CASE: Southwest Airlines: Culture, Values and Operating Practices _____________________________________________________________________________ I.

CASE BACKGROUND Southwest Airlines was obviously in strong position when the industry got hammered in the aftermath of September 11 terrorist attacks. The industry had suffered to cash drains, bankruptcy, cutting flights, laying-off employees, deferring or cancelling new aircraft on order and speculating on how to cut fares to induce passengers to fly. The company has struggle and overcome the crises of the legal and regulatory hurdles, the pressures to gain a market foothold, and the financial trouble to operate profitably. Southwest has able to boosts its market share because of its operating practices, strong values and cultures and its strengths and capabilities as to low cost or low fares, strong human resource, customer-oriented service, and its innovative marketing and promotion. II. STATEMENT OF THE PROBLEM How should the Southwest Airlines sustain its competitive advantage as to low cost while operating profitably? III. ISSUES OF THE CASE 1. What is the companys organizational culture? How does their culture affect the organization? Does the companys culture greatly affect their strategy and competitiveness? 2. What are the strengths and capabilities of Southwest Airlines that makes them competitive of over their rivals? 3. What are companys competitive weaknesses that should be given a significant consideration? IV. ANALYSIS

TOWS Analysis

Opportunities

Rivals cutting back flights. This is an opportunity for Southwest for they could maximize it by adding additional flights to those areas where other airlines cut flights. Rapid growing and progress of cities like Texas, Dallas and San Antonio. These cities were too apart from each other to commute conveniently by rail road. High price of other airlines was unaffordable for most growing cities.

Threats

 Decline of passengers. The effect of September 11 terrorist attacks resulted to sharply lower the passenger travel. More legal and regulatory hurdles the efficient operations of airlines as to advertising and publishing schedules or fares. Also, the added security measures incur higher cost. Increase in price of fuels may hinder the company to expand their services to other areas.

Strength
Strong Culture. Southwest Airlines has a culture of valuing their people as shown in their operative principles that employee come first and customers come second. They strongly believed that you have to treat them right for them to treat the outside customer right. The companys focus on the human resource was reflected in their recruitment and selection process, training, promotion, compensation, employee relations, no-layoff policy, management style, core values and employee productivity enhancement. As the company upholds and support the corporate culture on people management and their strategy execution, as well as realigning the companys objective, favorable outcome has achieve. Low cost/low price/no frills. Southwest is well-known for its low fares. Such capability has able the air travel affordable to a wide segment of the US population-giving substance to its tagline-the freedom to fly. No frills strategy reduces cost as well as non-productive turnaround time at targets. Southwests point-to-point routine system. This minimized connections delays and total trip time which emphasized on non-stop flights between about 350 fairs of cities allowed about 77% of Southwest passengers to fly nonstop to their destination Strong human resource. For Southwest, people are their greatest asset, thats why they devote much of their time and energy to hiring great people with winning attitudes. Starting with Herb Kelleher to Southwests new leadership team, James Parker and Colleen Barreth (as Southwests guiding light), management has able to provides a nurturing and supportive work environment, offering a competitive compensation package, a pride to team accomplishments and enhance job satisfaction to keep their culture and Southwest spirit alive. In return, the company has able to gain their peoples warm caring, compassionate and reliable-friendly service to their customers. Innovative marketing and promotion. The company has noble ways to boosts its competitive advantage as to performance and capabilities through its several ads and billboard that were unconventional and attention-getting. In fact, they were able to build and reinforce the companys maverick, fun-loving and combative image.

Weaknesses

1. No long long-hauled flights can be serve to be able better serve the passengers need for long travel while promoting its fare rates, thereby retaining its current passengers and increasing its profits. 2. The companys weakness as to no baggage transfer services to other carriers, which make the passengers responsible for picking up their luggage. For the customers looking

for more convenient and relaxing air travel, such need may cause the current customer to look and shift to other alternatives. 3. No sitting arrangement was offered by the company that could results to blast flight.

