suitable airline performance data, provide a discussion rivals North American Airline industry found hard match southwest airlines. 2)Discuss dynamic capabilities, distinct capabilities generally, a source competitive advantage fast-paced highly uncertain environments.
The airline industry has generated unprecedented development within the society. Supported by technologic innovation, the airline industry has shifted balances in wars and fights and it has supported the advancement of the societies and economies. Due to the airline industry, people became able to travel to places once considered remote and as such to expand their cultural horizons, but also the business operations.
At its inception, the airline industry would be mostly owned and operated by the government, and this situation still applies in some of the countries in the globe. In the United States however, the airline industry has been subjected to deregulation and privatization and it is now characterized by high levels of competition. The cost of competition is increased; the returns are often insufficient and the industry is dependent on the economy, meaning that economic difficulties can easily lead to organizational shortages (Investopedia, 2012).
This sensibility of the airline industry to economic conditions has been observed on numerous occasions throughout the past recent years, when several airline companies were forced to declare bankrupt. Some examples in this sense include American Airlines (2011), Mesa Air (2010), Frontier Airlines (2008), Delta Air Lines (2005), United Airlines (2002) and so on (2011). Some of these institutions used the bankruptcy law as a period of protection against creditors and an opportunity to stabilize themselves, whereas others never managed to overcome the bankruptcy.
Southwest Airlines is one of the few companies which did not require filing for bankruptcy and has managed to preserve and further consolidate its position within the market and the industry, despite the threats in the micro and macro environments (changing customer needs, economic pressures, increasing oil prices, increasing pollution concerns and so on).
Southwest Airlines was established in 1967 in Dallas, Texas and has spent the past four and a half decades consolidating its position as leader in the low cost airline industry segment. Measured by the number of domestic passengers transported (110,587), Southwest Airlines is the largest airline company in the country. By measure of total passengers (domestic and international) carried by the company, Southwest Airlines is the second largest air flight operator in the United States (International Air Transport Association, 2012).
The success strategy implemented by Southwest Airlines and which has proved difficult to implement by other organizations is represented by an intense focus and commitment to operational efficiency. In this setting, emphasis was placed on the minimization of the costs and the maximization of the outputs. At the level of cost minimization, the company devised strategies such as minimum investments in personnel or decreased customer offer.
The buyers usually get the tickets online, where they do not solicit the support and consumption of the company's resources; still in support of efficiency, the company does not reserve seats for the travelers, but leaves the seats free for them to be occupied by the people arriving first at boarding.
Also, the company's infrastructure has been created in a manner to also support efficiency. Southwest Airlines as such only operates Boeing airplanes and in mostly national places. The organization as such places an increased emphasis on domestic direct flights, which are simple to deliver and do not include more complexities, such as long flights, the need for more personnel shifts and so on. The operation of only one type of aircrafts also creates efficiencies as the company will always require the same tools, mechanics and processes to upkeep its fleet of approximately 700 airplanes.
The economists at Hoovers summarize the company's competitive strategy as follows:
"Southwest Airlines will fly any plane, as long as it's a Boeing, and let passengers sit anywhere they like, as long as they get there first. Sticking with what has worked, Southwest has expanded its low-cost, no-frills, no-reserved-seats approach to air travel throughout the U.S. To serve 70+ cities in more than 35 states. Now the largest carrier of U.S. domestic passengers, Southwest still stands as an inspiration for scrappy low-fare upstarts the world over. The carrier has enjoyed 39 straight profitable years, amid the airline industry's ups and downs" (Hoovers, 2012).
At a managerial model, most companies in the airline industry believe that the customers come first and they represent the focal point of organizational operations and decisions. This perception is supported by the changing trends within the business community, where a shift is observed from manufacturing and agriculture to services industry. Within the United States for instance, nearly 80 per cent of the gross domestic product is generated by services, when agriculture generates 1.2 per cent of the GDP and the industries generate 19.2 per cent. The distribution of the labor force is also similar, where the agricultural sector employs 0.7 per cent of the total labor force and the industries employ 20.3 per cent, leaving the majority of 79 per cent of the American labor force employed in the services sector (Central Intelligence Agency, 2012).
