Question & Answer: Read through Case 20—Southwest Airlines in 2010: Culture, Values, and Operating Practices Begin with…

Read through Case 20—Southwest Airlines in 2010: Culture, Values, and Operating Practices Begin with a SWOT analysis, in which strengths include the firm’s market share and weaknesses include the firm’s cost trends.

Expert Answer

Strength	Weakness
The man focus of firm’s operating strategy is on point to point trips The company has substantial fleet operations with 537 Boeing 737 aircrafts. It has a very strong presence in North America with more than 101.3 million passengers in 2009. It is known for having the most friendly staff as it was selected as “Friendliest Flight Attendants and Crew” in a survey conducted by Smarter Traveler readers. It is considered to be the largest airlines in the world in terms of highest number of passengers per year Firm has attained economies of scale and is in industry for more than 40 years. Despite having 82% employees as unionized, it offers flexible working hours. It has a very strong brand name in low fare aviation industry and thus it is expanding its market. In comparison to any other American airline, it has the highest domestic departures. High Current Ratio High Quick Ratio High Cash Ratio Low Debt-to-Assets High Times Interest Earned High Net Working Capital Turnover High Gross Margin High Operating Margin High Pre-Tax Margin High Profit Margin High Pre-Tax ROA High After Tax ROA High Pre-Tax ROIC High After Tax ROIC Long Accounts Payable Turnover (days)	Falling margin profits from 2007 – 2009 Depends mainly on passenger revenues which is almost 95%. Rely heavily on Boeing. Conservative growth strategy Only 57 cities are covered domestically. Booking is done onlu through company owned counters. No market segmentation policy Limited ability to carry freight and cargo Low market share – 10.8% compared to market leader (15.2%) High Debt-to-Equity High Long-term Debt to Net Working Capital High Days of Inventory (days) Low Operating Cycle (days) Low Total Asset Turnover Low Fixed Asset Turnover Low Accounts Payable Turnover Low Cash Turnover Low Pre-Tax ROE Low After Tax ROE High Inventory to Net Working Capital
Opportunity	Threat
Domestic airline industry is expected to grow by 2.3% per year till 2025. By acquiring Air Tran, the firm can have reach in global aviation too. Improved performance of tourism in USA which has a growth of 3-4% in 2010. By having joint ventures with Volaris, it can expand its operation. Due to fuel efficiency and aerodynamics , longer flight hours are possible. Traveler traffic is expected to grow by 3.5% through 2019	Due to economic turmoil, a lot of competition and reduced profits. Low fare policy can be threaten by high price of oil. Low flying frequency due to higher unemployment and inflation. Greater regulations from government.h

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