Edinburgh Napier University: Southwest Airlines Case Study Analysis

This case study delves into the strategic management of Southwest Airlines, examining its competitive environment and internal capabilities. The analysis begins with an application of Porter's Five Forces model to understand the dynamics of the US airline industry, assessing factors such as rivalry, buyer power, supplier power, the threat of new entrants, and the threat of substitutes. The study then proceeds to an internal analysis of Southwest Airlines, focusing on its resources, capabilities, and core competencies, particularly through the VRIO framework (Valuable, Rare, Imitable, Organized). The VRIO model evaluates Southwest's strengths, including its unique workforce culture, customer focus, and financial position, assessing how these factors contribute to its competitive advantage. The case study also touches upon the importance of company culture in implementing strategies. Overall, the analysis aims to provide a comprehensive understanding of Southwest Airlines' strategic choices and its ability to sustain its market position within a competitive and evolving industry.

Contemporary Issues in Strategic Management

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
QUESTION 11. Porter five forces model..............................................................................3
QUESTION 2. Internal analyses of Southwest Airline for analysing internal capabilities.. .5
QUESTION 3.........................................................................................................................8
QUESTION 4.......................................................................................................................11
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Strategic management refers to a set of activities which includes planning, organising and
monitoring the resources of the company so that they can achieve their pre-set goals and mission
within set deadlines (Rosenberg Hansen and Ferlie, 2016). Primary aim of this approach is to
attain maximum utilisation of resources which leads to better productivity and profitability in the
competitive market. For this report, Southwest Airlines is taken for consideration which is one of
the only airlines in the world which remains profitable since they have started their business
operations. Herb Kelleher and Rollin King started Southwest Airline in 1966 and bought three
Boeing 735 and hire few employees to manage their aircrafts. To analyse the external
environment, Porters five forces model will be implement so that environment in which company
is running is analysed and monitored. Besides this, value chain analysis will be done on
company’s capabilities and its competencies so that generic competitive strategy would be made
to sustain its market position. Apart from this, importance of culture and how its affect
Southwest Airlines at the time of implementation of company’s strategies accordingly. At last,
various opportunities which company could attain by crossing US borders will be explained with
the use of various techniques and concept of management.
MAIN BODY
QUESTION 11. Porter five forces model.
The Porter five forces model was developed Michael Porter which helps in understanding the
attractiveness of the market. It consist of five different forces and the primary motive of this is to
build and develop a thorough system in order to evaluate the position of the company. It helps in
ascertaining the different types of threats which the company is facing. Furthermore, by
analysing and conducting Porter five forces model on US airline industry, it will be easy to have
a clear image of organisations profitability and position at the market place (Gamble, Peteraf and
Thompson, 2014) . The following are the five different forces that will be taken into account and
help the company in various ways:
 Rivalry competition within the industry: This type of force is concerned with depicting
the level of competition which is being faced by the organisation at the market place.
This force is high in US airline industry. It is because the big airline industry travels or
fly to similar airports at different prices and other facilities. This means there are large

number of competitors in the market which have the direct impact on the operations of
the organisation. There are dozen categories of fares at which different airline industry
operates. The major competitors for the company are Southwest airline, Delta, etc. The
higher level of competition and low fares has led to increase in demand for the airline
industry.
 Bargaining power of buyers: The customer or buyers are the most crucial elements of
every business organisation. Every product is produced by taking into consideration the
requirements and demand of the customers. This force is related to determine the power
of customers in order to minimise the prices or improve the quality of the products and
services served by the US Airline industry (Grant, 2016). So this force is high as
customer have greater amount of power because of different low cost flights available in
the market. The switching cost is very low so customer can easily shift from one
company to another. Furthermore, each customer is required to get useful information
regarding the flights, timing, safety, etc.
 Bargaining power of suppliers: There are different suppliers for the airline industry who
supplies the company different and useful materials which are needed for daily
operations. The suppliers have high bargaining power because of the three crucial factors
which can affect the operations of the US airline namely, fuel, aircraft and labour that
have direct influence from exterior business world. In this context, there are limited
suppliers of the products which are essentially needed in order to fly a plane which places
greater amount of emphasis in maximising the prices of the products and services. Due to
increase in prices of fuel, the airline industry faced the problem of overall increase in the
costing that has directly influenced the financial position for the firm. In such cases, the
US airline company has started charging for the food which they serve in flights,
established a maximum weight which are allowed by per person in the flight and over
and above that will be chargeable.
 Threat of new entrant: This force examines the level of threat which the company can
face from the entry of exit of the new companies in the same industry. Earlier, the US
airline industry were have very weak or low threat from the new entrants because this
requires heavy amount of investment, highly professional workforce who are well trained
and have the ability to fly plane, etc. But after the deregulation, it has sent tumbling in

