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Case Study for Southwest Airlines
Case Study for Southwest Airlines
Case Study for Southwest Airlines
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Resources: Southwest Airlines had always managed its resources well including the financial resources. In 2012, Southwest returned $422 million to Shareholders through repurchasing $400 million of common stock (approximately 46 million shares) and distributing $22 million in dividends. It made money every year and earned a Return on Invested Capital (ROIC) of 5.8%. Even in 2008, an awful year for the airline industry it made a profit and earned an ROIC of 4%. By October 2013, Southwest Airlines has a large standardized fleet of 550 of Boeing 737 aircrafts. Implementing a new reservation system as a part of its endeavor towards technological resources, Southwest Airlines introduced the e-ticketing service a few years back which is now responsible for generating 46% of its revenues. Hiring at the rate of only 3% of the job applicants interviewed, Southwest Airlines has the most thorough recruitment process which equips it with the most competent workforce. Apart from this the company culture of teamwork is influential in efficient handling of operations. The profit sharing plan which makes at least 25% of the employee’s share of the plan invested in Southwest Airlines stock, acts as a major motivating factor of the workforce making it more flexible and productive. Southwest Airlines excludes meals and provides for light snacks as inflight refreshment, so as to minimize the overhead expenses and save the resources. Capabilities: Southwest Airlines focuses mainly on point-to-point service, rather than the hub-and-spoke service provided by major US airlines. Point-to-point service allows for direct nonstop routing by minimizing connections, delays and total trip time. As a result, approximately 71% of Southwest Airlines’ cust... ... middle of paper ... ...; and changing from the latter to the former is not recommendable at this fragile state of the aviation industry. Southwest Airlines has a unique, thorough and highly selective hiring process which ensures that its workforce has the requisite motivation at par with the spirit of the Airlines. Now, this cannot be as easily applied by its rivals who are mostly very hierarchical and formal. Southwest Airlines innovated the strategy of fuel hedging for a long time, something which its rival cannot start and reap short-term benefits. With its unique way of communication to both prospective and incumbent passengers, either by goofy humor or funny flight attendants, Southwest Airlines has been able to sustain a Differentiation Leadership. No other carrier can practically think of depending too much on its on-board staff in absence of any kind of inflight entertainment.
Southwest Airlines is “America’s largest low-fare carrier” (Southwest, 2014). The Headquarters for Southwest Airlines reside in Dallas, Texas. Southwest Airlines was founded by Rollin King and Herb Kelleher and was originally planned to serve only a small three city area. “Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18, 1971, with three Boeing 737 aircraft serving three Texas cities - Houston, Dallas, and San Antonio , and grew to become a major airline in 1989 when it exceeded the billion-dollar revenue mark (Southwest, 2014).
Despite its growing domestic network, the company didn’t offer international flights until July 2014, and even then, it only offered limited destinations (“Southwest Corporate Fact Sheet,” n.d.). Furthermore, the company’s reliance on a single aircraft is cause for concern. Southwest Airlines was also weak with technology utilization initially but has since turned this into an asset, as described later. Finally, the company has a limitation with providing customer perks due to its low-cost operations (Ross & Beath,
...r flight attendants. "Southwest invites its frequent flyers to help interview new flight attendants. This involvement not only brings customer expertise to the selection process, but also sends a strong message to the customers participating- you're so important to us that we want you to help us pick the people you think can best serve your needs". (Brown, 2003) Organizational goals are very important to Southwest when it comes to hiring employees. They include: Humor, talent, team play, measuring and rewarding, leveraging the freedom factor, and knowing the internal customer. (Czaplewski, 2001)
Also, Southwest is renowned in the airline industry for its short turnaround time on arrivals and departures. And since people's biggest concern nowadays is money and time, having low price airline tickets to cater their traveling needs in a shorter period of time will surely satisfy them. Moreover, aside from the low prices offered, what attracts customers is Southwest’s way of dealing with them. The employees of the airline treat their customers well and really listen to their needs. Southwest Airlines is also well-known for having a very productive and loyal workforce.
Replacing the old aircrafts with new and more advanced Boeing 737-800s, has given Southwest airline the opportunity to fly out of U.S., and to find more customers such as tourists and business travelers not only inside the U.S. but outside the country. Second, giving promotions and coupons, such as rewards programs would encourage more customers to use Southwest Airline services, and as a result it would increase the company’s revenue. Trying to stick in customer’s mind as a low cost air line through advertisement would help the company to find new customer as well. Moreover, developing some subsidiary services such as car rentals, or taxi services could help customers to reach faster and easier to the airport, so it would have a positive impact in the customer’s
In the airline industry, Southwest Airlines is considered a true innovator. By shaking up the rules of flying and improving upon inefficient industry norms, Southwest has quickly grown by leaps and bounds. From the very start, Southwest Airlines' goals were to make a profit, achieve job security for every employee, and make flying affordable for more people (Southwest,2007). Southwest has not strayed from these goals. It does not buy huge aircrafts, fly international routes or try to go head to head with the major carriers; and thanks to a great planning, Southwest airlines has become the most successful airline company in the U.S., if not the world.
