Business Finance Homework Help

Questions to Answer

1. What is Southwest’s strategy?
2. When a firm is able to offer low prices, in many cases it is due to that firm experiencing lower costs. One technique to identify whether a firm’s cost advantage is a result of economies of scale is to examine the relationship between some measure of volume (such as market share or total output) and a firm’s profitability. What does that relationship look like in the airline industry?
3. Why is Southwest able to outperform its much larger competitors?
4. The individual aspects of Southwest’s strategy don’t seem incredibly difficult to imitate. Let’s assume you are one of Southwest’s competitors. Why can’t you simply begin to copy Southwest’s strategy and experience the same profits that they do?
5. Southwest and all of the major airlines are achieving record profits as oil prices have dropped. How should Southwest grow, given the fact that it has largely saturated its short-haul markets with point-to-point service?  
6. Will long-haul flights be as profitable for Southwest as short-haul flights?  Why or why not?  Will they be as profitable for Southwest as for Delta or Jet Blue?  Why or why not?
7. What will limit Southwest’s pricing on long-haul flights? Will they be able to charge as much, or even slightly below, competitors? Why or why not?