V. Present Strategies

Southwest Airline current strategies include the following: Low-cost/Low Fare/No frills Strategy Focus on Customer and Customer Satisfaction Marketing and Promotions Gradual expansion Preserving the culture

VI. TOWS MATRIX

OPPORTUNITIES SOUTHWEST AIRLINES

1. Rivals cutting back flights 2. Rapid growing of cities like Texas, Dallas and San Antonio. 3. Rivals high price offering.

THREATS
1. Decline of passengers 2. More legal and regulatory hurdles 3. Increase in price of fuel

STRENGTHS

OS STRATEGIES
OS1: Increase the flights schedules (O1,O3 S1, S2, S3, S4, S5)

TS STRATEGIES

1. Low cost/low price/no frills 2. Strong human resource 3. Strong culture and values 4. Point-to-point routine system 5. Innovative marketing and promotion

OS2: Increase route destination to other domestic areas (O2,O3, S1, S2, S3, S4, S5)

TS1: Intensify Current marketing and promotion (T1, T2, S1, S2, S3, S4, S5,) TS2: Increase the operating practices as to cost minimization strategy (T3, S1, S2, S3, S4, S5,)

WEAKNESSES

OW STRATEGIES

TW STRATEGIES

1. No long-hauled flights 2. No baggage transfer flight 3. No sitting arrangement

OW1: Offer international flights (O1, O2, O3, W1) OW2: Extend services on baggage transfer.(O1, O2, O3, W2) OW3: Develop a sitting Scheme (O1, O2, O3, W32)

TW1: Development of new customer-oriented service (T1, T3, W1, W2, W3) TW2: More focus on marketing as to online reservation/booking (T1, T2, T3, W1, W2, W3)

TOWS Explanation

OS1: Southwest may increase its flight schedules to areas where rivals were cutting back flights to be able to increase aircraft utilization with its average flights of 7.2 per day and to be able to penetrate the market whereby passengers are looking for low fares. OS2: Southwest was currently serving 59 cities. The company may increase its route destination to growing cities where both businesses and leisure traffics are extensive, offering its low cost while maximizing its competitive strengths. TS1: Since there was 28% total seats available in 2002, intensifying its current marketing and promotion is necessary. The company then will able to maximize its load factor while recovering its operating expenses. TS2: The increasing price of fuel could be recover by the increasing the cost minimization strategy without sacrificing its service. OW1: Having the opportunities of increasing flight schedules and destinations with high prices of rivals, the air travelers as to long-hauled fights could be served through offering international flights. OW2: Southwest Airline may extend its services on baggage service to be able to serve the customers demand as to convenient flight. OW3: The company has to develop a sitting scheme to be able to have a more convenient and smooth flight travels. TW1: Considering the companys weaknesses, the declining passengers and increasing price of fuel can be resolve through developing a new customer-oriented service. TW2: Southwest Airlines should combat the industrys declining passengers and its regulatory hurdles by focusing on the marketing strategy as to online reservation and/or booking. By then, the company was able to overtake its weakness while increasing its passengers and decreasing its cost for personnel and commission to travel agents. Also, the company has 28% total seats still available, the company could still increase its load factor.

VII. Decision

OS1, OS2 and TW2

Since OS1, OS2 and TW could be done in simultaneous with its current market, Southwest Airlines might sustain its competitive advantage as to low cost while operating profitably by increasing its route schedules and route destinations. Since most travelers are looking for convenient flight travels with low fares, the company has to make substantial expansion of providing lots of flights to serve the needs of the wide segment of travelers. Southwests competitive strengths and capabilities would be best maximized by taking initiatives to capitalize on competitors weakness and taking the opportunities of serving the demands of customers, thus sustaining its price competitiveness while increasing its profitability. Furthermore, the company should combat its threats and weaknesses by promoting the companys Web site for online booking and reservation, thereby decreasing the cost and sustaining its competitive advantage as to low cost provider.