Southwest Airlines Case Study: Strategy, Culture, and Challenges

This case study examines Southwest Airlines' strategic advantages and operational efficiencies within the competitive airline industry. The analysis delves into Southwest's commitment to customer service, cost-effective business model, and employee-centric culture, highlighting how these factors contribute to its success. The study explores the key differences between Southwest and its competitors, including its single fleet strategy, point-to-point service model, and unique approach to labor relations. Furthermore, it assesses the crucial role of culture and leadership in fostering a dedicated and productive workforce. The case study also identifies the challenges Southwest faces, such as rising operating costs and increased competition from merged airlines. Finally, it offers recommendations for Southwest's management to ensure continued success in the future, emphasizing the need to adapt to market changes and leverage new technologies while maintaining its core values and strategic focus.

[Case study: southwest airlines 2011]

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Question 1. What is the strategic advantage that Southwest Airlines has and how is
strategy execution supported?
Answer 1. Southwest Airlines has become a successful airline, were most Airlines have been
struggling to attain the status of Southwest. The company has always being able to
maintained their quality, whether there was the problem of fluctuation in demand was
experienced by them or the company faces the problem of rising oil prices. The strategic
approach of the company always provided them to take an edge over their competitors.
Southwest Airlines main corporate strategy is that they are dedicated towards the highest
quality of Customer service that is delivered with a sense of Company spirit, individual pride,
friendliness and warmth. The company is following there these strategies for the past 30
years. This corporate strategy helps the company in maintaining its commitment to
customers. In addition, the company has maintained their lower cost structure for the
domestic airlines that helps the company in maintaining customer’s loyalty and it also
increases the revenue of the company by attracting more customers (Muduli and Kaura,
2011). The customer satisfaction is shown in the accolades that Southwest has received.
The business strategy of the company is very clear they always give preference to the
employees and the employees of the Southwest are the highest paid employees in the industry
and this is the result of cost reduction across the entire system. Due to the business strategy,
the employees of the company contain high energy for work, maintain a friendly environment
and the attrition rate is extremely low (Raynor, 2011).
To get success in every aspect of the business model is the basic requirement of every
company but Southwest provide their focus more on the hiring right people and company’s
this approach provide it a competitive advantage. Southwest has pride in itself that they are
the world’s one and only people-oriented airlines that operate with an approachable and
friendly team members and employees (Bettencourt, Lusch and Vargo, 2014).
One more strategy that is helping the company in getting an advantage over their competitors
is its flexible policies. The company always wants that their customers have an enjoyable
experience and for that, the company has developed various procedures and policies that
make the fly with the company easy for customers. With the easy and flexible policies, the
customers of the company always remain satisfied with their travelling experiences. Policies
also help the company in building brand value and creating brand loyalty.
Southwest has one of the most better reward systems in the whole Airlines Industry. The
reward system motivates the employees to provide great customer service to the customers
who are travelling with them. In the reward system, the company also provide an offer to
their customers such as the company offer a low fare price.
The main strategy the company follows is that they always look forward to making new and
innovative improvement in the Airlines. The company has a record of accomplishment of
being a company who always thinking forward to boost the business.
Question 2. What factors make Southwest Airlines different than other airlines?
Answer 2. Many factors make Southwest Airlines different from other airline some of them
are- Southwest has become one of the largest airlines company in the U.S in terms of
increased number of passengers. The company has not devoted from their initial focus from
low fares, high-frequency flights, a fleet consisting only of Boeing 737s, point to point flights
and primary short haul. In comparison to the other airlines, the company uses ‘no frills’

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method of service. No frills means the company do not reserve seats or offer meals on
priority bases the seats and meals are based on first come first served bases. Unlike other
major carriers, the company rarely provide a facility of a hotel room or long distance
telephone calls to delayed customers. The company has limited participation in the
computerised reservation system, that why they preferred to have travel agents and
reservation centres (Shekari and Nikooparvar, 2012). The company always put their focus on
maintaining labour relation, the pilots of the company do not belong to the Airline Pilots
Association they have their individual union, 87% of the employees were unionized.
Southwest is the first airline that introduced the concept of employee’s profit sharing.
In 2011, the company has acquired AirTran Airways to expand their business worldwide.
This step of the company proves that the company is always ready with their future plans and
they are aware of the facts what is going to happen and with that how the company is going
to deal.
The main factor Southwest has that other airlines did not have is their single fleet strategy.
Single fleet strategy means Southwest did not pursue a multiple fleet strategy like other
airlines they have developed their concentration on only one kind of aircraft. The single fleet
strategy allows a company in reducing their operating cost by reducing maintenance and
service cost.
Another factor that makes Southwest different from other companies is the company from the
beginning has used point to point service business model as opposed to the hub and spoke
model. All the other companies in the industry use the hub and spoke model, on the other
hand, the only company uses the point to point business model is Southwest. The point to
point business model allows the company to offer more direct and non-stop flights at very
less fares.
The company did not charge any kind of additional charges from the customers for the
additional services the company provide such as meals, seat selection, change in flight
reservation baggage, clearance etc. These charges are levied by other airlines but Southwest
did not want to trouble their customers by putting additional bundle of charges.
Question 3. What role do culture and leadership play in their success?
Answer 3. It is well known that the airline's industry is a very tough place to make money, as
there are so many competitors, high capital intensity, price sensitive customer power full
suppliers and bust and boom cyclicality. To face all these challenges, to bring the business
forward, and to earn a maximum profit by keeping the employees satisfied the good leader
and his good leadership is very much required (Choi, Lee and Olson, 2015). For that, the
company has Herd Kelleher. From 1981 to 2001 Herd Kelleher was appointed as a CEO of
the company in 2001 he resigned from the post and till 2008 he holds the position of the
Chairman. He was a great leader and an important part of the company. The leadership style
adopted by Herd Kelleher is the combination of fun, unique perspective, and flamboyance
and it is fresh (Diaconu, 2012). Herd Kelleher leadership led the company to consistently
new standards for itself and for the industry. Among employees, he has generated an intense
loyalty. He is a person who binds the whole organisation as a family. He after being a
CEO/chairman of the company knows the name of each and every employee of the company.
This gesture of Herd Kelleher makes them feel that they are important of Southwest. He is
the person who has believed and maintains the bond of loyalty between company and
employees.

