Management Information System Essay

The ten study internal carriers in the United States reported revenue of 145. 3 trillion dollars in 2012, according to data gathered by logical argument hoses for America (2012). The accord commercialize capitalization of the twelve largest and publicly traded flight paths stood at 48 one thousand one thousand thousand dollars as of April 2012 just four billion greater than the value of Starbucks and counsel be gloomy opposite(a) companies like Facebook and eBay ( b arlines for America, 2012). Our research lead give a detail analysis of the deuce theories substantial by Harvard line of fruits schooldays Professor Michael porter. gatekeeper posited that in orderliness for short letteres to get by an in-depth analysis should be done not solitary(prenominal) of your direct competitors but also extraneous forces that undersurface help a course mathematical operation Porter designate this as the vanadium Forces of competitive Strategy. An different concept de veloped by Porter was the Value strand, the Value train breaks the agate line process into two groups, Porter argues that business should analyse the areas of the Value Chain to see where improvements stinker be made to enhance performance. Our report testament show how southwest flight paths uses Information system in Porters theories and concept to gain competitive improvementIntroduction to southwestward Airlines accord to information received from south-west. com (2013), Southwest Airline was incorporated in 1971 by co-founders Rollin King and Herb Kelleher as Air Southwest Comp each. The family is based in Dallas, Texas and has a staff contentedness of over 46,000 persons. The carrier was formed has a upset cost domestic carrier originally only flying in the tell apart of Texas forwards branching out to other US states. From inception Southwest policy business strategy was to offer low fare and conveniently time flights on short haul routes (Ross & Beath, 20 07).Today Southwest Airlines flies domestic in the United States to 79 cities. Southwest Airlines is the largest air duct in the man by passengers carried, in 2012 over 100 million persons was transported by the airline to different cities in the USA. The airline has being a pioneer in the industriousness and is credited for setting the foundation for the rise of other low cost carriers across the military personnel being like Ryan Air and Easyjet. In an labor where profit margins are movementually low and different carriers filing for unsuccessful person ever so often Southwest has managed to stay above the fray.In almost 40 years of returns the airline has consistently off-key a profit composition other airlines go struggled and has remained one of the worlds most profit fit airlines. The airlines consistent favorableness was due to its take ability of low cost on a set per mile basis due to its use of a individual aircraft model the Boeing 737 and its fuel hedging program that protect the company from ascension fuel prices (Ross & Beath, 2007). Southwest Airlines commands a market capitalization of over golf club billion dollars making it one of the most valuable airlines in the world.Southwest credited its success for building a philosophy of simplicity, the company offer of low cost fares kept attracting passengers while its gamy touch node service kept them coming back (Ross & Beath, 2007). As the airline grew and its business processes became more complex and with other airlines investing heavy in applied science in order to survive Southwests CEO at the time realised that a solid IT infrastructure would be subjective for the company to achieve its strategic goals and could lower the airline cost without flexile on customer service (Ross & Beath, 2007). Porters Five Force Model for Competitive StrategyPorters Five Force Model was developed by Michael Porter, Professor at the Harvard agate line School in 1979. According to Porte r (1979) the Five Forces is a holistic approach of looking foring and analysing any industry to understand the structural underlining drivers of profitability and competitor. Porter believes that industry act asers hear too much of a narrow look in assessing competition by believing that direct competitors in an industry are the only ones that are important. He uses the five forces model to show how business are engaged in a broader form of competition that can touch their profitability.These broader forces of competition accept customers and suppliers who can have legitimate bargaining top executives, freshly entrants that can emerge in the industry and affect your market share, utility(a) products or function that can be used and can have a direct effect on your profitability or result and direct industry argument and competition within the industry. According to Hills & Jones (2008) a businesss ability to earn great profits are dependent on the strength of Porters Fi ve Forces, the reverse is also on-key that a weak competitive force allows for a greater opportunity to make profits.For example, a company that controls a monopoly in a certain geographical area pull up stakes see greater opportunities for profit, because being a monopoly will eliminate the threat of new entrants, no internal contender and low bargaining power of consumers. The superior issue most businesses will have is to identify changes in the five forces and knowing how to formulate strategies from the opportunities and threats that may arise from the change (Hill & Jones, 2008). The image below illustrates Porters Five Force Model. Fig. 1 Source (Porter, 1979) Threats of Entry in the Airline manufacturingThe domestic airline industry in the United States has intense contestation between its competitors. Over ten airlines fight for market share with the rivalry completely driven on price. Southwest Airline faces some its greatest competition from fellow low cost airline s such as smelling air and JetBlue all three compete against each other on direct routes trying to offer the lowest prices and the best service to passengers with very low profit margins. Passenger figures stand at approximately 450 million passengers travel domestic annually in the United States (International Air sway Association, 2012).However, Southwest Airlines remained the dominant domestic carrier with a passenger adulterate of over 100 million 2012 (Southwest Airlines, 2012). The competitive nature of the domestic market in the United States has led to the merger of some of its carriers in order to consolidate costs. The most recent merger being that of American Airlines and US Airways and before that it was Continental and United Airlines who joined forces. Barriers to Entry in the Airline Industry Prior to 1978 the airline industry in America was heavily regulated by the United States regimen and was driven by high prices and empty airlines.Government regulation not o nly prevented competition among industry players but also created an entry barrier for new airlines, as government regulated routes presented a monopoly for established carriers (Bloomberg Business Week, 2011). In the United States the state of Texas was the only state which never had