Southwest Airlines Case Study: A Comprehensive Analysis Of The Aviation Industry
Task: Conduct a strategic analysis on the southwest airlines case study.
The report on the southwest airlines case study majorly focuses on highlighting the major approaches and frameworks to achieve a higher level of efficiency and performance in the organizations by implementing the concepts of strategic management. The case study of the first-ever cheap travel service of America, Southwest Airlines is considered for analysis in this research. The major challenges that have been witnessed in the aspect of implementing new leadership management in southwest airlines by the year 2001 have been considered for analysis in this report. The listed challenges would also have significance in the dynamic variation of the southwest culture and the increased expenditure in transportation by the hike in wages and fuel. The report on the analysis of Southwest airlines case study would also focus on the expansion activities commenced by the managing body of the company. The succeeding discussion would lead to clarity over the present stature of the southwest airlines company and the associated facts. After providing the readers with in-depth clarity, the report would further move on in analyzing the external environment of southwest airlines and the strategies adopted to balance the associated dynamics. The major objective of this report is to investigate how southwest airlines has attained a highly competitive advantage in the transportation business and placed itself among the top five performing companies in the USA. In the posterior section of this report, various academic pieces of literature that have laid the foundation for the framework implied in the southwest airlines case study like Porter’s Generic Strategies and Goolsby Leadership Model is discussed. Porter's Generic Strategies would deal with the existing competition in the operational market and the associated cost-effective measures, and The Goolsby Leadership Model would highlight more about the cultural aspect. It is only after analyzing these two academic concepts that the other theoretical concepts are integrated into this Southwest airlines case study. In the final section of this report, certain valuable recommendations are listed down, which would improve the output of the company.
The context of change in leadership by the year 2011 in Southwest airlines is majorly considered as the point of analysis in this report. The instance of leadership change occurred when James F. Parker was promoted to the post of the chief executive officer from General counsel, and Colleen C. Barette was promoted to the post of the chief operating officer from the designation of vice president for customers by Herb Kelleher. A substantial change in the organizational culture has been witnessed by the sudden leadership change in the company (Milliman et al., 1999). A considerable gap was developing between the higher authorities, managing bodies, and the employees instead of working as a team towards achieving the organizational goal. The managing team used to get involved at a personal level with employees like taking part in the birthday celebration and similar events before the leadership changed.
The new policies implied by the changed leadership had made it difficult for the managers to maintain the previous approach with the subordinate employees. The new culture of considering the warm relationship between the management and employees as absurd gradually started rising in the working environment of Southwest airlines. A higher level of agitation and frustration was displayed by the workers union regarding this new hostile environment (Boguslaski & Lee, 2004). It has been prominently argued by the employees of the Southwest airlines company that the managing team spent most of their time behind the office. However, it was being argued by the managing team that the new policies implied by the new leadership while dealing with the worker’s unions would sabotage the existing culture in the organization. It has been observed under the study conducted in this report that the hike in the magnitude of employees and the associated growth of the company in the market has posed a significant challenge to the existing organizational culture.
The management of the company was also facing additional challenges by the indiscriminate increase in the wages and cost of fuel. By the year 2006, the expenditure on average seat mile (ASM) had raised to 8.8 cents, whereas it was just 7.07 cents in 1995 (Morrison, 2001). The increased expenditure and the reduced profit margin have compelled the higher authority of the company to take some strict and effective actions. It has been observed that the reduction of the cost is very difficult in the existing scenario and hence the only viable option before the company is to reduce the appointed human resources significantly and increase the fare charges to a moderate level. Though both of these policies were strictly contradicting the existing organizational culture and hence raised some skirmishes.
