Southwest Case Study

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In 1993, Southwest (SW) was faced with the decision of how to schedule two new uncommitted planes, and it evaluated three options for enabling either internal or external expansion—adding a new segment direct from Phoenix to Detroit, entering the Dayton market to contribute to growth goals for Midway, or entering an entirely new geographic market in Baltimore which would begin creating a presence for SW on the East Coast. SW sought conservative and controlled growth, and typically prioritized options to expand through the existing route structure; however, in this case, it is important to evaluate the current options on several additional criteria, such as strategic alignment; ground, in-air and total economics; and spiritual impact and cultural fit. After considering these decision factors, we recommend that SW enter the Baltimore market, as this option has the greatest potential to deliver on SW’s strategic objectives, maximize profit while still preserving the culture so critical to SW’s success to date. SW built its success by developing strategically aligned internal resources and capabilities (Exhibit 1) and executing on a highly focused strategy centered on cost control. SW’s commitment to simplicity and consistency, operationalized across all key business activities (i.e., use of only one type of plane, non-hub and spoke route system, simplified baggage handling system, minimal in-flight services, etc.), allowed SW to decrease turn times and ultimately keep costs low. This resulted in a low-cost, highly efficient domestic airline business that could profitably operate quick turnaround, short-haul, point-to-point flights from secondary airports. Consequently, SW could deliver the important consumer benefits of everyday low unrestricted fares for convenient, frequently scheduled flights and reliable on-time departures. SW’s business practices also created an entirely new service model that would significantly grow any market SW entered. Consumers who...