Southwest Case Study

1. What is Southwest's competitive strategy? What are the sources of its success? How does it make money?
Answer: Southwest’s competitive strategy is cost cutter. Management handles operational expenses very well at a low cost. They are using fuel efficiency. Their plan has no class difference. They spend more times in the air rather than other airlines. They make very simple to their customers. Southwest has never offered meal service. They provide only cookies and beverage. Offering meal service can be $40 in their price. 2. What are the foundations of Southwest's competitive advantage?
Answer: Even though Southwest had many basics for success, a noticeable competitive advantage could be found in its cost structure. They really handled that issue very well. In 1984, Southwest’s average cost per mile was 5.86 cent and over a decade its cost was enlarged by only 20 percent.
This cost benefit helps Southwest to gain amazing productivity from its workforce. This workforce can manage their work at less time rather than its competitors’ workforce. For example, they usually turn around an aircraft in 15 minutes from it arrives at the gate where United and Continental need average 35 minutes. It has a culture where employees love to work. Their pilots spend more times in the air than at other airlines. Employees will do any work at any situation. Once, a customer entered at airport with his dog. But he was not allowed to bring dog at airplane. The gate agent took care of the dog so that person could take pleasure in his vacation. Southwest is not focused on low cost, but also highlights on customer service. Basically customers are the life of its communication. Southwest also treats his employees as “internal customers” it’s has distinctive leadership, unique people management, powerful recruitment process. 3. How are these sources of competitive advantage produced and sustained by what the organization does and how it does it?
Answer: Theses competitive advantage sources produced lots of good things for them. It has a distinct leadership system. The CEO is very much closely with employees. So the employees feel that they are equally important to management. He wants to make enjoyable and comfortable working place for employees. Employees make party monthly and annually. They set up cultural committee consisting of 65 people from all stages and regions of the company. As a result, employees will work hard and the number of productivity will be increased.
Southwest company has changed their HR department name. Currently, this is called “the people department”. They want to make happy customer whatever it takes do. They feel that employees are customer of the people department. Employees are one of the competitive advantages of this company. They try to hire people who do right things for the job.
Their recruitment process is very outstanding for insuring to get right people. They have got thousands and thousands. Under their recruitment process, only fit people will be selective. They focus on organizational culture, teamwork. An experience pilot who had done stunt work for movie, was rejected from Southwest recruitment process because he was being rude to Southwest receptionist. They do not hire those applicants who say the word “I” too much. It means that team working is part of Southwest airlines. Sometimes, customers are involved their recruitment process. Applicants can come and talk with other employees. So applicants draw a clear picture about Southwest. Southwest treats with rejected applicants with very tactically. Some rejected applicants claimed that they had a better experience rather than being employed by other company. Through recruitment process, they have got very potential employees.
When Southwest got the right people for the job, it tries to fit them with organizational cultural. Training is the important part of the Southwest. Basically, most theses trainings are customer service oriented, culture of the organization, team working and team building. For managers, their training is about leadership, management and how business works. Their training is virtually internal. Southwest does not provide any sponsorship to attend outside training. They also collect trainees’ feedback.
Southwest maintain a good relationship with their employees. Their employees’ contract is based on seniority. Employees will get low pay at the beginning and it will increase when they get seniority.
Southwest tries to maintain and manage its culture hardly. Management and employees think that it is not business; it is family. If there is any problem, management and employees try to get rid of that trouble. 4. To what extent are Southwest's sources of advantage difficult to imitate and likely to persist over time?
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