An underdog strategy involves a small and, usually, young firm taking on a much larger competitor. It is often employed by an upstart company that doesn’t hesitate to get into a fight with much bigger opponents in order to break their monopoly and offer the market better products, lower prices, or both. The underdog enters a market dominated by established players that are portrayed as being somewhat bureaucratic, complacent, and unresponsive to customer needs. Firms following underdog strategy promise to offer an attractive alternative to what customers have been buying.
Southwest Airlines, in its early years, is an example of a company that became an underdog in its fight against established competitors, as it offered the traveling public highly attractive prices and superior value. Southwest was ready to begin operations in 1967 but could not do so until 1971 due to time-consuming court battles initiated by Braniff and Texas International Airlines, two established competitors that are no longer in business. These two competitors, in an attempt to keep Southwest out of their market, argued in court that there was not enough demand to support three airlines in the Texas Interstate market. Southwest won the case. After Southwest began operations, these same competitors initiated a price war against Southwest with airfares plummeting to record low levels. Southwest managed to survive these competitive wars and it acquired the image of a gutsy fighter and an underdog in the eyes of the public and its own employees.