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Southwest Airlines in 2008: Culture, Values and Operating Practices
Irma Irsyad – 1040002194
Strategy and Execution
Lecturer: Mr Janpie Siahaan
2
Background Pioneered the low-cost model
Primarily short haul
High-frequency
Point-to-Point
The 3rd largest airline in the world (fleet size)
3
History Founded: 1971 (Rollin King and Herb Kelleher)
Fleet size : 472
Destination : 63
Headquarter: Dallas, Texas
Started serving Dallas, Houston and San Antonio based on: convenient schedules, low fares, on time arrivals
Gained foothold after several difficulties
4
Company Values
Core Values
LUV
Code word for treating individuals, employees, customers
Dignity, respect and caring loving attitude
Appeared on banners and posters at company facilities
FUN
Entertaining behavior of employees in performing their jobs.The ongoing pranks and jokes
Frequent company-sponsored parties and celebrations.(e.g charity benefit games, chili cook-offs, Halloween parties)
5
Company’s CultureEmphasis on Value of People
• Keep Employees Happy – then they will keep customers happy
Colorful personalities
• Employees are friendly, creating unique love based atmosphere
“Now There’s Somebody Else Up There Who Loves You”
•Airport: Dallas Love Field•Route: Love Triangle•Planes: Love Birds •Drinks: Love Potion• Peanuts: Love Bites•Coupon: Love Ticket
6
Business ConceptGood
Experience
Short, Safe, Reliable Trip
Short, Safe, Reliable Trip
On-time arrival Low fare and High Quality
service
Flying convenient schedule
Point-to-Point
7
Top-Ten Airport (daily departure)
Avoided congested Airport
Realiable on-time Performance
Hedging on Aviation Jet Fuel (to gain competitive advantage)
8
ActivitiesThe low fare airline
Standardised 737 aircraft
15 mins. gate-turnaround
High level Employee stock ownership
Limited used of Travel Agents
Flexible Union contracts
High employee compensation
9
Business Segment
Business Travelers(Time sensitive)
Leisure Travelers(Price sensitive)
Frequent Conveniently timed flights Low fares
10
Geographical Segmentation
Southwest flies to 62 cities in 32 states in America
Albany Columbus Indianapolis Midland/Odessa Philadelphia San Diego
Albuquerque Corpus Christi Long Island Nashville Phoenix San Jose
Amarillo Dallas (Love Field) Jackson New Orleans Pittsburgh Seattle/Tacoma
Austin Denver Jacksonville Norfolk Portland Spokane
Baltimore/Washington Detroit (Metro) Kansas City North Virginia (Dulles) Providence Tampa
Birmingham El Paso Las Vegas Oakland Raleigh-Durham Tucson
Boise Ft. Lauderdale/Hollywood Little Rock Oklahoma City Reno Tulsa
Buffalo Ft. Myers/Naples Los Angeles (LAX) Omaha Sacramento West Palm Beach
BurbankHarlingen/South Padre
Island Louisville Ontario St. Louis
Chicago (Midway) Hartford/Springfield Lubbock Orange County Salt Lake City
Cleveland Houston (Hobby) Manchester Orlando San Antonio
Southwest looked for city pairs that could generate substantial amounts of both business and leisure traffic
11
Route Map
12
Strategy Implementation
No meals
No seat assignments
Passenger related
departure
High aircraft utilisation
Limited passenger services
No baggage transfers
Short haul & point to point
travel
Low ticket prices
No connection with other
airlines
13
Building Capable Organization
1
•Staffing the Organization
2
•Core Competencies and Competitive Capabilities
3
•Matching the Organization Structure to Strategy
Southwest Capability
14
Staffing ‘Employee come first and Customers come second’
Putting Together a Strong Management Team• 80 to 90% Southwest’s supervisory positions: filled
internally• Development of leadership and communication skills
for low level management • Up and Coming Leaders received training in every
departments over sixth-month period
Recruiting, Screening, and Hiring• Hired employee for attitude and trained them for
skills• Analyzed each job category to determine the specific
behaviors, knowledge, and motivations that job holders needed and with the desired traits
• A trait common to all job categories was teamwork
15
Development of Core Competencies &Competitive Capabilities
One type of aircraft
Reservations and purchase tickets at the company’s website
