1.What is Southwest's competitive strategy? What are the sources of its success? How does it make money in this business? 2.What are the foundations of Southwest's competitive advantage?
Southwest Airlines' successful and profitable business model has been driven by several strategies: high aircraft utilization; standard fleet; charismatic leadership; low fare carrier; excellent customer service practice; attractive frequent flier program; innovative and creative marketing program; performance focused organizational culture; strategic human resources management and a lean operations.
Southwest fleet is made up of mainly Boeing 737 fuel efficient airplanes which spent an average 11 hours in the air daily compared to an industry average of 8 hours and average 10.5 flights per gate versus 4.5 which yields more income by virtue of more flight available. By using a single type aircraft, the company has save on maintenance and training costs, which also has contributed to the company's immaculate safety record.
Southwest's strategy of short-haul, point-to-point flights using less congested airports have contributed greatly to the airline's efficiency. A significant cost saving factor is the productive and motivated workforce. In 1991, with reference to industry standards, Southwest had fewer employees per aircraft (79 versus 131), flew more passengers per employee (2,318 versus 848) and had more available seat miles per employee (1,891,082 versus 1,339,995). Unlike other large airlines, Southwest did not buy into the expensive computerized reservation systems. It sells essentially a product with a higher level of service, offering more frequent departures, low airline fares with a low frills approach.
Incorporated and developed directly under the charismatic and motivational leadership of founder Herb Kelliher, the airline's distinctive corporate culture and human resource management practices are an essential part of the business...