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Southwest Airlines: The corporate culture of the LUV airline
Southwest Airlines is known for a unique corporate culture that is particularly distinctive, in contrast to its competitors. Southwest Airlines has "a raucous corporate culture that is the exception in the grim airline industry" (Bailey 2008). From the Airline's inception, its founder and chairman, Herbert D. Kelleher ensured that there was "a startling amount of office hugging and kissing in lieu of handshakes; elaborate practical jokes; and on-the-premises beer drinking at headquarters, as long as it is after 5 p.m." (Bailey 2008). The Airlines' quirky sense of humor is communicated through everything from its abbreviation on the stock exchange (LUV) to its behavior of flight attendance on board, which often involves cheering, singing and dancing. "The service, while no-frills, is generally cheerful. And on many days that is enough to distinguish it from other airlines, where the workers have a hard…
Bailey, Jeff. (2008). Southwest. Way Southwest. The New York Times. Retrieved:
Holstein, William. (2008). At Southwest, the culture drives success. Businessweek. Retrieved:
Effectiveness of Southwest Leadership
Southwest management has defined a clear and simple business purpose. The management has also chosen the right business model that supports the business purpose. The management consistently demonstrates the core values and behaviors derived from the key business purpose (Emerald, 2005). The quality of the airline customer service is synonymous with warmth, friendliness, individual pride, and company spirit. This has kept the staff morale high. The leadership has opted not to do their business the usual way by providing low fare air transportation service in 34 states in the United States of America (Emerald, 2005). This has forced its competitors into bankruptcy. The airline's decision making bodies are capable of executing the business model through perfect strategic alignment. Southwest Airlines' organization is kind of upside-down pyramid making it very much in line with the way they want to do business. The upper management is…
Emerald (2005). Culture is the Key at Southwest Airlines. Retrieved from http://managers.emeraldinsight.com/quality/articles/pdf/southwest.pdf
Roybal, K. (2011). Leadership Upside Down: Herb Kelleher Style. Retrieved from http://bornleader.net/2011/10/30/leadership-upside-down-herb-kelleher-style/
Scott, W. (2012). 7 Business and Leadership Lessons from Southwest Airlines. Retrieved from http://www.bigisthenewsmall.com/2012/04/11/7-business-and-leadership-lessons-from-southwest-airlines/
Southwest (2008). Doing the Right Thing. Retrieved from http://www.southwest.com /assets/pdfs/corporate-commitments/southwestcares.pdf
Southwest Airlines originally began operation in 1967, but as Air Southwest Co. In 1971 its name was changed to Southwest Air Co. The purpose behind its foundation was to provide passengers with a cheap means of air travel within Texas. Today they have a fleet of 550 Boeing 737s and 37000 employees. Although it's a relatively small, domestic airline, taking passengers to 73 American cities, but it provides remarkable customer satisfaction. Its $178 million Net income provides a good estimation of its profitability. The company has a high position in the Fortune 500 companies and the Department of Transportation's survey of customer satisfaction placed it at number one. Its complaints ratio per passenger is the lowest among all airlines operating in U.S.. Its popularity among customers as well as employees is legendary. The airline empowers employees with decision making rights for immediate resolution of problems. The airline boasts of: close…
Bunz, U.K & Maes, J. D, (1998). Case Studies. Learning Excellence: Southwest Airlines Approach. Retrieved 8 July, 2012, from http://bunz.comm.fsu.edu/southwest.pdf
Dirk, T. (2012). Travel and Leisure Services Outsourcing. Retrieved 8 July, 2012, from http://www.wns.com/Resources/Articles/Article-Details/45/Five-trends-for-the-airline-industry-in-2010.aspx
Hall, A. (2007). Southwest Airlines: The Role of Human Resources in Implementing Business Strategy and Hiring Practices. Retrieved 8 July, 2012, from http://www.arichall.com/academic/papers/om5210-hrm.pdf
The Official Board (2012). Southwest Airlines. Retrieved 8 July, 2012, from http://www.theofficialboard.com/org-chart/southwest-airlines
The deregulation of the United States domestic civil aviation industry in 1978 saw airlines begin to compete freely. However, the capital-intensive nature of the business, along with undifferentiated products and services, has led to 120 airline bankruptcies since then. In the light of this context, Southwest's ability to compete is particularly interesting as it has not only continued to expand, but has been the only one to earn a profit every year since 1973 (Freiberg, 1998, p. 4-5).
Today, Southwest is the fourth largest major airline in America, flying more than 64 million passengers a year to 58 cities (Southwest Airlines, 2002). Southwest attributes its success to its unique business model of rock bottom fares, low costs, and outrageous customer service that entails getting passengers and their baggage to their destinations on time and ensuring that they have some fun along the way (Peters, 1998, p. xiv). This…
Freiberg, K. & Freiberg, J. (1998). Nuts. Orion Publishing, London.
Peters, Tom (1998). Nuts: Foreword. Orion Publishing, London.
Southwest Airlines. (2002). History: We weren't Just Airborne Yesterday. Retrieved Jan 30, 2004 from the World Wide Web: http://www.iflyswa.com/about_swa/airborne.html . So Southwest Airlines. (2003). Southwest Airlines Historical Advertising Gallery. Retrieved Jan
30, 2004 from the World Wide Web: http://www.iflyswa.com/about_swa/netads.html
Southwest Airlines Case Analysis
Southwest Airlines is a company that has grown from a small regional carrier in exas and surrounding states to the largest U.S.-based airline. he primary strategy of the company is to be the low-cost, no frills option for people wanting to travel within the United States. Recently, Southwest acquired another carrier so they will soon begin international flights to the Caribbean and Mexico. his paper discusses the company, its competitive environment, how it relates to external forces, and how the company has built and maintained its reputation with a creative internal focus.
Until recently the company has maintained a spotless maintenance record, but there have been several incidents that have worked to temporarily tarnish the reputation of the airline. Due to some faulty aircraft inspections, Southwest has had to rethink it maintenance program. Since the issue was connected with maintenance, the primary recommendation of this paper…
The best option is the second one. First of all it is an immediate fix that does not cost the company a great deal of money. The change to maintenance schedules and double checking that the maintenance was done will help the public gain its confidence back. It is also possible to develop the new schedules with the people in place in the department already, so there is no need to outsource the issue. All planes that are deemed too old can be scrapped and new ones ordered. Also, the company can look at upgrading its fleet a little more quickly than it had originally planned.
Thompson, A.A., Strickland, A.J., & Gamble, J.E. (2011). Crafting and executing strategy: Concepts and cases. New York: McGraw-Hill/Irwin.
Value chain and resource-based view of the firm
Southwest Airlines has a famously unique business model for an airline, one which has enabled it to sustain a profit even during times when the rest of the airline industry's fortunes were flagging. Southwest is a budget airline that offers relatively limited flights to a fixed number of destinations, in comparison to its competitors. However, it strives to offer superior service, thanks to its enthusiastic and well-trained staff. It offers value to customers based upon price as well as programs such as its apid ewards loyalty program (Thompson & Gamble 2008: C-287). "Southwest was a shrewd practitioner of the concept of price elasticity, proving in one market after another that the revenue gains from increased ticket sales and the volume of passenger traffic would more than compensate for the revenue erosion associated with low fares" (C-287).
Southwest was also one…
Thompson, Arthur & John Gamble. (2010). Southwest 2010.
efore 1978, the federal government regulated the U.S. airline industry. Airlines were given profitable routes but were also obligated to serve unprofitable routes in the public's interest. Increases in airline costs were routinely passed along to customers due to the lack of price competition.
In 1978, the airline deregulation act enabled airlines to set their own fares and enter or exit routes without government approval (Lam, 2003). The major airlines responded by dropping the unprofitable routes, in favor of the more profitable ones that were the long haul flights between big cities. Short haul flights still operated, but only as feeder flights to the major airports where the long haul flights departed from. In many cases, passengers had to fly short haul to a hub airport, then connect to another hub airport and take another flight to reach their final destination.
Deregulation allowed smaller regional airlines to expand…
Baiada, Michael. (July, 1994). Southwest Airlines: Below the Surface. Airline Pilot: pp. 19-22.
Forbes. (1991). Southwest Airlines. Forbes:: pp. 48-51.
Freiberg, Kevin. (1996). Nuts! Southwest Airlines Crazy Recipe for Business and Personal Success; 1st ed.; Bard Press.
Lam, Howard. (January 25, 2003). Marketing Strategy of Southwest Airlines. Cambridge Press.
Southwest Airlines: We Love Bags
Determine how Southwest Airlines' corporate culture differs from other airlines.