No congested airports, focus on major metropolitan areas and in medium-sized cities
Point-to-point flights
No reserved seat
No first class section, no fancy clubs at terminal and no meals
No baggage transfer services
Conversion from cloth to leather seats
Low Operating cost
16
Development of Core Competencies &Competitive Capabilities
Make sure Passengers had a positive, fun flying experience
Happy face & fun loving attitude to passengers
Complaint letters as learning opportunities for employees and reasons for improvements
Focus on Customer and Customer Satisfaction
17
Development of Core Competencies &Competitive Capabilities
Setting the external conditions and Strategy
change
Expansion into new
geographic markets
Adding flights in
areas where rivals cutting back service
Attractive frequent
flyer program
Adding longer
nonstop flights to the route system
Strong emphasis on safety, high-
quality maintenance, and reliable operations
18
Development of Core Competencies &Competitive Capabilities
Training and retraining employees (to maintain skill-based
competencies)
Designed and conducted by Southwest’s
University for People
Courses for new recruits ,
employees, and leadership
training program (for new and experienced managers)
Leadership course :management style based on coaching and
courage, not supervising or enforcing rules and regulations
Courses: safety, communications,
stress management,
career development, performance
appraisal, decision making,
and employee relations
Orientation program: videos on Southwest’s
history, overview of the airline industry, and competitive
challenges that Southwest faced, and introduction
to Southwest culture and
management practices
19
Matching the Organisation structure
Designing an organization structure that facilitates good strategy execution
•Only four layers of management between a frontline supervisor and the CEO
Decision how much decision making authority to push down to lower-level managers and front line employees
•Decentralised organisation structures•Employee-led initiatives were common•Employees have substantial authority and decision-making power•Candid meetings of frontline employees and managers•Managers were expected to spend at least one-third of their time out of the office, walking around the facilities under their supervision, observing firsthand what was going on, listening to employees and being responsive to their concerns.
20
SWOT Analysis
Strengths
- Low price tickets - Low operating costs
- Good customer service- High frequency service
- Productive pilots & ground crews
Weaknesses
- Doesn’t serve international flights
- One type of airplane
Opportunities
- Ability to add scheduled flights
- Low prices enable market share growth
Threats
- Big companies emulate Southwest's low cost model
- Difficulty securing new gates at existing airports
21
Five Forces Analysis
Rivalry among
Competitor(HIGH)
Substitute Products
[train, bus](LOW)
Customer’s bargaining
power(MEDIUM)
Potential New Entrants (LOW)
Supplier’s bargaining
power (LOW)
22
The Blue Ocean way
Made competition irrelevant
Looked across alternative industries
Looked beyond existing demands
Uncontested market space
23
Four actions framework
A new value curve
Reduce(what factors should be used below the industry standard)
Create (what factors should
be created which industry has never
offered)
Raise(what factors should be raised well above
the industry standard)
Eliminate(which factors the industry take for
granted which the industry should
eliminate)
24
The eliminate-raise-create-reduce Grid
Eliminate
•Hub connectivity
•Seating class choices
Raise
- Hub connectivity
- Seating class choices
Reduce
- Lounge- Meals- Price
Create
- Frequent point-to-point departure
25
Key success factors
•Created employee ownership
•Post 9/11 went ahead with the employees’ payroll
Employee First
•For price sensitive customers
Low fares
•33 US States
•65 Cities
More destinations
Operational efficiency
Financial
Safety
Transition Plans
26
Key People
27
Other airlines
Conclusion
Southwest
Numbers
Culture
Scheduling
Strategy
Culture
Scheduling
Strategy
Numbers
Southwest build numbers on its culture whereas other airlines have their culture shaped by numbers