Executive Summary

In this paper, strategic analysis and an evaluation of Southwest Airline’s recent financial performance will be presented. Firstly, the paper undertakes a macroenvironment analysis for the company. PESTEL framework is employed. Then the paper continues to analyze the competitive forces in the airline industry. For this, Porter’s 5 Forces framework is used. Next, the trends of the market as well as consumer behaviors are presented. Later, the competitive advantages contributing to the success of Southwest are outlined. Considering all the analyses performed before, possible strategic improvement to Southwest performance are suggested. Then, a review of Southwest financial performance (via income statement and balance sheet) is performed. Discussions if the company is a viable investment option will be presented.

Introduction to Southwest Airline

In 1971, Southwest Airline (“Southwest”) was founded by Rollin King and Herb Kelleher. It is founded as a low cost airline, focusing on short-haul flights (i.e., flight less than 500 miles). In the year 2009, despite the severe impacts due to Great Recession in 2009, the company is still able to remain profitable, achieving the 37^th consecutive years of profitability (Annual Report 2009). The company is a highly successful company in the hyper-competitive airline industry, where it is witnessed that many airline operators had gone bankrupt during hard times. In 2005, the company successfully achieved a market capitalization exceeding those of all other US-based airlines (Bailey et. al., 2009). The remarkable success of the company had drawn many practitioners and academicians’ attentions to investigate the company. Similarly, investors are getting interested on the performance and the stock is constantly being monitored closely by many interested investors.

Environmental Factors Affecting Southwest

In this section, the various external forces in the business environment facing Southwest will be discussed. To conduct a comprehensive analysis on the airline business environment, the PESTEL framework is employed.

Political Analysis for Southwest

Political and ideology conflicts are not unusual around the globe in the last decade. Terrorism is a serious threat to the airline industry, as people had learned from the 11 September terrorism attack on US. Nonetheless, the situation is well controlled, whereby better safety systems are deployed to prevent such event from happening again in the future. Unfortunately, this has increase the financial burden upon airline operators (Amernic et. al., 2004; Tanguay, 2010).

Economic Analysis for Southwest

The economic situation in US is volatile, tepid and halting, with mixed signals observed by analysts and researchers (Schmidt-Hebbel, 2010). In fact, the recent Great Recession is the most serious economic downturn, responsible for creating a quarterly loss for even the most profitable airline, namely Southwest in 2009, for the first time since its inception (Annual report 2009). The unemployment rate in US remains sluggish, although there are some sign of recovery recently. Besides, it is also uncertain if the impacts due to Quantitative Easing will last long into the future (Forbes, 2010). Corporations remain cautious in hiring, expansion and this in turn is dampening consumers spending power in US (Chitakornkijsil, 2010). Overall, it is safe to conclude that the economic outlook is a tricky one to be handled by airline companies.

Social Analysis for Southwest

One of the key social changes in the past 50 years in airline industry is that people are getting used to fly from a place to another, primarily to save time. Such a trend is also contributed by the low ticket prices offered by low cost carriers (Tierney & Kuby, 2008). Besides, tourism industry is becoming a more vibrant industry around the globe, where people are willing to fly and visit different places around the world. Apart from that, due to globalization process, businesses and people are also flying more frequently from one country to another. All these contribute to gradually growth in demand for the airline flight (Gudmundsson & Oum, 2010).

Technological Analysis for Southwest

Information technology is widely used by airline companies to make the operation more efficient and effective. New systems such as CRM, ERP, Revenue Management, Yield Management system are now common software employed by most of the airline operators (Box & Byus, 2009; Post, 2010).

Environmental Analysis for Southwest

Today, the world is becoming highly aware on the harms that businesses had done to the world. The voice for better, cleaner and greener world is becoming more intense in the past few years. Statistically speaking, the rapid growth of air travel in last decade had cause greater pollution attributable to aviation industry, significantly offsetting the small reduction contributed by automobiles. Thus, it is expected that public pressures on airlines will cause the companies to involve greater capital expenditures on adopting greener technologies. Besides, it is also expected that governments may impose higher tax upon the industry for such adverse impacts the companies had done to the environment (Gudmundsson & Oum, 2010).