fares and enabled various new firms to enter into the same segment. This has impacted
the financial position of already established and newly opened company both. During the
initial period of deregulation, approximately 150 new airline companies were entered into
the market (Kohlborn and et. al., 2014) . From this, many were start ups and failed to
compete in the market. So this has affected US airline positively as the company is able
to generate sufficient amount of profits by purchasing two new Boeings.
 Threat of substitutes: The substitutes products or services are those which the customer
can use in place of original one. In this, the US airline industry faces moderate threat
from the substitute companies. This is because as per the case study, majority of the
newly opened companies in the airline industry suffered from severe bankruptcy and
loses due to which they were not able to exist in the market. This has given chance to the
US airline industry to grow and prosper. But after deregulation, the travelling was
increased and it was seen major increase in travelling from 200 million people to 700
million people from the year 1974 to 2007.
After conducting Porter five forces model, it has been analysed that US airline industry is
attractive in its field. It is effectively able to establish themselves in the market. Though the
company has faced severe ups and downs and obstacles during the period of deregulation,
recession and inflation. It has suffered from various loses and problems which has led to low
profitability for the organisation (Foss and Hallberg, 2014) . All this was very challenging for the
company, but it has dealt with it properly and is able to exist in the market. Apart from this, there
are certain things which must be taken into account by all the competitors like customers needs
and demands are highly dynamic and during the initial period of airline industry, only those who
can afford it can fly and rest cannot. But with growing competition in the market, the company
has to provide the tickets of all prices depending upon the needs and requirements of the
customers. Now a days, each and every customer is involved in travelling through flight and its
easily affordable.
QUESTION 2. Internal analyses of Southwest Airline for analysing internal capabilities.
The internal analyses is concerned with determining and examining the interior business
environment of the organisation. It is very crucial to analyse the culture and working pattern of
every organisation which helps them in the growth and development of the company. In other
words, it helps in determining important internal traits of the organisation (Cegliński, 2016) . By

analysing this, Southwest Airline are able to assess resources, capabilities and key competencies.
This mainly takes into consideration the four important elements that is vision, mission,
objectives and strategies that helps in attaining the other 3 elements. By performing this, the
company will be able to identify the internal strength and weaknesses and external threats and
opportunities which have a direct impact on the organisations growth and success. Furthermore,
the manager or CEO that is Herb is focussed towards maintaining competitive advantage.
Therefore, VRIO model will be used by the organisation in order to evaluate the internal
capabilities and core competencies of the firm.
VRIO Model
VRIO stands for valuable, rare, imitable and organised resources. This is the framework through
which strategic analyses tool are designed in such a manner that it supports the organisation in
order to protect the available and scare resources and capabilities that creates long term
competitive advantage (Menz and Scheef, 2014) . This model is the part of resource based view
model which examines the link between the organisation internal features and its performances.
The following is the description of VRIO model in detail:
 Valuable: This is the first step in the model which describes that resources must be
valuable in nature. Such resources are considered to be valuable when the organisation
have the ability to develop such strategies which contributes in improving organisation
effectiveness and efficiency with the help of grabbing opportunities or minimising the
associated threats for the businesses. Therefore, the valuable resources which the
Southwest airline is having are valuable workforce and staff, who brings in new and
innovative ideas for the betterment of company (Wetherly, 2014) . These staff are highly
helping in nature and have kind behaviour towards the customers. The aircraft carriers are
also very valuable, customers are highly valued resources where the company operates
and works by taking into consideration the needs and requirements of the customers. It
has a huge capital outlay which is again highly valued.
 Rare: The rarity is the term which describes that the resources which are valuable must be
rare in nature that are not easily available in the market. This is one of the most important
factor because it determines the uniqueness and differentiated characteristic of the
products and services (Hill, Jones and Schilling, 2014) . So in Southwest airlines, the
staff is rare which is not easily seen in any other organisation, as they enjoy while

