What is Southwest\'s competitive strategy? What are the sources of its success?
ID: 352188 • Letter: W
Question
What is Southwest's competitive strategy? What are the sources of its success? How does it make money?
2. What are the foundations of Southwest's competitive strategy?
3. How are these sources of competitive advantage produced and sustained by what the organization does and how it does it?
4. To what extent are Southwest's sources of advantage difficult to imitate and likely to persist over time?
5. To what extent is Southwest's success based on Herb Kelleher?
6. How serious is the competitive threat? To what extent can United and/or Continental duplicate Southwest's business model? Why or why not?
Explanation / Answer
What is Southwest's competitive strategy? What are the sources of its success? How does it make money?
Southwest has a short-haul and low fare flight business model. In order to realize this model, it depends on low cost structure such as focusing on airports underutilized and close to a metro polite area like LOVE Field in Dallas. It also utilize only fuel-efficient single aircraft model Boeing 737, leading to additional reduction of maintenance cost. To cut cost, it does
nt provide
meal service or any assigned seating. Simultaneously, Southwest is famous for high level customer services. Additionally, it defines and broadens its market broadly so that considers people who may drive their car as potential customers. In summary, lowering the fares and increasing frequency of flights are key drivers of making money
2. What are the foundations of Southwest's competitive strategy?
Even though its competitive advantage is on the basis of low cost structure, most important so
urce of South wests competitive advantage lies in its people, carrying out its remarkable productivity, which is far ahead of other airlines one and cannot be easily imitated. People in
Southwest share its culture such as team spirit, fun, family, dedication, cost consciousness and so on
3. How are these sources of competitive advantage produced and sustained by what the organization does and how it does it?
Southwests leadership initiated building its culture. Kelleher and senior management teams
p
hilosophy has permeated the organization. They uphold its culture of „having fun, which leads
to satisfaction of employees, its organizational solidarity, dedication and flexibility. His consistent efforts to promote and maintain its culture is main source of sustaining the organizational vitality.
4. To what extent are Southwest's sources of advantage difficult to imitate and likely to persist over time?
Southwest’s sources of advantages...
What are the sources of Southwest Airlines competitive adva
ntages?
There were three keystones to Southwest Airlines competitive advantage. The first lied in its
Employees and how they were managed. Secondly, the firm sought to identify major threats and opportunities in their competitors, and assess how Southwest could improve and capitalize on markets where their competition failed. And the final significant success factor was the
company’s cost structure.
Former CEO, Herb Kelleher, was a prime example of how South west fostered a healthy internal environment. He interacted with customers and employees, promoted company parties and understood that the firm was only as strong as its employees. Employee satisfaction was
crucial. Therefore, the human resources department (“the People Department”) encouraged
employees to give feedback and to ask questions. Its people were so important, that the firm is
very selective in the recruiting process. Since teamwork is critical, the wrong people could
5. To what extent is Southwest's success based on Herb Kelleher?
HERB KELLEHER LED THE WAY The U.S. airline industry experienced problems in the early 1990s. From 1989 through 1993, the largest airlines, including American, United, Delta, and USAIR, lost billions of dollars. Only Southwest Airlines remained profitable throughout that period. Herb Kelleher, cofounder of Southwest Airlines in 1971 and until recently its CEO, pointed out that “We didn’t make much for a while there. It was like being the tallest guy in a tribe.
6. How serious is the competitive threat? To what extent can United and/or Continental duplicate Southwest's business model? Why or why not?
Similar studies in steel, apparel, and semiconductors, sponsored by the Alfred P. Sloan Foundation, reveal similar positive effects for people-centered practices
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