Wait a second!
More handpicked essays just for you.
More handpicked essays just for you.
Strengths and weakness of southwest airlines
Strengths and weakness of southwest airlines
Strengths and weakness of southwest airlines
Don’t take our word for it - see why 10 million students trust us with their essay needs.
Recommended: Strengths and weakness of southwest airlines
Introduction
Air travel began in the early 1900s and scheduled flights started in the 1920s (Harris). In the early years, the airline industry competition was nonexistent. The competitive environment changed dramatically over the course of the last century specifically when the industry underwent regulation and then deregulation. The future success of the airline industry depends on the ability to adapt with rapidly changing industry environmental factors.
Southwest Airlines business opened for operations in 1971, after Rollin King and Herb Kelleher raised enough capital to finance their plan. Their service model broke off from the typical large airline policies and procedures. The typical model had an airline that was “home based” from a hub and ran routes to and from that location. This model added cost that Southwest wanted to avoid, causing them to implement point-to-point flights. The leadership team also made decisions to eliminate the inflight meal options to reduce overhead costs. Customer service and the overall experience of their customers became the valued operating vision and mission for Southwest. Eventually utilizing technology for online booking to the fullest potential saved precious time and gained efficiencies. Though the company started strong and grew slowly, several elements affected the long-term success of the company. Some of the factors that caused Southwest to reevaluate organic growth processes included not operating out of key United States hubs, the rise in fuel costs, and troubled contract negotiations.
Analysis
Five Forces Analysis
Threat of new entrants
According to the Bureau of Transportation Statistics, the average price of an airline ticket was $355.72 during the first quarter of 2011. Th...
... middle of paper ...
...: text and cases (6th ed.). New York: McGraw-Hill/Irwin.
Grant, R. M. (2010). Contemporary strategy analysis. (7 ed.). West Sussex, UK: Wiley.
Harris, A. (n.d.). The History of Airline Industry. USA Today. Retrieved from http://traveltips.usatoday.com/history-airline-industry-100074.html
Maynard, M. (2004). Out of the Blue, Southwest Airlines Chief Resigns. The New York Times. Retrieved from http://www.nytimes.com/2004/07/16/business/out-of-the-blue-southwest-airlines-chief-resigns.html
Pawlowski, A. (n.d.). Airlines eye subway-style self-boarding - Travel Kit on NBCNews.com. Breaking News & Top Stories - World News, US & Local | NBC News. Retrieved from http://www.nbcnews.com/travel/travelkit/airlines-eye-subway-style-self-boarding-1C6369602
Wheelen, T.L., & Hunger J.D. (2008) Strategic management and business policy. Upper Saddle River, NJ: Pearson-Prentice Hall.
Tuttle, B. (2013, March 26). Southwest Airlines: We're Not Really About Cheap Flights Anymore . Retrieved from TIME Magazine : http://business.time.com/2013/03/26/southwest-airlines-were-not-really-about-cheap-flights-anymore/
The Organizational Structure of Southwest Airlines. One of the determining factors of the organizational behavior in an organizational structure. It includes several areas such as issues of authority and control, communication team, market and geographic structure, product division. Southwest Airlines determine all these areas and proved a strong competence in all issues. The SWA organizational structure is well-known for being functional. First of all, because their structure is multi-divisional, “each division in a multidivisional structure is essentially a different business. Moreover, the responsibility of each divisional manager is to design the divisional structure that best meets the needs of the products and customer of that division” (Jones, 2007, p. 155). The major positive aspect of such kind of structure is an increased organizational effectiveness and control. In this system, behavior is controlled through internal upward mobility. “A large divisional company possesses an internal labor market which increases managers’ motivation to increase organizational effectiveness” (Jones, 2007, p. 157). One more important issue in such type of structure is how to keep the customer’s happiness. The SWA coped with this question easily. They put the
Southwest Airlines roots can be traced back to Texas in the 1960’s where a company by the name of Air Southwest Co. was created to provide interstate flights in Texas to avoid federal aviation laws. This technique of trying to avoid federal regulation was challenged when 3 other major airlines filed a lawsuit against Air Southwest Co.; later the state of Texas upheld Air Southwest Co. right to fly within the state of Texas and the Supreme Court decided not to review the case. (Southwest Airlines, n.d.) This was a challenging start for Southwest as it was being targeted right off the bat by some of its competitors. The company name was changed in the early 1970’s to Southwest Airlines Co. and a headquarters was established in Dallas, TX. The company’s main focus was interstate flights between the 3 major cities in Texas including Dallas, Houston, and San Antonio. (Southwest Airlines, n.d.)