Legal Analysis for Southwest

Since the terrorists attack on 11 September, governments have been tightening the safety rules on airplanes. Besides, several governmental rules and regulations had also affected the operations of the airline companies. For example, prohibition of bring up certain chemicals of devices on board is demanding airlines to cooperate and spent more financial resources to deal with the new technologies and safety system to fulfill governments demands and regulations (Box & Byus, 2009; Tanguay, 2010).

Competitive Structure of the Airline Industry

Since 1978, the airline industry deregulation in U.S., which had lower the barriers for new airlines and subsequently attracted many new entrants to the industry, had cause the industry structure to become a highly competitive one. Today, the industry landscape is even more competitive. In this section, the analysis of competitive structure of the airline industry will be conducted using Porter’s 5 Forces Framework.

Rivalry among Existing Industry Players

The rivalry among airlines is intense, both in US and other part of the world. Since deregulation, the airline industry had changed from a reasonably profitable industry to a devastatingly depressing industry. Many of the airline companies, particularly those from the traditionally ‘legacy airline’, tend to go bankrupt during financial crises. For example, companies such as United Airlines, Delta Air Lines, and Northwest Airlines have all declared Chapter 11 Bankruptcy. Worth, companies such as Continental Airlines and US Airways had done so twice. This is due to the new entrants, the emergence of the low cost carriers into the industry, depressing the pricing capabilities of the legacy players. Such a trends is similar in the other part of the world, whereby low costs carriers are taking away the market shares from the legacy airline at a fast rate (Jackson & Jackson, 2009).

Besides, the rivalry of airline companies had extent from purely pricing strategies to include other marketing promotional and operational efficiencies strategies as well. Most of the airlines are offering great promotional and advertising to entice the consumers, and on the other hand is streamlining the operations for cost cutting purposes. Those players that are not able to cope with such challenging demand will decline and face financial distress very soon, and find that their market shares are sonly taken away by other players (Box & Byus, 2009).

Nonetheless, the competitions within legacy players are greatest in the industry (as low costs carriers still enjoying the benefits of taking away market shares from the legacy airline). The airfare pricing between the legacy airlines are often termed as the “fare war” as the legacy players are trying to undercut the others purely from pricing perspective, and such acts had greatly undermined the profitability of legacy airlines in the recent years (Box & Saxton, 2009).

Bargaining Power of Suppliers

There are three primary suppliers for airline operator, namely the airframes, fuel and professional labor such as the pilot. Fuel is the hardest to managed suppliers, as the prices can rise as unforeseen circumstances happen. Besides, there are only two suppliers for airframes – Boeing and Airbus. However, there are so many airline operators around the world. Such a condition is contributing to the low bargaining power of supplier for airline operators. Specialized workforce is perhaps the most easily controlled suppliers (Jackson & Jackson, 2009). Nonetheless, after considering all various pictures, the bargaining power of suppliers for airline operators are low (i.e., unfavorable).

Bargaining Power of Buyers

The bargaining powers of buyers (i.e., the customers) are moderate to high in the industry (i.e., unfavorable). Firstly, due to the internet, buyers can obtain critical information such as air fares easily. Secondly, the switching costs for buyers to try out another airline operator are low. In fact, buyers may simply react to pricing promotion or bonuses offered by competitors in the airline industry. They may not be loyal, and their choices will have significant impacts towards profitability of an airline operator (Jackson & Jackson, 2009).

Threats of New Entrants

In the past, the threats of new entrants into the airline industry are high, but that is no longer the case in the recent years as the competition within the existing players is intense. Today, potentially new entrants are highly aware of the competitive industry structure of the airline industry and unless they have high confidence or new business models that would be able to change the entire industry landscape significantly, it is not expected that any new player will enter the industry provided he is rational and informed (Liu, 2009).

Threats of Substitutes Products

The threats of substitute products in the airline industry are low, as there are very few substitutes available to compete for customers in the industry. Perhaps for the case of low costs carriers such as Southwest (whereby the flights length are largely below 500 miles), ground transports can be a possible threat. However, it is also acknowledge that customers will prefer to travel via airline due to speed reason, as the fares offered by low costs carriers are competitive. Thus, there are little threats of substitute product for the industry (Jackson & Jackson, 2009).

Competitor Analysis for the Airline Industry

The competition in the airline industry is highly intense, particularly when the economic outlook turn gloomy and when consumers cut down their spending on travelling activities. Currently, some routes are still being dominated by some of the existing larger airline company, but these airline companies are facing intense competition from the new players in the last decades (Kumar et. al., 2009).

