Southwest Case Study Answers

 

provide direct flights, but that is offered at a higher price. *outhwest Airlines was inbetter shape than its for a simple reason- their low$cost model."here were three &eystones to *outhwest Airlines> competitive advantage. "he first liedin its employees and how they were managed. *econdly, the firm sought to identifyma2or threats and opportunities in their competitors, and assess how *outhwest couldimprove and capitali+e on mar&ets where their competition failed. And the finalsignificant success factor was the company>s cost structure.:<@, erb Belleher, was a prime e#ample of how *outhwest fostered a healthy internalenvironment. e interacted with customers and employees, promoted company partiesand understood that the firm was only as strong as its employees. <mployeesatisfaction was crucial. "herefore, the human resources department 7Cthe 6eopleDepartment8 encouraged employees to give feedbac& and to as& uestions. !ts peoplewere so important, that the firm is very selective in the recruiting process. *inceteamwor& is critical, the wrong people could Espoil the pot>.*outhwest remained aware of their ever$changing strengths, wea&nesses, opportunities,and threats. "hey sei+ed opportunities to e#pand when other airlines closed their airlineservices to some cities that they deemed unprofitable. "hey concentrated on flying toairports that were underutili+ed and close to metropolitan areas. <liminating centralhubs created efficiency, in which flights had point$to$point routes without connectionflights, because delays were often associated with connection flights. "herefore, a*outhwest aircraft spent more hours in the air than its competitors, on average.:ost efficiency was a two$front strategy for the firmF it not only reduced the firmsspending, but it also allowed them to pass the cost reduction onto the customersthrough providing lower fares. *outhwest found that a swift turnaround of an aircraftcreated cost advantage.

#. How would you des$ri%e the stru$ture and $ulture o&& Southwest Airline?Stru$ture'

:entered on team$building:ross$training encouraged;road latitude offered 10 of stoc& held by employees*outhwest Airlines is an upside$down pyramid. "he upper management is at the bottomand supports the front line employees, who are the e#perts. "his is erb Belleher'sunorthodo# leadership style, in which management decisions are made by everyone inthe organi+ation, not 2ust the head e#ecutives. "he company is described to not havemuch emphasis on structureF instead employees are encouraged to thin& freely withoutconstraints such as titles. *outhwest Airlines values employees, initiating the first profit$sharing plan in the 3.*.airline industry in 19) and offered it ever since.

Culture'

"he culture of this company is what helps ma&e it a wonderful place to wor& for. "heleaders of this company have tried their best to develop a place where everyone loves to

It seems as though the airline industry is in a perpetual state of crisis.

While virtually every major U.S. airline has declared bankruptcy in the past 10 years, Southwest Airlines has remained solvent and has consecutively generated a profit for the past 39 years.

How do they do it? Their mantra seems to be "keep it simple," having mastered the art of cost-cutting, reports Seth Stevenson at Slate.

Here are some of the strategies employed to keep operating costs low:

Having one type of aircraft

Southwest's fleet is comprised of one type of aircraft: the Boeing 737.

"We only need to train our mechanics on one type of airplane.We only need extra parts inventory for that one type of airplane. If we have to swap a plane out at the last minute for maintenance, the fleet is totally interchangeable," VP of ground operations Chris Wahlenmaier told Slate.

Using a point-to-point routing system

Another cost-cutting tactic? Forgoing the popular hub-and-spoke model, which can lead to delays in the event of inclement weather or scheduling conflicts.

Instead, Southwest uses a point-to-point routing system; with this strategy, passengers deplane the flight and, chances are, the aircraft will turn around and fly back to its starting airport.

Putting a premium on customer service

Perhaps Southwest's real strategy for success lies in its customer service practices. There's no first class, nor is there assigned seating, which means no wait for your section to be called before you're allowed to board.

At a time when many airlines are applying (often obscene) surcharges to check bags, Southwest allows two pieces of checked luggage per ticket. Another added perk? Your luggage will likely greet you on the other side, as Southwest boasts a 99.6 percent completion rate on bags.

While Southwest remains the most consistently profitable of all U.S. carriers, they still are not immune to the realities of today's economy. According to USA Today, in April Southwest posted an adjusted first-quarter loss of $18 million due to rising fuel costs.

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