HULT5

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Hult International Business School *

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DAT5311

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Management

Date

Feb 20, 2024

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docx

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6

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The Case of Southwest HULT
The Reason for Southwest Airline’s Success Southwest success could be attributed to an efficient use of their asset, the cheapest service, and reliable service for customers. For this, Southwest should maximize aircraft operational excellence and differentiated themselves from other competitors through an effective marketing. I try to explain more about this from now on. The key factor on success of Southwest was their low-cost model. Firstly, Southwest used one type of air plane, the Boeing 737 series. This resulted in all kinds of cost-saving: maintenance cost, training cost for their mechanics and pilots. It also gave Southwest flexibility to move their aircrafts throughout the route network without reconfigurations. Secondly, Southwest improved profitability by minimizing turnaround time and kept low fares by selecting spider-web system that enable point-to-point flying, instead of hub-and- spoke system that needed more geographic coverage. Lastly, Southwest’s no-frills policy and contracting for some of their work was helpful for keeping low fare and providing their own value for customers. It was “frequent, reliable, on-time flights, and very low prices” (Goldstein, Rungtusanatham, Schroeder, 2011, p. 439). In the marketing side, Southwest did a differentiated and effective marketing. They positioned them themselves in fun image, the concept of LUV, and this “served to reinforce Southwest’s lively image among its employees and encouraged them to pass it on to passengers” (Goldstein et al., 2011, p. 440). Southwest’s the lowest prices offering appealed to many people who were not interested in additional in-flight services or wanted to avoid busy airports. Southwest thoroughly put a price from a profit perspective at the same time, not a just cheap price; they fully considered all kinds of cost and then found a solution to meet the twin goals of offering low fare to customers and securing profitability to company.
Southwest’s success was due to their focused group defining target customers and searching new market. Southwest used an effective promotion policy that could entice their target customers, regular business commuters, such as sweetheart stamp. When Southwest decided to enter new market, they chose “only the ones that fit their business model” (Goldstein et al., 2011, p. 441). In corporate culture, familial atmosphere and collaborative management-union relationship resulted in a high sense of unity and strong trust in the company. This was driving force of high morale and low employee turnover. The 10 to 15 Minutes Turnaround Time of Southwest Airlines Southwest turned their airplanes round 10 to 15 minutes from the time it arrives at the gate until it leaves. This minimized the time that airplanes sat on the ground and this quick turnaround allowed their airplanes to be in the air more. This quick turns enabled Southwest to increase fright per airplane. Southwest airplanes were able to be in the air for more time each day than a similarly sized competitor. Southwest’s airplanes were in the air for 12 hours per day, whereas industry average was 8 hours per day. As a result, this meant growth of productivity of finite resources compare to their competitors and this must also lead to revenue increase. Challenges Facing Southwest and Response The competition in low-fare market is getting fierce. Many low-fare carriers such as JetBlue, AirTran Airways, and Frontier Airlines appeared. These competitors copied and improved upon Southwest’s model. Unlike Southwest, new competitors offered more amenities such as luxurious leather seat and in-seat audio video entertainment, they also used “leading-edge technology to streamline operations” (Goldstein et al., 2011, p. 445). For
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