Southwest Airlines started from a simple concept. “Rollin King, a San Antonio entrepreneur who owned a small commuter air service, marched into Herb Kelleher’s law office with a plan to start a low-cost/low-fare airline that would shuttle passengers between San Antonio, Dallas, and Houston” (Thompson, Strickland and Gamble, 2010, pg C-401). “His business concept for the airline was simple: attract passengers by flying convenient schedules, get passengers to their destination on time, make sure they have a good experience, and charge fares competitive with travel by automobile” (Thompson, Strickland and Gamble, 2010, pg C-403). Although the concept was simple trying to commence operation was ...view middle of the document...
Kelleher was known for his competitive nature especially regarding competitors. He instilled that in the company along with the employees. “Kelleher was a strong believer in the principle that employees-not customers- came first: You have to treat our employees like our customers. When you treat them right, then they will treat your outside customers right. That has been a very powerful competitive weapon for us. You’ve got to take the time to listen to people’s ideas. If you just tell somebody no, that’s an act of power and, in my opinion, an abuse of power. You don’t want to constrain people in their thinking” (Thompson, Strickland and Gamble, 2010, pg C-409). I believe that the type of corporate culture Southwest has keeps them with a competitive advantage. Employees of Southwest are heard as if they were executives in the company. The atmosphere at Southwest keeps the employees happy which in turn keeps the customer happy.
If you are running a business, the business needs to know how much they are earning versus how much the business in spending overall. “The operating profit margin is a measurement of management’s efficiency. It compares the quality of a company’s activity to its competitors” (Kennon, 2010, pg 1).
Operating Margin = Operating Income / Sales
“The higher operating margin is generally doing belter as long as the gains did not come by piling on debt or taking highly risky speculations with shareholders money” (Kennon, 2010, pg 1).
The profit margin tells you how much profit a company makes for every dollar it generates in revenue or sales” (Kennon, 2010, pg 1).
Net Profit Margin = Net Income after Taxes / Revenue
The higher a company’s profit margin compared to its competitors the better.
Return on Total Assets (ROTA) is” ratio that measures a company’s earnings before interest and taxes (EBIT) against its total net assets. The ratio is considered an indicator of how effectively a company is using is assets to generate earning before contractual obligations must be paid” (Kennon, 2010, pg 1).
ROTA = EBIT / Total Net Assets
645 + (-267) + 413 / 16772 = 791 / 16772 = .047
“Return on equity reveals how much profit a company earned in comparison to the total amount of shareholder equity found on the balance sheet. A business that has a high return on equity is more likely to be one that is capable of generating cash internally” (Kennon, 2010, pg 1).
ROE = Net Profit / Average Shareholder Equity for period
645 / 6941 = .929
The Characteristics of Company’s Culture
Southwest has several key components that contribute to their success. “Southwest hired employees for attitude and trained for skills. Management believed that delivering superior service came from having employees who treated customers warmly and courteously; the company wanted employees who genuinely believed that customers were important, not employees who had merely been trained to act like...