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The leader of the company always believe in his lesson these such as be people-oriented,
have a remarkable sense of humour, care for values more than anything material, keep toiling
and stand strong and upright for what you think right even if the whole world is against you.
The company always tries to develop the flexible, fun and family-orientation culture. This
type of culture plays a very important role in bridging the gap between the top management
and the employees. With this type of culture, the company maintains the energetic, dedicated,
satisfied and happy environment that helps in maintaining customer loyalty.
Question 4. Why is it difficult for competitors to do what Southwest does?
Answer 4. The company maintain its operating cost structure very low it is the key point that
keeps the company ahead from their competitors. Due to the low operating cost, the company
get help in maintaining its fare low and in distributing higher salary to the employees in the
whole industry. It is difficult for the other companies in the same industry to maintain the
operating cost low because the standards and policies of Southwest are far more different and
it is not easy for Southwest competitors to follow those (Fu, Homsombat and Oum, 2011).
The other companies provide the option of seat reservation and meals of the customers
choose but Southwest did not provide this kind of option the company work on first come
first serve method. Southwest is consists the best employees in the industry and this all
because the company make them feel they are important to the company. This approach
provide a the positive effects on the working of the company the turnaround time of
Southwest is about 15 minutes but the competitors take 45 minutes it is all because of the
great crew member that is 50% smaller than the other companies (Porter and Heppelmann,
2015).
The company keep their focus on one or single fleet strategy that makes the company
different from its competitors. The competitors of the company were pursuing the multiple
flight strategy but Southwest is very much focused on the single flight strategy they never
thought to expand their flight ranges they just want to keep their focus on the single range of
flight and for that particular range, the company has developed their strategy to enhance the
service. It is very difficult for the other companies to stay at one range of flight but Southwest
is doing it and generating profits out if that.
The employees of Southwest are the highest paid employees in the U.S. airline industry. The
company treat its employees as a family and never let their employees feel left out. This is the
reason the employees of the company feels like they are not working for a company they are
working for a family. The example of this is the employees at Southwest are limited in
number whenever the pilots feel that the ground staffs is absent and because of that
passengers are facing a problem, they went to the passengers and help them with their
baggage (Brodie, Benson-Rea and Medlin, 2017).
Question 5. What are the significant challenges that Southwest Airlines face now (time
of the case) and in the future?
Answer 5. Southwest is doing well its profits and financial position in market is good.
However, still there are many challenges that company may face in future. In the market a
new merger is been taken place between United/Continental and Delta/Northwest and after
their merger it was expected that they become more efficient and smaller players and can
quote lower costs than Southwest. Although the productivity of the employees of Southwest
remained high, the operating cost is rising. These factors are clearly stating that the company
is going to face a dramatic change in the future. There are many questions raised in front of

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the company that are they going to maintain the position of the American most prosperous
airline. The new mergers are taken place in the market with the purpose of overtaking the
business of the Southwest and this emerges as the big challenge in fount of the company,
Southwest is single handy dealing within the market but the others are managing with twin
afford still they did not reach the heights of Southwest.
Question 6. What should Southwest management do to ensure continued success?
Answer 6. It is important for the company to position themselves in the new market and tried
to take full advantage of the new changes and technology arrived in the market. The company
has to plan a responsive and efficient system for enabling lower fares of the flights and to
lower down the total operating cost. To analyse the risk for the company Southwest has to
choose both qualitative and quantitative method (Callison and Seltzer, 2010). As the other
companies are also involving the lower fare charge in their system it becomes important for
the company to minimise the operating cost more so they can reduce the fare little bit more.
The threat of competition is visible to the company so it is important for the company to
maintain employees turnover, equipment and capital problems, overcome supplier loss and
make all efforts to retain their loyal customers (DaSilva and Trkman, 2014). To face the
competition the company has to redesign their strategies and policies because in future the
company is going to get a tough fight from the other companies (Mallikarjun, S., (2015).
There are many companies has joint here hand to give competition to the Southwest, to face
them the company has been making itself well preparer.

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