I. Introduction 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 is one of the most profitable airlines in the industry (Jackson et al., 2012). Corporate culture concentrates on empowering the workforce. It shows through Southwest Airlines core values that “happy employees lead to happy customers, which create happy shareholders” (Jackson et al., 2012).
After September 11th, 2001, the airline industry experienced a significant drop in travel. The reasons for the airline industry downfalls also included a weak U.S and global economy, a tremendous increase in fuel costs, fears of terrorist's attacks, and a decrease in both business and vacation travel.
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.
Average of $296.60 in 1995 to $388.32 in 2015 (“Average Domestic Air”, 2015). While this seems to fit an inflation based rate increase, it does not. An inflation-adjusted U.S. average shows a decrease in per passenger rates from $463.03 in 1995 to $388.32 in 2015 (“Average Domestic Air”, 2015). With the inflation-adjusted per seat cost declining, what has happened is that the big players have slowly adjusted prices that are now comparable to Southwest’s. A 2013 price per seat mile provides a clear picture on where each airline stands in the pricing ranks. Delta is currently the highest cost airline with $8.98 per seat mile, Allegiant the low-cost winner at $5.66, and Southwest currently in the middle at $8.25 (Bachman, 2014). This trend indicates that Southwest Airlines is no longer the low cost leader in the airlines industry.
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 Airlines company and its culture is one that is often cited in today 's business classes. The airline is widely known to be “different” compared to many of its competitors, a result of its founding values and strong corporate culture. This culture developed early in Southwest’s history and was deeply entrenched due to the competitiveness of the airline industry, as well as due to some of the pressures experienced as a result regulatory issues and stiff competition.
Fast Company,(139), 69-70,73,16. Retrieved from Research Library. Document ID: 1870795761. Wheelen, Thomas L. & Hunger, J. David, (2010). Strategic management and business policy.
The low cost and no frills strategy is make travel affordable at low cost. The company only operates one type of aircraft which is Boeing 737 to help maintenance cost low. Southwest was the first airline to use E-ticketing in this way customer can reserve spot and buy ticket on their web and allow less expense in printing tickets. Medium measured airports which allowed them to produce better time performance and less fuel costs so plane do not have to wait in the line at the runway. The core value of the company of “LUV and fun” makes the company great place to work that gives customer with a great experience.
Airline and travel industry profitability has been strapped by a series of events starting with a recession in business travel after the dotcom bust, followed by 9/11, the SARS epidemic, the Iraq wars, rising aviation turbine fuel prices, and the challenge from low-cost carriers. (Narayan Pandit, 2005) The fallout from rising fuel prices has been so extreme that any efficiency gains that airlines attempted to make could not make up for structural problems where labor costs remained high and low cost competition had continued to drive down yields or average fares at leading hub airports. In the last decade, US airlines alone had a yearly average of net losses of $9.1 billion (Coombs, 2011).
Wheelen, T. L., & Hunger, J. D. (2012). Strategic Management and Business Policy: Towards Global Sustainability. Upper Saddle River, NJ: Prentice Hall.
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.
Freiberg, K., & Freiberg, J. (1996). Nuts! Southwest Airlines’ Crazy Recipe for Business and Personal Success. Austin: Bard Press.