Southwest Airlines

SouthwestAirlines

Question1: Assessment of Southwest Strategy Execution

Ifone was to grade the level of strategy of execution of SouthwestAirline, they would probably give it an A. Indeed, strategy is anecessity for effective business management, but it does notguarantee a smooth run for any company. Adopting a winning strategyis an important step for any company. However, the execution ofstrategies is an important aspect that determines whether or not anycompany would succeed.originally chose acompetitive strategy that was different from the rest of the playersin the aviation industry. Some of the strategies that the companysuccessfully executed is avoiding large, congested airports, andoffering short-Haul, point-to-point service between mid-size citiesand secondary airports in large cities. The company executes thesestrategies while keeping costs low, which in turn, helps keep ticketprices low for consumers. This was a phenomenal commitment tostrategy because they have managed to keep their fares perenniallylow while also maintaining a high frequency of flights. The companyhas also managed to attract people who might otherwise travel by car. Thus, executing these competitive strategies meant that the companydid something different such as providing other activities thancompetitors.

Thecore evidence that the company is a great implementer of competitivestrategies is that, it has earned a reputation as an aviation entitythat has chosen to be different from full-service airlines. Full-service airlines serve a large number of cities. Many customersuse connecting flights, and, therefore, full service airlines have toco-ordinate schedules and check baggage through a connectinglocation. Most of the full-service airlines use the hub-and –spokehours at hub airports. It is also worth noting that the new mergerwith AirTran will allow the Airline to use both strategies. Itsstrong history of strategy execution sets it out from the rest. Under the hub-and-spoke method, the airline clusters around peakflying hours at the hub airports. Southwest has managed to deviatefrom its operations from this traditional method for a long time byconcentrating on short-haul routes and use a rolling hub system inwhich flights leave spaced out throughout the day rather than atsmall number of peak times the way most airlines do.

Anotherstrategy that the company has executed excellently is maintaining astandardized fleet of the 737s (B737), which makes maintenancesimpler and less costly. As the figures on Southwest’s costsstructure indicate, the company has a low cost of training crew,flight attendants, and the mechanics only work on a single class ofaircrafts, making even its safety standards to be more reassuring. As proof of the success of the airlines standardization strategy, ithas a comparative advantage in the use of B737. The strategy isdifficult to match and industry analysts indicate that suchstandardizations are some the core factors that contribute todecreased costs for carriers.

Thedifference between operational effectiveness of a company and theexecution of strategy is another indicator of the Southwest Airline’sability to meet all the required objectives through an effectiveexecution strategy. Any company that intends to survive in itsbusiness environment must find ways of being operationally effective. It is also worth noting that Southwest Airline has managed to strikea balance between executing its strategies and maintaining a highlevel of operational effectiveness. For a company to beoperationally effective, it must execute similar operations in mannerat a lower cost than the competitors in the industry. The fact thatthere is a considerable margin of profits between and other aviation players in the current business environment meansthat its strategies to keep costs low and key operations in progresshave worked.

Analystscontend that operational effectiveness is a cornerstone of industryprofitability for any company. In most cases, similar activities leadto copying of strategies from competitors. The outcome of copying isthat the company performs no better than its rivals. As mentionedabove, the competitiveness of a company’s strategies is based itsability to perform different activities from the other industryplayers or perform the similar activities in manner that gives them acompetitive advantage. has outperformed its rivalsthrough establishing a difference and hanging onto this differenceand preserved it by way of thinking ahead. One proof of theseassertions is on the financial statements shown in the case study.While most companies were grappling with profitability during therecent economic downturn, did not have a delayedresult of its great strategies.

Properimplementation of strategy stems from an organization’s internalcapabilities to do so. Internal capabilities include having rightleadership, facilities, money, and other resources that wouldfacilitate the implementation process.

Question2: The policies, procedures and practices that are working well for

Southwesthas a unique strategy that touches on the uniqueness of its policies,practices, and practices for purposes of sustaining its competitiveposition in the industry. They include:

Thecompany uses a single type of aircraft: In the case study, theBoeing 737 is the type of plane the company has placed in operations.It has provided the company with an opportunity to cut on the costspertaining to spare parts and other costs that are likely to increaseas a result of bloated inventories. The only costs that are apparentare evident for Southwest airlines pertaining to the costs of keepingplanes in the sky are training or technicians and pilots, proficiencycosts and the cost of employing personnel in charge of planeschedules. In fact, this policy is responsible for significantamount of costs that have been cut to keep the company at the currentlevel of profitability.

Ticketlessflights: This policy reduced the overall cost of travel for theairline because customers and the company do not have to worry aboutthe time and cost associated with producing tickets. It may seem aninsignificant policy, but it has had far reaching positive effects onthe cost structure of the company.

Emphasison the amount of time planes stay in the on the ground: This anothervery important procedure that has led to reduced fuel costs. Furthermore, the fact that customers stay for a relatively shorterperiod of time makes the Airline an attractive carrier for customersespecially those making business or corporate trips that requirepunctuality.

Integratedscheduling of flights: Unlike the traditional hub-and-spoke systemsthat are common in the industry the Southwest airlines an integratedscheduling system that carries out scheduling on a point-to-pointbasis. The difference between the two systems is that the later hasproven to be cost-efficient and time saving than the former.

Strategicfuel hedging practices: According to the case study, the Airlinederivatives to counter the effect of rising fuel costs. Hedging notonly assures the Airline of business continuity and profitability butalso creates certainty for shareholders.