Advertising: As one of the largest domestic airlines, Southwest Airlines has an enormous advertising budget to sustain its presence and increase its market share through focusing on the benefits of flying Southwest over its competitors. Southwest recognizes that flying is no longer a pleasurable experience for many customers, even on Southwest, historically a budget airline. Even though Southwest is often regarded as a no-frills airline, it still attempts to build goodwill from its customers based on its advertising. Of the $249 million it spent on advertising in 2011, Southwest Airlines is unique in that it does not sell additional ad space on the exterior of its aircraft. Many domestic airlines have begun selling aircraft exterior space as a way to increase revenue, but Southwest Airlines insists that it wants to keep its product and advertisi...
Southwest Arilines has been facing direct competition in 9 routes of the intra-Califonia market with United Airlines and their "Shuttle By United." Shuttle By United was designed to be a high-frequency, low fare, minimal amenity, short-haul flight operation initially serving destinations in California and adjacent states who's intent wsa to "match Southwest's strategy." In the four months since Shuttle By United's inception competition has been fierce resulteing in Southwest and United slashing prices and envoking a merkteting blitz in this 9 route area. Recent news highlighted that Shuttle By United intended to discontinue some service (perticularly the Oakland-Ontraio route) and raise fares $10.00 per ticket. Southwest's respons to this and the coninued threat of losing market share to United should be:
This is why they have become a company with high retention rates. Southwest Airlines is voted “the best place to work” for a simple reason. The company invests in their employees and is committed to their values and vision through training and development.
Southwest Airlines’ excellent customer service, positive energy and proven effectiveness are a communications and public relations professional’s dream. Aside from the topping several “Best Places to Work” lists, Southwest Airlines’ work-hard, play hard culture is one I’d loved to be immersed in. The passion Southwest has for “loving” people is parallel to how I strive to live. The importance placed on people, whether customers, employees or the community, is inspiring.
Southwest Airlines strategy of focusing on short haul passenger and providing rates as low as one third of their competitors, they have seen tremendous growth in the last decade. Market share for top city pairs on Southwest's schedule has reached 80% to 85%. Maintaining the largest fleet of 737's in the world and utilizing point-to-point versus the hub-and-spoke method of connection philosophy allowed Southwest to provide their service to more people at a lower cost. By putting the employee first, Southwest has found the key to success in the airline business. A happy worker is a more productive one as well as a better service provider. Southwest will continue to reserve their growth in the future by entering select markets only after careful market research.
The mission of Southwest Airlines is a dedication to the highest quality of service delivered with warmth, friendliness, individual pride, and company spirit (Mission…, 2007). The company also provides opportunities for learning and personal growth to each employee. Creativity and innovation is very important and highly encouraged, for the purposes of improving effectiveness. Employees are to be provided the same concern, respect, and caring attitude within the organization that the employees are expected to share with the customer. Southwest Airlines was initially created to be a low-cost alternative to high price of intra-Texas air carriers (Freiberg, 1996). Southwest’s fares were originally supposed to compete with car and bus transportation. It was a little airline, and it would withstand the test of time. As a discount, no-frills airline, it would provide stiff competition for larger airlines. Their strategy was to operate at low cost, offering no food, no movies, no first class, and no reserved seats. They created their own market and provided increased turnaround times at the gate, by avoiding hub-and-spoke airports and opting for short-haul, direct flights. Through this market approach, Southwest has a majority of market share in the markets they serve.
The low cost and no frills strategy is make travel affordable at low cost. The company only operates one type of aircraft which is Boeing 737 to help maintenance cost low. Southwest was the first airline to use E-ticketing in this way customer can reserve spot and buy ticket on their web and allow less expense in printing tickets. Medium measured airports which allowed them to produce better time performance and less fuel costs so plane do not have to wait in the line at the runway. The core value of the company of “LUV and fun” makes the company great place to work that gives customer with a great experience.
Another internal challenge for Southwest Airlines is the conflicting management style and business operation with AirTran. On top of that, the external challenges such as the increase of competitions and gas prices are some of issues f...
It all started in 1971, when Rolling King and Herb Kelleher decided to challenge the existing rut of charging high prices for air travels. They considered the railways and roadways their competitors and decided to offer cheaper travel for smaller routes. The company was incorporated in 1967, apart from initial entry troubles, Southwest has been the only US airline to have earned profits since 1973. The eccentric company’s outlandish way of conducting themselves has been the sole reason for Southwest Airlines to succeed in a highly competitive and packed industry.