Southwest Airlines and Its Business Strategy

As Hill & Jones (2004) explained, one major component contributing to an organization's competitive advantage is the maximization of employee productivity (p.87). Southwest Airlines has taken a number of steps to ensure it places the right employees within the company and creates a culture that breeds success. As Trustees of Dartmouth College (2002) argued, Southwest Airlines stock symbol LUV has set the tone for how employees treat one another and customers. Trustees of Dartmouth College explained that Southwest Airlines CEO Herb Kelleher's explanation of the company's approach to employee relations was, "If they're happy, satisfied, dedicated, and energetic, they'll take real good care of the customers. When customers are happy, they come back. And that makes the shareholders happy" (p.2). Herb Kelleher has translated Southwest Airlines organizational strategy based on LUV into a simple accolade that easily resonates with customers and employees alike.

Southwest Airlines is a company that is not only well known in the United States, but also happens to be the number 1 airline in terms of the number of seats and flights each year domestically. Over the years, Southwest has grown from its original three Boeing 737s to seven hundred and four making it Boeings top customer. Southwest entered the market as a broad cost leader (where it still sits today), offering substantially lower prices than competitors.

When it comes to the external environments of Southwest airlines there are many things to consider. The general environment and the industry in general are thing to consider. A major challenge that must have due consideration is competition.

Southwest Airlines has been in business for over 34 years. This airline strives on their customer service and the efficiency of their operations. They focus on the customer’s overall experience by making flights enjoyable. They achieve this by training their employees to understand the needs of the customer. The airline focuses on the customer enjoying their flight at an affordable price.

The company’s success is founded on two primary goals: providing exemplary customer service and helping its employees do so by giving them the same respect and accommodations. As the aviation transportation landscape has slowly changed, so has Southwest. Whereas they initially focused on “no frills” flying by eliminating frivolous amenities, they have slowly transitioned into a more competitive airline by adopting programs aimed to tailor customer experience. The Southwest of 2014 is different from the Southwest Airlines of the past, but their strategic plans have remained focused on customer service and employee retention.

The mission of Southwest Airlines is “dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.” They value their employees, their communities, their planet, and their stakeholders. The following mission statements are dedicated to employees, the community, the planet, and stakeholders.

Southwest Airlines’ company strategy consists of competitive moves and business approaches management has developed to attract and please customers, conduct operations, grow the business, and achieve performance objectives (J. Gamble & A. Thompson. 2009. p. 2). In writing to inform the management team of the discussion, we will discuss Southwest’s operating practices, their struggles, cultures and values, and how the airline strategically manages their business to obtain the goals needed to be a successful airline.

Southwest Airlines continues growth during challenging times with no its low price, no frills and good customer satisfaction, setting themselves apart from the competition. Organizational change is part of the culture that successfully allows Southwest Airlines to set itself apart. The airline industry is subject to external forces such as fuel prices, labor costs, passenger economic status, and public perception. Southwest Airlines has developed a successful business model based on standardization and efficiency that has allowed them to keep operating costs low and as predictable as possible.

One of the most important standpoints to look at when improving the business’s overall welfare, is of course marketing. Southwest Airlines is a predominantly prosperous organization with many strengths and opportunities. Although a successful airline service, Southwest still of course has many weaknesses as well as threats. Looking at Southwest Airlines from the point of view of the organization’s Vice President, the issue that I would focus on first is the fact that Southwest Airlines only caters to the budget traveler.

Southwest Airlines is the industry leader in low cost airfare. They began its operation in 1971 with three Texas based routes and began interstate routes in 1978. When Southwest entered the market in 1971 they employed a market penetration pricing approach. They wanted to provide the best service for the lowest possible price. They saw that if they cut out certain unnecessary benefits they could lower their ticket price to a level far below that of the competition. They do not have in flight movies, meals, or first class sections. This strategy has been very cost effective and Southwest passes the savings on to the customer. They chose to focus on pleasure travelers and low-income travelers opposed to business travelers. This

Rollin King and Herb Kelleher, founders of Southwest Airlines (SWA), previously referred to as Air Southwest Company, founded SWA back in 1967. The airline first operation was launched in 1971 servicing the Dallas, Houston, and San Antonio area (Muduli & Kaura, 2011). SWA started off as a small Texas airline and has now grown to become the fourth largest airliner in the United States of America (Unnikrishnan, 2016). SWA impressive performance is evidenced by the fact it has managed to earn a profit every year since 1973. As of 2017, SWA employs more than 53,000 people with a mission to deliver exemplary customer service throughout the organization. In addition to the exemplary customer service, Southwest rock bottom airfares, and low operating costs is what spells out success for the multi-billion-dollar commercial airline company (Southwest Fact Sheet, 2017).

Southwest Airlines was incorporated in 1967 and founded by Rollin King and Herb Kelleher. However, due to lawsuits, Southwest was unable to fly their first commercial flight until 1971. Southwest founded their business on the quote: "If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly yourairline5." Southwest focused on a point-to- point operational system and a low cost pricing strategy that is currently used today. The organization is very centralized due to its point to point emphasis. The centralization of the company requires very strategic route utilization. The company for instance, selects routes to airports with low competition and overall traffic. This allows the company to be more price competitive as competitors are reluctant to venture into less travelled routes. In order to make decisions regarding these routes a centralized organizational structure is warranted. In addition to the centralized organizational structure of Southwest, many committees, teams, and task forces are designed with the sole purpose of reducing waste and cost control. The airline industry is predicated on cost containment, particular those related to fuel and other commodity prices. Task forces are designed with the purpose of providing a sustainable means of reducing costs without a corresponding decline in customer experience. The centralized

of these features were exactly what defined a competitive airline at the time. And, all of these features added cost. Instead, Southwest Airlines selected a specific target customer — a Texan traveling between cities in Texas — and then determined what it would take to satisfy that customer.    That customer was far more interested in travel efficiency than travel class. That customer would be glad to forgo a meal, especially in exchange for a friendly flight attendant and a Dr. Pepper. That customer was trading off driving for flying, and needed flexibility in booking rather than navigating through the decisions and planning related to yield

Southwest Airlines have become an international carrier with gradual development coupled with strong leadership. The company has faced difficulties through stiff competition from the other leading carriers, which struggle to gain a larger market share for the travel product. The company desire to expand is what makes it more successful in the market. The expansionary measures also require significant management practices, which become harder. Southwest Airline faces competition from Delta Airlines, which is a major carrier on the international travel. The companies go neck to neck on revenues and number of passengers in the recent financial years. For Southwest Airlines to overcome the stiff competition, different strategies like more

With the vision and purpose of existence, Southwest’s long-term strategy is to provide superior service with low-cost targeting point-to-point destinations. When compared with its competitors, Southwest’s business model leverages the operations, resources and strategies very efficiently to minimize costs. The following are the few techniques/strategies which exemplify the success of Southwest’s operations.