Many of the existing airlines have been underperforming, if compared to the other businesses from other industries (judging from the stock return of the airline to the stock market index of the market). The evidences for the relativel underperformance are shown in Figure 1 below. This is a norm for the airline industry since deregulation in US.

Figure 1: Underperformance of Airline Industry

Source: Southwest Airline’s Annual Report 2009

Market Trends and Analysis for the Airline Industry

In this section, the various market as well as consumers trends in the airline industry are presented. By understanding the trends relevant to the market, industry and consumers, a more comprehensive picture on the industry as well as the company under researched can be obtained.

The airline industry is a highly cyclical one. Airline companies are often categorized as those high beta companies by financial analyst, as the volatility of these stocks are greater than the market average significantly. From this perspective, airline companies are risky investment target, as in the times of economic downturn, many will be threatened with possibilities of bankruptcy. Historically, many airlines had gone bankruptcy during recessions, and many of them had done so twice (Forbes & Lederman, 2009).

The emergence of the low cost airline. Traditionally, the airline industry is dominated by the so-called “legacy airlines”. However, in the last few decades, the emergence of low costs no frills airline business model, such as the one practiced by Southwest Airlines, JetBlue, AirTran Airways, Skybus Airlines and many others are taking away market shares from the traditional airline companies (Box & Saxton, 2009).

More consumers are willing to fly in the future. Since deregulation, the price competition between airline companies had brought down the costs of flying t consumers. Since then, the demand of air travel had grown steadily, as millions of those who had never fly before found flying is affordable. Besides, due to the frequent flyer loyalty program, consumers are enticed to use air travel as their choice of transportation in the recent years. In fact, due to the intense competition of airline industry players, companies operating inter-city bus lines are facing great pressure and most of them had withered away (Gudmundsson & Oum, 2010).

The rise of tourism industry. Tourism industry is booming in the last decades, consistent with the transformation of production economy to the servicing economy. Today, consumers around the world are more willing and motivated to fly to visit other places or countries (Prince & Simon, 2009).

Effects of globalization. The trend of globalization is creating huge demand for airline industry in the recent years. As businesses and people are exploring and entering to the other regions of nations around the world, the demand of airline services had increase. The trend is expected to continue in the future, as the world is becoming more integrated (Gudmundsson & Oum, 2010).

The ever increasing consumers’ expectation and demands. Today, consumers are becoming more knowledgeable, more aware of their rights, and have high expectations as well as demand. Thus, it is not easy to get these consumers satisfied. In a survey, it is found that the service quality offered by many airline companies had decline from the perceptions of consumers from year 1994 - 2000. Consumers are cited to perceive that the high fares of business class flight are not justifiable. Researcher attribute such findings due to the pressure from low costs carriers (Rhoades, 2006).

Volatility in oil prices. One of the greatest financial issues troubling airline companies is the increasing and yet, volatile oil prices. According to surveys, the key financial costs burdening airline companies are of labor costs, and tightly followed by the fuel costs, whereby the fuel costs may become the biggest costs whenever the oil prices spike up due to unforeseen circumstances around the world. Airline companies are often forced to hedge against such incidents, and this further complicates the financial management of these companies (Annual Report 2009).

Overall, airline is perhaps the hardest business to be managed profitably in the new economy. Since the deregulation process, competition within industry players have been increasing, and as the competition worsen, airline companies are reverting to pricing war. The situation is becoming worse due to the emergence of new business model, namely the low costs no frills carriers. Consumers are the biggest winners. According to researchers, the annual increment of demand is 15% from 1950s to 1960s, and it is approximately 6% throughout the year 1980s to 1990s (Tierney & Kuby, 2008). The various reasons for such a trend are discussed above, among them include: cheaper and more affordable pricing, emergence of low cost carriers, the rise of tourism industry, and the globalization effects. Despite the increase of aggregate demands on flight, the entire industry landscape remains competitive, due to overcapacity and high intense competition within existing industry players.

