Southwest Strategy

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SouthWest Airlines

A company’s differentiation in resources and capabilities makes it difficult for competitors to copy. We know that Southwest is successful because of the number of awards the company has won. It is the most onetime airline; it has fewer lost bags, most satisfied customers etc. These awards represent Southwest’s unique capabilities. How is the company able to differentiate? Let’ take a look at its cost drivers. Firstly, They redesigned their processes such as: no meals, no ticket booths, and no travel agents; this helps is reducing ticket prices. However these are not Southwest’s most important cost drivers. Secondly, tactically and strategically, Southwest has standardized its airplane fleet. The company only own and operate Boing 737s. This helps in cutting down maintenance costs due to low training costs and low repair materials. This also creates economies of learning for pilots and maintenance employees. This cost driver capability is difficult for competitors to copy. Thirdly, in terms of Operations, Southwest has a 25 minute Turnaround time compared to the industry average of 45-60 minute. This is a key capability because airline companies can only make money when the flight is in the air. Southwest utilizes its capacities better than its competitors. As a result the company will have fewer planes and more flights out of the same planes. Finally, in terms of culture, Southwest has a strong culture. The stakeholders it value the most is employees and then customers. Labor in Southwest is unionized, and employees are motivated and cross trained. Human resource capabilities of Southwest include: training, compensations, selection, and leadership. Training, socialization, and incentive structures build up the culture. Incentive structure in Southwest is unique because of profit sharing salary system and no lay off guarantee. This builds loyalty. Southwest also has an effective selection system to check the fit of a...
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