Week 7 Case Analysis Southwest Airlines
Southwest Airlines in 2014: Culture, Values, and Operating
Practices
Before beginning this exercise, you will need to read the
Southwest Airlines case. You will also need to review the concepts in Chapters
5, 10, 11, and 12.
The following questions will be covered in this exercise:
1. Which one of the five generic competitive strategies
discussed in Chapter 5 most closely approximates the competitive approach that
Southwest is employing?
2. What are the key policies, practices, business
principles, and procedures that underlie how Southwest management has
implemented and executed the company’s strategy?
3. What are the key elements of Southwest’s culture? Is Southwest a strong culture company?
4. Which of Southwest’s strategy execution approaches and
operating practices have been most crucial in accounting for the success that
Southwest has enjoyed in executing its strategy?
5. What weaknesses, problems, or strategic issues do you see
at Southwest Airlines that need to be addressed by top management?
6. What recommendations would you make to Gary Kelly?
1.
Which one of the five generic competitive strategies
discussed in Chapter 5 most closely approximates the competitive approach that
Southwest is employing?
Low-cost provider
Broad differentiation
Focused differentiation
Focused low-cost
Best-cost provider
2.
What are the key policies, practices, business principles,
and procedures that underlie how Southwest management has implemented and
executed the company’s strategy?
Select “yes” for those statements that accurately describe
Southwest’s policies, practices, business principles and procedures, and “no”
for those that do not.
1. Southwest management’s strong conviction and operative
principle that “employees come first and customers come second.”
2. Management’s beliefs that customers were the company’s
most important asset.
3. The strength and depth of management’s commitment to
deliver high quality customer service—as stated in the company’s mission
statement, which company management gives every appearance of having lived up
to and tried to achieve.
4. CEO Gary Kelly continued to stress the importance of
top-rate customer service, by hiring great people, caring for customers,
keeping fares and costs low, and staying prepared for bad times.
5. The company operates multiple types of aircrafts to allow
for more customized scheduling, accommodating the varying passenger demand
based on the different routes it flies.
6. Southwest management’s zealous pursuit of low operating
costs, which had led to a number of practices to achieve lower costs than rival
airlines like American, Delta, United and US Airways.
7. Aggressive pursuit of projects to increase fuel
efficiency.
8. To capitalize on passenger demand for popular routes, the
company emphasized flights to the most-used airports in major metropolitan
areas, avoiding less-used airports in medium-sized cities.
9. Southwest was the first major airline to introduce
ticketless travel and also the first to allow customers to make reservations
and purchase tickets at the company’s website.
10. Use of hub-and-spoke system which is more cost efficient
than point-to-point scheduling used by rivals.
11. Southwest did not have a first-class section in any of
its planes and had no fancy clubs for its frequent flyers to relax in at
terminals.
12. Assure, as much as possible, that passengers received
their preferred seating when making a reservation.
13. Southwest regularly upgraded and enhanced its management
information systems to speed data flows, improve operating efficiency, lower
costs, and upgrade its customer service capabilities.
14. Hiring of a special cleaning crew to free up flight
attendants for other tasks during layovers.
15. First-mover among major U.S. airlines in employing fuel
hedging and derivative contracts to counteract rising prices for crude oil and
jet fuel.
16. Careful attention paid to recruiting, screening, and
hiring new employees.
17. Management’s success in involving and engaging employees
in seeking out and implementing ways to save on costs.
18. Expedited baggage transfer services to other carriers.
19. Southwest’s compensation policies and practices; pay
scales tended to be above the industry average, its benefit packages compared
favorably with those at other airlines, and it had an attractive profit-sharing
plan.
20. Conversion from leather to less-expensive cloth seats on
airplanes.
21. Southwest’s employees enjoyed substantial authority and
decision-making power; the company relies heavily upon empowerment of employees
and decentralized decision-making.
22. The company’s flexible layoff policy – in most cases the
last employees hired were the first to be laid off, but management had
discretion to make decisions based on scheduling and demand.
23. Management’s strong commitment to and skills in building
a strong strategy-supportive culture, accompanied by efforts to ingrain core
values that were equally strategy supportive.
24. Management worked hard to restrict the union from having
any influence on work rules, job classifications, and other work practices.
