The most impressive thing I find about Southwest Airlines (SWA) is the history of the company. I really admire how Herb Kelleher fought to create SWA, even when everything and everyone was against him, and how his warrior spirit has shaped the organizationÂ´s culture and performance.
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Also it is very impressive to me how the company can be profitable with a low cost strategy. It is well known that airlines companies do not make any gain even with high ticket prices so it is really amazing to me how SWA is successful in this point.
Finally I am really impressed with its human resources management and the spirit of the company. I found really interesting that a customer driven business dedicated to sales has one of its core principles stating “Employees come first and customers come second”. I think it is a really smart thought to believe that happy employees will keep customers happy.
What grade would you give Southwest management for the job it has done in crafting the company’s strategy? What is it that you like or dislike about the strategy? Does Southwest have a winning strategy?
In my opinion, management did a great job crafting the strategy of the company. At the beginning, Herb Kelleher saw a market opportunity with the flight triangle and fought hard to sustain the company. With his performance and behavior indirectly he was setting the pillars of Southwest. Since the beginning Herb established the mission and vision of Southwest and objectives pointing out the path to follow.
Also Herb hired very talented executives and managers with much experience in the sector.
The only thing that I do not like about the SWA strategy is that I think is limited on growth. The planes purchased, the airports working at and some in-flight services such as not offering meals limit the possibility of expanding internationally.
According to the book Essentials of Strategic Management (Chapter 1) to know if a company winning strategy, 3 questions can be used:
- Does the strategy fit the company’s situation?
- Has the strategy yielded a sustainable competitive advantage?
- Has the strategy produced good financial performance?
In my opinion, SWA has excellent performance in each of the questions.
The strategy fit competitive conditions in the industry (external) and has important resources and capabilities. Also the cost reductions carried out by the company confers a competitive advantage over competitors and the financial performance is excellent.
What are the key policies, procedures, operating practices, and core values underlying Southwest’s efforts to implement and execute its low-cost/no frills strategy?
They key policies that I find on Southwest are:
Using only one type of airplane: as it is explained in the case, using only Boeing 737 allowed them to minimize to minimize the size of spare parts inventories, simplify the training of maintenance and repair personnel, improve the proficiency and speed with which maintenance routines could be done, and simplify the task of scheduling planes for particular flights  .
Introduction of ticketless travel: this element helped SWA to reduce cost related to travel agents and emission of paper tickets  .
Deemphasizing of congested airports, helping them to produce “better-than-average on-time” performance and reduce fuel cost  .
Implementation of point-to-point scheduling of flights, which is more cost-efficient than the hub-and-spoke systems implemented by competitor airlines  .
Use of fuel hedging and derivate contracts to counteract rising prices for crude oil and jet fuel.
Empowerment of employees and TQM approach, contributing to fast problem solving and efficiency.
The motto “employees are first, customers second” has generated a strong company culture motivating employees to do their jobs in the best way, achieve goals and objectives more efficiently and thus, creating a direct contribution to the companyÂ´s profitability.
What are the key elements of Southwest’s culture? Is Southwest a strong culture company? Why or why not? What problems do you foresee that Gary Kelly has in sustaining the culture now that Herb Kelleher, the company’s spiritual leader, has departed?
The culture of Southwest Airlines primarily involves giving importance and emphasis on the overall welfare of its employees, having its operative principle of “employees come first and customers come second”. Particularly, the key elements of SWA culture are:
Fun atmosphere and work environment: promoted through entertaining behaviors in performing their jobs, an ongoing pranks and jokes, and frequent company-sponsored parties and celebrations.
High compensation and numerous incentives.
“Can do” attitude: this enables the employees of the company perform their jobs effectively, solve problems efficiently, overcome adversities and celebrate the company’s success.
Company’s culture of not giving up: developed through all the adversities the company had to face
Cost-consciousness: seeking to reduce costs in every step of the business.
Empowerment of employees: this motivates employees and makes them feel as an important part of the company.