Southwest Airlines was founded on the premise that an airline needs to put its customers and their needs at the center of all operations, and further create a customer experience that is highly differentiated, memorable and sought-after by passengers. Southwest has surpassed even its own initial expectations in these areas. The culture of Southwest galvanizes the employees, customers, stakeholders, suppliers and partners into a cohesive value chain all aimed at keeping costs down and increasing lifetime customer value through loyalty (Krames, 2003). Due to its excellent control of costs and aggressive use of fuel hedging, all supported by a very customer-centric, positive culture, Southwest is the only U.S.-based airline to never file for bankruptcy protection, much less ask for a government handout (hoades, 2006). Southwest is one of the most unique service businesses in the…
Carey, S. (2012, Jun 13). Customer ratings rise for low-cost airlines. Wall Street Journal (Online), pp. n/a-n/a.
Freiberg, K. And Freiberg, J. (1996), Nuts: Southwest Airlines' Crazy Recipe for Business and Personal Success, Broadway Books, New York, NY.
Ginger Hardage (2006). PROFILE: COMMUNICATING THE SOUTHWEST WAY. Strategic Communication Management, 10(3), 4.
Jeffrey A Krames (2003, November). Performance culture. Executive Excellence, 20(11), 16-17.
Air travel is still the preferred means of transport in the United States of America largely because it is faster. However, it has in the recent times experienced decreased growth from the peak in before the 1990s. The period between 1980 and 1990, there was a sharp increase in the number of people travelling by air. Today, major carriers have cut costs in the face of intense rivalry and low profit margins. Nonetheless, the economic downturn experienced in the U.S. has not made the situation any better for the aviation industry. Many airlines have greatly been affected by the increase in fuel prices and demand for high cost of labor. However, through product and service differentiation innovation strategy of low cost, reward and convenience, Southwest has successfully distinguished itself from market competitors in a bid to maintain profitability in this excessively aggressive industry.
Differentiation Innovation Strategy
Acap, J., Feng, Z., & Mattu, M. (2007). Southwest Airlines:The Freedom to Fly. Environmental Economics & Policy.
Little, L. (2011, May 26). Southwest Best Airline For Frequent Fliers. Retrieved November 4, 2012, from abcnews.go.com.
Southwest Airlines . (2005). Annual Report . Southwest Airlines CO. .
Stevenson, S. (2012, June 12). The Southwest Secret:How the airline manages to turn a profit, year after year. Retrieved November 4, 2012
Southwest Airlines is one of the most successful low-cost airlines in the world. The company's focus on constant innovation, excellent labor relations, and sound financial management have ensured its success at a time when many companies have suffered from the economic downturn. In this way Southwest Airlines has created an example of business success for many. The company's success is also due to the consistency among its organization practices, which even imitating companies have found difficult to truly replicate. Indeed, the company has used its tangible, intangible, and other resources to ensure its security in the world.
Southwest's response to 9-11 has shown its attitude and commitment to the industry. It has set itself apart from its competitors by avoiding layoffs in an industry where most major airlines cut their workforces by 16%. Southwest, in turn, maintained its labor force and expanded the availability of its product to the flying…
Gittell, J.H. (2005). The Southwest Airlines Way: Using the Power of Relationships to Achieve High Performance. Retrieved from: http://www.coachingandmentoring.com/BookReviews/SouthwestAirlinesWay.htm
The New York Times. (2011, Apr. 5). Southwest Airlines Company. Business Day. Retrieved from: http://www.slideshare.net/algarni1/resources-capabilities-and-organizational-structure
Srinivasan, M. (2009). Southwest Airlins Operations -- A Strategic Perspective. M*A*L*Q. Retrieved from: http://www.malq.net/airline-industry/southwest-airlines-operations.html
The airline industry has been one that has consistently lost money during the last decade. Even before that, if an airline did not have a good business strategy, they were most likely doomed to failure. Many people do not remember Braniff, TWA or Pan American, but for a long time they were among the largest air carriers in the world. He present model, for airlines as well as other businesses, is to determine what they can do to streamline their costs, and the costs to their customers, while still remaining profitable. This may seem like what companies have always done, but that has not been the case. When the economy is doing well customers do not care as much about pricing and carriers offer more for the price of a ticket. Unfortunately this balance has been destroyed by the economic downturn, and many businesses have not been able…
Bowen, G. (2010). Outsourcing helps Southwest Airlines make passenger journeys easier. Retrieved from http://www.outsourcing-center.com/2010-02-outsourcing - helps-southwest-airlines-make-passenger-journeys-easier-article-37271.html
British Airways. (2011). Stronger together: British Airways and Iberia. Retrieved from http://www.britishairways.com/travel/british-airways-and-iberia/public/en_us
Coase, R. (1960). The problem of social cost. The Journal of Law & Economics, 33, 1-44.
Kadet, A. (2008). Price profiting. Smart Money: The Wall Street Journal Magazine. Retrieved from http://www.revenueanalytics.com/documents/SmartMoneyPriceProfiling.pdf
Southwest Airlines has been a model of success for the past forty years. It is a success based on company values, on low prices, on business innovation, and on the quality of the service, among other elements. The company built on these values and used an adequate promotional campaign and strategy to build brand loyalty. Today, many of the company's clients use its services because of what is known as brand loyalty: customers buying the same services because of an attachment to the company that often goes beyond simple decision making factors such as price or quality.
The paper concludes that Southwest Airlines has been successful for many different reasons, but primarily through a successful combination of good promotion, relaxed and fun marketing and advertising and a solid set of values and competitive advantages, which it continuously emphasized in its integrated communication strategy. Its promotional mix was adapted to the…
1. Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; David J. Reibstein (2010). Marketing Metrics: The Definitive Guide to Measuring Marketing Performance. Upper Saddle River, New Jersey: Pearson Education
2. Dick, Alan S. And Kunal Basu (1994), "Customer Loyalty: Toward an Integrated Conceptual Framework," Journal of the Academy of Marketing Science, 22 (2), 99-113.
3. Jones, Michael A., David L. Mothersbaugh, and Sharon E. Beatty (2002), "Why Customers Stay: Measuring the Underlying Dimensions of Services Switching Costs and Managing Their Differential Strategic Outcomes," Journal of Business Research,
4. Reichheld, Frederick F. And W. Earl Jr. Sasser (1990), "Zero Defections: Quality Comes to Services," Harvard Business Review (September -- October), 105-11.
Southwest Airlines has been an innovator in the airline industry. The company has steadily implemented one of the most interesting operational strategies since the company was founded. As a result, Southwest Airlines has earned countless awards rated against factors such as employee satisfaction, customer satisfaction, and profitability. Furthermore, Southwest was able to claim these awards while being able to also claim some of the lowest operating costs in the industry. Despite the company's long track record of success, it will face brand new set of challenges and risks in the coming years since the airline industry seems to be evolving. The evolution of the airline industry will be driven by rising fuel costs, slow demand, and many environmental issues. Therefore Southwest will have to be able to further refine its strategy to meet the challenges in the new continually evolving external environment.
External/Internal Industry Analysis
Threat of New Entrants --…
CAPA. (2011, September 21). IATA upgrades 2011 airline industry profit forecast but warns of weaker 2012. Retrieved from CAPA Centre for Aviation: http://www.centreforaviation.com/analysis/iata-upgrades-2011-airline-industry-profit-forecast-but-warns-of-weaker-2012-59153
Herskovitz, J. (2011, December 12). Analysis: Durban deal may do little to cool heating planet. Retrieved December 12, 2011, from Reuters: http://www.reuters.com/article/2011/12/12/us-climate-diplomacy-idUSTRE7BB0X820111212
Mustoe, H. (2010, July 22). Airbus, Boeing May Force Supplier Mergers to Reduce Costs. Retrieved August 10, 2012, from Bloomberg: http://www.bloomberg.com/news/2010-07-21/airbus-boeing-cost-squeeze-may-spark-merger-boom-among-aircraft-suppliers.html
Richardson, A. (2011, October 10). Southwest Airlines Is Playing with Brand Fire. Retrieved from Havard Business Review: http://blogs.hbr.org/cs/2011/10/southwest_airlines_is_playing.html
Margins have fluctuated and are down, indicating short run cost control failure. However, company performance in the long run is strongly attributable to the corporate culture. Southwest has had consistent performance since its inception, despite many swings in the fortunes of the industry overall. This indicates that management fostered a culture that over the long run will drive customer loyalty and will drive steady, incremental cost reductions. Success for Southwest is not measure in short-term results so much as long-term and on that measure the culture has contributed to a long run of success for Southwest.
