Southwest Airlines: Understanding Business Strategy and Concepts
Southwest Airlines, Key Facts:
Niche strategy. Concept:
Concentrate in underutilized airports
1 type of aircraft fuel-efficient 737 (1994 more that 200 planes) Frequent, on-time departures
Low cost fares, only 2 types of fares per root
No seats assigned, no meals
Point-to-point roots
Higher equipment initialization, shorter turn-around times Competitive advantage:
Cost structure
"The workforce is dedicated to the company. They're Moonies basically. That's the way they operate." Issue: New Competition. Other US airline companies started to imitate Southwest Airlines and created their own low cost carriers (for example: Continental Lite and United's Shuttle).
How has Southwest used OB ideas to secure a competitive advantage? In the past when Southwest was unique in its approach to airline service, the company did not really have competitors within the airline industry (of course, Southwest had rivals, but the company managed to find its' place on the market). As one of the managers said, they were competing more with on-land transportation means (such as busses and trains) rather than with other airlines. From 1980s the situation in the airline industry started to become more unfavorable with companies loosing money and going bankrupt. At that time American airline companies realized that they can probably deal with these problems by copying the Southwest Airline's concept (as Southwest has been profitable in all years of its; operations). In the first part of 1990s two companies Continental and United launched their own low cost carriers and Southwest was concerned with the new competition. In fact these companies had plenty of time to analyze Southwest's model and they could copy their concept partly without any serious problems (one plane type, one way flights, no meals, low fares, etc). But the way the operations were structured and cost savings that resulted from it was only one part of Southwest's success, while the
Niche strategy. Concept:
Concentrate in underutilized airports
1 type of aircraft fuel-efficient 737 (1994 more that 200 planes) Frequent, on-time departures
Low cost fares, only 2 types of fares per root
No seats assigned, no meals
Point-to-point roots
Higher equipment initialization, shorter turn-around times Competitive advantage:
Cost structure
"The workforce is dedicated to the company. They're Moonies basically. That's the way they operate." Issue: New Competition. Other US airline companies started to imitate Southwest Airlines and created their own low cost carriers (for example: Continental Lite and United's Shuttle).
How has Southwest used OB ideas to secure a competitive advantage? In the past when Southwest was unique in its approach to airline service, the company did not really have competitors within the airline industry (of course, Southwest had rivals, but the company managed to find its' place on the market). As one of the managers said, they were competing more with on-land transportation means (such as busses and trains) rather than with other airlines. From 1980s the situation in the airline industry started to become more unfavorable with companies loosing money and going bankrupt. At that time American airline companies realized that they can probably deal with these problems by copying the Southwest Airline's concept (as Southwest has been profitable in all years of its; operations). In the first part of 1990s two companies Continental and United launched their own low cost carriers and Southwest was concerned with the new competition. In fact these companies had plenty of time to analyze Southwest's model and they could copy their concept partly without any serious problems (one plane type, one way flights, no meals, low fares, etc). But the way the operations were structured and cost savings that resulted from it was only one part of Southwest's success, while the