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Southwest Case Analysis

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QUESTION 1: What is the strategy of Southwest Airlines?

Southwest’s strategy has two overarching themes: 1) Operate as a leading low-fare carrier, and 2) their mantra, “Happy employees make for happy customers.” There are several components to each, which are described in detail below.

1) OPERATING AS A LEADING LOW-FARE CARRIER

There are several factors to this strategy:

Low fares: SWA had the lowest fares in the industry and endeavored to keep it that way.

Low costs: Southwest had the ability to charge low fares in part due to low overhead. Lost cost measures included the following: * Identical fleet of airplanes: This minimized the number of parts required for upkeep and maintenance, and it reduced carrying costs. It allowed SWA to simplify and harmonize training and operating procedures. Finally, not only was inventory “interchangeable” across the organization, staff could have moved freely from one location to the next with little to no training time required. * No meals on flights: A savings of $40 per passenger. * No seat assignments: No staff resources were required to maintain or change seat assignments, and no electronic system capacity was required to track/record such transactions.

Simplified approach: Southwest kept the fare structure simple. * Only two types of fares: Regular and off-peak fares (no business class, first class.) * Consistent “within state” fares: For instance, a passenger can fly anywhere within the state of California for $69.

Frequent flights: SWA increased passenger volume by two to three times in its operating regions. * For example, the number of Louisville/Chicago flights more than tripled when SWA introduced its low fares/frequent flights.

2) “HAPPY EMPLOYEES KEEP CUSTOMERS HAPPY.”

Employee culture: This is a significant part of the company’s strategy

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