Southwest Airlines, a company incorporated in March 15, 1967 by Herb Kelleher and Rollin King, is a very competitive airline company, headquartered in Dallas, Texas. It piloted the idea of a “no frills” airline, which meant a reduction in ticket costs for consumers and the removal of unnecessary expenses by the company. This meant using a single type of plane (the Boeing 737) for all the short routes that Southwest serviced. This move proved to be the company’s ace, with just one type of aircraft boosting the company’s efficiency while bringing down its maintenance costs.
Currently, the company services 64 cities in 32 states in the United States, employing about 36 thousand people. Recently, the company scaled back operations but upgraded other aspects of its business.
In September 2010, Southwest acquired AirTran Airlines, another low-cost airline based out of Orland, Florida. Southwest acquired AirTran to streamline the low-cost airline industry, thereby enlarging the market reach of Southwest and making the company the top provider of low-cost airfare in the US.
Southwest has become a successful airline company because of its focus to customers, its desire to become highly competitive and its artful positioning in its niche market. It is the airline of choice for passengers that look for a quality service airline with the best value for money.
This business model follows the company’s mission statement clearly. Their mission statement reads:
“the mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spiri1t”
The corporate culture of Southwest has evolved as another competitive advantage of the firm. Southwest’s corporate culture gives it the ability to create value for the services they offer. Southwest airlines has one of the lowest employee turn-over rates and highest productivity values, due in part to the ability of employees to communicate well within their respective teams and with management. Southwest fosters close-ness, such that corporate parties are commonplace and managers and executives discuss work and non-work matters with employees and colleagues. This results in a work environment that is enjoyable, trickling down as great customer service to clients. This is even found in the company’s mission statement, which reads: “The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit2”.
Southwest Airlines operates and competes in the same challenging environment as any other airline. The strengths and weaknesses of the company however, indicate what makes the company different from the others. Southwest’s strategies have proven to make considerable difference. Between 2010 and 2011, the total revenue of the company significantly increased. However, the company incurred higher operating expenses coming off from non-recurring (one time) expenses. Still the company is profitable and financially healthy.
Using Internal Factor Evaluation, a strength-weakness test is performed. The company’s strengths are:
Fast growth since its 1971
Provides excellent customer service
Provides credit based on trips taken with Southwest rather than miles traveled
The first in offering senior citizens with flight discounts, the first in ticketless travelling, the first in air freight delivery
Excellent employee hiring process
Provides travel packages
Cost leader in the airline business
Excellent employee relations
Single plane type of operation that reduced costs and increased efficiency
These strengths have enabled the company to rise above the rest and remain profitable despite the economic recession in the US. However, no company operates without any weaknesses. The weaknesses of the company are:
The company does not have segmented (coach, business, etc.) seating
Because of the size of their planes, their ability to handle cargo is limited
Southwest operates in domestic airspace only and never on international flights
Short trips in Southwest offer the same perks as long trips, hence not giving incentives to passengers for longer flights
Very lean company which spreads employees too much
The internal analysis below was adapted from the study made by Thompson (2010). The IFE Matrix is used for the evaluation of the internal strengths and weaknesses of the company since it audits the capabilities of the firm based on internal abilities. The weights of the firm’s strengths and weaknesses have not been changed, in reality, Southwest has not drastically modified their strategy. Hence, this IFE matrix is applicable to 2012 as much as it was in 2010 when the IFE Matrix was developed.
The IFE Matrix shows a rating of 2.16 for Southwest. This is an average score for the airline industry but is still above what other airlines have. This is due mainly to the US recession but the fact that Southwest has been able to keep their head above water is a feat in itself, considering how bad the US economy has turned out in the last three years.
Conclusion and Future Recommendations
Why re-invent the wheel? This seems to be Southwest’s main strategy in that, it is operating the same way it has been since 2009. With a little bit of investments here and there and not much modification in how they conduct business, Southwest has remained profitable, competitive and highly admirable.
The company has cultured employees in a way that they are the primary strength of the company. They have thoughtfully used their resources to manage their costs and improve their efficiencies. They have creatively conjured new strategies that provide value for their clients. All in all, Southwest has created brand loyalty in a way that it secures them from the threat of recession or competition.
Southwest, with its Rewards policy for loyal clients will continue reaping the benefits of its hard work, making the company a true cut above the rest of its airline brethren.
Yahoo Finance: Southwest Airlines. 2012. Retrieved from http://finance.yahoo.com/q/is?s=LUV+Income+Statement&annual
MaxiPedia.com. 2012.IFE Matrix. Retrieved from http://www.maxi-pedia.com/IFE+EFE+matrix+internal+factor+evaluation
Quality Assurance Solutions.com. 2012. Southwest Airlines. Retrieved from: http://www.quality-assurance-solutions.com/southwest-airlines-swot-analysis.html#ixzz28psDdcX2
Thomson, T. 2010. The Airline Industry: A Strategic Overview of Southwest Airlines. Retrieved from bus690-airlines.wikispaces.com//Airline+Industry-Southwest+Final
Southwest Airlines. 2011. Vision and Mission. Retrieved from http://www.southwestonereport.com/2011/#!/thirty-thousand-foot-view/mission-and-vision