In such a setting, the majority of the airline companies, in their quality of service providers, place the customers at the center of their operations. They believe that customer satisfaction is essential to ensuring sales, demand and organizational revenues. In other words, most airline companies implement an organizational philosophy based on the belief that customer satisfaction would lead to the attainment of the organizational objectives of operability and profitability.
Southwest Airlines nevertheless has adopted a different approach, in which the customer comes second, and the company believes that if they are able to attain their operability and profitability objectives, then they would be able to deliver services which would satisfy the customers. A similar approach is implemented in terms of the staff members, who are generically perceived as the most valuable organizational asset by other companies, who seek to train, organize, discipline, motivate and capitalize on their staff members. At Southwest however, the management of the human resource is more permissive.
"In their best-selling book Nuts, Kevin and Jackie Frieburg point to a company with people who are committed to working hard and having fun and who avoid following industry trends. The Freiburgs note that Southwest, based in Dallas, Taxes, is a company that likes to keep prices and rock bottom; believes the customer comes second; runs recruiting ads that say "Work at a place where wearing pants is optional"; paints its $30 million assets to look like killer whales and state flags; avoids trendy management programs; avoids formal, documented strategic planning; spends more time at planning parties than writing policies and once settled a legal dispute by arm wrestling" (Shah, Sterrett and Anderson, 2004).
The organization developed and implemented this seemingly unprofessional managerial model, yet managed to distance itself from the competition and has created unique points of differences. Southwest Airlines is as such a powerful economic agent and a notable presence within the global airline industry, and the primary element in this sense is represented by the consistency with which the company has implemented its business model. With the aid of its business uniformity, the organization has managed to create numerous strengths, such as those listed below:
Price leadership within the market
Human resource management based on flexibility, which stimulates employee satisfaction and engagement
The integration of technologic innovations to create operational efficiencies (e.g. The usage of the internet to make reservations)
Strong and positive relationship with its staff members, which support the company in reaching its overall objectives, and last
The provision of high quality low cost services (Rapid Business Intelligence Success, 2008).
Today, if other low cost airline companies were to adopt the model of Southwest, their success would be unsure and this is because they do not have the same consistency as the Dallas-based company. Southwest has already gained the trust and respect of the community, the customers, the employees and the investors and it relies its success on an established model. For other companies however, this model would not be applicable.
Shah, A.J., Sterrett, C.R., Anderson, W.L., 2004, Southwest Airlines Co., Case study
2008, A Southwest Airlines SWOT analysis, Rapid Business Intelligence Success, http://www.rapid-business-intelligence-success.com/southwest-airlines-SWOT-analysis.html last accessed on August 1, 2012
2011, American joins long list of airline bankruptcies, Boston, http://www.boston.com/business/articles/2011/11/29/american_joins_long_list_of_airline_bankruptcies / last accessed on August 1, 2012
2012, Publications and interactive tools, International Air Transport Association, http://www.iata.org/ps/publications/Pages/wats-passenger-carried.aspx last accessed on August 1, 2012
2012, Southwest Airlines Co. company information, Hoovers, http://www.hoovers.com/company/Southwest_Airlines_Co/rrykki-1-1NJIDI-1NJIDJ.html last accessed on August 1, 2012
2012, The industry handbook: the airline industry, Investopedia, http://www.investopedia.com/features/industryhandbook/airline.asp#axzz22GxEqfd2 last accessed on August 1, 2012
2012, The world factbook -- United States, Central Intelligence Agency, https://www.cia.gov/library/publications/the-world-factbook/geos/us.htmllast accessed on August 1, 2012
2. Dynamic capabilities
The modern day business community is extremely challenging and it forces the economic agents to quickly develop and adapt to the challenges in the micro and macro environments. Economic agents must, for instance, quickly integrate the changing demands of the customers, better…