One of the strategic decisions in the case is how to deal with the declining revenue environment. The airline industry has struggled in recent years leading to industry-wide cost reductions. To address this issue it is recommended that Southwest simply ride it out. The corporate culture has been a source of value for the…
The secondary gross margin measure, Gross Margin after Depreciation, shows the costs of having a rapidly growing infrastructure to support new routes and the purchase of additional planes over the five-year period. The reduction Gross Margin after Depreciation would be flat or slightly down during a strong economic period as well. This measure of gross margin indicates that the capital investments that are often amortized over seven years as fixed assets are being depreciated on the Southwest Airlines balance sheets through the 2004 -- 2009 period. In summary, the Southwest Airlines financial statements reflect how effective the strategies of continually improving productivity through process improvement are which are tied very closely to the culture the company has worked so hard to create. The activity-based ratios shown in Table 1 including Inventory Turnover, reduction of Operating Cycles and stabilizing Days to Sell Inventory stabilized at 9 days is impressive. This says…
Bovier, Connie (1993, June). Teamwork: The heart of an airline. Training, 30(6), 53.
David a Carter, Daniel a Rogers, & Betty J. Simkins. (2006). Does Hedging Affect Firm Value? Evidence from the U.S. Airline Industry. Financial Management, 35(1), 53-86.
Freiberg, K. And Freiberg, J. (1996), Nuts: Southwest Airlines' Crazy Recipe for Business and Personal Success, Broadway Books, New York, NY.
Ginger Hardage (2006). PROFILE: COMMUNICATING the SOUTHWEST WAY. Strategic Communication Management, 10(3), 4.
outhwest Airlines, Inc.
outhwest is an impressive company on many levels. Most notably, it's determination to do whatever it takes to get the job done stemming from its original battles to begin operations make the company flexible in meeting the demands of a highly dynamic industry. econdly, the company fosters innovation and has been very creative in being a leader in transforming the industry. ome of the most important examples include its ability to facilitate rapid turns, early leadership in online ticket bookings and "outrageous" marketing campaigns.
Thirdly, the belief that the employee comes first and that customer satisfaction will follow has boded well for outhwest. It's "hire for attitude, train for skills" and People Department reinforce this airline's dedication to making the working environment as enjoyable as possible. This combined with an open door policy and lean management layers promotes a strong sense of ownership and team accomplishments. outhwest…
Southwest has become the dominant carrier at four airports (Baltimore/Washington, Las Vegas, Kansas City and Chicago Midway) and the leading carrier in intrastate air travel in three states (California, Texas and Florida).
In response to September 11 and the resulting reduction in passenger traffic and cutbacks by rivals, Southwest needs to consider several actions. First, rivals are slashing jobs, wages and services to lower their costs. And, they are also becoming more efficient in their check-in methods and flight schedules. To maintain its cost differential advantage, Southwest must keep an eye on its wages which are now considered to be average for the industry, but may quickly become higher as competitors win wage concessions. Also, it's not clear if Southwest can continue to sustain a no layoff policy if passenger traffic doesn't pick up and it may need to make adjustments to its layoff guidelines. In the past, Southwest has had much success with taking advantage of market opportunities as other airlines have retreated from what they perceived to be unattractive business propositions. Southwest may have some excellent prospects as airlines discontinue destinations and cut back flights.
Levinson, M. (2001, December 1). Sky-High Performance. CIO. Retrieved March 12, 2003, from CIO.com Web site: http://www.cio.com/archive/120101/rule_southwest.html
Internal Analysis of the Southwest Airlines BV Framework
Southwest Airlines (NYSE:LUV) has a market cap as of September 12, 2011 of $6.3B, the most profitable and valuable American-based airlines there is today. This is a direct result of the company's ability to consistently take a resource-based view (BV) of its inherent strengths and develop and execute successful strategies on them over time. The BV of the airline industry illustrates how challenging it is to attain higher levels of eturn on Invested Capital (OIC) on a services-based business that is under continual price competition (Kumar, Johnson, Lai, 2009). Southwest has been able to overcome these challenges by concentrating on fuel edging strategies, greater focus on standardization of aircraft and supplies to drive down operating costs, and a focus on delivering an exceptional customer experience on each flight (Michalisin, Karau, Tangpong, 2004). Using an BV-based analysis of the company, this…
Ali, Q., Hussain, A., & Jamal, M.. (2011). Theoretical underpinnings behind Resource-based view: a marketing perspective. Interdisciplinary Journal of Contemporary Research In Business, 3(3), 1324-1331.
Freiberg, K. And Freiberg, J. (1996), Nuts: Southwest Airlines' Crazy Recipe for Business and Personal Success, Broadway Books, New York, NY.
Ginger Hardage (2006). PROFILE: COMMUNICATING THE SOUTHWEST WAY. Strategic Communication Management, 10(3), 4.
Sameer Kumar, Kevin L. Johnson, & Steven T. Lai. (2009). Performance improvement possibilities within the U.S. airline industry. International Journal of Productivity and Performance Management, 58(7), 694-717.
Southwest Airlines Business Model and Downsizing.
Southwest Airlines: Downsizing decisions
Southwest Airlines brands itself as a people-focused company. Interacting with its quirky, humorous staff has become part of the Southwest experience that customers expect when traveling on the airline. Southwest places a premium upon selecting the right people for each position at the company, with the belief that while workers can learn skills, they cannot learn to have the right attitude. When faced with the prospect of downsizing, Southwest must confront the possibility of letting go cherry-picked workers who have made a tremendous investment in the company, and in whom Southwest has made a tremendous investment in recruiting and training. "There is little airlines can do about the cost of fuel, landing fees or insurance. The big fish is controlling labor expenses, and experts say that companies must reduce costs or get better efficiency (i.e. more working hours) out of…
Brancatelli, Joe. (2008). Southwest Airline's seven secrets for success. Wired. Retrieved:
DiCarlo, Lisa. (2004). The secret to Southwest's success. Forbes. Retrieved:
"Paying market prices for a third of its fuel needs could add as much as $600 million to its bill next year, according to an analysis by the federal Bureau of Transportation Statistics," almost twice "the $313 million profit that the airline made in 2004, and well above the $440 million analysts expect it to earn this year," meaning that Southwest's main competitive threat really comes from the end of its previous business strategy. However, "Southwest is planning for the day when things get even worse. The airline is already looking at 2010, when its fuel hedges completely disappear, leaving it with a fuel bill that would be $1.4 billion higher than in 2005 - an increase equal to 20% of its current revenue - if prices stay the same as they are today. Southwest's fuel costs now average $15 a passenger, according to a study by the federal statistics…
Crotty, W. (11 Oct 2005) "JetBlue's New Look." The Motley Fool. Retrieved 21 Oct 2005 at http://aol.fool.com/News/mft/2005/mft05101123.htm
Southwest Airlines. (2005) Official Website. Retrieved 21 Oct 2005 at http://www.southwest.com /
Maynard, Micheline. (61 Oct 2005) "So Southwest Is Mortal After All." Business News. The Sunday New York Times. Retrieved 21 Oct 2005 at http://www.nytimes.com/2005/10/16/business/16southwest.html
Zimmerman, Shannon. (21 Oct 2005) "Southwest Airlines? Topflight Always?" The Motley Fool. The Motley Fool. Retrieved 21 Oct 2005 at http://aol.fool.com/news/commentary/2005/commentary05102104.htm?logvisit=y&source=eptaollnk308100&npu=y
More specifically, since Southwest invests heavily in both training and the "attitude" of its employees, the fact that all economically motivated employee separations are voluntary buyouts allows the company to protect that investment.
A happy workforce is more productive, which further helps the company manage its costs. Compared to the industry average, Southwest serves more than twice as many customers per employee and gets by with 8% fewer employees per plane. Moreover, the company's all-hands-on-deck approach allows it to turn its planes substantially faster than the competition, getting these extremely expensive assets back into the air where they can generate revenue.
4. Given the strategic decisions in the case, recommend actions that management should take to sustain/strengthen the culture (or implement a change), based on the situation given.
In the face of recent safety-related setbacks to the company's previously unblemished brand, both employee and public confidence in the maintenance system…
The capital asset pricing model (CAPM) is a method that is commonly used to determine the cost of equity for a company. The formula for CAPM is:
According to MSN Moneycentral (2012), the beta for Southwest Airlines is 1.13.
The risk free rate, based on the one-year Treasury yield, is 0.17% at present (U.S. Department of the Treasury, 2012). e are assuming a 7% market risk premium, as is customary.
This results in a CAPM calculation as follows:
Ra = Rf + ? (Rm-Rf)
Ra = 0.17 + (1.13) (7)
Ra = 0.17 + (7.91)
Ra = 8.08%
Therefore, according to CAPM, the cost of equity for Southwest Airlines is 8.08%.
This cost of equity is about what would be expected. Southwest is a relatively stable firm that seldom has massive swings in earnings, despite being an airline. If the historic average cost of capital for…
Investopedia. (2012). Capital asset pricing model (CAPM). Investopedia. Retrieved February 16, 2012 from http://www.investopedia.com/terms/c/capm.asp
MSN Moneycentral. (2012). Southwest Airlines. Retrieved February 16, 2012 from http://investing.money.msn.com/investments/stock-price?symbol=LUV&ocid=qbes
US Department of the Treasury. (2012). Daily treasury yield curve rates. Retrieved February 16, 2012 from http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
At YUM Brands, this internal environment is characterized by an organizational culture focused on the role of people in the attainment of the organizational goals and objectives. The Yum Brand managers then recognize their employees as the most valuable assets and strive to increase their on the job satisfaction.
