Table of Contents
- Price for a
- Organizational Capabilities: Unique Capabilities and Resources Supporting Them
- Implementing Strategy: Evaluating the Strategy in Terms of Fit, Competitive Advantage, and Good Performance
- Conclusion and Recommendation on Further Improvement of the Company’s Overall Strategy
- Related Free Case Studies Essays
Southwest Airlines requires an effective overall strategy in order to achieve long-term growth and sustainability. In order to design an appropriate competitive strategy, it is necessary to consider two things. First, it is important to estimate the airlines’ unique capabilities. Second, it is imperative to figure out the availability of resources in order to support these capabilities. Third, the analysts and corporate leaders should work together to develop the said strategy and estimate the current strategy in terms of good performance and desirable results. Finally, it is of critical importance for Southwest Airlines’ corporate leaders to find out if the current strategy in use has yielded a competitive advantage in the company’s favor. The analysis of the case requires an in-depth examination of the details of the Southwest Airlines’ operational performance that is available in a book entitled Essentials of Strategic Management: The Quest for Competitive Advantage (Gamble, Peteraf, & Thompson, 2014). The following pages provide the results of the analysis of the Southwest Airlines case based on the parameters outlined earlier together with a suggestion on how to improve the company’s overall strategy.
Organizational Capabilities: Unique Capabilities and Resources Supporting Them
Southwest Airlines’ unique capabilities are summed up under a competitive strategy that focuses on domestic flights only, implying the decision to never provide international flights for its customers. Due to the focused differentiation that distinguishes Southwest Airlines from its competitors; the said airline company decided to service only secondary airports and not the large and busy ones like John F. Kennedy’s airport in New York and O’Hare airport in Chicago (Gamble, Peteraf, & Thompson, 2014). This particular strategy enabled the company to increase the number of domestic fights offered to potential customers compared to other airline companies operating within the United States.
The main resource required to offer the said unique capability is provided by the company’s human resource department together with its vibrant executive leadership. In other words, effective and innovative leadership trains skilled and dependable employees who in turn create the environment that allows for the development of good leaders for the future management and stewardship of the company’s resources. It all begins with the executive leadership that models the kind of behavior that would allow Southwest Airlines to provide excellent service to its customers. However, this is just the first aspect; the strong leadership capacity of the airline company is enhanced by its equally effective succession plan that ensures the smooth transition from one leadership responsibility to another in case if key personnel retires from the company. This succession plan is boosted even further by a corporate culture that considers its workers a part of a family and not just a workforce. Thus, it creates loyalty that allows the company to train people more efficiently and effectively. Losing workers and training new batches of people to make them effective employees is very costly for the companies.
Aside from developing the environment that produces good leaders and good workers, another major resource is available to the company. This is the fleet of Boeing 737s. Despite other airline companies also use 737s to form part of their fleet, Southwest Airlines utilizes this aircraft in a more strategic manner. Southwest Airlines decided to use this type of aircraft solely and exclusively. It is not difficult to understand how the use of one type of aircraft can create a competitive advantage for Southwest Airlines if viewed in terms of maintenance cost, management of the fleet, and the resources and time needed to train pilots and identify problems (Gamble, Peteraf, & Thompson, 2014). It is much more difficult to manage a fleet that consists of different types of aircrafts. It would require the capability to track more materials and spare parts with regards to maintenance of the fleet and it would require different modes of training, not to mention the different problem-solving methods that the managers must familiarize themselves with if an aircraft breaks down or requires emergency repair.
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Implementing Strategy: Evaluating the Strategy in Terms of Fit, Competitive Advantage, and Good Performance
It has to be elucidated that Southwest Airlines designed a competitive strategy that is characterized by a low-cost airline carrier and that focuses only on domestic flights within the United States and servicing only secondary airports. It is important to note that Southwest Airlines benefits from the application of an effective competitive strategy based on two factors. First, the strategy fits the issues and options of the US airline industry. Second, the strategy is difficult to copy. With regards to the first point, the US airline industry is not profitable for the most part of the airline companies due to significant operational expenses required to operate in large airports (Gamble, Peteraf, & Thompson, 2014). In addition, there is a high cost associated with international flights, especially the use of large jet airplanes. Thus, it was a practical move for Southwest Airlines to focus only on domestic flights and use only one type of aircraft.
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Regarding the second point and the other reason for the effective implementation of the company’s competitive strategy, it is also a shrewd step considering the way in which competitors are accommodating their clients. Other major airline companies used the hub-and-spoke system driving a lot of workload and air traffic to major airports that work like a hub or center of a wheel. From these main hubs, flights go out to smaller airports. The problem with this strategy is that it forces the underutilization of resources when there are no inbound flights. In contrast, Southwest Airlines uses a point-to-point system that allows the company to focus on one flight at a time, therefore, reducing the number of personnel and resources required to service their customers.
Southwest Airlines was able to develop a competitive advantage, because the company implemented a strategy that is difficult for others to copy, offering the company with a unique value (Gamble, Peteraf, & Thompson, 2014). In this case, competitors will find it difficult to duplicate the strategy of using only one type of aircraft because they have already committed to the use of different aircrafts as well as the need to provide international flights. It is also difficult for them to copy the point-to-point system because the systems they are currently using were developed and established after several decades of operations. As a result, only Southwest Airlines could display its good and profitable performance when compared to other airline companies. It is the only airline company that announced receiving profits even when its competitors reported a net loss.
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Conclusion and Recommendation on Further Improvement of the Company’s Overall Strategy
Southwest Airlines was able to implement a competitive strategy that made it a profitable business enterprise. The strategy corresponded to the needs of the customers and the challenges faced by the airline industry. The recommendation for improving its overall strategy is based on the idea that new companies will try to copy Southwest Airlines’ strategy. Thus, in order for the airline company to make it difficult for newcomers to use the same strategy, the executives must develop a plan to reduce the further costs of operations. The main focus should be placed on the reduction of the fuel consumption and fuel acquisition. At the same time, the airline company should reduce other aspects of the operational expenses in order to offer the cheapest airfare in the industry. This is the only way in which Southwest Airlines can discourage its competitors to use the same competitive strategy of a low-cost airline that focuses on a domestic market and uses only one type of aircraft.