The rising of new entrants in the business aspect of low fare division had posed a new imminent challenge before the management of the company. The major competitors had copied the business model of the Southwest airlines case study which compelled the managing team to imply the restructured and updated version of the existing business model. The major intent of the company to modify the existing business model was to attract a higher magnitude of potential clients and customers. As a part of this strategy, the company had included various entertainment systems and leather seats at the same charges for travellers. The new business model was extremely beneficial for the company and had placed it as one of the most successful companies in the USA in just a few years. The new challenge before the company was the uncertainty whether the existing customer base would keep on preferring the service of the company if there a new substitute at the same price, which would provide better service. The report on Southwest airlines case study would investigate the extent to which the business would get impacted by the variation in competition, culture, and cost parameters. The question of whether the departure of Kelleher had created any impact on the business of the company is also another issue that should be further explored.
Strategic analysis of the company presented in this Southwest airlines case study
It was in the year 1971 that the company Southwest airlines shifted from being a small Texas carrier to the fourth-largest airline company in the country. The analysis of the strategic management conducted before the commencement of leadership change is conducted in the initial section. The company displayed a very accelerated growth before the sluggishness caused by the new leadership change. There has been a higher clarity over the expectation of the higher authorities from the subordinate workers, and the whole human resource had engaged passionately to attain the common goal of the organization. It was the collective effort of the staff employed in Southwest airlines that made the company one of the top-grossing companies in America. The population of America utilized the cheap and leisure travel experience offered by Southwest airlines. The company has focused on point to point short interstate trips rather than challenging the well-established aviation companies which focused on flying through the international routes. Rather than acquiring the majority of market shares, the management of the company has focused on a higher magnitude of profit turnover (Bunz & Maes, 1998).
The company has strictly followed the policy of providing customers with premium quality services at a very affordable and cheap price. Along with the customers, the company has also focused on employee satisfaction. The company should keep stress on reducing their business expenditure so that the aviation service could be provided at the minimum possible price. Thus the management of the company has devised out strategies to increase the efficiency and quality of the services along with decreasing the overall expenditure. The processes and services of the company have been upgraded over the years, and a much more introspective nature had been implied to increase the cost savings. The major stockholders of Southwest airlines, like its suppliers, employees, and customers, have witnessed the amiable environment of respect and trust in the organization. The parameter of ethical integrity, abnegations of personal matters in the work environment, anti-corruption attitude, etc. are being heavily expected from the employees of the company. The same level of ethical standards is expected from the suppliers of the company. Cultural diversity is efficiently identified in the work culture of both the employees and the suppliers (Smith, 2004).
As mentioned in the earlier section of this Southwest airlines case study, reducing the expenditure by reducing the inefficient factors has always been the primary motive of the managing team of the Southwest airlines. The business operations have simplified to a significant level to reduce the functioning expenditure. Various tools like offline reservation system, service without a meal, uniform style of aircraft, tickets being used as the cash register receipts, etc. have been implied by the managing team of the Southwest airlines company to bring down the cost for output. It is well understood by the staff members of Southwest airlines that the aeroplanes could only generate revenue when they are used for air transportations trips. To work according to this principle, the company has implied the point to point strategy. The theories of the hub-and-spoke and higher average velocity have well implied in serving the cause of reduced cost.
The company has stopped providing complimentary dishes and free meals on the flights, and instead of it, the travellers were provided with some sort of beverages or other light snacks which helped them in providing tickets at very low fare. The company had devised up the strategy of reduced turnaround time for the workers to provide more strength to the cost advantage measures. The pilots who worked in Southwest airlines were mandated to fly a higher magnitude of working hours when compared to that of other aviation companies. The aspect of time management was well mastered by the employees and management of the company.
Just by avoiding the supply of ticket copies to the customers, the company could just supply the travellers with soft copies through email or other messaging platforms. The use of official portal and company websites could be used to give the customers with required information in a cost-effective way. The same platform could be utilized by the company to publish their contact details, annual reports, vacancy in the job, product brochures, etc. It was majorly argued by Gary Kelly, the CEO of Southwest Airlines that the websites of the company have significantly contributed to mitigating the huge financial gap created by the increased level of fuel prices. By eliminating the involvement of travel agents, the company was able to provide its services at a ten times lower price to the customers. By employing the reservation staff retained by the company itself, the cost was further reduced five times. The best exclusive feature of Southwest airlines is that it charges only 1 $ as a booking charge and the management of the company is endorsing some extra effort to reduce this cost (Freiberg & Freiberg, 1998). The efficient use of the most modern internet tools has helped the company in reducing operational expenditure.