"We believe that our customers' experience will never exceed that of our team members. For that reason, our Dynasty Model starts with our people. We know that people don't just play a role in our success -- they are the reason for our success. Our corporate values -- what we call our How We Win Together principles -- are built around a "People Capability First" philosophy and lay the groundwork for the way we team together every day" (Website of Yum Brands, 2012).
Despite the positive attitude embraced by the Yum Brand executives, fact remains that the brands are spread out…
2012, Famous recognition culture, Website of Yum Brands, http://yum.com/company/recognition.asp last accessed on July 20, 2012
Parnell, J., Strategic management: theory and practice, Cengage Learning
..you've got to take time to listen to people's ideas. If you tell someone no, that's and act of power and, in my opinion, an abuse of power. I don't want to constrain people in their thinking" (71).
Today the biggest asset Southwest Airlines has is its employee loyalty. Always considered to be valued employees over profit and money and this is exemplified by the fact that the airline has never had a lay off of any kind - with the exception of laying off three employees early in the business but hired them back in a short amount of time. Southwest's company loyalty to their employees has made them stronger organization and has saved them a significant amount of money. Trust and security shown by Southwest employees is evidenced in how they do their job. There definitely exists a bond of loyalty that is hard to break, as the…
Huey, John. "Outlaw Flyboy CEO's, Two Texas Mavericks Rant About the Wreckage of the U.S. Aviation Industry." Fortune 13 November 2000: 237-52
Katrina, Brooker. "What it Took to Make Southwest Airlines a Great - if Wacky - Company. How Did He Do it?" Fortune 28 May 2001: 62-85
Southwest: Safety and Risk Management
Historically, Southwest Airlines has definitely turned heads in both business and aviation when it comes to how their company deals with risk. In 2014, the firm acquired AirTran, a Florida-based airline for over a $1 billion dollars. While the moved surprised many in the industry, Southwest essentially showed that they viewed that expensive acquisition as a form of an insurance policy. Risk manager Chris Thorn asserted, “We knew that this was going to be a great opportunity to try to save some money on our aviation placement” (Reynolds, 2014). Fundamentally, what looked like a splurge in spending with questionable reasoning behind it, soon manifested as both a risk management and savings maneuver. “AirTran and Southwest went into the market as a joint placement. That resulted in lower pricing for both sets of risk exposures” (Reynolds, 2014). This was a shining example of the mentality that…
Alvesson, M., & Sveningsson, S. (2003). Managers doing leadership: The extra- ordinarization of the mundane. Human relations, 56(12), 1435-1459.
Friedman, S., & Douglas, J. (2018, May 3). Southwest Mechanics Critiqued for Finding Safety Issues: FAA. Retrieved from https://www.nbcdfw.com/investigations/Distrust-Between-Southwest-Airlines-Mechanics-Managers-Could-Put-Passengers-at-Risk-FAA-481672721.html
Ford, J. L., & Stephens, K. K. (2018). Pairing Organizational and Individual Factors to Improve Employees’ Risk Responsiveness. Management Communication Quarterly, 0893318918774418.
Graff, A. (2018, February 27). Southwest Airlines engine spews flames across the sky. Retrieved from https://www.sfgate.com/news/article/Southwest-Airlines-engine-fire-flames-video-12713263.php
Reynolds, D. (2014, September 12). Tales of an Aviation Risk Manager - Risk & Insurance. Retrieved from http://riskandinsurance.com/tales-aviation-risk-manager/
External Audit of Southwest Airlines Co.
Opportunities of Southwest Airlines Co
1. There is an expected world tourism growth of up to 4.3% on an annual scale hence the airline must take advantage of this opportunity for growth as well.
2. The accessibility of the Mexico, Cancun and the Caribbean region following the AirTrans merger bring the international opportunities that Southwest Airline can take advantage of.
3. The ATA domestic code-sharing treaty also breaks down barriers and bureaucracies for ease of trade.
4. The repeal of the Wright Amendment also works for the good of the airline in its operations.
5. With the down cycle of the economy since 2009, there has increased the potential for profit for this airline since people have become more cost sensitive than before.
6. The lower interest rates in the economy than before also works for the advantage of the airline
7. There has…
Adamkasi, (2017). Porter’s Five Forces Analysis Model of Southwest Airlines. https://www.porteranalysis.com/porters-five-forces-analysis-model-of-southwest-airlines/
CAPA, (2014). Southwest Airlines SWOT: Financial strength is mainstay, but cost and culture challenges loom large. https://centreforaviation.com/insights/analysis/southwest-airlines-swot-financial-strength-is-mainstay-but-cost-and-culture-challenges-loom-large-187714
Moran D, (2018). Diane Moran’s audit of Southwest Airline. http://dianemmoran.com/wp-content/uploads/2013/12/Southwest-case-study-audit-12.1-.pdf
One of the key components to Southwest’s strategy is empowering the worker, and the company does this via 2 HR practices: 1) treating employees well through incentives, and 2) hiring the right people for the job. This is a good strategy because it aligns with the concept of hiring “great people with great values,” and then supporting them so that they pass it on to the customer (Strategic Management, n.d., p. 113).
Treating employees well through incentives supports the idea of hiring great people, as it serves to attract qualified candidates for the job—people who know how to work well and want to compensated favorably for their skills and abilities. Southwest recognized that in order to attract quality workers it had to compensate them with quality packages and incentives.
Second, the company realized that hiring the right people for the job was critical to success. It did not matter if…
Since its inception, Southwest Airlines has grown significantly to become one of the most reputed, low-cost, and longest-standing airline that offers the largest number of domestic flights within the United States. For more than four decades now, the company has been able to sustain its appeal to consumers and its low cost originator image, even though that discernment and view has now become more of an old tale than the present reality. The airline company has done well to increase and improve its market base all over the United States; however, it lacks presence in the international market.
SWOT Analysis is a valuable and convenient tool employed for understanding a firm's strengths and weaknesses, identifies the opportunities available for the organization and the threats it faces. In the business realm, an organization can utilize this technique in order to attain a sustainable share in the market. The company…
Center for Aviation. (2014). Southwest Airlines SWOT: Financial strength is mainstay, but cost and culture challenges loom large. CAPA. Retrieved from: http://centreforaviation.com/analysis/southwest-airlines-swot-financial-strength-is-mainstay-but-cost-and-culture-challenges-loom-large-187714
Gulliver Business Travel. (2012). The secrets of Southwest's continued success. The Economist. Retrieved from: http://www.economist.com/blogs/gulliver/2012/06/southwest-airlines
Mind Tools. (2016). SWOT Analysis: Discover New Opportunities, Manage and Eliminate Threats. Retrieved from: https://www.mindtools.com/pages/article/newTMC_05.htm
Schmidt, A. (2015). Important Factors that Can Affect Southwest in the Future. Market Realist. Retrieved from: http://marketrealist.com/2015/07/important-factors-can-affect-southwest-future/
Southwest Airlines Analysis
Established in 1971 by Herbert D. Kelleher and several business partners, Southwest Airlines has secured a strong position in the airlines industry over the last 35 years. Southwest and its wholly owned subsidiary, Air Tran, serve a combined 103 destinations in 41 U.S. states, the District of Columbia, the Commonwealth of Puerto ico, and six near-international countries (Johnson, 2011). Both entities combined offer over 4000 daily flights. The Southwest Airlines corporate vision and self-concept is "America's low-cost, low-fare airline" (West-Grubbs, 2005). This is more than an espoused philosophy -- it's part of an operational model that is permeated throughout all business operations.
Short "peanut" flights are the airline's specialty. Southwest operates almost exclusively with only one type of plane in its fleet -- the Boeing 737 -- a quieter, more fuel efficient, and easier to maintain model which has helped reduce costs. Profit potential is the driving…
Enz, C.A. (2009). Hospitality Strategic Management: Concepts and Cases. (2nd ed.). John Wiley and Sons.
Gittell, J.H. (2005). The Southwest Airlines Way: Using the Power of Relationships to Achieve High Performance. McGraw-Hill Professional.
Hill, C. & Jones, G. (2009). Strategic Management Theory: An Integrated Approach. (9th ed.). Cengage Learning.
Johnson, Cynthia. (2011). "Industry Snapshot: Airline." Hoover's Online, [online] http://www.hoovers.com.
And many have got successful too in earning the market share. The emerging competition by new companies is a growing threat for the company and it should be tackled properly to avoid any future disturbances.
