Financial Analysis and Strategic Alternatives Essay

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Analysis: Strategic Alternatives Assessment and the Financial AnalysisFrom the evaluation of the potential growth opportunities as well as strategies for Southwest Airlines, it was established that the optimal strategic alternative would be better service quality. At present, the airline offers a wide range of product offerings. These, according to the airline, are meant to make customers’ travel extraordinary and are inclusive of, but they are not limited to; business select, WiFi, mobile access, EarlyBird Check-In, PAWS, Express Bag Drop, Business Travel and Groups, etc. Other strategic alternatives that were identified in this case were route expansion and floating of flight discounts. The strategic alternatives were determined via the application of the scenario development approach – in which case assumptions were made about Southwest Airline’s future in the face of developments in the Airline industry, and a determination made regarding the various courses of action Southwest Airlines ought to embrace. The best alternative was in this case selected via the deployment of a decision matrix. It is important to note that the said decision matrix in this case proved to be a really important decision-making tool as it made it possible to not only evaluate, but also prioritize the three alternatives identified. A rating of each alternative was obtained using a pre-determined scale of 1 to 5, and weights assigned on the basis of the relevance of each alternative. The evaluation criteria utilized in this case was; alignment to airline mission, long-term viability, and cost implications. The cost implication of each alternative happens to be a crucial aspect to take into consideration. This is more so the case given that the industry is not out of the woods yet following the negative impacts of the COVID-19 pandemic. Decreased customer spending is also a concern owing to the risk of a downturn in economic activity going forward. It is on this basis that ‘cost implications’ were assigned the weight of ‘4’, indicating that this was the most important consideration.It would be prudent to note that there is other information that would have come in handy in efforts to formulate recommendations. This is more so the case when it comes to not only the development, but also the suggestion of value-enhancing strategic alternatives. For instance, we lacked access to internal reports and records such as budgeting reports, white papers on urgent issues, personnel and human resource reports, etc. This info would have been instrumental in the further assessment of the airline’s capabilities and shortcomings. Other information that would have come in handy in this case relates to the airline’s dividend policy. This would have had the effect of establishing the earnings the airline has at its disposal to reinvest, i.e. in the betterment of its service quality – specifically when it comes to the integration of new technology, which could be a rather resource intensive undertaking. My team would also have been able to engage in the better assessment as well as management of the proposed alternatives’ possible risks if we had access to key info in relation to future government policy and/or monetary policy, i.e. in relation changes in law and adjustment of interest rates.

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For instance, a move by the Fed to further hike interest rates could have a negative impact on the cost of doing business – effectively affecting the airline’s bottom line and ability to settle its long-term obligations.Financial…

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…associated with this particular strategic alternative were inclusive of, but they were not limited to; old feature redundancy, increased operational costs, negative customer sentiment (i.e. as a consequence of failure to sufficiently address user/customer needs), laws and regulations (i.e. changes in law that impact the mode of delivering certain services), competitor retaliation, resources (budget and people), contract risk (i.e. in relation to the ability of the airline to hold vendors or contractors accountable), economic downturn, resistance to change (i.e. where employees of the airline refuse to fully embrace changes meant to enhance service quality), unforeseen circumstances etc. These risks have been highlighted in the risk matrix (table 1). Two of the most crucial risks wereResource risk: This has largely got to do with the ability (or inability thereof) of Southwest Airlines to access all the relevant resources to successfully implement the strategic alternative. Resources could in this case be inclusive of financial resources. Given the move by the Fed to hike interest rates, it might be too expensive for the airline to access funds from commercial lenders at this moment in time. This would have the effect of failed implementation of the strategic alternative.Economic downturn: According to Morrow (2022), there is “consensus that a global recession is likely sometime in 2023....” This is likely to affect people’s disposable incomes and purchasing power. As a consequence, most industries, including the airline industry, could register lower returns. Lower returns could impact the ability of Southwest Airlines to recoup any investments made towards the enhancement of service quality.ANALYSIS 7Impact0Acceptable1Tolerable2Unacceptable3IntolerableLittle or No EffectEffects are Felt but Not CriticalSerious Impact to Course of Action and OutcomeCould Result in DisastersLikelihoodImprobableRisk Unlikely to OccurCompetitor retaliationContract riskNegative customer sentimentPossibleRisk….....

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