In my opinion it is clear that that Southwest Airlines is a strong culture company.Â All elements pointed before make employees of SWA feel as part of a big family rather than merely employees of accompany who does not care about them. This feeling make the employees to work hard for the success of the company and they see the companyÂ´s success as professional and personal achievements.
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Regarding the problems that I can foresee with Gary Kelly’s promotion, and according to the information given in the case, I cannot foresee real problems on sustaining the culture. Gary has been in the company for enough time to know which ones are the core values of SWA and the key elements of its success. Maybe the only problem I foresee is that Kelleher was very important for the organization and it will take a while to Gary to gain that position but the path that he will walk will be the same as the one walked by his predecessor. This is sustained with the video watched in class. In the video Gary Kelly was presented as a “down to earth” boss who knows most of his employees, and still follows the ideas established by Kelleher like “treating the customers as queens and kings and employees better”.
What grade would you give Southwest management for the job it has done in implementing and executing the company’s strategy? Which of Southwest’s strategy execution approaches and operating practices do you believe have been most crucial in accounting for the success that Southwest has enjoyed in executing its strategy? Are there any policies, procedures, and operating approaches at Southwest that you disapprove of or that are not working well?
According to the book Essentials of Strategic Management (chapter 10) a successful strategy must have 8 components:
In my opinion, SWA is successful in most of the eight points:
SWA is mainly characterized on recruiting the best and bights people they can find and then retain them with excellent compensation packages, opportunities for rapid advancement and professional growth, and challenging and interesting assignments  .
The success of SWA was to tackle those activities that were critical in its low-cost strategy. The company only operates one type of aircraft, was the first company to introduce ticketless travel or point-to-point scheduling of flights. These are just few examples on how research and marketing departments put their entire effort on finding ways to reduce cost in every step of the service offered.
Also the TQM approach is very good implement due to the empowerment of employees at all levels: “empowering people to take decisions will make a positive difference every day”  and the improvement of total customer service and satisfaction by hiring personnel who enjoyed interacting with customers and developing marketing tools as frequent-flyer program and rapid reward based on trips flown rather than mileage.
SWA has a really strong corporate culture fostered by its executive management level. In SWA managers are expected to spend at least one-third of their time out of the office, walking around the facilities under their supervision, observing firsthand what is going on, listening to employees, and being responsive to their concerns. Also company executives are very approachable and in 1990 formed a Culture Committee. All this things also help to pursue the goal of customer satisfaction.
SWA also believed in training and promotions. Approximately 80-90% of SWA supervisory positions were filled internally. Also the salaries are above the industry average. It introduced a profit sharing plan for senior employees and stock option programs. All this contributes significantly on tying rewards to the achievement of performance objectives.
For all this reasons I think that SWA management deserves an A for the job done in executing the companyÂ´s strategy.
The approaches and operating practices most crucial in accounting for the success that Southwest has enjoyed in executing its strategy has been their cost containment, recruiting process and organizationÂ´s culture.
Regarding the policies, procedures, and operating approaches that are not working well I can see that there is a weakness regarding the support systems. Many case analysis of the company point out that Southwest must be required to modify and upgrade a significant portion of its internal software to guarantee that its computer systems will function properly.
What weaknesses or problems do you see at Southwest Airlines?
The weakness I see in SWA is related to one point of its strategy. The current strategy of only flying to “second line” airports represents a problem of limited growth and there are still big cities in the USA without SWA services. And this is contradictory with the ideas of Gary C. Kelly. As it is explained in the case, during his tenure as a CEO, Kelly has worked with other top-level Southwest executives to sharpen and fine-tunes SWAÂ´s strategy in a number of areas and continued expanding the operations (adding both more flights and initiating service to new airports). The current strategy has a “space” limit that will restrain company’s desires of expansion.
What recommendations would you make to Gary Kelly?
The first recommendation I will make to Gary Kelly is to try to keep going with the company as it is, feeding company’s culture and good environment. Also try to keep their low-cost strategy even through bad times.
The second suggestion I would make to Gary Kelly will be to modernize its fleet ( I have read that it is a bit old), purchase bigger planes and expand the flights to other main cities in the U.S and expand their business to other countries close to the U.S such as Mexico or Canada.
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