Southwest: A Model of Innovation
Innovation is an essential ingredient in today’s competitive landscape (Denning, 2011). Unless innovation moves beyond initiative and becomes part of an organization’s DNA, innovation is doomed to fail. Southwest Airlines (NYSE: LUV) has embrace innovation as an essential part of its culture. The innovation and importance of the Southwest culture is demonstrated throughout customer service, business strategy and green initiatives.
The Southwest Culture
Core Values
The culture of an organization can simply be defined by its core values, traditions, and beliefs. For over 45 years Southwest Airlines has been successful. Its success has been attributed to a value system that tasks managers with the responsibility
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Southwest’s philosophy is that a fun attitude provides a balance in the workplace and it encourages employees not to take themselves too seriously. Additionally, Southwest Airlines’ inculcation of servant leadership into their business philosophy has also been attributed to their success as a company. The Robert E. Greenleaf Center for Servant Leadership describes a servant leader as one who “focuses primarily on the growth and well-being of people and the communities to which they belong”. Colleen Barrett, president emeritus of Southwest Airlines, explained that the difference between the Southwest pyramid structure and that of other companies is that most companies have their shareholders at the top of the pyramid but for Southwest, their employee satisfaction and the needs of their customers are the first priorities. Barrett also stated that Southwest’s philosophy is to follow their golden rule which is to “treat people the way you want to be treated”. By putting their employees first and treating employees as a part of the family, Southwest has been able to lead in the airline industry as a company with satisfied employees. (Barrett, …show more content…
The marketing approach of Southwest Airlines is built upon their strong business model. They have successfully managed to target two specific market segments of the airline industry while remaining profitable. Their strategy is simple, to offer frequent non-stop flights with the lowest costs which appeal to both the business and budget travelers. By segmenting their target audience to specific demographics and ticket pricing, passengers know exactly what they are getting for the price they pay.
Pricing. Their pricing strategy is based off their market position as a budget airline. Positioning their company as a budget airline, Southwest can maintain and keep their lower price points compared to their competitors. For Southwest to maintain sustainability as a market leader, they must effectively utilize their resources to reduce their cost of operations. By only operating one type of aircraft, short non-stop flights, point to point routes, and flying into less crowded secondary airports, this has allowed Southwest Airlines to keep their price points down while simultaneously reducing their planes turnaround time.
Distribution. Unlike other airlines in the industry, Southwest Airlines does not use third party booking reservation systems. They are unique in such a way that they operate ticket sales directly through their company. By limiting third party booking reservation systems, Southwest can keep their sales distribution in
Unlike most corporations, Southwest has an inverted pyramid structure with employees at the top, a higher priority than any other stakeholder. Customers come second, as Southwest President Colleen Barrett describes it: "If we treat them [employees] right, and give them proactive customer service, they...will in turn assure that our second most important group, [the passengers]...receive the same proactive customer service." (Barrett, Colleen. Interview. Knowledge @ Wharton. Wharton School of Management: 8 Jul 2008. Podcast). Barrett and her colleagues are demonstrating conceptualization, or the ability to distinguish what are their top short and long term goals. They hope to create a continuous wheel of service where employees at the top ensure that passengers below them are always satisfied. To complete the organization pyramid, management is at the bottom. This further embodies the spirit of servant leadership, where the focus is on increased services to others rather then to
Despite Southwest’s long standing reputation as an employer who makes their employees and customers happy, there have been storms brewing in the company’s labor relations and customer relations sector. As was mentioned before, Southwest recently acquired AirTran Airways and revealed plans to take its already successful domestic business international with flights to Mexico and the Caribbean (Martin, 2014). This organizational restructuring is causing Southwest to have what Time Magazine’s Brad Tuttle calls an “identity crisis” for the airline whose new advertisements have removed the humor they are famous for and the messages of “bags fly free” from commercials. Bob Jordan, a Southwest executive, explained the change as a new era for Southwest and chance for consumers to see them in a brand new light. Some speculate that this “new light” will not be positive for the airline; after all, one of the reasons Americans love Southwest is because it has always differed from other large and impersonal airlines, such as American Airlines and Delta. Southwest has always seemed like the underdog taking on the giant, overpriced competitors; now they seem to have hopped on board with the “big boys” of the airline industry. Another disturbing trend is that studies show Southwest’s fares have risen 39% over the last five years compared to a 10% rise in the rest of the industry, while Southwest still lets bags fly for free. There is some debate if that will be one of the items swept away in the airline’s big restructure. Time will tell if Southwest’s top-notch customer service will still be enough to set them apart from other airlines or if their new, “stiff” image will leave them with shaking heads and deficits on the balance sh...