Anemployee-oriented strategy employed by the is amotivator for the Airline’s employees. The policy has not affectedthe delivery of employees since they understand that the continuityof the company is contingent upon the number of customers itattracts. Considering that the policy makes employees naturally loyalto the company, employees keep receiving high-quality services fromemployees who have the impetus to work better for their employer.

Question3: The problems and weaknesses at

Theairline’s decision to only serve second line airports limits growthbecause the huge potential customer base that exists in big citiesgoes unexploited. Unlike the days of Garry C. Kelly where thecompany used the ideas of top-level executives, this strategy may beprofitable today, but may not sustainable in future.

Aworking philosophy of short-haul and a short time in the airports maynot accommodate future expansion when more fleets will be purchased:the operational culture of the company is short-haul flying whereplanes take a short time in the airports so that customers can arriveat their destinations at their desired time. As the case studyindicates, planes take an average of ten minutes each. Thisoperational culture has endeared to new and oldcustomers as well. This strategy may become difficult to maintainwhen the airline merges with AirTran.

Question4: The Way Southwest has integrated with AirTran

SouthwestAirline’s leadership has the versatility to implement strategiesthat lead to the company’s success. Over the years, the companyhas obtained its optimal position in the industry until it decided tointegrate with AirTran.

Question5: The Key elements of Southwest’s culture and the strengths of itsculture

Thereare several key elements that define the organizational culture of. The elements are: leadership that shapes theculture of the organization, creating lasting relationships among itsemployees, and finally a working philosophy that directs all theengagements of the company.

Leadership:Kelleher’s leadership, as the case study indicates, was very vitalin beginning an organizational culture that has lasted for manyyears. Leaders at Southwest exhibit qualities such as positiveenergy, competiveness, and spontaneous in leading the organization inall the tasks they are assigned in departments and other levels ofSouthwest’s organizational structure. Kelleher began the cultureconsidering employees as family by knowing the names and individualidentities of a majority them. Kelleher also created a personalizedrelationship by insisting that they do not address him with a lot offormality. The end result of Kelleher strategy of leadership is theloyalty and dedication that came with the commitment not let him downbecause they considered it their solemn duty to maintain the healthyrelationship with the top leadership at . The sameculture extends to customers by treating them with dignity and asense of familiarity.

Creatinglasting relationships: While Southwest expects employees to taketheir duties seriously, the company also has inculcated a uniqueinformal working relationship that provides employees with a se senseof belonging. Employees also do the same to customers by treatingthem with dignity.

Thereis no doubt that Southwest Airline has a strong organizationalculture. The key elements are unique to the company and otherairlines do not have a strong organizational culture that sets thenout from the rest in the industry.

Question6: Strategic issues to be addressed in relation to the AirTranintegration

Increasein employee costs: when the two airlines merge the employees ofAirTran will be employed under the new terms of Southwest. As aresult, the cost of paying employees may go up unless the increasedsize and market share of the merger offsets the resultant bloatedcosts as a result of employment as a result of increasing the numberof employees.

Theintegration will mean that AirTran will cease to exist as a separateentity. Considering that AirTran was among the top companies offeringLCC and an industry leader in aggressive discounting practices, theoutcome of as a change in the way the merger will have to treat suchincentives to retain the market influence of Air Tran. Theintegration is also likely to cause post-integration price increasesbecause the two airlines were closer rivals in that segment than evenother airlines such as legacy airlines. Unfortunately, standardmarket concentrations analysis and standard market shares may notindicate the post-integration price increases that are likely tooccur.

Thethird strategic issue is how the merger will handle the transitionfrom the Southwest’s point-to-point system to the hub-to-spokespoke that is set to replace the former. The change will make themerger incapable of continually instilling its competitive disciplinethrough the low cost travel fares it has always had, a variety ofchoices that customers will have, and the entry and increase ofoperations that each of the LCC offers to the industry through thescope of the merger. After the integration process is complete, thecompetition that will emanate from other remaining LCC’s is a vitalconsideration.

Question7: How well Southwest has executed its low cost strategy

Southwestairline has executed its low-cost strategy very well. Other airlinescannot match the low cost of fares of Southwest because it became itsculture way before the economic downturn began to keep airlines outof the skies. The low cost model is unique and efficient in a mannerthat coincides with airline’s culture of cost sensitivity. Southwest executes its low cost-model through strategic alignment.Despite its protracted legal battles with competitors such as Texasinternational (formerly Trans Texas, the company has not only grownits passenger base, but also its overall revenues. Today, it is thebiggest and leading low cost carrier in the world. Furthermore, thecompany is also the largest local airline in the United States.

Nolow cost company can get such kind of attributes without a proper wayof executing its low cost strategies. The second largest localairline in the United States, American Airlines is about 12millionpax behind the Southwest Airline. It is noteworthy that otherstart-ups that began with a low cost strategy without properimplementation did not survive after attempting to do so in theirfirst years after commencement of business. Southwest Airline usedopposite strategies that other airlines used. Instead of the high lowcost the company adopted low cost, low-fare instead of high-fare,point-to-point instead of hub-and-spoke operations, low-frequencyinstead of high-frequency, and short-haul instead of full-services. These opposite trend instead turned the company into an increasinglyprofitable company because they have proved their resilience sincethe economic depression of 2008.

Reference

SouthwestAirlines. (2015). Web. Available athttps://www.southwest.com/html/about-southwest/