Southwest Airlines
Southwest Airlines is the largest low-cost airline in USA and the 3rd largest carrier in the world (as per the number of domestically carried passengers). It was founded in 1971 and headquartered in Dallas – Texas. The airline operates an average of over 3,800 flights every day. Southwest Airlines offers its scheduled services to 40 states and 98 destinations. Its fleet size has reached up to 72 aircrafts that are comprised of Boeing 737s.
Mission Statement of Southwest Airlines & Its Appropriateness
The mission of Southwest Airlines is, “Dedication to the highest quality of Customer Service delivered with a sense of warmth, individual pride, friendliness and Corporate Spirit”. Firstly, it is worth mentioning that Southwest Airlines lack a visions statement; however, it has undoubtedly delivered every single word of its mission statement. The brand is a true symbol of highest quality customer service, corporate spirit, and warmth. The mission statement has been appropriately executed by the company by providing comfortable and safe transportation in short-haul and commuter market at the most competitive prices making the airline profitable, quality experience, and fun (Hill et.al, 2014).
SWOT Analysis of Southwest Airlines
Based on the information given in the case study Southwest Airlines has following strengths, weaknesses, opportunities and threats.
Core Competencies of Southwest Airlines
The three pillars of Southwest Airlines are efficient operational costs, remarkable employer-employee relationship, no baggage fee and low-cost business operations. This remarkable business model of Southwest Airlines is not a miracle, but a perfect blend and the right application of organizational resources and capabilities. One of the biggest aptitudes of Southwest Airlines is it upper-healthy relationship with its employees. Another major proficiency that enables it to maintain all time low fares is its tactic of using only one kind of aircrafts in its fleet, which tremendously reduce its cost as compared to other airliners (Dess et.al, 2014). Also, to have only one type of aircrafts facilitate Southwest Airlines to achieve a higher level of synergy in fleet management. Southwest Airlines upholds several contracts with suppliers of fuel, which allow it to save a great amount of money. Southwest Airlines has also maintained effective HR strategic, which keeps employee turnover as low as 7% (Hill et.al, 2014).
Strategic Business Units Strategy of Southwest Airlines
The strategic business strategy of Southwest Airlines is based on cost leadership model. Southwest Airline consistently struggles to maintain as low cost as possible to sustain its competitive advantage. It is also reasonable to say that Southwest Airlines also endeavor to add some flavors of differentiation by constantly offering unmatchable traveler benefits. However, the primary focus of Southwest Airlines is to maintain low-cost operational model by developing efficient supplier contract, exploiting fuel hedging options, and having cost effective operations. A blend of all these cost-effective strategies enables Southwest Airlines to preserve an exemplary cost-leadership business model (Hill et.al, 2014).
Current Strategic Issues of Southwest Airlines
Apparently, maintaining low-cost structure and consistent offering of low-fares poses somber risks of a price war for Southwest Airlines. Along with this, Southwest Airlines is also facing problem in maintaining its fuel-hedging tactics as the price of fuel are volatile. Another issue faced by the business is its limited market focus; whereas, other airline operators are exploiting different diverse market options and different types of traveler segments. Additionally, Southwest Airlines is not addressing the customer with higher net-worth and business traveling needs by offering them online business options (Dess et.al, 2014).
Recommendations
In order to address these issues, Southwest Airlines is recommended to undertake strategic differentiation initiatives targeting the needs of higher-net-worth traveling and business travelers by increasing the amenities and flight benefits. It is also suggested that Southwest Airlines should expand its existing operational achievements to better serve its customers. Southwest Airlines should craft value strategies for effectively improving fuel hedging, as well as, supplier support and cost efficient operations. Southwest Airlines can exploit new opportunities through acquisitions (Kumar, 2006).
Object Lesson
The case study makes us understand that a strong business model is crucial for the success of business organizations. It asserts that Southwest Airlines needs a hybrid model of operational aviation to attract both leisure and business travelers. It should also improve its abilities to adopt changes. Southwest Airlines should focus on differentiation factors or it may lose its low-cost perception among the competitors. Southwest Airlines should be courageously taking risk over its profit boosting strategies by expanding its scope and core business positioning.
References
Dess, G. G., Lumpkin, G. T., & Eisner, A. B. (2014). Strategic management: Creating competitive advantage. Massachusetts: McGraw-Hill/Irwin. Retrieved On June 28, 2016
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning. Retrieved On June 28, 2016
Kumar, N. (2006) Strategies to fight low-cost rivals. Harvard Business Review. Data Retrieved From https://hbr.org/2006/12/strategies-to-fight-low-cost-rivals On June 8, 2016
