The company I decided to research and write about is Southwest Airlines. I recently flew Southwest from Charleston to Minnesota and was surprised at first on how they operated but as I thought about how they did business, like no seat assignments, I began to realize that this Is a better way because It allows people to fly at a much lower cost than other airlines. I feel the most important business level strategy for Southwest is the Cost Leadership Strategy for their long-term success.
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Although I was frustrated with the fact that I couldnt sit next to my friend at first once I settled down and took a deep breath I came to the realization that it really doesnt matter because e get to the same place at the same time and we have the week to be together. Some people may not agree or become angry but It all plays out the same. The cost Leadership strategy Is one that Is set up to produce a acceptable service to their customers at the lowest cost possible.
In this strategy the company is always looking for ways to lower their costs by always rethinking how they can save money but still have the same product or service that the customers want all the while ensuring that they can maintain the competitive levels of differentiation. When using his strategy a firm must also examine their support activities so they can find more cost reductions (Hitt, et. all, 2013). I believe how Southwest operates is a good choice for them because their competitors are not able to comply with the same cost saving methods.
Southwest does not run the huge planes and they do not have any first class seats on their aircraft. One question that I’m sure is on the minds of the other airlines is: What does Southwest know that others airlines don’t? They work hard on 3 keeping everything simple and consistent and in turn drive the cost of their service own and maximizes the productive assets and customer expectations. At Southwest one plane fits all unlike other airliners who operate everything from turboprops to wide-body aircraft. Southwest only uses the Boeing 737 which ends up saving the company millions of dollars in maintenance and spare part inventory.
Their mechanics only have to have training on the one airframe which also saves costs for the company. Southwest also saves costs by not having to use the hub and spoke system like the other airliners. Most airliners fly from one location by prop in some instances then to the hub where you get on another plane. Southwest does not use a hub but have a point-to-point flying system. Southwest does not have to worry about the delay that most hubs have in which they are able to be in the air more than an hour longer each day them other Jets flown by network carriers.
They have a simple in-flight service system that consists of Just one class of service, a good cabin that is a little more spacious than most of their competitors. There are no assigned seats, saving the consumer money and the crew a lot of time. They don’t serve meals at all and never have, they focus on drinks and snacks. With the system they have in place hey are able to get a plane boarded within 20 minutes by having the passenger’s line up according to the number on their tickets.
Airline efficiency experts have said that the way they do business allows Southwest to fly an extra flight every day and we all know that extra flight means extra money for them. Southwest has no perks and no fees, no fuel surcharge, no standby travel or ticket changes, and the customer is allowed to check two bags with no baggage costs. Southwest is most likely one of the most striking examples of a business because they have a clear and simple business urpose, the right business model supporting their business purpose and they demonstrate high core values from the key business purpose.
All-in-all their promise is to have the best quality in customer service with a warm, friendly, pride and spirit (Advanced Business Consulting, n. d. ). 4 Analyze the corporate-level strategies for the corporation you chose to determine the corporate-level strategy you think is most important to the long-term success of the corporate-level strategy that I feel Southwest focuses on is Value-creating Diversification. The reason I chose this strategy is because Southwest is all about a ommitment to their customer service and customers.
Southwest recently merged with AirTran Airways and is using their own core competencies to turn the airline around. By applying their own strategies, goals, and core competencies Southwest has developed yet another high-level airline with all the same benefits. AirTran is a customer service in place. By combining the business to one Southwest will have the best of two worlds, short and long flights. AirTran customers will gain all the same frills as the Southwest customers are already getting.
Both airlines now share the aintenance facility in Florida, they incorporated both networks into one network for flight schedules using AirTrans system. All and all both airlines are now using the same networks, maintenance facilities and other supply areas together. I think the way Southwest is doing business is a very smart choice on their part. By buying other airlines they are becoming a stronger and more competitive airline. They keep their costs low by not having assigned seats, which helps save time at the check-in point, they have automated check-in and internet check-in.
Luggage is free which brings a ot more customers because people are getting tired of having to pay the cost of having their luggage checked. Southwest now has bigger planes that can go none stop to major cities and working on the international side of air transport. Watch out airlines because they are an airline that will keep getting the competitive advantage (Southwest website, n. d. ) 5 Analyze the competitive environment to determine the corporation’s most significant competitor. Compare their strategies at each level and evaluate which company you think is most likely to be successful in the long term.
Justify your choice. According to Forbes website (2012), Delta Airlines is the number one competitor to Southwest Airlines. During my research on the internet I found two very interesting articles written by two people who travel both airlines for business and leisure purposes. Both had a lot to say about both airlines but all and all Southwest came out on top. Ken Krogue (2013) wrote a blog while he was sitting on a Southwest flight from Salt Lake City to Los Angeles. In his blog he compares his experience on both Delta and Southwest.
His blog starts out by talking about a flight he did earlier in the week on Delta and throughout the blog he compares the experience he had on both flights. When he flew Delta they gave him a seat assignment but Southwest didn’t, although both airlines loaded the passengers using a zone boarding process. Southwest had posts with the zone numbers on them and took time before the plane ever arrived to organize the passengers so there was no delay in the flight. Delta on the other hand took time to organize the people as they tried to get to their seat and find an overhead bin to put their stuff in.
Southwest was quicker and easier and Delta took twice as long to get the people settled in. Delta had to wait nearly an hour on the flight line before take-off and Southwest was slightly ahead of schedule. Southwest’s crew was funny and laid back, made Jokes over the intercom, even the pilots got involved, they took the drink orders and gave him some peanuts and pretzels (twice). There was no Joking on Delta in fact the flight attendant was rude. Southwest kept coming back and ensuring the passengers didn’t need anything else and handed out even more snacks.