Effective Internal Marketing
The culture of Southwest spirit is deep-rooted among the hearts of the employed staff members. It is encouraged in the official environment of the company to treat every colleague as a family member. The good culture followed in the company ensures that the components of high communication ability and the better interpersonal relationship would not get worn down even if Kelleher would leave the organization. The sort of dedication and work ethic would remain among the employees even if he decides to leave Southwest airlines (Czaplewski et al., 2001).
The aspect of customer satisfaction and the related services are highly being focused on by Southwest airlines. Not only the customers but also the employees of the company are being treated courteously to develop a high level of satisfaction and is being strictly implied as a part of the company policy. The same factor makes the official environment of Southwest airlines, one of the most amiable and fun places to work in.
The working culture in Southwest airlines encourages the employees to serve the customers in the best possible manner by following an innovative and fun approach. Though at the same time, the primary objective of making a profit should not be disregarded. A separate set of principles and working culture is followed by the employees appointed in the Human resource department, which is also termed as The People Department in Southwest airlines. The human resource department of the company appoints the staff by taking into account their attitude and later are trained for developing further skills.
The approach of first satisfying the employees before the customers are followed in the policies of Southwest airlines. The same policy of not making any compromise in the satisfaction of the employees has turned out to be the major factor in the success of the company. If said in a theoretical manner, the Market – Focused Management Model is implied in the organizational format of Southwest airlines. The culture followed in the company mandates that the higher authorities should endorse their trust in the performance and decisions made by the subordinate employees since there is a fair chance of customers being wrong (Miles & Mangold, 2005).
The human resource department of Southwest airlines is open enough to appoint candidates with absolutely no experience as an intern of the company. The company provides such candidates detailed training and a very apt atmosphere to learn many crucial skills. The new candidates would get exposure to very experienced officials in the working culture of the Southwest and opens up a Pandora of opportunities for them. The new approach of training the new employees would empower them to take the responsibilities and carry out the required duties when the demand and situation arrives. The proper understanding of the major challenges faced by various departments in the organization would help the employees in performing the duties in the most appropriate manner.
The major policy put forward by Southwest airlines before its employees are that the whole company is a single-family. The major example which justifies this concept is the profit-sharing plan followed in the company. The celebration followed by employees is well encouraged by the management of the company. Every person associated with the company is well considered by the authorities.
The hygiene of the aircraft retained by the company is considered to be the collective responsibility of every staff since every employee of the family is considered to be a single-family. It is the collective effort of the ground duty, which makes the aircrafts ready again to take off for the next service. It is by dint of rapid turnaround service of the company that the aircraft is made ready within twenty minutes for another round of the trip. The internal design of each aircraft is altered and customized by the company to facilitate speedy service and easy maintenance by the ground staff.
Only the candidates with a particular level of creativity are selected in the Southwest aviation company, and hence every employee has their own personality. The customer is provided with a very comfortable environment since the humorous interaction, appropriate clothing, and interactive broadcasting are carried out by the staff members. The company has devised out certain tools to reduce the stress of travellers by providing them with entertainment at no expenditure. Just focusing extremely on the security of the passengers may build a barrier between the customers and the employees. Displaying personality would sometimes get difficult when the individual is working in a professional environment (Ren, 2020).
It is proven behaviour that a person would feel highly comfortable and thus provide maximum efficiency when they are wearing their favourite dress or uniform. The company management has devised out certain other ways that would help the employees to become much more comfortable while in the working environment. The competitors of Southwest airlines have just merely copied the business model to attract a larger market share of the consumers. Since most of the employees are emotionally connected with the company, a higher level of dedication is delivered by them. These are some of the major factors which have led the company towards immense success.
