Lecture 5 - Corporate Strategy Notes

CORPORATE STRATEGY
Presentation Notes
Date: 20 Sep 2021
Lecture No: 5
Topic: Southwest: In a Different World
Porters 5 Forces
Specific Points Covered
Southwest Case Fish bone-Ichikawa Diagram to analyse the problem for

Discussion Southwest
Main Issue- Should we go in La Guardia or not?
Other items for consideration: La Guardia has a short runway there is

a possibility of accidents
Management Team discusses the problems.
Legal will be worried about the slots
Marketing- would suggest go for it
Operations people will be resistant as there will delays
CEO- Can southwest expand
How southwest was founded?
The founders were sitting in a restaurant and scratched a lay plan on a

tissue paper
Was the market already there or created?
SW created the market. They were trying to match the road fare
Market creation is blue ocean strategy.
Red oceans are all the industries in existence today – the known
market space, where industry boundaries are defined, and companies
CORPORATE STRATEGY
try to outperform their rivals to grab a greater share of the existing

market
How was market created?
The existing market got converted. people traveling via car took 2 hrs.
in logistics so they tapped that market. Eg: mini cola availability only at
schools and weddings as they did not want to cannibalize the market.
Once they were sure of the market than it was launched
What tactics they used to have a low pricing model
The strategy is low cost but how to achieve that in value chain is
through tapping the operational cost-effective tactics.
Less congestion traffics were focused.
They also reduced cost by going point to point.
They did not go over 600 miles,
In value chain- it is necessary to understand how to reduce the

turnaround time. SW had a team working together towards a singular
goal
They also standardized the planes so that similar parts are available.
Non-Assigned Seating Initially
Fuel Hedging- airlines hedge between one‐ and two‐thirds of their

fuel costs. Most airlines look forward 6 months in their hedging, with
few hedges more than a year ahead and almost none beyond 2 years.
What was SWs positioning?
Low cost, high reliability, caring employees etc.
What are the risks of entering the new market-La Guardia?
Can we maintain the same culture in the new area?
Can we offer same reliable results?
Can we offer the same customer service?
Is Turnaround Time necessary. What is the sensitivity?
How to monetize time saving due to quicker turnaround time?

CORPORATE STRATEGY
Calculation is on the slides
It is extremely necessary.110 planes saving is incurred due to reduced

turnaround time. we are considering delta saving in this calculation.
Overall, 67% operating income before tax is saved.
72% occupancy on the flight. Roi can be calculated based on this by

calculating delta from the market return.
Did they enter La Guardia?
yes, they did. They made sure to reserve their previous long-term
employees and placed in la Guardia. Employees in La Guardia were
also expensive, and they needed to preserve their organizational
culture.
Case Learning
Tread only into new areas only if you are sure if all the risks are
covered.
Chapter 3 Porters 5 forces is done for Industry evaluation
Rivalry: You and your Product.
 Depends on structure of the market. If there is perfect

saturation than prices are same/similar.
 if the market structure is fragmented than no rival will have
high market share-30% market might 20 players in consumer
CORPORATE STRATEGY
electronics. I
 if you have high scale than you can dominate the market. If you
have good relationship with the buyer than you have high
customer loyalty (customer with repeated purchases)
 buyer behavior can also be changed due to incentive that is
being offered.
 Behaviour of brand loyal or a brand switcher is observed based
on economic return
 A consumer can be tagged considering the mix
Substitutes: Satisfies your need in a different way
 Pricing plays a very important role
Supplier:
 we need to have alternate supplier.

 Never bid with the brand name of the company
 Eg: IBM lost its market due to Intel as IBM sought Intels
software supply
Factors to be studied from the slides
For Hourly Chap 1,2 and 3 for hourly

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CORPORATE STRATEGY

Topic: Southwest: In a Different World

Specific Points Covered

Southwest Case Fish bone-Ichikawa Diagram to analyse the problem for

Main Issue- Should we go in La Guardia or not?

Other items for consideration: La Guardia has a short runway there is

Management Team discusses the problems.

Legal will be worried about the slots

Marketing- would suggest go for it

Operations people will be resistant as there will delays

CEO- Can southwest expand

How southwest was founded?

The founders were sitting in a restaurant and scratched a lay plan on a

Was the market already there or created?

Market creation is blue ocean strategy.

try to outperform their rivals to grab a greater share of the existing

How was market created?

What tactics they used to have a low pricing model

Less congestion traffics were focused.

They also reduced cost by going point to point.

They did not go over 600 miles,

In value chain- it is necessary to understand how to reduce the

Non-Assigned Seating Initially

Fuel Hedging- airlines hedge between one‐ and two‐thirds of their

What was SWs positioning?

Low cost, high reliability, caring employees etc.

What are the risks of entering the new market-La Guardia?

Can we maintain the same culture in the new area?

Can we offer same reliable results?

Can we offer the same customer service?

Is Turnaround Time necessary. What is the sensitivity?

How to monetize time saving due to quicker turnaround time?

Calculation is on the slides

It is extremely necessary.110 planes saving is incurred due to reduced

72% occupancy on the flight. Roi can be calculated based on this by

Did they enter La Guardia?

Chapter 3 Porters 5 forces is done for Industry evaluation

Rivalry: You and your Product.

 Depends on structure of the market. If there is perfect

Substitutes: Satisfies your need in a different way

 Pricing plays a very important role

 we need to have alternate supplier.

Factors to be studied from the slides

For Hourly Chap 1,2 and 3 for hourly

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