Southwest Airlines' organizational culture and competitive strengths

Southwest is a strong performer in the U.S. airline industry. There are a number of reasons for this success, based on the strengths that the company has cultivated over the years. Southwest's strengths include its organizational culture, which is a source of sustainable competitive advantage and supports virtually every other strength that the company has. The other strengths are its management team and leadership; its financial situation and its operational excellence. These strengths are counterbalanced by weaknesses such as poor political relations, maintenance and safety issues and ongoing issues with the integration of AirTran into the company. Overall, however, Southwest's strengths are both intense and permanent, while the weaknesses are not particularly intense in nature, and are for the most part transient.

Introduction

Southwest Airlines is one of the market leaders in the U.S. airline industry, and one of its best performers financially. The company trails Delta and United Continental in terms of market share with its 14.8% (RITA, 2012). Southwest has achieved this level of success based on a number of different internal factors that have allowed the company to be less susceptible to changes in the external environment. This report will outline some of those factors, and also some of the weaknesses that the company has.

Strengths

One of the most important strengths at Southwest is its corporate culture (Smith, 2005). This culture drives most of the key elements of Southwest's strategy. The culture facilitates the company's strategy of cost leadership by emphasizing cost reduction. However, the culture is also important for delivering a superior customer experience, because the airline's staff has a higher commitment level than does the staff at other airlines. Not only does the corporate culture bring these benefits to Southwest, but the culture is something that is difficult for other airlines to replicate. In that, the organizational culture at Southwest may be its single greatest source of sustainable competitive advantage.

Another strength for Southwest is its management team, which remains led by the inspirational leadership of Herb Kelleher. While Mr. Kelleher is retired from active duty as CEO, he remains very much a part of the organization. His influence on the company was critical during its early years, when many competitors sought to eliminate Southwest, and it continues to be an influence today. The current management team under Mr. Kelleher has been able to maintain the company's culture and its other strengths as well, something that is testament to the quality of leadership the firm has, and how well these managers understand the company's business.

There are other strengths as well at Southwest. Financially, the company is in a strong position compared with other airlines in the U.S. The company has a cost leadership strategy, and is able to execute this strategy not only because of operational efficiency but because it does not have the high legacy costs that other airlines have. In particular, major U.S. airlines are often burdened not only with uncompetitive structures but with high pension obligations, something that Southwest has never really had. This allows the company to undercut the competition, something that has proven attractive to American flyers.

A further strength on which Southwest can draw is operational competency. It is nearly impossible to execute a cost leadership strategy without operational excellence. The company has tight turnarounds on its flights, fewer issues with maintenance and delays, and is able to generally keep costs down. Pilots are generally paid more than competitors' pilots, and worked more hours, to reduce the average pilot cost per flight. Southwest is strongly focused on minimizing its costs per revenue mile, a key metric in the industry, and remains one of the most successful airlines in the U.S. with that strategic objective.

Lastly, the Southwest brand is strong now. The company's track record of on-time flights, good service and low prices has allowed it to build one of the best brands in the airline industry. Southwest's customer base is loyal and passengers seek out the company when they travel. The brand strength is difficult to lose, although there have been challenges to the brand strength of Southwest in the past couple of years. The company has worked hard to create positive associations with its branding, and in general has been successful in doing so, leading to a high level of success over the course of the past four decades.

Overall Analysis

Overall, Southwest has more strengths than weaknesses. Some of its major weaknesses are temporary, and most are fairly low intensity. By contrast, the strengths at Southwest are permanent, and contribute in multiple ways directly to the organizational objectives. There is even some synergy in addressing key weaknesses with the strengths. For example, integrating AirTran will be easier over time, as AirTran's employees are brought into the Southwest culture. Presumably, those who cannot adapt will leave the company, and eventually the AirTran culture will disappear completely. This is because Southwest is the dominant culture and this force is much stronger than any inertia on the part of AirTran's employees.

In addition, the clock is ticking on the Wright Amendment problem and there have not been any new issues with government in recent years. The safety issue is something of ongoing concern, but one that can be managed with the company's strong leadership and operational excellence. Therefore, there is no reason to believe that the weaknesses at Southwest today are permanent weaknesses that pose an ongoing threat to the company's business.

Works Cited:

AP. (2006). Bush signs bill repealing the Wright Amendment in 8 years.

USA Today. Retrieved May 17, 2012 from http://www.usatoday.com/travel/flights/2006-10-16-wright-repeal_x.htm

No author. (2012) SWOT analysis. Business Balls. Retrieved May 17, 2012 from http://www.businessballs.com/swotanalysisfreetemplate.htm

RITA. (2012). Airline domestic market share. Bureau of Transportation Statistics. Retrieved May 17, 2012 from http://www.transtats.bts.gov/

Smith, G. (2005). Culture is the key at Southwest Airlines. Quality Management. Retrieved May 17, 2012 from http://managers.emeraldinsight.com/quality/articles/pdf/southwest.pdf

Southwest Airlines 2011 Annual Report. Retrieved May 17, 2012 from http://southwest.investorroom.com/download/2011+Annual+Report.PDF

Unger, C. (2011). Southwest safety crisis part of a larger pattern of improper maintenance? Smarter Travel. Retrieved May 17, 2012 from http://www.smartertravel.com/blogs/today-in-travel/five-foot-hole-opens-midflight-in-southwest-plane.html?id=7286087