The company realized a 10 percent reduction in baseline costs from this great work (Ross & Beath, 2007). Additionally, Southwest Airlines focused on its business integration capabilities by dedicating a two year project to redesign its “sacred transactions,” those transactions that provide the company’s core data (Ross & Beath, 2007). In these ways, the company has worked to rationalize its technology infrastructure to build a new
Southwest Airlines has come from an underdog to being one of the best airlines in the industry. This reputation translates from its strategic management of resources. The Co-founder and former CEO, Herb Kelleher, established a unique corporate culture that leads to high customer satisfaction, employees’ morale, and one of the most profitable airlines in the industry (Jackson et al., 2012). The corporate culture concentrates on empowerment the workforce. It shows through Southwest Airlines core values that “happy employees lead to happy customers, which create happy shareholders” (Jackson et al., 2012). Since its first grand opening in 1971, Southwest Airlines has shown steady growth, and now carries more passengers than any other low-cost carrier in the world (Wharton, 2010). To expand the business operations, Southwest Airlines took over AirTran in 2010 as a strategy to gain more market share for the Southeast region and international flights. However, the acquisition of AirTran brought upcoming challenges both internally and externally for Southwest Airlines. In this case analysis, the objectives are focusing on the change process post the merger with AirTran, and evaluating alternatives to address the impacts of the merger.
“Our people are our single greatest strength and most enduring long-term competitive advantage,” reports CEO Gary Kelly on the Southwest Airline website (https://www.southwest.com/html/about-southwest). The company works hard to hire great individuals and then rewards and supports them to make satisfied, productive employees (Ross & Beath, 2007). In fact, Southwest Airlines has received repeated recognition as a great place to work (“Southwest Corporate Fact Sheet,” n.d.). As a result, Southwest Airlines is able to provide a low-cost, fun-cultured experience with excellent customer service (Ross & Beath, 2007). This has allowed the company to build its final strength in this evaluation: a strong brand
If the short haul passenger was the backbone of Southwest Airlines success, then their 737s were the lifelines that supported it. By choosing the 737 as the airplane for all of Southwest's flights, the company saved time and resources in training its employees. The crew could be easily substituted for one another due to the extensive training on the 737. Low costs and, therefore, low fares are an enormous competitive advantage, when combined with their high-quality and loyal workforce. A very unique culture was found at Southwest Airlines among all of its employees.
Southwest Airlines operates in the American domestic market. It is well known for its growth over the years. Its mission is the dedication to the customer service of the highest quality that is delivered with a sense of friendliness, company spirit, personal pride and warmth, (Inkpen & Degroot, 2). The airline industry had general environmental factors that do impact it is several ways within the market.
Even though Southwest offers no-frills, there is still a high degree of customer satisfaction that continuously builds customer loyalty for the company. As mentioned, Southwest offers low prices on their airplane tickets. Also, Southwest is renowned in the airline industry for its short turnaround time on arrivals and departures. And since people's biggest concern nowadays is money and time, having low price airline tickets to cater their traveling needs in a shorter period of time will surely satisfy them. Moreover, aside from the low prices offered, what attracts to customers is Southwest’s way in dealing with them. The employees of the airline treat their customers well and really listen to their needs.