They picked up the trash from the passengers every time they way through the flight. They only gave one 6 rink and a bag of pretzels, then they didn’t pick up the trash until the end of the flight right before landing. His experience on Southwest was a lot more pleasing and relaxing than his experience was on Delta. Terry Brock also travels a lot for business and leisure. He posted an article on his website called Achievement Systems about his experience on both airlines. He is a lifetime gold medallion member on Delta and for the most part has been impressed with their service, quality and performance.
He also enjoys flying Southwest, he stated that it’s like going to summer camp and he enjoys it. He recently had a experience in booking a flight because he wanted a direct flight to his destination. He finally got his flight booked on Delta but then had to change it because in his words “Life Happened”. When he called Delta to change the flight they wanted him to pay 200 dollars in order to change it so he ended up not changing his flight and missed something that he really wanted to do. If he would have booked on Southwest there wouldn’t have been any charge at all.
In fact if there was a difference in cost to the good for him Southwest would have given him a voucher with the amount he saved or another flight. He thought about that situation and made the decision to make Southwest his primary carrier over Delta. Like he says, “In life the little things matter a lot. ” When the customers are annoyed in one area it can destroy the goodwill in the other areas. The bottom line for me is that no matter what the company that finds ways to improve their business and cut costs for customers is the business that is going to come out ahead.
Delta charges for each bag you check while Southwest allows you to check two bags at no cost and have two carry-on’s as well. Unless Delta starts cutting he cost for their customers, adding friendly and tentative flight attendants they will always be behind Southwest. Last week I flew to Minnesota on Southwest and the crew was funny and awesome, even when doing the in-flight training for the 7 passengers. I have flown on many different airlines and by far Southwest is the only airline that can get people boarded and takeoff in less than 45 minutes.
Determine whether your choice from Question 3 would differ in slow-cycle and fast- cycle markets. According to Hitt, et all, 2013, the Slow-cycle Market are companies that have a ompetitive advantage and are shielded from imitation, for long periods of time, and are costly to imitate. In all the research I have conducted about slow-cycle and fast- really doesn’t have any patents or copyrights that makes it harder for other companies to advance in front of them they do have a huge advantage over other airlines in the market. Slow-cycle markets are hard or costly to imitate.
Southwest has a huge advantage over other airlines by the way they treat their employees and customers that other airlines Just can’t imitate, as many have tried. According to A. Francis (2010), over the past fifteen years the U. S. airline industry has not been a good business to be in. Between 1979 and 1993 twenty-nine new airline companies opened their doors which led to an over capacity of airlines trying to get people to fly with them which made it tough to get a head. Despite all the Southwest was able to stay consistently profitable while their competitors were in the red.
Southwest has been the leading airline because its loyalty to their customers. They don’t have any control or patents on how they do their business but they are very hard to imitate. Since Southwest has operated with the sole purpose of ensuring the customers come back by not having a charge for baggage and getting the people on the plane quicker and to locations at a 99% on-time rate the other airlines are struggling. Southwest whole concept is a no frills approach to customer service, they have never served meals on their flights and there are no first class seats yet they have very loyal customers 8 because they treat them right.
Southwest saves a lot of money by not using the big companies that other airlines use to get flights like CheapAir. com, Travelocity. om, or any other online travel agent type sites. In order to get a flight on Southwest you have to go to their website or call them. They ensure that their employees are happy even though a few years ago they had to give pay cuts when the economy was so bad but they went to the employees and gave them the choice. They didn’t want to lay anyone off so they asked the employees if they would be willing to take a pay cut versus layoff.
The CEO, Herb Kelleher, even gets on flights and helps the flight attendants serve drinks and snack. Southwest gives their employees free range which makes the lights fun because they crack Jokes while doing the in-flight safety brief, even the pilots come on over the intercom. Southwest offers their employees stock options resulting in around 10 percent of the stock being owned by them. There are so many things that Southwest does that the other airlines Just can’t imitate because it costs them more money to get where Southwest is now. Their competitive actions are what make them who they are today.
According to Hitt, et. all, (2013), fast-cycle mark isn’t shielded from other companies imitating them and it isn’t expensive to imitate them. Which comes to fast-cycle markets don’t really have a competitive advantage over other companies. In this market pressure is on the higher level managers to make quick strategic decisions that are effective but Southwest really considers different points from other employees to ensure they have the best of everything. This market also makes it almost impossible for companies to develop a competitive advantage. the profits before other companies can imitate what they are doing.
Instead of looking at protecting, maintaining and extending an advantage they focus on how to ind new ways to get the advantage because someone has caught up with them. In this market strategy innovation is the 9 key to getting competitive advantage over other companies but in the long run can cost more money to do so. Southwest probably wouldn’t do good in the fast-cycle market because they care about the customer and the employees. They, like any other company, want the profit but they always put their customers first. Southwest has done business the same way since their company stated. According to M. F.
Masson (2008), Southwest works hard to keep the image they have, by presenting hemselves as a fun, low cost, no frills airline and best of all no charge to change you flights. The bottom line is Southwest wants to ensure that the employees and customers are happy. They have the competitive advantage because they have a smart way of doing business. They have a record of 41 years of consecutive profitability which no other airline has been able to match. Southwest puts its focus on their employee’s welfare because they are the ones who serve their customers in- turn the customers get treated like friends and family.