government regulation in the industry. The deregulation in Texas gave Southwest Airlines an opportunity to inaugurate the market offering its service in the major cities of Texas only (Southwest Airlines, 2012).The deregulation effort that was led by democratic senator Ted Kennedy and signed into law by former President appreciate Carter saw a dismantling of fare and route controls in 1978 (Bloomberg Business Week, 2011). This deregulation made it increasingly easy for new airlines to enter market and compete. With government control no longer a barrier airlines were able to enter the market once they were able to access the capital that was involve and meet the safety standards that were unavoidab le by the Federal Aviation agency (FAA).However, Michael Porter (2008) in an interview with Harvard Business School described the airline industry as one of the easiest enter with low barriers to entry he pointed out there is a constant stream of new airlines that enter the market regularly despite low profits. Bargaining Power of Suppliers and Customers in the Airline Industry According to Porter (2008) the limited number of suppliers in the airline industry gave a considerable amount of power to the ones that existed. Porter argues that airline suppliers made considerable more profits than airlines themselves.Aircraft manufacturing is dominated by only two major players, American company Boeing and French company Airbus. In 2011 both manufactures controlled over 90 per cent of new air craft orders with Airbus dominating at 64 percent (The Guardian, 2012). An airline extract in the industry is also tied considerably to the price of crude oil which is core to operation. Southwest Airlines use a method of hedging to compete on the price of oil which allows the airline to lock in to contracts at cheaper prices in anticipation of future rises in the world market prices (CNBC, 2012). other supplier cost that affects performance let ins security cost, airport gates and remainder fees and wages to staff. The greater the rivalry among industry players the more fickle customers will become. Customers in the airline industry have tremendous bargaining power and are very price sensitive. The fast pace nature of the industry can allow a customer to switch airlines at any time. Customers were the key beneficiaries from the deregulation of the industry, before the removal of price structure and other regulation, government policy ensured that airlines competed on service and not price (Bloomberg Business Week, 2011).This shifted dramatically with deregulation has new entrants to the markets like Southwest and JetBlue built their business model on low prices which has c aused older established companies to lower their own margins. Substitutes Products for Airlines There are a number of substitute services on hand(predicate) in the domestic airline industry in America. Substitute products include rail service, water, coaches, private car transportation or refusing to travel. These substitutes provide customers with other alternatives other than flying and are strong competitive forces to the industry.Airlines are then forced to show the economical convenience of air travel as oppose to using other means. For example a person travelling on business who places great value on time could acknowledge it more efficient to fly instead of using substitutes. Airfares offered by low cost airlines like Southwest are also competitive with other substitute products. The Value Chain Analysis Along with the Five Forces Michael Porter also developed the Generic Value Chain as a means of understanding competitiveness in the business industry.The Value Chain is m arked at helping us understand how goods and services move with an organization and how value is added to them. According to Porter the Value Chain represents a business process that comes along with a product (Porter, 1985). The main aim has articulated by Porter (1985) is to find sources for a companys competitive advantage by dividing the company into several activities in the business process which are all strategically relevant to the goods or services provided.The business process is divided into primary and secondary areas. primary election activities include areas directly related to getting the product to the consumer. Inbound logistics is the acquisition of the rude materials that are necessary to provide the product or service. Southwest inward logistics include areas such as route selection, flight and crew scheduling, fuelling, getting aircrafts and ticket anxiety systems. Operation generally refers to the physical actions that are required to produce the service o nce all the raw materials are acquired.Southwest Airlines operations include a variety of actions to provide its service. It covers the airlines customer tending services, gate operations, air craft operations and maintenance and baggage treatment. outward logistics involves moving goods into inventory and places where they can reach customers. Southwest Airlines outbound logistics includes website for engagement tickets, connecting passengers on flights, offering, baggage collection systems and other gate services. Other areas Primary agents of the value chain include marketing and sales and services.Marketing and sales involves the initiation of buying the product by utilizing advertising, promoting and monitoring sales (Porter, 1985). whence any advertising, promotional activity or deals and incentives offered by the airline will fall under marketing and sales activities. While service involves handling of customer relations once the product or service is in the hand of the consumer these include handling customer complaints, handling special request from customers such as disability requests or dealing with elements such as flight delays and cancellations.The secondary activities are important in creating a product or service but are not directly winding in its creation. Procurement is responsible for buying the raw materials for the company it can include computers furnisher and other fix assets which are essential to the value chain, the act of procurement according to Porter is normally carried out by management or the sales department (Porter, 1985).Technology support activity includes research and development that could lead to product development for the primary areas of the value chain, human resources role provides the company with essential staff to carry out functions while infrastructure involves the processes and procedures needed to execute the business process for example payroll and account (Porter, 1985). The purpose of this process is to analyse all the aspects of the Value Chain and square up if improvements can be made to increase the profitability and performance of the business.For example, Southwest Airlines could look at a value chain and determine if they could reduce the speed at which it check in passengers to flights to reduce regress time or increasing the speed of operating procedures such as maintenance and refuelling. Value Chain is a structured way to look at improving the business process and information systems can play a key role in this effort.