Southwest Airlines Strategic Planning Final Course Project

Business Strategy – BAD 4013 – SUMMER 1999 Case Study Southwest Airlines I. Strategic Profile and Case Analysis Purpose The mission of Southwest Airlines is dedication to the highest quality of customer service delivered with a sense of warmth, friendliness, individual pride, and company spirit. Twenty-seven years ago, Rolling King, owner of floundering commuter airline, and Herb Kelleher, King’s lawyer, got together and decided to start a different kind of airline that would provide a short-haul, low-fair, high-frequency, point-to-point service in the United States. The company began service on June 18, 1971 with flights between Dallas, Houston, and San Antonio (“The Golden Triangle” as Herb called it). Southwest Airlines is the fourth

Currently, Southwest Airlines Company achieved the higher net income in 2013 and widened its field of operations by the integration with AirTran Airways. It seems Southwest’s business is going pretty well. However, there are numerous problems from competitors who will cause negative effect on Southwest’ market leader position and market shares. This marketing plan will make a careful analysis of the current activities of Southwest Airlines Company, and then this marketing plan will create how the company develop Southwest’s market leadership and higher market shares within 5years.

According to MBASkool (2015), a SWOT analysis has been completed to show some of the opportunities and threats that American Airlines faces. They are listed as follows:

The skill emphasis needed in a service industry such as airlines is mostly interpersonal. Recognizing the need for interpersonal skills, JetBlue designed the employee selection process to make sure the hired crew members fit into the culture and understood the values and mission. Decision making is another important characteristic of the service industry and the crew members were also identified and selected on their decision making capabilities as the customer related decisions are made at the lowest level of the organization. JetBlue designed the orientation process to highlight the different core values to the employees and made them identify with the mission. Expected behavior of the employees and their contribution to the success of the

The five universal competitive plans include overall low-cost provider strategy, broad differentiation strategy, focused low-cost strategy, focused differentiation strategy and best cost provider strategy (Bethel, 2017). Southwest Airlines popular competitive strategy is keeping customers happy by being low cost, employee driven, future-minded, and differentiated. The overall low-cost provider strategy that is being used at Southwest is a low-cost airline that focuses on no-frills service (Investopedia, 2015). Southwest Airlines diligently follows the strategy of a differentiated low-cost carrier. [They do this by providing the lowest possible fare in the industry, and do so by focusing on consistent service, reliable operations,

Southwest Airlines (SWA) maintained a low-cost, low-price and no frills strategy. The small Texas carrier began as a concept, its business plan detailed on a cocktail napkin in 1971 and grew into the nation’s fourth largest airline. Known as an innovator with low operating costs, dominating smaller airports, with a humorous customer service, SWA saw its 40th profitable year in 2013. Like all companies, SWA underwent leadership changes in 2001, and said goodbye to the company’s founder in 2008. Unfortunately, the changes in leadership were not the only changes; the organization proceeded to alter their beliefs and activities.

The five universal competitive plans include overall low-cost provider strategy, broad differentiation strategy, focused low-cost strategy, focused differentiation strategy and best cost provider strategy (Bethel, 2017). Southwest Airlines popular competitive strategy is keeping customers happy by being low cost, employee driven, future-minded, and differentiated. The overall low-cost provider strategy that is being used at Southwest is a low-cost airline that focuses on no-frills service (Investopedia, 2015). Southwest prides itself on being a people-oriented airline that operates with warm and helpful employees and team members. The most valuable competitive interest has been being its intense focus on hiring the right people (Investopedia, 2015).

Southwest Airlines is a passenger airline company that arranges and provides scheduled flights for passenger and transportation freight services. The company mainly provides, low-fare, point-to-point services all over the US and near-international markets. The headquarters is located in Dallas, Texas and as of December 2014, the company employed over 46,278 people. The company was founded by Rollin King and Herb Kelleher in 1971. Southwest was the first airline to introduce the frequent mile program. This took place in the mid 1980’s. This type of program allowed passengers to add up traveled miles to use later as credit on a future airline ticket. The traveled miles would add up and would also reduce the price of a ticket. Southwest created the idea of senior discount, fun fares and the fun packs. These were perks that attracted people from different age groups. When Southwest originally was incorporated, the idea was to operate in three cities in Texas, but after taking over Morris Air and TranStar in 1987, this gave them a cutting advantage in the airline industry.

Economic, social-cultural, and technological forces are the external macro-environmental factors Southwest Airlines should be most concerned with. Weak economic growth reduces the purchasing power of an airline’s target market. Southwest, known for being a leader in low cost airline, provides flights at a higher frequency and capacity to attain profit. However, the company experienced increasing overhead through the lapse of long-standing fuel contracts, which previously helped provide a competitive advantage. This factor is also amplified by the growth the company experienced with success. Southwest is the fourth largest airline and has seen fuel cost skyrocket from 29 percent to 35 percent over a seven-year period.

During the rapid globalization, being one of the topmost and sustainable airlines is not easy due to the highly competitive airlines industry. Southwest Airlines, founded by Rolling King, Herbert Kelleher, and Lamar Muse in 1967, is considered a very long history of success following its goal that emphasizes on customers’ satisfaction. The key of organizational success relies on human value of Southwest CEO, managers, and employees who try to help each other in order to reach the customers’ best service because these people are the major factors to justify their own images that represent their organization. Furthermore, Southwest has motivated its employees to be more creative and improvable by allowing suitable norms and

Grand strategies, often called master or business strategies, provided basic direction for strategic actions. There are many grand strategies that Southwest Airline can chose from when considering which strategies match with their company’s strength, weaknesses, opportunities and threats.

Distribution strategies exist in three forms: exclusive distribution, selective distribution, and intensive distribution. Kotler and Keller (2009) define each of the distribution strategies as: exclusive distribution limits the number of intermediaries used; selective distribution depends on a limited number of intermediaries; and intensive distribution works with as many outlets as feasible. The distribution strategy of the airlines industry was not a part of its early history, but is now integral to the success of airline organizations.

Technology is growing rapidly since the early 90’s and a lot has changed in the marketing sector on how businesses operate. The internet has made it possible for businesses to market their products and services through digital channels. According to Smallwood, (2016). “The way people connect, communicate, and share information online has evolved in ways unimaginable just a generation ago, yet from a marketer 's perspective the biggest change may be in the amount of information suddenly available.” Through digital media consumers are able to associate themselves with the products and services that are rendered. The three organizations I have seen advertised; that have specifically focused on digital media to market its products and or services are, Southwest Airline, John Foy & Associates, and the Coca-Cola Company.

Management highly believes that treating their employees well and making them loved their job will naturally lead them to treat customers warmly and courteously in return. In this regard, Southwest looks for fun loving and spirited people whose natural warmth and compassion contributes to superior customer service. This is the reason why Southwest particularly takes the pledge of hiring employees for “attitude” prior to “skills” as corroborates this quote from the former C.E.O Kelleher “At Southwest, our People are our greatest assets, which is why we devote so much time and energy to

This proposal addresses the needed steps to be taken in order for Southwest Airlines to see continued growth in the airline industry. Southwest Airlines has been able to remain one of the most profitable airlines in the industry for an extended period of time. Even with the hindrance of the 2001 terrorist attacks involving airplanes and the U.S recession of 2008, Southwest has continued to see strong revenue growth. Meanwhile, other companies were experiencing major losses and in some cases folding. Southwest Airlines has capitalized on the company’s strength of being the top low cost