working, pampers one another and have very kind and generous behaviour towards their
customers. The aircraft carriers are rare, customers have rarity and capital outlay if also
rare.
 Imitable: This means that the valuable and rare resource must be non imitable which
means that it cannot be copied easily. In initial stage, it may be beneficial for the
organisation but in long run, the competitors are able to copy the resources effectively
and efficiently. The Southwest airline has resources which are difficult to get copied like
employees skills, abilities, nature, thought, etc, are very difficult for other companies or
competitors to copy these things (Morden, 2016) . The aircraft carriers and staff members
are such which are not possible to get copied as each person has different set of skills and
mind set which cannot be completely analysed and copied.
 Organised: The valuable, rare and imitable resources do not add any benefit to the
company if they are not well organised and functioned. This requires the need to establish
proper coordination and communication in order to assemble resources effectively and
efficiently. The company will be able to accomplish the business objectives of attaining
competitive advantage when these resources are well organised (Bettis and et. al., 2016).
Therefore, in Southwest airlines, the staff members are well organised and they are clear
with business goals and objectives and the ways to achieve them. They work harder and
internal business environment openly invites the advices and suggestions of those
employees.
The Southwest airline has certain strength which makes the company highly effective and it
includes, strong brand recognition in the global market, huge financial position and higher level
of profitability, highly innovative and expert workforce, good and very friendly working
atmosphere where each and every employee feel free to work. Whereas, at the same time, there
are some weaknesses which the company suffers from like it suffers higher level of competition
from the companies like Delta, US airline, etc (Jenkins and Williamson, 2015) . Apart from this,
the airline industry works 24 hours and 7 days a week which some time creates exertion for the
employees and they may feel dissatisfied with the company.
The Porter Generic strategies includes, three different types of strategies namely, cost leadership,
differentiation and hybrid. In cost leadership, the Southwest airlines focuses on keeping the cost
of the company at lowest and for this purpose, the organisation has developed various strategies

like using fuel which is pollution free, charging customer to pay extra for boarding first, etc. in
differentiation strategy, there are various services which are unique and exclusively provided by
the Southwest airline only. For instance, the company was the first to provide internet booking at
international carrier in the market of the company. The staff members are highly unique in nature
which kept on providing entertainment and games to the customers in the flight so that they do
not feel bored. The last strategy is Hybrid in which the company puts emphasis on obtaining low
cost products with unique and exclusive features. So Southwest airline keeps focus towards this
and has set various standards in order to stay competitive in the market (Sakas, Vlachos and
Nasiopoulos, 2014) . It is involved in flying more passengers than employees as compared to any
other airline industry. Furthermore, it has able to manage the debt equity ratio to the lowest and
is one of the company in the world with high credit rating in investment.
QUESTION 3
Culture is one of the most important aspects which has a direct impact on the success and growth
of the company. This is considered to be the underlying beliefs, thoughts, importance and
different methods through which people working in a company can interact with one another.
The term culture is a very broad as it only concerned with the organisations expectations, internal
business environment but it also takes into consideration, the vision, mission, business objectives
ad ways through which the company can accomplish the same (Stead and Stead, 2014). This
culture can contribute to the success and growth only if the business managers and leader of the
company are well organised and has the ability to develop a workplace where people feel free to
communicate and work towards the betterments and accomplishment of business objectives and
goals.
The culture of Southwest Airline is very good and unique in nature and perspective which has
led the company to the greater heights and success. The business manager of CEO of the
company was Herb Kelleher who followed such leadership style in the organisation that was the
combination of lavishness, fun and joy and has exclusive as well as unique perspective. Herb has
set differentiated and innovative standards for work not only for himself but also for the entire
industry. The primary motive of Herb was to stay loyal and honest with their employees and
have the potential to recognise and remember the name of each and every employee discusses
and asks them to share their personal as well as family life (Jarzabkowski and Kaplan, 2015).

