What\'s the major business strategy that Southwest is applying to compete agains

Question

What's the major business strategy that Southwest is applying to compete against the others? How does Southwest achieve this strategy?

Besides ads campaign, what measures did Southwest take in early 1970s to beat the other competitors?

What’s your understanding of the two core values of Southwest?

What’s special with Southwest corporate culture? How was it nurtured and sustained?

Search online and find out the recent incidents happened with United Airlines. What is the direct and indirect impact on United Airlines' business? What's wrong with its culture?

Does the AirTran acquisition make good strategic sense for Southwest?

Explanation / Answer

Answer:

Southwest Airlines competitive strategy:

To reach its highly competitive position, Southwest Airlines has focused on four main strategies: being low-cost, employee-driven, future-minded, and differentiated.

As mentioned previously, Southwest is a low-cost airline that focuses on fast, no-frills service. It has never served meals, does not have advanced seat reservations, and flies only Boeing airplanes. These decisions have helped Southwest be flexible in the face of the recent decreases in airplane passengers caused by the 9/11 terrorist attacks and the world economic crisis. The company did not have to make the drastic changes seen in its competitors’ services because it was already operating as a low-cost carrier. While other airlines cut back costs by reducing their services and firing large portions of their employees, Southwest was able to get by with nothing more than pay-cuts - no employee was fired because of economic issues. Although a company-wide pay-cut is nothing to sneeze at, Southwest employees agreed they would rather have their jobs for less pay than try to find work elsewhere. Through this loyalty, Southwest was able to recover much faster than its competitors and maintain its strong customer base.

Customers can easily see Southwest’s low-cost, employee-driven strategies, but what they can’t always see is Southwest’s internal strategy. One of the company’s main focuses is on differentiation. This is an interesting strategy choice because differentiation is usually seen in high-price and/or unique product companies (such as BMW or Starbucks). Still, this is one of Southwest’s key choices, and they are making it work.

One of their key differentiation strategies is their Rapid Rewards frequent flyer program. According to their financial statements, Southwest has revamped their system so “...members are able to redeem their points for every available seat, every day, on every flight, with no blackout dates; and..points do not expire so long as the Rapid Rewards Member has points-earning activity during a 24-month time period.” Many airlines have similar, but much more complicated rewards systems, so Southwest’s emphasis on flexibility separates them from the rest of the pack.

Southwest’s other key differentiation strategy is what they call “aggressive promotion.” They take their key messages, put them into easy-to-understand commercials, and let the strategies themselves do the talking.

Southwest sets up all of its strategies in that commercial. It shows its low costs (bags fly free!), emphasis on employees, and its differentiation (even going so far as to call out other airlines for charging baggage fees). This sort of campaign sets the company apart from competitors and makes potential customers aware of Southwest’s unique policies.

The fourth key strategy is Southwest’s focus on its future. Everything it does progresses the company, and every decision is made with long-term benefits in mind. Their recent acquisition of AirTran shows how Southwest is thinking of ways to expand its services and grow its market share. In their Annual Report, Southwest listed the strengths of this integration. “It allows...more low-fare destinations by extending...network and diversifying into new markets....” It also “...increases Company’s share of current domestic market share capacity (as measured by available seat miles or passengers.” And “it provides access to near-international leisure markets in the Caribbean and Mexico...and provides firsthand and meaningful insight into...new expansion opportunities.” Essentially, Southwest is working to expand its services, steadily increase its market share, absorb prior competition, and prepare for future growth. These steps will help the company be successful both now and in the future. In the current economy, companies must be more flexible and prepared than ever before, so plans like Southwest’s are essential.

Southwest is a people-oriented company and uses that orientation to leverage its advantages. It cuts costs by having employees who work for a company they love, instead of for a simple paycheck at the end of the week. The company also plans for the future and is not afraid to take the risks necessary to stay ahead of the competition. As seen with their integration of AirTran and the new Boeing planes, Southwest is focused on expanding its services and increasing its market share. They plan far ahead and make sure their plans are sustainable for current and future competitive advantages.

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