The concepts of code of conduct and the lean structure tools are implied in the business structure of Southwest airlines. The mode of cross-communication is made possible by implying the lean structure theories. The staff members are provided with high accessibility and freedom to provide their valuable suggestions and recommendations to the respective directors or even the presidents. The form of hierarchy used in Southwest airlines is quite simple, which makes it very easy for the managers to manage the activities of the subordinates. The particular system helps the managers to conduct a clear and direct form of communication. The personalities appointed at a higher position in this company are not inaccessible to the subordinate workers. Every person in the company has access to even the office of president. It has been witnessed in the company that the leaders were even actively involved with the staff members of the baggage handling department. The particular form of the official environment would provide the workers with a very higher level of confidence and freedom (Richards, 1996).
It has been particularly identified by the organization that the real factor of ownership could not be identified by the magnitude of shares owned by a particular entity or person. It is the will to make a positive change in the existing case that is considered to be the primary parameter for the level of ownership. The employees in the organizations are more encouraged to find the solution for the emerging issue rather than approaching seniors for the answers for every challenge. Whether the employee is a flight attendant or an engineer, the recommendation put forward by them would obviously be considered as valuable one by the higher authorities of the company.
It is believed by the managing team of the Southwest airlines company that the more knowledge an employee holds, the more that individual would care about and contribute to the institution. Every employee in the organization would have access to every crucial data of the organization. The employees of the company have a good concern over the profit of the company since it directly affects the security and certainty of the income. Hence every staff member would actively participate in drafting the money-saving strategies that if implied, would help the company in generating a high level of profit.
Effective external marketing strategies
The passenger of the companies are always focused on being made comfortable and delighted, and as a part of it, they are told interesting stories and jokes. The approach would make the passengers select the same flight service of the company in the future. The gap that occurs due to the absence of other forms of entertainment could hence be effectively reduced. It would be very hard to maintain the enthusiasm of the passengers when the flights are very long. Hence the Southwest airline should focus thoroughly on entertainment facilities for the aircraft which conducts distant journeys. It is not a feasible idea to include stewards in every flight, since significant passenger space would be occupied by them. The option is hence not practical in every instance of aviation flights. It is hence highly recommended to the Southwest airlines company that the flights should be installed with very advanced entertainment technologies so that a very satisfying experience could be given to the passengers. However, the same action would force the company to increase its charges to regular passengers.
The company should focus more on including the cheaper mode of entertainment in the aircraft so that the task could be done very efficiently. Though the same approach of installing cheaper products would turn out defective in the long run, and the company may have to suffer a larger range of loss rather than using premium products. The company of Southwest airlines retains a lot of aircraft which reach up to the count of 300. Even providing cheap newspapers in every aircraft would pose a huge financial burden over the reserve of the companies. Providing newspaper may seem initially very cheaper for the management of the company though including advanced electronic gadgets would turn out way cheaper in the long run for the company. The cost of including entertainment facilities in the aircraft used for long trips would turn out to be very expensive for the company (Hallowell, 1996).
Analyzing the external environment of Southwest airlines
There are many external factors that make a direct impact on the business of Southwest airlines organizations. Even though there occurs a large economic crisis in the country, the company would sustain its dominating position in the market. In the local market of domestic aviation services of the United States, the company of Southwest airlines is considered to be the best among every other option. The company has not only proven its brilliance in attracting a wide range of customers but also in adapting itself to the needs and requirements of the customers. In contrast, other aviation companies are struggling even to sustain in the business because of the increasing fuel prices. Most of the companies have lost a significant part of their market share by increasing the ticket charges (Heskett & Sasser, 2010).
