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Southwest corporate strategy
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An Assessment of Four Function of Management within Southwest Airlines
According to Edward de Bono "an expert is someone who has succeeded in making decisions and judgments simpler through knowing what to pay attention to and ... Creativity involves breaking out ..." Southwest Airlines has done just that, in a world of high competition and drastic changes they paid close attention to their customers needs, therefore, succeeding when many other airlines were failing. In a time of national tragedy (9-11) this airline pulled together to develop create ideas to prevent them from going through bankruptcy as many of their business rival suffered. With a motto of "Time flies when you are having fun!" (www.southwest.com), Southwest Airlines has managed through rapid change, diversity, e-business solutions to maintain a loyal customer base while moving forward.
The airline industry is fragile and especially vulnerable due to increase security demands, the cost of fuel with limited resources, highly expensive industry, very highly regulated industry, and labor intensive industry. Despite the vulnerability of this industry Southwest Airlines has managed to survive despite the odds, when larger airlines were forced to merge, have huge lay-offs of employees and some even when under. It is interesting to review just how Southwest Airlines survived the rapid changes, while presently recognizing a growth spurt.
Weather a business can survive the rapid change of technology, increasing customer. Demands, while remain creative, producing innovate solutions often determines the success of the business. In spite of these embedded difficulties, after September 11, southwest was the only major carrier that did not ground any of its fleet or furlough any of its Employees. We were able to borrow sufficient cash to maintain liquidity because:
Our costs were lower than our competitors'.
Our balance sheet was better than our competitors'.
Our debt per plane was less than our competitors'.
Our Customer Service was better than our competitors'.
(www.southwest.com)These are all important factors in the survival or Southwest Airlines business. Another factor of 9-11 that created a huge amount of change was the already struggling airline industry was increase security measures.
It is an understatement to say that the events of September 11, 2001 changed the lives of all Americans and particularly our relatively unfettered ability to travel by air. All of what we knew changed as the result of the diabolical endeavors of a relative few, and the new procedures, while still evolving, will likely be with us in perpetuity.
The Change in Airport Security from 9/11 The terrorist attacks on September 11, 2011 prompted the world to reevaluate and drastically modify airport and airline security. “Four targets had been chosen, all iconic American buildings that would send a clear message of the depth of their hatred for the United States. All four planes crashed, killing all on board—terrorists, crew members, and passengers, along with hundreds who were killed inside the structures, on the ground, and the men and women who ran into collapsing buildings in an effort to try and save others” (Smutz 1). As Jason Villemez said “the decade after the 9/11 attacks reshaped many facets of life in America” (Villemez 1). Before the attacks, people did not think that large scale hostility towards innocent people in our country was remotely possible.
The Airline Industry is a fascinating market. It has been one of the few industries to reach astounding milestones. For example, over 200 airlines have gone out of business since deregulation occurred in 1978. Currently, more than 50% of the airlines in the industry are operating under Chapter 11 regulations. Since 9/11, four of the six large carriers have filed for and are currently under bankruptcy court protection. Since 9/11 the industry has lost over $30 billion dollars, and this loss continues to increase. Despite the fact that the airline industry is in a state of despair, JetBlue has become the golden example, a glimpse of what the industry could be.
It is evident that the greatest strength that Southwest Airlines has is its financial stability. As known in the US airline industry, Southwest is one of those airlines who are consistently earning profits despite the problems the industry is facing. With such stability, the corporation is able to make decisions and adjust policies, which other heavily burdened airlines may not be able to imitate.
Before the dreaded day of September 11, 2001, a person or persons flying could be escorted to their gate by family members and loved ones. The thought that a gun would or could be brought on board of an airplane and used as a means to hijack an airplane never crossed a passenger’s mind. Isaac Yeffet said, “After Lockerbie, everyone thought; now we’ve learned the lesson of how to be proactive instead of being reactive. Unfortunately, September 11 came and we know the result. Thousands of people lost their lives. Security totally failed, not at one airport, at three different airports around the country.” Due to the terrorist attacks on 9/11, the United States government decided airport security needed to be updated and become more stringent. These updates included a formation of TSA and Sky Marshalls, tighter security measures, and policy changes.
Along with the low stock index numbers of September 17th, the airline industry and travel stocks were also rocked. One of several airlines announcing layoffs, US Airways said that they would be terminating 11,000 jobs. These heavy losses were contributed to airlines “being grounded last week [week of September 11th], plus passengers have been apprehensive to fly, in the wake of the hijackings” (Stock Markets Reopen 1).
Pricing. Their pricing strategy is based off their market position as a budget airline. Positioning their company as a budget airline, Southwest can maintain and keep their lower price points compared to their competitors. For Southwest to maintain sustainability as a market leader, they must effectively utilize their resources to reduce their cost of operations. By only operating one type of aircraft, short non-stop flights, point to point routes, and flying into less crowded secondary airports, this has allowed Southwest Airlines to keep their price points down while simultaneously reducing their planes turnaround time.
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.
Northwest Airlines is one of the pioneers in the airline transportation industry and is ranked at the fourth largest air carrier in the United States today. The success of the carrier depends on the quality and reliability of the service at a reasonable price. Close competitors force Northwest to innovate their services by increasing efficiency. This essay will try to examine different perspectives in the services needed to successfully complete the company’s objectives. The analysis will explain historical and financial perspectives that may give a better understanding of the current market trend of the organization.
Southwest Airlines is operating in an industry that is struggling to make profits. The slowing economic growth and raising fuel costs are lowering earnings while revenues remain the same. The macroeconomic factors affecting the airline industry include unemployment, the economic growth in the United States, and inflation. With low economic growth, consumers are finding luxury items more difficult to purchase and airline tickets for vacations fall into that category. Unemployment contributes to a lack of vacation travelers since individuals who are not employed do not have extra money for vacation or airline tickets. Inflation also causes operating costs of the airlines to be higher cutting into profits.
Southwest Airlines faced many barriers to entry from the fierce competition of other airlines in the industry. Though competition was fierce, Southwest Airlines managed to succeed by doing things differently. Their mission was to provide affordable air travel to those who would not normally fly. Contradictory to the rest of the airline industry, Southwest maintained a profit while keeping its fares low. Southwest was unique to the industry in two ways. They focused on the short haul traveler and used a point-to-point method of flight connections.
Although many companies are in business to make a profit, Southwest claims that their primary goal is not profit maximization. However, they have been consistently profitable by making air travel affordable to those who previously could not afford it (Freiberg, 1996).Southwest says the customer comes second, showing their devotion to employees. By taking care of their employees, the company encourages employees to take care of the customers. Employees are...
Southwest has comprehensive strategy and they work with harmony. They are low cost airlines which make the customer feel like royalty. Southwest have a winning strategy is proven by their profit year after year even thought they had economy crisis. Since 1973 Southwest reported a profit each year even when they lost billions of dollars from the year 1980 to 2009 because of the low operating cost strategy, low fares and customer service. Since the start of Southwest they have stay faithful of keeping low cost across the industry. Their value in corporate culture reflected through their prices and customer service.
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...
Several large scale, interrelated conditions have affected the airline industry over the past several years in such a manner that every carrier has had to respond in order to remain viable and competitive.
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.