This creates a friendly culture in the company where employees feel that the Southwest Airline
considers not only the professional needs and requirements of the employees but also focuses on
personal requirements. This has creates the environment where the company has successfully
earned the respect and trust of the employees. There was a culture where Herb does not consider
himself just boss but the quality and skill which makes them to work with lower and middle level
people where while flying plane, they help the ground crew people to load and unload bags and
also helps cabin crew people to serve drinks and food to the passengers (Hitt, Ireland and
Hoskisson, 2016). This gesture has created a highly respectful image of the company and the
boss which has strongly contributed in the development and growth of company with this type of
culture where boss does not only orders but also helps each and every level of people in their
work.
In the culture of the organisation, customer service was beyond and above perfection which has
created the positive image of the airline in the overall industry. The culture of the company was
to give most exclusive services to the customers. For instance, there was one of the incident,
where passenger who was suffering from serious diseases and was leaving for Houston to have a
kidney transplant operation, but accidently missed the flight. That passenger was taken to
Houston in the private plane of the company. Apart from this, one elderly passenger was flying
to Phoenix for the purpose of having cancer treatment was quiet nervous and scared because
there was no relative or friend of her (Peppard and Ward, 2016) . At that time, the ticket agent of
the Southwest airline has invited that women at her place and helped her for 2 weeks by
escorting them at their place. Therefore, such type of incidents shows that the employees of the
company are very helping in nature and they do not only work for money but takes into
consideration the emotions and problems of their customers. This has strongly created positive
image in the customers as they feel happy and satisfied that finally contributes in creating
positive working culture and leads to success.
The Southwest airline has an intense communication within the company which are given greater
amount of importance and helps the company to maintain spirit de crops which are recognised in
the organisation. Due to the secure and safe working culture within the organisation, the
company is able to keep their employee turnover rate at minimum. Furthermore, people desire to
work with the company and in the year 2012, the company has received the job applications of
114,845 (Hanson and et. al., 2016). The friendly culture, safe working atmosphere, good

employee relations influences the company and employees to work harder and accomplishes
business goals and objectives collectively. The employees works in team that reduces the
chances of conflicts and develops team spirit them (Slack, 2018) . It makes them understand that
working in team could always generate better results and enhances the productivity.
Training is one of the most important and crucial factor which is required in each and every
organisation. It helps in making people and employees working in the company to learn new
skills and develop their knowledge base. The Southwest airline has a strong culture of providing
training to their employees (Ansoff and et. al., 2018) . The human resource department of the
company regularly conducts the training sessions. In that programs, the company is able to
identify the kind of training which is needed to develop the employees. The starting of training
focuses on developing efforts among the employees which induces them to share and inspire the
unique culture of the company. The company has developed a new training program or
orientation session which is called with the name of new- hire celebrations. In this, each and
every department of company introduces themselves to the newly hired employees in a rap style.
This is quiet entertaining, fun and joyful sessions because generally orientation sessions are
always boring in many of the companies. But the Herb has chosen a new concept which gathers
the attention of employees and they are able to recognise each and every department properly. In
the orientation program only, they are able to develop positive and joyful working culture of the
company which ultimately motivates and encourages them to stay attentive towards the training
sessions (Helfat and Peteraf, 2015) . This also influences them to take part in every session in
order to know the different norms and ways of getting training.
The Southwest airline apart from organising the orientation programs for the newly recruited
people also organises advanced training sessions for both new and already existing employees.
Such trainings are organised in University of People at Love fields in Dellas. In that, the
company provides various classes and sessions like building team spirit where employees are
given training on working in team and its importance for them as well for the company.
Generally people does not feel comfortable while working team and also leads to conflicting
views so under this training, the employees are trained that how to work in team and importance
of maintaining team spirit. The another aspect where they are given training is on leadership as it
is the act through which people are able to lead their team and influences them to work as per the
organisational objectives and goals (Teece, Peteraf and Leih, 2016) . Southwest airline also

