Southwest Airline case study

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Illustrate the meaning of “Sustainable Competitive Advantage”. What was the main strategy adopted by Southwest Airlines that made it successful in the airline industry?

Competitive advantage is a position of a company in a competitive landscape that allows the company earning return on investments higher than the cost of investments. Competitive advantage should be relevant, unique and sustainable. Therefore sustainable competitive advantage, it’s a long-term competitive advantage that a company own over others in the same sector that is not easily duplicated or surpassable by its competitors (wikipedia, 2009). Competitive advantage can also be seen as a superiority gained by an organization when it can provide the same value as its
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You get paid according to your grade and level. Southwest airline run a program that allow its employee’s to own its share on a discounted price, 85-90% of its employee’s own southwest airline stock, i.e 12% of its total stock is owed its employee’s because of the discount purchase program put in place by the management.
Mostly importantly, another very important strategy adopted by southwest airline is utilization. Each plane in the fleet flies extra flights per day, saving on maintenance and training costs. Utilization of cost effective revenue streams have been critical to their success. Southwest were one of the first airlines to have a website in early 1995. In 2006 70% of Southwest’s revenue were generated from bookings online. Southwest gained a reputation for outside the box thinking and proactive risk management, including the use of fuel hedging to insulate against fuel price fluctuation. From a cost point of view, Southwest have maintained a cost per seat mile of $0.12, which is around 25% cheaper than competitors. Aircraft turnaround time is 15 minutes, this is facilitated by multi tasking crews, with pilots and air crew cleaning the plan while on the ground. On average there are 94 employees per aircraft in contrast to competitors who have 130, and the south west staff serve on average 2500

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