25. Southwest managers were expected to spend at least
one-third of their time out of the office, walking around and observing
facilities under their supervision, and listening to employees and being
responsive to their concerns.
26. Southwest’s relationships with the unions representing
its employee groups were harmonious and non-adversarial for the most part—even
though there were sometimes spirited disagreements over particular issues.
27. Southwest’s supervisory positions were almost always filled
externally, reflecting management’s belief that “fresh ideas from the outside”
were vital in maintaining competitiveness.
28. Top management’s ongoing emphasis—from Kelleher through
Kelly—on “operating excellence.”
29. Much time and effort over the years had gone into
finding the most effective ways to do aircraft maintenance, to operate safely,
to make baggage handling more efficient and baggage transfers more accurate,
and to improve the percentage of on-time arrivals and departures.
3.
What are the key elements of Southwest’s culture? Is
Southwest a strong culture company?
Select “yes” for those statements that accurately describe
Southwest’s culture, and “no” for those that do not.
1. A fun atmosphere and work environment—a “pep rally”
atmosphere and “can do” attitude.
2. LUV—evidence of the Golden Rule and a caring, supportive
environment abounds in many places.
3. The culture is combative and feisty and a “warrior mentality”
prevails; a carryover from the company’s battle to survive in its early years
and something that is reflected in its ads.
4. The tradition of centralized decision-making to ensure
consistency across all units.
5. A cost-conscious and thrifty approach to operating; both
management and employees are attentive to keeping costs down and to operating
in a lean fashion; employees cooperate fully in the company-wide effort to trim
costs and maintain a lean approach to operations.
6. The longstanding top management emphasis on achieving low
costs, even if it meant making difficult decisions to lay off employees or cut
salaries.
7. Southwest Airlines is very much a “strong culture”
company; there is plenty of evidence in the case indicating the lengths to
which Southwest management has gone to nurture and ingrain the culture and to
create a work environment where core values are widely shared and deeply
entrenched.
8. To build and maintain a team-oriented culture, as opposed
to individual-oriented, Southwest avoided employee recognition programs that
singled out and praised individual employees.
9. A Culture Services Team in Southwest’s executive office
was dedicated solely to ensuring that the culture of Southwest Airlines
remained alive and well; in addition, each major department and geographic
operating unit had a Local Culture Committee charged with organizing
culture-building activities and nurturing the Southwest Spirit within their
unit.
10. Almost every event at Southwest was videotaped,
providing footage for creating such multipurpose videos as Keepin’ the Spirit
Alive that could be shown at company events all over the system and used in
training courses.
11. The culture is very strongly supportive of Southwest’s
focused differentiation strategy.
12. Southwest went to great lengths to communicate with
employees through a monthly newsletter, quarterly news video, and even
published a book for employees.
4.
Which of Southwest’s strategy execution approaches and
operating practices have been most crucial in accounting for the success that
Southwest has enjoyed in executing its strategy?
Select “yes” for those statements that accurately describe
Southwest’s strategy execution approaches and operating practices, and “no” for
those that do not.
1. Southwest’s low-cost/low-fare strategy strikes a chord
with fare-conscious flyers; Southwest has grown over the years to become the
number three airline in terms of domestic passengers carried.
2. Southwest has come up with effective strategic moves to
create and sustain a low-cost advantage, including maintenance, general
administration, and other operating expenses.
3. Southwest’s fuel hedging strategy was moderately
successful in 2008, but even more so in 2009-2013.
4. Southwest’s cost advantage gives it a modest degree of
pricing power; they can charge low fares and make money.
5. Southwest has been profitable while rivals have lost
billions of dollars; this is powerful testimony to just how recession-proof
Southwest’s low-cost/low-fare strategy is and has been.
6. Southwest has prospered with its broad differentiation
strategy; the company has enjoyed spectacularly rapid growth.
7. There does not appear to be any major airline competitor
that can duplicate or imitate Southwest’s strategy; profitably matching
Southwest’s low-fare structure appears out of reach of United, Delta, and
American.
8. Southwest’s strategy has delivered competitive advantage;
their financial performance has been the best in the U.S. airline industry over
the long-term and its short-term performance (2009-2013) has been good.
9. Southwest has expanded very rapidly into new geographic
areas.
10. Southwest’s cost advantage is not as big as in prior
years; their costs have crept up as other airlines have restructured and
lowered their costs in some areas.
