Instilling a good corporate culture
* Southwest (SA) in its early stages was consistently on the verge of going under. Employees knew this and created a drive to survive and proper despite the odds. * Colleen Barrett (President 2001-2008) was culture building, morale building, customer service, & ensuring employees felt empowered to serve SAs cause * Employees hired with attitude in mind first, then trained for skills Exercising strong leadership
* Herb Kelleher (CEO from 1981-2001) He put employees before customers - treating employees well will reciprocate with them treating customers well. Marshaling Resources behind the drive for good strategy execution * Garry C. Kelly (CEO 2004-onward) He invested in technology & fuel hedging to backup strategy to help keep operating costs low (fuel being a large percentage of the costs) * Putting funds in HR & training department: (hiring process included targeted selection) * Southwest’s University for People: To keep customers safe and increase satisfaction * (2009) All employees collectively spent 720,000 hours in training: * Training & safety requirements
* Communication, career development, decision making, service, culture, appraisal * 14,225 employees completed “Every Customer Matters” course in 2009 * “On Boarding” 1st yr. program-Employees guided new hires into the culture * Screening for best culture fit: Review past behaviors, unselfishness test, 3 on 1 interview. Instituting policies and procedures that facilitate strategy execution * Keeping operating costs low by having flight attendants clean up trash vs. cleaning crew * Cloth seats changed to leather- lower maintenance costs outweigh costs of conversion. * Southwest added vertical winglets on the wing tips on most of their planes. * Efficiency, performance, cut maintenance & fuel costs Installing information sys. to enable company personnel to carry out their roles efficiently * 2001: Implemented new software to decrease the time to generate optimal crew schedule. * 2007: Using Naverus, performance-based navigation sys. - Develops & implements new flight procedures for planes - Lower fuel usage & greenhouse gas emissions, reliability. * 2007-2008: Implement software improves ticketless sys. Accounting/payroll & HR info. sys. * 2009: Replaced point of sale, electronic ticketing & boarding & revenue accounting sys. * 2010: Completed an initiative to convert to new SAP enterprise resource planning application * Replaces general ledger, accts payable/receivable, payroll, benefits, cash mgt, fixed asset sys. Key economic and industry variables: (Yr 2009) 468, 992 passengers (domestic & int’l) traveling on selected U.S. airlines 2000-2009-Southwest Airlines 21.61% , Delta & Northwest 23.15%, American Airlines 18.28%, United Airlines & Continental Airlines 21.32%, US Airway 10.87%, JetBlue Airways 4.77% * The U.S. airline industry was unprofitable 15 out of 30 years Porter’s 5F analysis
Supplier bargaining power (strong): Industry members incur high costs switching purchases to alternative suppliers * Boeing supplied 3 new 737s at discounted price: $5M - $4M, & financing 90% of $12M deal * Fuel Prices hedged through contracts.
Rivalry (strong): Numerous competitors: Delta & Northwest, American Airlines, United Airlines & Continental Airlines, US Airway, JetBlue Airways Buyers (customer) bargaining power (strong):
Leisure travelers - Price conscious flyers & Business travelers - time sensitive flyers New entrants (weak): Large capital start-up required & regulation proceedings * “Papers [filed] to incorporate the new airline & submitted application [Aeronautics Commission]”…Muse raised $7M in new capital to purchase planes & equipment…” Key Drivers for the Industry