Assignment Questions 1. Is there anything that you find particularly impressive
ID: 361774 • Letter: A
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Assignment Questions 1. Is there anything that you find particularly impressive about Southwest Airlines? 2. What grade would vou give Southwest management for the job it has done in crafting the company's strategy? What is it that you like or dislike about the strategy? Does Southwest have a winning strategy? 3. What are the key policies, procedures, operating practices, and core values underlying Southwest's efforts to implement and execute its low-cost/no frills strategy? 4. What are the key elements of Southwest's culture? Is Southwest a strong culture company? Why or why not? What problems do you foresee that Gary Kelly has in sustaining the culture now that Herb Kelleher, the company's spiritual leader, has departed? 5. What grade would you give Southwest management for the job it has done in implementing and executing the company's strategy? Which of Southwest's strategy execution approaches and operating practices do you believe have been most crucial in accounting for the success that Southwest has enjoyed in executing its strategy? Are there any policies, procedures, and operating approaches at Southwest that you disapprove of or that are not working well? 6. What weaknesses or problems do you see at Southwest Airlines as of mid-2014? 7. Do you approve of the AirTran acquisition and the way that Southwest has gone about integrating AirTran into its operations? Is the integration taking too long? Why go so slow? 8. What strategic issues and problems do Gary Kelly and Southwest executives need to address as they complete the integration of AirTran's operations into Southwest's operations and migrate AirTran's employees into the Southwest organizational and ways of doing things? 9. What recommendations would to Gary Kelly and Southwest executives as the company heads towards the end of 2014 and on into 2015?Explanation / Answer
1. The strategy of southwest airlines to use non-conventional and standardized models of Boeing 737 to reduce cost, it's fun-filled attitude replicated everywhere and keeping employees first before customers are quite impressive. It used lean operations management such as flying point-to-point and via decongested airports to have cost-effective operations that strengthened its bottom line. It was a low-frills airline that always flew under 500 miles distance. Their target customers were mainly price-sensitive customers like leisure travellers, retirees etc.
2.I would give 8/10 or A grade to the management for its strategy. They have ensured that this remains sustainable, inimitable and fit to the mission and vision of their organisation. As mentioned above, the things liked are it's low-cost operations that provided the advantage of low turn-around time, economical flights. People liked the connectivity, high frequency and low hauls that Southwest gives. Yes, it does have a winning strategy. Many competitors were unable to copy it and it has won numerous awards like Triple Crown.
3. Southwest put a lot of importance in the fair treatment of customers and had numerous policies for it. They completely modified the boarding process for equitable treatment and saving their time and efforts. For employees, they ensured hiring the ones who are fit for the culture and refrained from expanding where they couldn't find such employees. They maintained fun relationship both inside and outside the office. Their concept was One Organisation: One Family.
4. The key elements are the fun-loving attitude with no seriousness, one-time delivery, pension through profit sharing, no dress codes, and "Patina of Spirituality" as they call. Gary has ensured that there should never be a single layoff at Southwest, and employees remain well-compensated. He found it tough but carried the legacy forward to make sure that it remained people-centric culture.
5. I would again give 8/10 or A grade. It's strategy to maintain lower costs via point-to-point travel unlike flying longer routes, fuel hedging, flying via smaller decongested airports and no-frills have ensured to keep it leaner and time-bound. Southwest doesn't differ between shorter and longer flying customers. Thus, the people flying above 200-300 miles distance including few businessmen feel to have any additional benefit like in-air flying facilities. Southwest can try to appease them by conveying their benefit properly targeted to them so they do not complain or provide some basic facilities.
6. Southwest was grappling with rising costs, falling profitability, market saturation at smaller airports and many new nimble low-cost competitors emerged to steal market share from Southwest like JetBlue, Allegiant and Spirit Airlines. They all utilised unique business models with lower costs to attract Southwest’s constituency of leisure travellers. Soit was inevitable for Southwest that business model would have to be changed. It has now to fous on secondary airports.
7. The profitability of Southwest started declining as well availability of further smaller airports. To sustain, Southwest needed to expand and Air Tran's acquisition provided an opportunity. Now, they can target business travellers via bigger airports but this called for the change in business model. The expansion provided by AirTran can help Southwest’s to acquire lucrative corporate agreements. Integrating AirTran’s network into Southwest is very difficult as appreciating AirTran’s unit revenues to match Southwest’s. AirTran’s secondary position in bigger markets like Atlanta’s is the main hindrance to integration.
8.As the merger started, Southwest objectives in some areas changed, mainly in its small markets and decisions it made to alter operations at Atlanta. When Southwest announced its intentions to acquire, CAPA estimated Southwest’s share of US domestic capacity approximately 18.7% and AirTran’s 3.5%. The problem they faced of fleet integration and migrating employees. AirTran’s smaller 717s but allowed to access small to medium-sized markets that were not viable for its fleet of Boeing 737s. To integrate employees, it ensured to give same privileges to the existing ones.
9. Preserve existing Air Tran's footprint, for the short term, focus on opening new international terminal at Houston and working to add near-international destinations, add new services away from low cost are some intiatives.
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