In order to further describe the competition Southwest Airlines is facing a Competitive Profile Matrix is designed. The following Competitive Profile Matrix tells about the tough competitors which are in a good position to have an edge over Southwest Airlines. It tells about the strengths and weaknesses of other competitors in contrast with Southwest Airlines.
Factors Weight Southwest Airlines United Airlines Delta Airlines Ratings Score
Score 1. Low fares.15 4.60 3.50 4.60 2. Customer Service.15 2.30 4.60 3.50 3. Employee Relations.15 4.60 3.50 3.50 4. Rate of Expansion.10 2.20. 4.50 4.50 5. Marketing.15 4.60 4.50 4.50 6. Finance Structure.15 4.40 4.40 4.40 7. Management Policies.15 4.60 4.60 2.20
EXTERNAL FACTOR EVALUATION MATRIX
Gittell, Jody Hoffer. The Southwest Airlines Way Using the Power of Relationships to Achieve High Performance. New York: McGraw-Hill, 2003.
More City Pairs Await Southwest - Kelleher Says Opportunities Remain Using Airline's Formula." Aviation Week & Space Technology. 143. 6 (1995): 40.
A www.marketingmix.com.au / www.mcdonalds.com / www.bbc.co.uk
Southwest Airlines Analysis Using the Maslow Hierarchy of Needs
Are Southwest Airlines Inc. leadership and policies fulfilling Maslow's needs ' theory stages? Please apply Maslow's hierarchy of needs to work motivation at Southwest Airlines, showing how various levels are or are not being met by Southwest Airlines Leadership and Human esources Management. (for example, are there employees at Southwest Airlines ever fired? How does that relate with lower level needs, such as safety needs?)
The leadership strategies and initiatives at Southwest Airlines are deliberately designed to support each level of the Maslow Hierarchy of Needs. Beginning with the initial physiological needs, Southwest is known for being an airline that pays better than comparable national carriers, while also having excellent medical benefits compared to its competitors (DAurizio, 2008). This ensure the physiological needs of the employees are met. As Southwest is an airline, the safety concerns are a critical success factor…
DAurizio, P. (2008). Southwest Airlines: Lessons in loyalty. Nursing Economics, 26(6), 389-92.
Laszlo, G.P. (1999). Southwest airlines - living total quality in a service organization. Managing Service Quality, 9(2), 90-95.
Lee, W.G. (1995). Southwest airlines Herb Kelleher: Unorthodoxy at work. Management Review, 84(1), 9-9. 14944
Miles, S.J., & W, G.M. (2005). Positioning southwest airlines through employee branding. Business Horizons, 48(6), 535-545.
There are many examples of this throughout the company's history, all pointing to the fact that employees who have a strong sense of ownership and wiliness to sacrifice for the greater good. Southwest's ability to translate cultural values into financial performance while embracing, even attacking change, in their industry is what fuels their profitability. Through the worst recession in 40 years, Southwest has been able to generate positive eturn on Investment (OI), eturn on Assets (OA), and eturn on Equity (OE).
Sustaining and Strengthening the Culture Given Strategic Decisions Made
The case study shows that while Southwest excels with their culture from a purely customer service standpoint, their leadership and management of maintenance, repair, overhaul and support has been a weakness that in 2007 became a liability. Southwest had failed to create a culture of transparency and accountability to the point of whistle-blowing in its maintenance organizations. As a result…
Freiberg, K. And Freiberg, J. (1996), Nuts: Southwest Airlines' Crazy Recipe for Business and Personal Success, Broadway Books, New York, NY.
Ginger Hardage (2006). PROFILE: COMMUNICATING the SOUTHWEST WAY. Strategic Communication Management, 10(3), 4.
Thomas a. Kochan (2006). Taking the High Road. MIT Sloan Management Review, 47(4), 16-19.
Dawna L. Rhoades (2006). Growth, customer service and profitability Southwest style. Managing Service Quality, 16(5), 538-547.
The company continually stressed the human nature of travel, and strove to make airplane travel affordable and enjoyable. Many people who used Southwest Airlines had never been able to fly before. However, the 'customer did not come first' at Southwest -- rather the customer came second, even though they "still got great service" (Friedberg & Friedberg 268). The company stood behind its employees, and allowed flight crews, for example, to use their expertise and knowledge to make autonomous decisions, rather than force the crews to worry about upsetting sensitive customers. The company believed that low fares and hospitality were what most customers care about, and did not focus on catering to customers with minor complaints. "Love doesn't guarantee approval... Although many people equate love and approval, they are not the same. Real love comes without conditions; it doesn't depend on anything. Approval must be earned by our performance" (Freiberg &…
Best practices case Study: Best perks, Southwest Airlines." The Vault. Retrieved 4 Aug 2008 at http://www.vault.com/nr/newsmain.jsp?nr_page=3&ch_id=401&article_id=19258&cat_id=1089
Case study: Southwest Airlines." (2005). CPP. Retrieved 4 Aug 2008 at http://www.cpp.com/pr/southwest_airlines_2006.pdf
Freiberg, K. & J. Freiberg. (1997). Nuts. New York: Broadway, 1998.
Kjerrulf, Alexander. (19 Jan 2003). "Book review: Nuts!" Positive Sharing. Retrieved 4 Aug 2008 at http://positivesharing.com/2003/01/book-review-nuts/
The company should focus on expanding its service trans-North America, and should further look into the possibility of launching trans-Atlantic operations. The company at the same should start dealing with Boeing for the purchases of advanced aircrafts.
The company should emphasis more on providing insurances of the passengers.
The advertising campaign should be evolved with new spirit irrespective of how well the come performs; the advertising campaign should be in run.
The employer has to be pushed, and it is important for the executives to work and handle the employee in cordial and healthy environment i.e. fun and love.
The present CEO and his secretary have renewed their commitment towards achieving all possible alternatives, and have taken concrete measures in this regard.
The company has to handle it rival with more convincing manner, it is equally important to avoid repeated court battles.
The company should start expanding…
The most notable would include: a renegotiation of the contract rates and benefits for employees. This is problematic, because if the staff begins to see that managers are making irresponsible decisions or are becoming disconnected with employees, it will create the setting for increased amounts of animosity to occur. Once this take place, it means that the company could lose talented employees and may be forced to renegotiate with unions (which would undermine its business model). ("Southwest Airline Corporation," 2002)
When you look at the total effects of the actions that were taken by Southwest, it is clear that the strategy of independently negotiating labor contracts provided the desired results. This can be seen by looking at the various steps that were taken during the process. Where, Southwest would be concerned about labor issues that are affecting other carriers. To counter these concerns, the company would negotiate with…
New Employee Orientation. (2002). DAS. Retrieved from: http://www.das.state.ne.us/personnel/nkn/IIF/2006-01/new_employee_orientation_handout.pdf
Southwest Airlines. (n.d.). SOE. Retrieved from: http://users.soe.ucsc.edu/~callon/southwest.html
Southwest Airlines Corporation. (2002). Dartmouth University. Retrieved from: http://mba.tuck.dartmouth.edu/pdf/2002-2-0012.pdf
Gillen, E. (2004). Why the Airlines can't Straighten Up and Fly Right. Black Table. Retrieved from: http://www.blacktable.com/gillin041013.htm
For short haul routes, customers have the option of driving or even taking the train. There are often low switching costs associated with driving. As the hassles associated with flying have increased, switching has increased as well. hile flights on longer routes are faster, there is often a price-performance tradeoff. The longer the flight, the lower the threat of substitutes.
The intensity of rivalry is high in the airline industry. There is little to differentiate airlines. Each airline has high fixed costs. Exit costs are high, as each airline has high fixed costs and only operates in the airline industry. In addition, the industry is subject to intermittent overcapacity. In addition, the service is highly perishable -- an empty seat cannot be resold later. This spurs intense competition to fill airplanes. ith low switching costs and a low diversity of rivals, there is a high degree of rivalry.
FRBSF. (2002). Competition and regulation in the airline industry. Federal Reserve Bank of San Francisco. Retrieved May 1, 2010 from http://www.u.arizona.edu/~gowrisan/pdf_papers/airline_competition.pdf
Grant, R. (2005). Contemporary strategy analysis. Malden, MA: Blackwell Publishing
McCormick, G. (2010). U.S. airlines more cautious on '10 fuel hedges. Reuters. Retrieved May 1, 2010 from http://www.reuters.com/article/idUSTRE61O59Z20100225
Porter, M. (1980). Porter's five forces. QuickMBA. Retrieved May 1, 2010 from http://www.quickmba.com/strategy/porter.shtml
As the value proposition that the company was based on, the attractiveness of flying when it is equal to or less than the cost of gasoline for the comparable trip has helped to create a unique niche for this airline. Their reliance on regional airports within 500 miles of each other has also contributed to the unique value proposition being realized for millions of customers a year.
