the competitive environment – part of external environment
analysis. At this stage do not focus too much on how Southwest Airlines managed to overcome
the forces and successfully compete in the industry, as this is the basis for the analysis of its
internal capabilities in question 2.
The purpose of the Five Forces Model is to gain a deeper understanding of the intensity of
competition in the industry and which forces are the key influencers. The more intense the
competition, the less attractive the industry, the lower the average level of industry profitability.
The reverse applies to less intense levels of competition. You must analyse each force
individually through an examination of the structural factors which determine the impact
of this force. The discussion of how these factors influence each force means that your
answer will go beyond the description of each force. For each force arguments should be
presented as to whether the force’s influence is high, medium or low. Your arguments should
reach formal conclusions:
• Is this an attractive/unattractive industry (high/low/average profit margins) as result of the
intensity of the competitive forces?
• What are the most significant forces facing the US airline industry in the future that all
competitors should take into account in their strategy formulation?
Question 2
Conduct an internal analysis (Unit 4) of Southwest Airlines’ capabilities, then to identify
and evaluate its core competencies:
• Use the Value Chain framework to analyse Southwest Airlines’ capabilities. You must go
further than describing what it does in each activity through a discussion of what it does well
(strengths) and what areas it needs to improve (weaknesses to address).
• To identify Southwest Airlines’ core competencies, analyse critical linkages/processes in
the Value Chain, some of which should be the basis for your choice of core competencies
(CCs). The explanation of Value Chain linkages is an intermediary stage to identifying CCs.
Assess which linkages are “core” by applying either Barney’s or Grant’s criteria.
• The final part of the question requires you to identify its choice of generic competitive
strategy – differentiation, cost leadership or hybrid (Unit 5). Your choice should be
supported by the capabilities and CCs you have derived from your preceding value chain
analysis.
Question 3
The focus here is on the organisational culture of the airline, and how this is able to influence
its strategic choices and implementation. Use the cultural web (Unit 10), and back up your
description with evidence from the case study. Again, you must go further than simply
describing what the culture is, by discussing the strengths and weaknesses of different
elements of the framework, and how they might impact the ability of the company to make and
implement strategic decisions.
Question 4
Consider three international strategy approaches (multi- domestic, global or transnational),
and to select which strategy you think Southwest Airlines should pursue, in the context of
the case study. To develop an argument to support your choice, work through the elements
of the Integration-Responsiveness Grid (from Unit 7) which apply to the industry and also to
Southwest’s own capabilities. You may wish to draw on your earlier analysis of Southwest’s
strengths and weaknesses to comment on how the company might overcome some of the
common difficulties associated with your chosen strategy.
