Southwest Airlines: Understanding Business Strategy and Concepts

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Southwest Airlines, Key Facts:
Niche strategy. Concept:
•Concentrate in underutilized airports
•1 type of aircraft – fuel-efficient 737 (1994 – more that 200 planes) •Frequent, on-time departures •Low cost fares, only 2 types of fares per root
•No seats assigned, no meals
•Point-to-point roots
•Higher equipment initialization, shorter turn-around times Competitive advantage: •Cost structure
•"The workforce is dedicated to the company. They're Moonies basically. That's the way they operate." Issue: New Competition. Other US airline companies started to imitate Southwest Airlines and created their own low cost carriers (for example: Continental Lite and United's Shuttle).

How has Southwest used OB ideas to secure a competitive advantage? In the past when Southwest was unique in its approach to airline service, the company did not really have competitors within the airline industry (of course, Southwest had rivals, but the company managed to find its' place on the market). As one of the managers said, they were competing more with on-land transportation means (such as busses and trains) rather than with other airlines. From 1980s the situation in the airline industry started to become more unfavorable with companies loosing money and going bankrupt. At that time American airline companies realized that they can probably deal with these problems by copying the Southwest Airline's concept (as Southwest has been profitable in all years of its; operations). In the first part of 1990s two companies – Continental and United launched their own low cost carriers and Southwest was concerned with the new competition. In fact these companies had plenty of time to analyze Southwest's model and they could copy their concept partly without any serious problems (one plane type, one way flights, no meals, low fares, etc). But the way the operations were structured and cost savings that resulted from it was only one part of Southwest's success, while the second part – the workforce attitude was far more difficult to imitate. From the case we learned that Continental Lite and United's Shuttle faced many problems and were not able to become as successful as Southwest, therefore we can conclude that Southwest's people were in fact N1 success factor.

Southwest is a company with very strong corporate culture, which formed thought the years of company existence. The "Southwest Way" of doing business came to the organization from its' owned – Herd Kelleher. As we are told, from the beginning this person adopted a visible, hands on, slightly over-the-top style – always ready to promote a party and have fun. His approach was that there is no reason that work has to be suffused with seriousness and that the professionalism cannot be worn lightly. In my opinion, such approach, together with the fact that he was the lowest paid CEO (and was proud of it) brought Kelleher closer to his employees. His behavior and his attitude to business enabled him not to go too far from "his people" and not to become someone at the top level who cares only about meeting the needs of company shareholders. I think that having reliable and efficient workforce resulted mainly from the fact that Herb was not "The manager" or "The Big Boss" for all those pilots, mechanics and agents who worked for Southwest Airlines. Kelleher was a Leader first of all. As chapter 16 from our book emphasizes, the study of 167 companies showed that leadership can make a huge difference (as we are told, companies with higher net profits were the companies with effective leaders). If we identify leadership as influencing employees to voluntarily pursue organizational goals, we can say that this is 100% what Kelleher and his team was doing. At the same time I would like to stress the importance of leadership prototype concept. Kelleher Herb was a good leader for those people who worked in the Southwest Airlines, but this does not mean that he can perceived...
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