As per the Southwest airlines case study, it should also be understood by the readers that Southwest airlines were also significantly hurt by providing the customers with cheaper tickets. It was in the year 2008 when the company had faced a huge challenge since the oil prices touched the record price. Due to the unprecedented price hike in gas prices on the global level, aviation companies found it extremely hard to sustain in the business. The factor of increased gas prices was further complemented by the challenges like a stagnant economy which resulted in very poor ticket sales which consecutively led to the insolvency of many other aviation companies. The companies that have faced the extreme financial crisis were those which operated on low fares. And it was in the same category that the low-cost carrier services of Southwest airlines would be labelled. However, the company has managed to escape this dreadful fate.
The majority of the passengers were concerned about the fare charges because of the stagnant economy. The services of Southwest airlines were chosen as the most preferred service by the local citizens of the USA. Apart from the financial aspects, the company has also faced some challenges from the cultural aspects since most of the terrorist organizations were targeting the aviation service. The increased fear had forced the public to choose the alternative mode of transportation. The policies implied by governments like the Deregulation act of 1978, which allowed other aviation giants to enter the local market. The move had created large pressure on the local aviation companies, and in the initial 10 years, around 150 companies related to aviation were declared as insolvent. Though the group of Southwest airlines had survived these challenges, the component of federal taxes is still posing some risks to the operation of the company (Raynor, 2011).
Various techniques and tools have been implied by the Southwest group to increase the turnover by minimizing the expenditure. The company has relied heavily on cost-reducing tools rather than just adopting the flexible approaching methods. It is the Southwest airlines case study that has displayed a standard for technological advancements before other aviation industries. It was Southwest airlines that had first established its formal website and official portals.
In the below section of this article on Southwest airlines case study, we have conducted a detailed SWOT analysis for a better understanding of the external environment.
· Very exciting and relaxed working environment
· High focus on the ground level market units
· Recognition of cultural diversity
· Awareness of process expenditure
· Strong connection with the customers
· High productivity and efficiency
· Strong coordination with the employees
· Premium-quality services
· Visionary and foresighted leadership
· Well-structured organizational process
· High level and advanced external marketing
· Innovative internal marketing strategies.
· The inefficiency of the leadership in countering various internal challenges.
· High reliance over single supplier for aircrafts
· Various skirmishes with the labor unions.
· Herb Kelleher taking permanent retirement
· When considered the long international flights, the factors of food and entertainment have raised to be the major issue.
· The existing aircraft of the company like Boeing 737 is not well suited for long international flights.
· The exponential hike in the present fuel prices.
· The high probability of the expansion in the related aspects.
· Passengers with domestic targets are still considered to be potential customers.
· The company could focus more on its international freight and transportation.
· Unavailability of any low-cost service providers in international flight services.
· There are some code sharing techniques to be used in the business process of the company.
· The high risk of terrorism and other socio-cultural risks.
· The uncertain dynamics of the local economy.
· The rise of new potential competitors.
· The cheap service is offered by other multinational companies.
· The heavy burden of federal tax levied by the government.
· Hike in the business expenditure because of the rising international airport taxes.
The article on Southwest airlines case study would throw light on the good business practices to be followed in the aviation industry. The instance of Southwest airlines proves that the factor of integrity is of the primary moral character to be followed in the international business. The employees of the company would require to sustain their integrity so that a collective approach could be made to attain the maximum output. The significance of efficient leadership and the business culture followed in an organization is highlighted in the above article on ‘Southwest airlines case study”. The higher authority should keep on altering their approach as per the demands of the customers and should always focus on eliminating the skirmishes within the organization by focusing on the concerns of employees. The study has proposed that apart from time management, the factor of energy management also plays a significant role in the success of the aviation business. Apart from implying the visionary ideas imminently, the leadership should try to adjust with the traditional framework that the employees are following for a long period. By reviewing the dynamics and business processes, as mentioned in this Southwest airlines case study, it could be ascertained that the Goolsby leadership style would be the most appropriate and suitable one for the organization. Since this leadership style focuses on the parameters of Integrity, Courage, and Impact, higher productivity could be observed in the aviation business.
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