Southwest Airlines Internal Analysis
SWA is well-known for its ability to keep costs down by concentrating on smaller, less expensive and less congested airports in conjunction with relying only on one type of aircraft, which is the Boeing 737. It has been well-documented that SWA achieves significant training and maintenance cost reductions as a result of relying on a single type of plane (Southwest Airlines Investor elations, 2009). Standardization on a specific type of jet has also enabled the company to streamline and…
Sunil Babbar, Xenophon Koufteros. (2008) the human element in airline service quality: contact personnel and the customer. International Journal of Operations & Production Management, 28(9), 804-830. Retrieved March 9, 2009, from ABI/INFORM Global database. (Document ID: 1534564061).
Terry Bacon (2004). You are how you behave: customers can't be fooled. The Journal of Business Strategy, 25(4), 35-40. Retrieved March 8, 2009 from ABI/INFORM Global database. (Document ID: 678131631).
Trebor Banstetter. (10 February). Southwest Airlines testing onboard WIFI. McClatchy Retrieved March 7, 2009, from ABI/INFORM Dateline database. (Document ID: 1643002901).
Leonard L. Berry, Venkatesh Shankar, Janet Turner Parish, Susan Cadwallader, Thomas Dotzel. (2006). Creating New Markets Through Service Innovation. MIT Sloan Management Review, 47(2), 56. Retrieved March 8, 2009, from ABI/INFORM Global database. (Document ID: 994490961).
Customers complain of smaller cramped seats and hence an uncomfortable flight experience. This is because Southwest wants to accommodate as many passengers as it can in one flight and its seats are thus smaller than those found in other airlines. This is especially uncomfortable for those who need extra space due to physical challenges.
The other weakness of Southwest is its customer on-plane experience. Owing to the cost concern, Southwest put as many seats as possible in the planes and only single class seat, economic. It means that the size of a seat in Southwest's airplanes is smaller than a seat in other airlines' aircrafts. Thus, there are some customers could feel uncomfortable with the smaller seats because those customers' physical issues, like the football players. Therefore, the Southwest might loses the business of those customers with special issues.
The threats always come from external environment. And external environment…
 "Southwest Airlines 2005 Form 10-K." Retrieved December 2, 2009. p 1
 "The Mission of Southwest Airlines."
The following definitions may be helpful.
Category 1 APUs are installed where in-flight auxiliary power operation is necessary. Category 1 APUs are usually required for essential APU installations. These APUs have been shown to meet all of the test and analysis requirements of the Minimum Performance Standard (MPS) of TSO C77b, Appendix 1.
Category 2 APUs are installed where in-flight APU operation is not necessary (non-essential installations).
Both Category 1 and Category 2 APUs are acceptable for non-essential APU installations. Category 2 APUs are not required to meet all of the test and analysis requirements that Category 1 APUs are subjected to. (See TSO C77b, Appendix 1, for the detailed requirements). (Category 1 and Category 2 APU, 2005). (See Appendix a for another example of an APU)
History (may need something different for this part - raw research) significant early demonstration was of the first liquid-fueled, fuel cell APU on…
Canadian Inventor Develops Airplane Auxiliary Power Unit Passive Cooling System. U.S. Fed News Service, Including U.S. State News. HT Media Ltd. 2008. Retrieved February 28, 2009 from HighBeam Research: http://www.highbeam.com /doc/1P3-1503121691.html' target='_blank' REL='NOFOLLOW'>
Southwest has the lowest prices per seat of any other airline. Moreover their pricing structure is simple and relatively transparent to passengers, with few classes of fares and few ticket reservations. They are able to do this due to providing frequent point-to-point service between secondary airports that are on average only 515 miles apart. They offer more direct, non-stop flights than the traditional hub and spoke system, and have quick turn around times (of 25 minutes compared to an hour or more for most major airlines). It ranks high on-time performance, baggage handling, and least customer complaints.
They do not offer meals, only peanuts and drinks. They have no major frills. Huge competition.
Major airlines have pared down flight schedules, and deferred or cancelled new aircraft deliveries, whilst some have also retired approximately 5% of their older planes. This leaves greater opportunity for low-cost startups…
How does Southwest's customer service affect its bottom line?
Any airline is by nature a services business, which by the structure of its business model is centered on creating accurate expectations of customers and then exceeding them. By continually surpassing the expectations of customers, companies build exceptional brand equity and loyalty. This is what Southwest has done such an exceptional job of in one of the toughest services businesses to excel in. They have continually set expectations with customers and then deliberately designed a myriad of processes to ensure everyone has a good flight and at a competitive price.
The ability to continually exceed expectations and deliver excellent customer experience is a large part of why Southwest Airlines continues to be profitable and has the honor of being the only American-based airline to never file for bankruptcy. By delivering excellent customer experiences on a consistent basis, business and…
outhwest Airlines (WA) has been a strong growth company for the last 40 years mainly due to its focal point on cutting costs. outhwest Airlines (WA) follows the Cost Leadership trategy in terms of Porter's four generic strategies and is the epitome of Blue Ocean trategy in its simultaneous pursuit of differentiation and low cost (Kim & Mauborgne, 2009.
That WA is cost-focused is evident from Liang et al.'s (2009) analysis of strategies that a company uses to differentiate itself. A successful company stands out by its association in the public's mind, and WA certainly stands out. Rollin King and Herb Kelleher's objective was: "If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline" (The Rise of outhwest Airlines) and its name,…
Southwest Airlines SWOT Analysis- http://www.businesstune-ups.com/Southwest-Airlines-SWOT-Analysis.html
The Rise of Southwest Airlines
Only a small percentage of flights are booked using travel agents. The primary means for customers to purchase tickets is directly from the airline over the phone or online at the company's website http://www.southwest.com/. Using this method, customers have access to offers that are only available on the web.
Southwest's marketing campaign is based on setting itself apart through branding. For instance, Southwest uses a "cattle call" method of seating. Customers are not assigned seats, but board in three groups according to arrival time. This allows the airlines to board passengers more quickly. In addition to this key difference, Southwest allows passenger to change reservations without incurring any additional costs, as with other airlines. However, Southwest does not offer same-day standby on a different flight. This service is usually free on other airlines without upgrading.
Southwest is the bare bones carrier. They offer Snack Packs of prepacked goods instead of…
American Airways. General Feed. Accessed June 11, 2010 from http://twitter.com/search?q=Continental#search?q=American%20Airways
American Eagle Airlines. General Feed. Accessed June 11, 2010 from http://twitter.com/search?q=Continental#search?q=American%20Eagle%20Airlines
Continental Airlines. Facebook page. Accessed June 11, 2010 from http://www.facebook.com/pages/Continental -Airlines/106091956088622?v=desc&ref=ts' target='_blank' REL='NOFOLLOW'>
Southwest Airlines has been a highly successful airline, it has been one of the most successful airlines in U.S. history with the low cost carrier model created by Southwest emulated successfully by many other airlines across the world. Today it is the largest domestic carrier in the U.S. And has a history of consistent profits, with on a few quarters in the recent recession showing losses (Southwest Airlines, 2013). There are numerous reasons behind the success, the main reason are the leadership and the way that the firms ability to gain and maintain effective competitive advantages. These will provide a good basis from which to consider the future of the firm.
Effectiveness of Leadership
Southwest Airlines was founded by ollin King and Herb Kelleher, having seen successful interstate airline operating out of California it was believed that Texas could also support an interstate airline (Barratt, 2008).…
Barrett, C, (2008), Southwest Airlines' Colleen Barrett on 'Servant Leadership', [online] accessed 27th September 2013 from http://www.youtube.com/watch?v=6TgR95vnM0c
Bryant, E, (2008, Dec), Leadership Southwest Style, T+D, p36-39
Mintzberg Henry, Ahlstrand Bruce, Lampel Joseph B. (2011), Strategy Safari: The Complete Guide Through the Wilds of Strategic Management, Financial Times / Prentice Hall
Southwest Airlines, (2013), homepage, [online] www.Southwest.com
This savings on fuel has also given Southwest more funds to invest in programs to reduce turn-around time of their jets between flights .
Southwest Airline's Internal Weaknesses
As with any company the size of Southwest, they have several weaknesses, with the most significant being their heavy dependence only on passenger traffic as their primary source of revenue. Despite efforts to move into logistics and supply chain services, the company is still struggling to gain significant success in more profitable business services markets (Kumar, Johnson, Lai, 2009).
Despite having an employee base that has the lowest turnover and highest levels of morale, Southwest also has one of the most rapidly declining sales-per-employee revenue levels for U.S.-based airlines (Kumar, Johnson, Lai, 2009). One of the factors that contribute to this is the fact that Southwest has more ground crew members than other airlines, an investment the company makes to attain the…
Christopher P. Ball. (2007). Rethinking Hub vs. Point-to-Point Competition: A Simple Circular Airline Model. The Journal of Business and Economic Studies, 13(1), 73-87,116.