Due to the hyper-competitive business environment, the profit margins of the entire industry are generally low. Not only that, as the industry is capital intensive, whereby a lot of upgrade is required to keep pace with the competition, while at the same time to cope with the replacement of old equipments or planes, the entire industry is generally highly leveraged. Worst, the industry is subject to cyclicality, whereby during recessionary economy, many of the industry players will face dramatic decrease of demands, burden of financial costs, and even greater competition from struggling competitors, and eventually being threatened by the possibilities of bankruptcy. For such reason, the financial performance of airline companies tend to be highly volatile, as it is usual to witness an airline company to suffer from 4-5 years of poor or even negative earnings, to be followed by 6-7 years of earning improvement (Tierney & Kuby, 2008). However, even when the earning prospects improved, the net profit margin remains tight, often in the range of 2-3%. In fact, descent researchers are arguing that since 1980, the industry has not earned back the required costs of capital even under the best operating period and environment in the history (Flouris & Walker, 2005).

Strategies and Competitive Advantages of Southwest Airline

So far, despite the highly challenging business environment facing the airline industry (i.e., hyper-competitive, highly leveraged, capital intensive, labor intensive and subject to oil prices volatility), Southwest Airline is still the most profitable company in the industry since 1973. There are many distinctive strategies employed by the company, which in turn contribute to the formation of competitive advantage of the firm. In this section, these strategies will be discussed.

Low Cost No Frills Business Model

The business model of Southwest Airline is to deliver the most basic service and safety quality standards to the consumers, with the lowest costs possible. For this, the company has been continuously enhancing its ability to send the customers to the destination safely, on time, efficiently, and conveniently (in terms of baggage handling, ticketing, and check-in processes). In order to achieve this in an excellent manner (i.e., unmatched by the competitors), several strategies are employed by the management team as follow.

Stay away from congested airports. One of the key success factors of Southwest Airline is the company ability to avoid entering the markets with high costs and highly congested traffics. In contrast, most of the competitors, particularly those traditional legacy airlines serve in this market (Rhoades, 2006).

Point-to-point system. In contrast to the traditionally hub-and-spoke system, Southwest Airline is employing a new business, namely the point-to-point system (Box & Byus, 2009; Ball, 2007).

Single type of aircraft. There are many benefits offered by employing single aircraft policy for the firm. Firstly, the company will be able to make the training and development processes of flight crews easier, and cheaper. Secondly, such policy offers economies of scale in term of parts purchasing (Smith, 2004).

Free and Single-Class Sitting of passengers. In order to lower the cost structure, the company has been offering single-class sitting for passengers. This will enable the firm to streamline the efficiencies of the operations, while achieve economies of scale in the management of passengers seat. Much of the complexities in revenue management program for different classes of sitting arrangements are taken out (Rhoades, 2006).

Simple and straightforward fares structure. Southwest does not employ travel agents, and therefore the costs for such purposes are cut down. Secondly, the company have am efficient reservation system, whereby clients can purchase the ticket directly from Southwest online, and this had again keep the company costs low (Smith, 2004).

A Focus on Customer Satisfaction

Southwest Airline is a company well known for its excellent customer services, whereby the company has been ranking high on several aspects as follow: on-time performance, handling of baggage, handling of customer complaints, and customer satisfaction level (Rhoades, 2006). Southwest Airline is a company sincerely believes that customers deserve both respect and dignity from the businesses, and by respecting the customers while providing little fun for them will earn customers’ loyalty. Thus, the company able to deliver remarkable services to customers as it had essentially makes service as a way of life in the company, in contrast to just another business technique to enhance profitability (Vargo, 2006).

Faster turnaround time. Southwest Airline has the fastest planes turnaround time, mainly through the usage of reusable plastic boarding passes as well as free sitting arrangement. This has contributed to enhanced customers’ satisfaction as customers no longer have to wait to board onto or from a plane (Smith, 2004).

Conservative Financial Management

Southwest Airline is also famous for conservative financial management, whereby the management consciously controls the growth rate of the firm. The company is said to be targeting an annual growth rate of 10-15% per annum, as with such a growth rate, the company will not raise heavy debt to grow faster than it should be. Such a move enable the firm to avoid being burdened with debt during recessionary periods, and provide the company an opportunity to beat the competition when the other competitors are struggling to stay solvent in times of financial crises (Rhoades, 2006; Smith, 2004).

Strategic Human Resources Management

It is not hard to found books and literatures arguing that strategic human resources management is the key drivers contributing to the success of Southwest Airline. In the following sections, the various strategies employed by the firm in managing its workforce effectively are discussed.

