Study of Southwest Airlines

Study of Southwest Airlines

1. What three things impress you most about this company?

One thing that really impressed me about Southwest was their ability

to maintain high profits and maintain a high customer base even after

the September 11 attacks and 2002 recession. Another impressive

attribute is the fact that they can keep their prices very low and

affordable to customers. The last thing that really impressed me

about Southwest Airlines was their management system. Their motto

that employees are equal to upper management seemed to me a risky

approach, but for Southwest it was a very brilliant and profitable

idea.

2. Do a SWOT analysis. (See Exhibit 1 for analysis)

STRENGTH

* Major profitable airline company since September 11, terror attack

* Lower prices than competitors

* Friendly service

* Short air travel between two cities

* Upside-down pyramid management system

* Plenty of daily flights

* Entertainment for passengers

WEAKNESS

* Only flies to 29 states

* Cannot compete with larger airline companies

* Does not utilize a hub system

* No first class seating

* Smaller seats compared to larger airline companies

* Only uses Boeing 737 Airlines

OPPORTUNITES

* Slash Prices even more to eliminate competitors

* Add first class compartment

* Expansion into new geographic region

* Add flights in areas where rivals were cutting back service

* Expand airline fleet to fly longer distances

* Add longer, non-stop flights

THREATS

* New entrants

* Increased rivalry

* FAA rules and regulations

* Government Regulation

* Land-based travel such as Amtrak and Greyhound

* Other airline companies duplicating Southwest Airlines? strategy

3. What grade would you give Southwest management for the job it has

done in crafting the company?s strategy?

I would give Southwest management an A grade, for the reason that

Southwest Airlines is described as an upside-down pyramid. The upper

management is at the bottom and supports the front line employees, who

are the experts. This is Herb Kelleher's unorthodox leadership style,

in which management decisions are made by everyone in the

organization, not just the head executives. The company is described

as not having much of an emphasis on structure; instead, employees are

encouraged to think freely without constrai...

... middle of paper ...

...mselves and stress the quality of these frills (such as roomier

seats). Others, through use of flight hubs, are the only ones who can

economically serve remote customers.

Another weakness of Southwest Airlines is its preference for Boeing

737s. Being limited to one type of airplane leaves them with little

flexibility when the model receives a bad reputation or a critical

flaw is discovered. Such would be a costly venture for this company,

who has used only one type of airplane, and in the face of a dire

situation would face a costly venture of finding replacements or

counteracting bad publicity.

A possible threat is that since Southwest Airlines' strategy has

proven so effective, it will be duplicated by its competitors to a

point where it would lose originality. This could result in

competitors offering low rates to the areas covered by Southwest and

beyond, making Southwest Airlines' range and limitations more obvious.

It would be very possible in the near future where a big company, with

its hubs (something Southwest does NOT have), would basically

introduce Southwest Airlines' low-cost model to a wider market,

encroaching and outdoing Southwest Airlines.