Bernoff, J., & Li, C.. (2008). Harnessing the Power of the Oh-So-Social Web. MIT Sloan Management Review, 49(3), 36-42.
David a Carter, Daniel a Rogers, & Betty J. Simkins. (2006). Does Hedging Affect Firm Value? Evidence from the U.S. Airline Industry. Financial Management, 35(1), 53-86.
D'Aurizio, P.. (2008). Southwest Airlines: Lessons in Loyalty. Nursing Economics, 26(6), 389-92.
start an analysis of Southwest Airlines and its success story is the company's mission statement. According to the company's website, the company's mission is "dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit"
If we take a brief look at this mission statement, we may find that, differently from many of today's companies, Southwest's mission is not profit maximization, but achieving customer satisfaction through the quality of the services provided. Additionally, the mission statement refers to the joint collaboration and mixture of Company Service and Company Spirit, in the sense that one cannot truly operate and exist without the other. A friendly and efficient working environment is, in Southwest's opinion, a key towards achieving the highest level of customer satisfaction.
The generic strategy for Southwest relies on several important pillars, some of them deriving from the mission statement. The…
1. The Mission of Southwest Airlines. On the Internet at http://www.southwest.com /about_swa/mission.html
2. Zelner, Wendy, and Arndt, Michael. Southwest Airlines is Holding Steady. BusinessWeek Online. February 3, 2003. On the Internet at http://www.businessweek.com/magazine/content/03_05/b3818085.htm
The Mission of Southwest Airlines. On the Internet at
An Examination of Southwest Airlines
Globalization and Technology
Application of the I/O Model
Application of the BV Model
Mission and Vision Statement
Southwest Airlines has been one of the aviation industry's success stories; founded in 1967 the airline pioneered the low cost carrier model, and grew organically leveraging a first mover advantage (Morrison, 2001). The airline now operates approximately 3,600 flights every day, employees 45,009 staff and with the acquisition of AirTran in 2011 it became the largest domestic U.S. carrier (Southwest Airlines, 2014). The airline has grown, but in recent years the airline industry has seen significant constraints on growth due to the maturity of the industry in the U.S. along with the economic influences constraining growth (IATA, 2014). However, this does not mean there is not room for growth; to assess ways in which the firm may improve and understand the position of…
Belobaba, Peter; Odoni, Amedeo; Barnhart, Cynthia, (2009), The Global Airline Industry, John Wiley & Sons
Buchanan, D; Huczynski, A, (2010) Organisational Behaviour, Harlow, FT/Prentice Hall
Carey, (2014, Oct 14), Steep Learning Curve for Southwest Airlines as It Flies Overseas, Wall Street Journal, accessed at http://online.wsj.com/articles/steep-learning-curve-for-southwest-airlines-as-it-flies-overseas-1413326936
Cook Sarah, (2008), The Essential Guide to Employee Engagement: Better Business Performance Through Staff Satisfaction, Kogan Page Publishers
marketing service issues that I would like to discuss, as applied to Southwest Airlines. The first is the fact that the concept of "fun" seems to be focal in Southwest's marketing service. As Johnson and Hall showed (2009), the marketing strategy at Southwest was focused on the idea of fun, primarily because this was the way in which the decision makers at the company wanted to position Southwest.
The idea was, obviously, to differentiate the company from other competitors. In the airline industry, there are a couple of ways this can be done: better prices, more routes, better service etc. With Southwest, it seemed that it was all of these at the same time, with a notable focus on better prices and cost-efficiency. However, a strategy of cost-efficiency can be better sold to the customers, present and potential, if it is wrapped up in something other than a rigid message…
1. Johnson, Eric; Hall, Joseph, (2009). Enhancing Service at Southwest Airlines. Tuck School of Business at Dartmouth.
2. Brancatellu, Joe, (2008). Southwest Airlines' Seven Secrets for Success. On the Internet at http://www.wired.com/cars/futuretransport/news/2008/07/portfolio_0708 . Last retrieved on March 18, 2014
Southwest Airlines Organizational Culture
Analysis of Organizational Culture at Southwest Airlines
Application of the OCP Framework
Developing Organizational Culture at Southwest Airlines
Implementation of Organizational Culture
Organizational Culture as an Important Determinant of Organization's Success
Southwest Airlines is a world renowned air travel company and a low cost leader in airline industry of USA. Formed in 1971 by ollin King and Herb Kelleher, the company is committed to "providing highest level of customer service with pride and caring" to its varied market segments ranging from leisure travellers to freight transportation. The two most important stakeholders for the company are its employees and its customers. Southwest Airlines owns 520 different types of aircrafts and serves 411 cities and 63 million customers at 59 airports in 30 different states within the United States with its nonstop air travel service (Southwest Airlines Inc., 2010).
The major reason for company's 35 years of phenomenal…
Aguinis, H. (2009). Performance Management. Upper Sadle River, NJ: Pearson Prentice Hall.
Bailey, J. (February 13, 2008). Southwest. Southwest Way. New York Times, Business.
Box, T.M. (2009). Southwest Airlines 2007. Journal of the International Academy of Case Studies Vol. 15, 21-27.
Erdogan, B. & . (2010). Erdogan, B., & Bauer, T. (2010). Organizational Behavior. Flat World Knowled Organizational Culture . Flat World Knowledge.
Another issue is the legal/political power that Southwest has (or does not have, in relation to its rivals). Ultimately, the company has suffered as the result of the right Amendment, and it needs to leverage its current size to fight back against American Airlines over this legislation. Not only should Southwest fight for the amendment to be repealed in its entirety and immediately, but it should fight for punitive action against American Airlines and DF airport. A civil suit against these parties for the financial harm caused to Southwest could prevent them from undertaking such illegal and unethical actions in the future and could help Southwest to put AA out of its misery. Lastly, Southwest has had problems with its maintenance. The company spends a lot less than any of its rivals on maintenance, and while its accident in Chicago was ruled the result of pilot error, concerns over the…
Chang, K. (2011). How Southwest Airlines beat the Wright Amendment. CNBC. Retrieved March 12, 2012 from http://www.cnbc.com/id/43714139/How_Southwest_Airlines_Beat_the_Wright_Amendment
Jacksonville Business Journal. (2012). Union slowing AirTran, Southwest merger. Jacksonville Business Journal. Retrieved March 12, 2012 from http://www.bizjournals.com/jacksonville/news/2012/02/27/union-slowing-airtran-southwest-merger.html
MSN Moneycentral. (2012). Southwest Airlines. Retrieved March 12, 2012 from http://investing.money.msn.com/investments/stock-balance-sheet/?symbol=us%3ALUV&stmtView=Ann
Mutzabaugh, B. (2012). Southwest's new routes begin to blend in AirTran cities. USA Today. Retrieved March 12, 2012 from http://travel.usatoday.com/flights/post/2012/01/southwest-new-routes/610164/1
Southwest Airlines. What types of budgets would you recommend for the company? Why?
Currently, the type of accounting standard that is being utilized by Southwest Airlines is Generally Accepted Accounting Principals (GAAP). This is the basic benchmark that has been implemented by many U.S. companies to more accurately account for: their budgets, expenses, assets and liabilities. Over the years, it has become common for most corporations to follow these different standards. ("2010 Annual Report," 2010) ("Generally Accepted Accounting Principles," 2011)
However, Southwest takes this process one step further by also including Pro Forma accounting standards as an alternate way of evaluating the company. This is when you are anticipating that certain events have occurred in the future and are listing them as revenues in the current quarter (such as: future earnings on a large contract that was signed). The idea with using this approach is to see how these revenues…
2010 Annual Report. (2010). Southwest Airlines. Retrieved from; http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9ODk3NDZ8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1
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1. Describe the change in Southwest Airlines boarding process
Southwest Airline takes a distinctive approach in its boarding process. Essentially, instead of giving out allotted seats akin to other airlines, Southwest carries out a policy of open seating. The inference of this is that in the course of the boarding process, the travelers have the freedom to take a seat in any of the available ones. However, in recent times, there have been changes to this open-seating policy. Preceding the 2007 financial year, the travelers in general boarded the planes on a first-come, first-serve basis. However, in 2007, the airline brought this process to its culmination. The new boarding process assigned every traveler a boarding group A, B, or C together with a boarding and the travelers boarded the plane on a sequential basis from A to B and thereafter to C.
2. What was Southwest’s main goal introducing the…
Another means in which Southwest Airlines resembles McDonald's is given by the very use of the onald McDonald House for charity events. McDonald's has been developing charity actions through sustained donations to the charity houses for nearly four decades now (Website of the onald McDonald House Charities). As of 1983, when a Southwest Airlines pilot lost his daughter to leukemia, the airline operator has also been annually donating money to the charity. Additionally, the company also volunteers employees to help in the charity houses (Airline Industry Information, 2005).