One of Southwest Airlines’ operations resources is their flight point-to-point service to maximize its operational efficiency and stay cost-effective, where its aim is to keep their aircrafts in the air more often to achieve better capacity utilization. Another resource that they have is the consistent aircrafts that they employ, in which they only use one type of aircraft , the Boeing 737 jets. By maintaining a single model fleet, it significantly simplifies scheduling, operations and flight maintenance. Then training costs for pilots, ground crew and mechanics are not as high, due to the fact that there's only a single aircraft to learn. This then makes the purchasing, provisioning, and other operations vastly simplified and thereby lowering costs. A third operations resource that they have is their airport operations that include the following: “Ramp Agents, Operations Agents, Customer Service Agents, Provisioning Agents and Cargo Agents” (Our People). Without them, a flight on Southwest would not go as smoothly as it does now. The last operations resource to consider is Online or E-tickets. This allows the customer to be able to find the flight they want in their own home without the hassle of booking through a travel agent, it is fast and convenient.
Since 1987, when the Department of Transportation began tracking Customer Satisfaction statistics, Southwest has consistently led the entire airline industry with the lowest ratio of complaints per passengers boarded. Many airlines have tried to copy Southwest’s business model, and the Culture of Southwest is admired and emulated by corporations and organizations in all walks of life. Always the innovator, Southwest pioneered Senior Fares, a same-day air freight delivery service, and Ticketless Travel. Southwest led the way with the first airline web page—southwest.com, DING, the first-ever direct link to Customer’s computer desktops that delivers live updates on the hottest deals, and the first airline corporate blog, Nuts About Southwest. Our Share the Spirit community programs make Southwest the hometown airline of every city we serve.
Advertising: As one of the largest domestic airlines, Southwest Airlines has an enormous advertising budget to sustain its presence and increase its market share through focusing on the benefits of flying Southwest over its competitors. Southwest recognizes that flying is no longer a pleasurable experience for many customers, even on Southwest, historically a budget airline. Even though Southwest is often regarded as a no-frills airline, it still attempts to build goodwill from its customers based on its advertising. Of the $249 million it spent on advertising in 2011, Southwest Airlines is unique in that it does not sell additional ad space on the exterior of its aircraft. Many domestic airlines have begun selling aircraft exterior space as a way to increase revenue, but Southwest Airlines insists that it wants to keep its product and advertisi...
Southwest Airlines is one of the most successful airlines in the United States. There has never been layoffs or strikes in the history of the company, although there were several times when layoffs could have been justified, including the months following the September 11, 2001 terrorist attacks. However, Southwest's Mission statement says “Above all, Employees will be provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Southwest Customer.” (Southwest, 1988). The Airline has always believed that their corporate culture is one of the keys to their success. The culture recognizes that employees have emotional intelligence and that their attitudes and morale are key to the teamwork and creative environment.
The mission of Southwest Airlines is a dedication to the highest quality of service delivered with warmth, friendliness, individual pride, and company spirit (Mission…, 2007). The company also provides opportunities for learning and personal growth to each employee. Creativity and innovation is very important and highly encouraged, for the purposes of improving effectiveness. Employees are to be provided the same concern, respect, and caring attitude within the organization that the employees are expected to share with the customer. Southwest Airlines was initially created to be a low-cost alternative to high price of intra-Texas air carriers (Freiberg, 1996). Southwest’s fares were originally supposed to compete with car and bus transportation. It was a little airline, and it would withstand the test of time. As a discount, no-frills airline, it would provide stiff competition for larger airlines. Their strategy was to operate at low cost, offering no food, no movies, no first class, and no reserved seats. They created their own market and provided increased turnaround times at the gate, by avoiding hub-and-spoke airports and opting for short-haul, direct flights. Through this market approach, Southwest has a majority of market share in the markets they serve.
Company had a culture on not giving up through all the adversities the company faced. Strengthening of employees that is when they are motivates employees and is important part of the company. Finally cost awareness is when reduce price in every progression in the business. Southwest airlines are a strong culture company because of how they make the employees feel as part of family. This makes the employees to work hard for the success and that success they see the company as expert and personal
It all started in 1971, when Rolling King and Herb Kelleher decided to challenge the existing rut of charging high prices for air travels. They considered the railways and roadways their competitors and decided to offer cheaper travel for smaller routes. The company was incorporated in 1967, apart from initial entry troubles, Southwest has been the only US airline to have earned profits since 1973. The eccentric company’s outlandish way of conducting themselves has been the sole reason for Southwest Airlines to succeed in a highly competitive and packed industry.