Put employees first, and customer second. Southwest Airline is committed to provide the highest level of customer service to ensure happy customers. To do so, the company has a policy to treat the workforce (i.e., the internal customers) in the company well in the first place. By treating the employees with respect, care and honestly, the workforce in turn will perform the same to the customers. The end result is workforce that is responsible and diligent in providing excellent customer services, creative, innovative and caring (Rhoades, 2006; D’Aurizio, 2008).

Highly stringent employees’ selection process - Recruit fro attitudes, and train for skills. Southwest is adopting the philosophy to hire carefully and only employ that can be absorbed into the company culture. Due to the careful selection practices, the employees’ turnover in Southwest is the lowest, and many workforce underperformance issues are avoided as the person being hired had already pass through rigorous evaluations (Czaplewski et. al., 2001).

Proper reward system. Southwest is having an effective reward system in place. For example, the reward system enables the firm to cultivate responsible individual (via stock options), while at the same time reward team-working among the workforce. Besides monetary compensation, the company also constantly acknowledges and recognizes excellent performers through internal corporate magazine (Czaplewski et. al., 2001).

Mutually beneficial employee relations. Southwest Airlines is reportedly to have good relationships with the unions. With flexible and yet mutually trusting relationships with the union, the company able to avoid many issues that can be caused by the unions to harm the operations and profitability of the firm (D’Aurizio, 2008).

The focus of human resources management in Southwest Airline is highly different that the other competitors. Most competitors will focus on investing in IT/ IS system to make the operation more efficient, to capitalize on various technologies to manage the customers and to take care of customers; but Southwest Airline follow a distinctively different approach – to train workforce that will ultimately deliver excellent, touching, and personal services to the customers. It is through managing those people that move the planes and get in touch with the customers, the company able to establish long lasting customer satisfaction and positive word of mouth from the customers (D’Aurizio, 2008; Box & Byus, 2009).

Strong Corporate Culture

Although it is not explicitly outlined by the company, researchers believe that strong corporate culture is the key contributor of success for Southwest Airline. For this, researchers had identified a total of thirteen core values of the company, namely: (a) low costs, (b) profitability, (c) fun, (d) love, (e) hard work, (f) family, (g) excellent services, (h) good judgment, (i) individuality, (j) ownership, (k) egalitarianism, (l) simplicity and lastly, (m) altruism (Rhoades, 2006; Box & Byus, 2009).

In a Nutshell

Financially speaking, Southwest Airline can be safely assumed as the price leader in the airline industry. Firstly, the operating costs for the company are the lowest among its peers, and the company is also having the strongest balance sheet in the industry (in US). Much of the successes of the company are contributed by the strong and competent management team in the firm, and a relentless focus on efficiencies (i.e., lowest costs) and customer satisfaction (i.e., the two criteria of a leader in any competitive industry). Many strategies and techniques are developed for the purposes mentioned above, and it is found that the strategic human resources management and strong corporate culture in the company is the key enablers leading to the successful implementation of the corporate strategic objectives. Through capability to implement these strategies, the firm able to deliver what the customers truly wants, at the best possible price. By doing this consistently, the company has been able to slowly driving the competitors out of business, while achieving remarkable and respectable growth, financial profitability and above average profit margin.

Possible Improvement to Southwest Airline Current Strategies

Generally, Southwest is a successful company. Thus, it is reasonable to expect that the company should continuously focusing on the strengthening of its competitive advantage, through low costs leadership (via lowest operating costs) in the industry as well as provision of best customer services to the market. The management should continuously widening the economic moat enjoyed by the firm, and through diligent implementation of the existing strategies to the other profitable market, the company will have a bright prospect in the future. Apart from that, some details on other possible improvement to Southwest are also presented as follow.

Low Cost Leadership through Efficient Operations

Management should continuously watch the costs incur n daily operation, and to cut it down whenever possible. Employees can be trained to perform similarly, and be rewarded for suggesting viable cost cutting measures to the management. Capital expenditures should be planned properly, and prudent and conservative financial management is the key to success.

Ensure Customers’ Satisfaction

In order to ensure customer satisfaction, it is crucial for the company to listen attentively to customer demands. Some other possible programs to be implemented include introduction of onboard wireless services, more appealing frequent flyer or loyalty program, and giving away bonuses packages to loyal customers.

Go Global

With careful researches, the company may be able to found new viable market in the global context. Strategic partners can be formed, and marketing partnership will enable the company to gain presence and eventually tap to bigger market shares in the global context.

