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1. CASE ABSTRACT
Conclusion
Directional vector coordinates: X-axis -1.4 + 5.0 = 3.6
Y-axis 2.6 + (-3.0) = -1.4
Therefore, the Southwest Airline should pursue Competitive Strategy
FS
+6
Conservative Aggressive
CA IS
-6 +6
(3.6,-1.4)
Defensive Competitive
-6
ES
The directional vector locates in the competitive quadrant of the SPACE Matrix, indicating
competitive strategies. So Southwest should take backward, forward, and horizontal integration;
market penetration; market development; product development; and joint venture.
Quadrant I
Quadrant II 1. Market development
1. Market development 2. Market penetration
2. Market penetration 3. Product development
3. Product development 4. Forward integration
4. Horizontal integration 5. Backward integration
5. Divesture 6. Horizontal integration
6. Liquidation 7. Concentric diversification
Weak Strong
Competitive Competitive
Position Position
Quadrant III Quadrant IV
1. Retrenchment 1. Horizontal integration
2. Concentric diversification 2. Concentric diversification
3. Conglomerate 3. Conglomerate
diversification diversification
4. Horizontal integration 4. Joint ventures
5. Divesture
6. Liquidation
4.0
High
3.0 to 4.0
I II III
Here, Southwest
3.0 is in cell VI
(2.03,3.05)
Medium IV V VI
2.0 to 3.0
2.0
1.0
2.0 3.0 4.0 IFE total weighted score
As the matrix, Southwest is in cell VI that suggests the hold and maintains strategy. In this
case, Southwest’s tactical strategies should focus on market penetration and product
development.
14. MATRIX ANALYSIS AND TOWS SUMMARY
As the result of IE matrix (at point 13), SPACE matrix (at point 11), Grand Strategy Matrix
(at point 12) and TOWS analysis (at point 10), we find out the Alternative Strategies such the
table below:
Nº Alternative Strategies IE SPACE GRAND TOWS Count
01 Forward Integration √ √ √ 3
02 Backward Integration √ √ 2
03 Horizontal Integration √ √ 2
04 Market Penetration √ √ √ 3
05 Market Development √ √ 2
06 Product Development √ √ √ 3
07 Concentric Diversification √ √ 2
08 Conglomerate Diversification 0
09 Horizontal Diversification 0
10 Joint Venture √ 1
11 Retrenchment 0
12 Divestiture 0
13 Liquidation 0
Expand into
more cities such Add 12 B17s to
Weight as Atlanta, New Fleet
Key External Factors (KEF)
0.0 to 1.0 York
AS TAS AS TAS
Opportunities
1. More than 100 new cities have encouraged
0.04 4 0.16 2 0.08
Southwest to offer flight service (2003)
2. There is an increased demand for
0.09 4 0.36 3 0.27
international travel
3. Increased demand for cities that are currently
(by 2009) without Southwest airline flights 0.09 4 0.36 3 0.27
such as New York, Atlanta
4. With an increase of nearly 3 million people in
the US there is an expansion of developing 0.01 3 0.03 2 0.02
cities across the United States
5. Increased amount of upper level business
travelers has led to greater demand for 0.01 2 0.02 4 0.04
better seats.
6. First airline on the web 0.02 - - - -
7. Booked online 13.6% more than American
0.03 - - - -
Airlines (in 2004)
8. Top-ranked web site in customer satisfaction
0.03 - - - -
among travel sites (by 2004)
9. Increase popularity of internet leads to an
expected rise of 22 percent from 2006 in 0.03 - - - -
flight booked online
10. There is a decline of 11 percent in airline 0.01 2 0.02 2 0.02
Doing calculation in the QPSM, we conclusion that market penetration strategy: Expand
into more cities that are currently without a SW airline flight (such as Atlanta, New York) is a
better option. This is given by the Sum Total Attractiveness Score figure. The market penetration
strategy yields higher score than the product development strategy: Add 12 B17s to Fleet. The
market penetration strategy has a score of 2.92 in the QSPM shown above whereas the Add 12
B17s to Fleet strategy has a smaller score of 2.38.
EPS
0.7
0.6
0.5
0.4 Series1
Series2
0.3 Series3
0.2
0.1
0 EBIT
0 200 400 600 800 1000
1
839.5 = 770 + (500/7.2)