Submitted By: Group G2
SOUTHWEST AIRLINES 2008
How can Southwest Airlines maintain its low cost leadership in the industry by making the strategy sustainable against the competitors that are emerging strong without compromising on the quality of customer service?
Pest Dimensions | Effects on the case |
Political | * 9/11 Attack, Ongoing war in Iraq, 2003 SARS epidemic affected the industry but Southwest was affected the least |
Economical | * High Fixed Costs * Constantly changing fuel expenses |
Social | * ...view middle of the document...
This may be to do with the fact that they would want to excel in the regional market than tap into the international markets and reduce the quality offered at a national level.
A charismatic CEO:
In Kelleher, Southwest Airlines had a charismatic, fun, fresh CEO who had a unique perspective and had earned ‘High Priest of Ha-Ha’ from Fortune magazine. The success of Southwest Airlines was credited to his unorthodox personality and engaging management style. He created a sense of loyalty among the employees with his special abilities to remember the employees’ names and his down to earth behavior of helping the crew unload.
Failure of Imitators:
The strategy followed and the operations were so in place at Southwest Airlines that even the imitators like Midwest Express, America West despite following the same could not stand in the competition.
Controlled growth since 2008, they had higher opportunities than any of its competitors and still none of their employees felt the idea of bigger is better. Constantly they added north east cities which showed they overcame the challenges posed by the north east region and successfully established their feet in the region.
Costs: About 80% of the total costs were fixed so they had to
* Reduce the operating costs(Challenge was the high fuel prices, 31% present)
* high capacity utilization
* High number of seats to increase profit margins
* Flexible pricing known as ‘Yield management’. (Higher the price, higher the yield)
Challenge was the limited labor flexibility, industry as a whole was lagging in profits compared to other industries such as banking, Healthcare.
* Low TAT - They will have to focus more on their Turnaround time reduction which is already least in the industry. That is 15 minutes while the industry average is 45 minutes. This will set the bar high among the competitors and customer satisfaction levels will go further high with quick responses.
* Focus on business class - Since there is always one set of travelers who do not mind paying higher amount of fare for luxury, southwest airlines can make the most by targeting them. There has to complete revamp in the boarding process, better...