Enhance Profitability through offering of Value-Added Services

To further enhance the profitability of the firm, Southwest can continue refining schedule optimization, revenue management, tiled management, and delivering of extra and value added services to the customers. For example, the company can partner with local hotel, other players in the tourism industry to provide a pleasant travelling experience to consumers, and to charge fees to the partners. Not only that, management should watch each of the market carefully, and trim down those routes that is not popular or profitable while expanding to more promising market.

Delivering Value to Shareholders

Management can perform large-scale share buyback in case no growth opportunities are found for the company. Besides, capital repayment may be the next best option to deliver value to shareholders.

Financial Structure and Performance for Southwest Airline

In this section, financial analysis on the company balance sheet and income statement will be performed.

Figure 2: 5-Year Performance of Southwest

Source: Annual Report 2009

Figure 3: Income Statement for Southwest

Source: Annual Report 2009

As shown in Figure 2 and Figure 3, Southwest was riding on a growth track until the Great Recession in the year of 2008 and 2009. The revenue growth and net profit trends was suddenly interrupted. It has been fortunate for the firm to record positive net income. Earnings per share (“EPS”) had also dropped abruptly. However, if the economy recover, it is reasonable to expect that the company can fall back to the growth track, due to the viable business model and low cost leadership in the industry.

Figure 4: Balance Sheet for Southwest

Source: Annual Report 2009

Figure 4 shows the balance sheet of Southwest. The capital structure is one of the highly leveraged one, as this is usual for firms operating in the airline industry. However, it is noted that Southwest is having relatively stronger balance sheet if compared to other weaker competitors (as discussed previously in section above). It is also noted that due to the Great Recession in 2008, the shareholders equity had decreased (shown in Figure 2 as well). The company is not spared from the negative impacts caused by the Great Recession; despite it is widely acknowledged as the best company in the airline industry, with viable business model and excellent team of management.

Discussion and Recommendations – Is it a Viable Investment?

Southwest is currently still the low-cost leader in the industry, despite many new comers, copying the ‘Southwest’ model in the industry (example, JetBlue, ATA and others). It is not hard to expect that competitors will start copying the low cost model, and this will definitely be harmful to the company. Management will be required to work harder to protect its position as the price leader in the industry.

However, it is also fair to mention that the company is managed well, and it is still the best airline company in the region. The strategies employed are viable, and the management is capable in execution. The company used to ride on a growth track record, but that was destroyed by the Great Recession in 2008. Looking forward, the economy is likely to recover slowly, while the route to recovery will be sluggish and volatile. As a consequence, the outlook for the airline industry remains gloomy (unless the economy recovers faster and stronger than expected). This will definitely affect the profitability of Southwest.

Figure 5: Stock Performance for Southwest

Source: Yahoo Finance.

Retrieved from http://finance.yahoo.com/q/ks?s=LUV+Key+Statistics

Figure 6: Valuation Metrics for Southwest

Source: Yahoo Finance.

Retrieved from http://finance.yahoo.com/q/ks?s=LUV+Key+Statistics

From Figure 5, it is shown that the stock prices had recovered significantly from panic selling in 2009. The stock prices had tripled. Today, it is found that the stock is fairly valued, whereby the trailing P/E is 19.34 while the forward P/E is 11.46. Apparently, the strong management team and growth potentials of Southwest are already priced into the stock prices. Although the P/E is not excessively high, this is justifiable because the profit margin of the company is relatively low (although that is significantly higher than the competitors). Besides, although both ROA and ROE figure is much better than the competitors, that achievement is not something wonderful if compared to many other outstanding firms from other industry. It is in fact not hard to find companies that able to produce ROE of 10% and ROA of 5% consistently in the marketplace in a consistent manner in other industry. Apparently, despite the successes enjoyed by the company in the industry, it is not spared from the hyper-competitive industry landscape, that had significantly limits the financial performance that is possibly achieved by the firm.

Conclusion

Overall, Southwest is a good company managed by competent management. The company has viable business model. However, the company is operating in a highly challenging business environment. The external forces as well as the industry structure look unfavorable to the firm. The valuation for the company is not cheap as well. Many positive factors are already priced in, and there is little margin of safety left for investors. Prudent investors should wait for weaknesses in the stock prices before investing, or to look for other better investment opportunities in other industries or other countries. It should not be hard for a hard working investor to find better investment option if he look hard enough.

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