provides training on cultural diversity because being an airline industry; the company operates
globally so it becomes very crucial for their employees to know the different culture of the places
where the company operates. This helps them in their overall growth and development.
The above was the training session for newly hired people, but the company also organises a
three day class or training workshop for the already existing employees who are promoted to the
next higher level and this session or class is known as leading with integrity (Johnson, 2016) .
Furthermore, each and every department of the company also consist of its separate training
programs where emphasis is given on technical work. apart from this, there is another training
programs with the name “walk a mile day” where workforce is motivated and primary purpose
of this session is to encourage and develop respect among each individual for their co-workers
while maximising the awareness of the company.
The culture of Southwest airline regularly encourages the initiatives and ideas of the employees
at different level in which it operates. For instance, pilots understands that prices of fuel are
increasing the overall costing for the company, so they regularly looks and suggest some ways in
which the fuel can be used properly and effectively. The red hearts and love are the key
ingredients for the corporate culture. There is a mentoring program or guiding session which is
known with a name called Co Hearts. The company places a strong focus on maintaining and
developing cooperative labour relations. For this purpose, 82% employees were unionised and
are represented by 11 different unions (Shaw, 2016) .
All the above discussed ways or culture of Southwest Airline have strong contribution towards
the growth and success of the company. When the company has good culture which works
collectively for employees and customers then this has strategically able to fulfil the desired
requirements of both. With the detailed description of organisational culture of the Southwest
airlines, it has been summed that the workforce if highly effective and expert which themselves
contributes in the betterment of the business operations. They are able to whatever is needed in
order to achieve the objectives (Flouris and Oswald, 2016). The actions performed by them are
also unique which created different and respectful image of the company in the overall business
market of the airline industry.
QUESTION 4
Southwest airline is one of the largest airlines of the United States of America. The company was
founded in the year 1966 with an aim of providing travel services to the passengers mainly in the

Golden triangle of Houston, Dallas and San Antonio by staying within the Texas. According to
the given case study, the demand of the passengers in the US airline industry is increasing
steadily however the airline firms are step away from the recession and bankruptcy. The continue
isolation of the firms in industry will results in reduce in operating cost and increasing the ticket
prices (Holloway, 2017). The chances of recession, terrorism activities can negatively impact the
success of the firm in the US airlines industry. The US airline industry was going through
various ups and downs after the implementation of the Airline Deregulation Act, 1978. Low
fares and competition results in huge demand of the air travel. This resulted in the rise of
passengers for the airline industry. The passengers rose from 200 million in 194 to 700 million in
2007. Due to the recession, airlines industry of the United States faced a loss of 50 billion
Dollars by 2011. The rise of passengers also resulted in rise of new airlines firms out of which
several were forced to close by the end of 2004 (Mallikarjun, 2015) .
These factors are posing the risk to the company regarding the sustainability in the airline
industry. Southwest airline is also facing stiff competition from the rivals. The newly acquired
legacy carriers can pose threat to the company as they can become more efficient and
technological advanced. Other smaller players such as Jet Blue and Alegiant are providing
services at low fares than the Southwest airlines (Chen, Lin and Vincent, 2017). The productivity
and performance of the employees of Southwest is high but still the firm is facing issues of rising
operating costs. In order to maintain their position in the airline industry, the firms needs to
upgrade their reach by entering into new markets (Albers and et. al., 2017). The company has
opportunities outside of the United States of the America which can enhance and strengthen the
position of Southwest in the global airline industry. Through the expansion, the market cap as
well as customer base of the company for enhanced performance and success (Lawton, 2017) .
The company can tap into new markets outside the US by using several international strategy
approaches and collaboration with multi-domestic, global or transnational companies which are
discussed below in detailed:
Multi-domestic companies: This collaboration can be used by the southwest airlines in order to
expand in the England. In this, the Southwest airlines need to acquire a domestic firm for
providing their products and sevices to the local customers. Through this strategy, the southwest
airlines can satisfy the needs and requirements of the local market through modifying their
products and services by analyzing the requirements (Lawton, 2017) . This type of strategy can