These actions of Southwest can be assessed from two distinct angles -- both similar to the angles of assessing the charity decisions of McDonald's. In this order of ideas, the first angle is constituted by the fact that the companies become respectable members of the community. They show their support to community causes and they are socially responsible by giving back to…
Durlabhji, S., 1990, The influence of Confucianism and Zen on the Japanese organization, Akron Business and Economic Review, Edition of June
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culture in an organization using Southwest Airlines as a model. It uses Geert Hofstede Four Dimension of Culture to analyze the company and provides an over view of how the company's policies enable it to secure a top position in the industry. It uses 5 sources in MLA Format.
Globalization has changed the way people do business today. Factors like strategies, resources or capacity to produce has become secondary to business agendas. Instead today businesses and businesspeople are more concerned with how they can achieve the maximum productivity and prosperity through alliances. These alliances often span far and wide, pilfering to foreign cultures. Often the alliances prove beneficial to the companies because of observation and approach companies take to deal with partner company's culture. On the other hand there are also cases where the alliances have resulted in losses because partner companies fail to understand each other's culture. For instance…
Ioannou, Lori. Herb Kelleher, Interview: The Best of Herb Kelleher: Southwest's Ceo Says He Succeeds in Business by Putting Staff Needs First and Making Work Fun. Your Company, 08-01-1998, pp 66+.
Author not available. Fortune 5 Hundred: Can Anyone Replace Herb? [Southwest Airlines No. 339] Kelleher's manic stamp is all over Southwest. If he goes, what happens to its famous culture?, Fortune, 04-17-2000, pp 186+.
Yung, Katherine. From David to Goliath: Southwest struggling to stay true to culture in the face of growth., the Dallas Morning News, 12-26-1999, pp 1H.
Southwest Airlines is a discount airline in the United States, and is one of the industry leaders as the #3 in market share (Portillo, 2012). The company has a large network of flights around the U.S. Recently, it is has turned its back on the discount carrier model and begun to price more in line with industry norms (Martin, 2013). The company faces the same supply chain issues as any other airline. As a service entity, staffing is a major input. The company's biggest commodity worry is fuel, which is a major cost driver. There have also been recent issues with respect to parts and maintenance, which are also elements of the company's supply chain, especially with respect to the procurement of good parts (Ferrari, 2009).
Business Strategy and Structure
As noted, Southwest operates as a discount carrier in the airline business. It has recently shifted…
Ferrari, B. (2009). Southwest Airlines again tests maintenance standards. Supply Chain Matters. Retrieved April 21, 2013 from http://www.theferrarigroup.com/supply-chain-matters/tag/southwest-airlines/
Portillo, E. (2012). Southwest Airlines to begin CLT service in 2013. Charlotte Observer Retrieved April 21, 2013 from http://www.charlotteobserver.com/2012/10/23/3614327/southwest-airlines-to-begin-clt.html
Martin, H. (2013).Is Southwest Airlines losing the luv? Los Angeles Times. Retrieved April 21, 2013 from http://articles.latimes.com/2013/feb/09/business/la-fi-southwest-airlines-20130210
Velotta, R. (2010). Fuel hedging leads Southwest Airlines to profitable 1st quarter. Las Vegas Sun. Retrieved April 21, 2013 from http://www.lasvegassun.com/news/2012/apr/19/fuel-hedging-leads-southwest-airlines-profitable-1/
Southwest Airlines Analysis Case Study
Vision and Mission Statement Development
Southwest Airlines stands out amongst its competitors in the travel industry for many reasons. One of those reasons is the company's ability to change with the times and adopt current strategies that reflect the market trends of today which can affect the profitability of the future for the company.
The recent expiration of the Wright Amendment suggests that Southwest Airlines adopts a more relevant approach to their business model that reflects this current policy change which will allow the company to expand its services to many new markets and essentially deregulating many of the past agreements relevant to the airline industry. DeVoss (2014) agreed with this idea and saw an opportunity for Southwest to grow by maximizing the deregulation efforts. He wrote "The main beneficiary of the Wright Amendment's demise is Southwest Airlines. It has spent the past decade fighting…
Clayton, M. (2015). 2015 Aviation Trends. Strategy&, 2015. Retrieved from http://www.strategyand.pwc.com/perspectives/2015-aviation-trends
DeVoss, D. (2014). Southwest Airlines gets a boost from expiration of Wright Amendment. Fortune, 13 Oct 2014. Retrieved from http://fortune.com/2014/10/13/southwest-airlines - gets-a-boost-from-expiration-of-wright-amendment/
Team, T. (2014). What Has AirTran Done For Southwest Airlines? Forbes, 11 Dec 2014. Retrieved from http://www.forbes.com/sites/greatspeculations/2014/12/11/what-has - airtran-done-for-southwest-airlines/
Southwest Airlines Webpage. Purpose and Vision Statement. Viewed 16 Jun 2015. Retrieved from https://www.southwest.com/html/about-southwest/careers/culture.html
Porter's five force is a good tool for understanding profitability in the U.S. airline industry. The service is largely undifferentiated, with the main points of differentiation being the routes and the price. Southwest is focused heavily on point-to-point journeys, and its expansion to Florida reflects that. Expansion into the Northeast would likely also reflect that as well. The bargaining power of suppliers is fairly limited as major airlines are the buyers on whom industry suppliers depend. The bargaining power of buyers, however, is fairly high. They usually have options with respect to what airlines they fly, and this is particularly true in the Northeast. The barriers to entry are not particularly high. Theoretically, it is expensive to start an airline, but new airlines enter the industry fairly frequently. JetBlue would emerge in just a few years with Southwest's business model (and some of its management) and a northeast…
Another initiative is to continue the work of integrating AirTran. This will allow the airline to expand their network to fly to more destinations and spread their low fares even farther (Gary's Greeting, 2012).
Southwest's initiative to refurbish their cabins is being called "Evolve: The New Southwest Interior." For the average customer, the differences probably won't be so obvious which is why Southwest is calling this an evolution rather than a revolution. The tones of brown and blue will be familiar, but with a closer eye, one will be able to see the changes. The changes will include:
Modern Cabin Design: The new design incorporates natural, earthy tones combined with Southwest's iconic Canyon blue and clean, aluminum accents for a more modern, fresh appeal. The redesign is inspired by Southwest's past with a nod to the future.
Lighter and More Comfortable Seat: The redesigned low-profile seat is more durable, made…
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There are many different pathways to success for companies, and as a result successful organizations can have distinctly different cultures. This paper will examine a couple of different companies – Southwest Airlines and Koch Industries, to examine their different cultures, and how those cultural differences have emerged, and support the overall business objectives of those two organizations.
Culture of Southwest Airlines
The Southwest Airlines culture is one of the more celebrated organizational cultures in business. The company is based around \" A warrior spirit, a servant\'s heart and a fun-loving attitude.\" A focus on fun-loving is more to the day-to-day, as the servant emphasis, but the warrior heart showcases that employees at Southwest are expected to rise to the challenges that they face, and overcome obstacles in their service (Makovsky, 2013).
These values are even reflected on the company website. For example, this month the Star of the Month…
(Southwest Airlines Corporation)
The employees are always put first at Southwest Airlines, and according to the CEO Herb Kelleher, who was responsible for founding the company Southwest Airlines, the philosophy that employees come first is deeply embedded in the psyche of the company, and if the employees of the company are happy and contented and fully satisfied with their work, then they will most definitely take better care of the customers of the company, and this is exactly what happens at Southwest Airlines. When the customers are happy at the treatment that they receive at Southwest Airlines, they, quite naturally keep coming back for more, and this in turn makes the shareholders extremely happy and satisfied. The employees at Southwest Airlines are some of the best and most highly paid employees of any airline, and in general, all the walls of the company are always filled with several pictures of…
Abenes, Fiorello B. "Marketing Study of Southwest Airlines" Retrieved at http://www.csupomona.edu/~lbabenes/MBA/SouthwestMarketingStrategies.doc. Accessed 30 August, 2005
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100 Best Corporate Citizens for the year 2005" (Spring 2005) Business Ethics Magazine.
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External Analysis of Southwest Airlines
External Analysis Southwest Airlines
Will Southwest Airline's strategic plan continue to bring success in the new airline industry landscape? This paper sought to answer this question by examining the external increasingly consolidated environment in which Southwest competes. The review was conducted through application of Porter's Five Forces, a PEAT analysis, and a SWOT analysis.
The report concludes that Southwest has gained ground and maintained stability, changing only as much as it needed in order to remain the friendly domestic budget airline it started out as, and to compete effectively but with fidelity to its vision and values.
This paper will present a brief analysis of the competitive landscape for Southwest Airlines based in order to assess the airline's future capabilities in an environment in which other airlines are increasingly co-opting Southwest's successful and innovative strategies. This deductive exploration of the landscape will continue at the…
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