Southwest Airlines Presented by: Overview Stocks Stock Information Industry vs.
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Confirm Remember my region and language settings Search Escaping the Doghouse: Boding ominously for profit margins, it brings slowing growth, falling prices, and increasing competition.
In recent years, the process of commoditization has accelerated. Company life cycles have halved in the past 20 years: But does commoditization have to be bad for every company?
While many fail to navigate this commoditization process effectively, others are able exploit it and flourish. Take the case of Wal-Mart, which faces rapid commoditization in the retail industry.
By adopting a low-cost approach through scale and efficiency, the retailer was able to achieve a five-year through total shareholder return of nearly 10 percent even as many other big-box retailers were being forced into bankruptcy. Utilizing a well-tuned differentiation strategy focused on design and user experience, Apple captured 28 percent of global PC profitability with market share of only 6 percent in What enables companies such as Wal-Mart and Apple to flourish under conditions of commoditization while others stagnate or perish?
As these examples suggest, there is more than one approach to escaping the doghouse of commoditization. Success lies in choosing the right one to suit your particular situation. The first step toward this determination is to understand when and how commoditization is happening.
Drivers and Signals of Commoditization Commoditization occurs when the market perceives products to be substitutable.
Two common factors drive this substitutability. The first is the emergence of a standard design or technology in the marketplace. Initially, multiple technologies compete to become the market standard.
As the market matures, companies converge on one standard, bringing greater parity across offerings. However, competitors adapted to the new multiblade standard: The second is an increase in pricing and product feature transparency.
When customers can more easily compare products, they are more willing to switch from one to another.
This was the case with the airline and auto insurance markets in the early years of this century, when online marketplaces allowed greater transparency and increased commoditization pressures.
As perceptions of substitutability grow owing to one or both of these drivers, commoditization is accompanied by the following set of common warning signs: As switching costs drop, consumers better understand product qualities and place a greater focus on price, acquiring higher negotiating power.
Companies begin to cut prices to attract customers. This creates a downward spiral on prices throughout the market, squeezing margins across the board. As companies struggle to survive, larger companies acquire smaller companies to gain advantages in scale, reach, and capability.
Taken together, these changes shift the way value is distributed in an industry. As prices decrease, the overall profit pool shrinks. At the same time, there is a shift in how value is spread among producers, distributors, and consumers.
The share of value captured by existing modes of differentiation diminishes. Value instead shifts to companies that offer the lowest-cost production, the best monetization of market inefficiencies, or both. To flourish under these changing conditions, companies need to navigate a number of critical strategic choices guided by a clear view of how value is shifting in their industry.
Navigating Commoditization Amidst the shifting tides of a commoditizing market, many companies find themselves unsure of how best to steer the ship.
Should we economize and ride out the storm? Change our position in the value chain?Start studying Marketing Chapter 2. Learn vocabulary, terms, and more with flashcards, games, and other study tools.
BCG Growth- Market Share Matrix* southwest airline use this strategy to target customers who could not previously afford air travel.
Jul 31, · CASE ABSTRACT Southwest is an Airline Company, based in Dallas, Texas Herbert D. Kelleher, Chairman, President, and CEO Since , when the Department of Transportation began tracking Customer Satisfaction statistics, Southwest has consistently led the entire airline industry with the lowest ratio of complaints per 5/5(5).
Jul 31, · CASE ABSTRACT Southwest is an Airline Company, based in Dallas, Texas Herbert D. Kelleher, Chairman, President, and CEO Since , when the Department of Transportation began tracking Customer Satisfaction statistics, Southwest has consistently led the entire airline industry with the lowest ratio of complaints per passengers boarded.5/5(5).
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married couples work for SWA. Southwest Airlines gained access to the Atlanta market when it purchased Air Tran. This is an example of a change in Southwest's _____. Southwest Airlines Case Study. Threats WO Strategy Case study: Continental Airlines WT Strategy.
Airlines Continental Airlines American Airlines Delta Airlines Southwest Airlines Total Revenue in millions Boston Consulting Group (BCG) Matrix The BCG matrix reveals the company¶s market share position in the industry /5(4).