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Running Head: SOUTHWEST AIRLINE STRATEGIC CHOICE

Southwest Airline Strategic Choice Christine Stevenson University of Phoenix STR/581 January 26, 2011 Dennis Madison

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Southwest Airline Strategic Choice Southwest Airline is one of the most successful airlines. Southwest Airline success is because the airline stays on track with the companys mission. The mission of Southwest Airlines is dedication to the highest quality of customer service delivered while keeping cost low. Since September 11, 2001 many airlines have struggle to survive. The airlines again are struggling because of the low economy. Southwest Airlines shows the example on how combining different strategies a company can because successful. Value Discipline Southwest Airlines set bar for other airlines after September 11, 2001 terrorist attack on the New York Trade Centers. As many airlines went into bankruptcy. Southwest airlines continued to have success. Part of Southwest Airlines success is because of the value discipline to observe operational efficiency and keep cost as low as possible. Southwest Airline became known for its low cost solution in its industry. Southwest Airlines changed people views on traveling by air in the United States. Each department followed the airlines objective making the airline the top airline in the industry. Southwest Airline took the philosophy to sell a product, the product has to be the right price, place, and timing. Operational efficiency of Southwest Airlines built on the key points: Price (low ticket rates every day). Location (smaller airports: Dallas Love Field, Houston Hobby, Chicago Midway, Oakland, Providence, Baltimore and Manchester). People (Dedicated employees,

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reasonable wages, voted the best organization to work for). And Frequency (lots of daily flights, convenience for business customers). Generic Strategies In order for Southwest Airline to seek a competitive advantage in the airline industry, the airline has to look at the three generic competitive strategies: low cost leadership, unique services through differentiation, or focus on a particular market niche (Pearce & Robinson, 2009). The generic strategy is the core idea about how Southwest Airline can compete and stay on top of the airline industry. Low cost leadership requires organization to have a policy that controls all cost of the organization such as tight control of costs and overhead, avoidance of marginal customer accounts, minimization of operating expenses, reduction of input costs, tight control of labor costs, and lower distribution costs (Thomas, 2011, para 4). The object is to have the competitive advantage by keeping costs of production or distribution lower than others in the industry. A strategy that worked for Southwest Airlines; by keeping operational cost low, the airline can lower cost for its airline passengers. The differentiation strategy is to have a product or service unique from the competitors. A differentiation strategy is more vulnerable to competitive advantage then a company pursuing a cost leader strategy. Combining the two strategies has proven to have a greater competitive advantage. Southwest Airlines used low cost leadership with differentiation. The airline is the only airline that does not assign seating and eliminated meals during the flight. By

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eliminating the extra non-essentials the other airlines offer. Southwest Airlines fare attracts a huge number of passengers. Grand Strategy Southwest Airlines stays true to low-fare pricing while enhancing customer service with new products. Southwest Airlines initiatives to be successful are due to: (1) Focusing on low-fare brand. The airline offers low fares through restructuring and aggressive fare sales in summer and fall. The airline has no hidden cost and do not charge extra for the first two bags. Southwest Airline does charge for extra language because customers expect to have the serve free.

(2) Growing revenue responsibly. Southwest offers new revenue-generating programs EarlyBird Check-In, P.A.W.S. (Pets Are Welcome on Southwest), Unaccompanied Minor service charge and rewards for Business Select Customers. These enhancements increased revenue.

(3) Optimizing our network. Southwest Airlines redeployment of unprofitable capacity allowed entrance into four new markets: Minneapolis-St. Paul International Airport, New Yorks LaGuardia Airport, Bostons Logan International Airport, and Milwaukees General Mitchell International Airport. The revenue benefits of these optimization efforts were in the hundreds of millions of dollars.

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(4) Containing our costs. Southwest Airline has been able to reduce cost by offering an early retirement plan. The retirement plans was accepted by 1,404 employees. The decrease in staffing designed to provide savings in subsequent years that will surpass the cost of the program. A freeze on senior management salaries was also implemented. Recommended Strategies Southwest Airlines has been successful due to the airlines low fares and differentiation. Southwest Airlines can has shorten staff and frozen management wages to keep cost low but if Southwest Airline offers advertisements for other infomercials or live infomercials products throughout the airport or during the flight. Airlines only advertise in pocket magazines behind seats or on television screens. However, if Southwest offered advertisement on the walls of the airport or on the side of a plain like buses, the airline could bring in more profit. Southwest Airline could install a computer that can scan an internet receipt for a customer that would produce the airline ticket without waiting in a long line because the tickets are already pre-paid. Allowing passenger two bags the computer can print out two tickets to place on the bags. The bags then can be placed only on a belt after scanning it in. Any bag placed on the belt that was not accounted for will stop the belt until the bag removed. This is a self checking system like the grocery stores provide. The system only needs two people to monitor. Saving time for the passengers and fewer employees needed to run the check in desk.

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Conclusion Southwest Airline has been successful even through economic times because of the airlines low cost and differentiation strategies. Keeping the operational cost low allows the airline to have low air fares. The low air fares separate the airline from all other airlines. Southwest recently offered early retirement plans to lower staff and froze management wages. If the airline offers advertisement for other products, the airline can bring in more profit to bring back more staff and give management a small raise.

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References: Pearce, J. A., II, Robinson, R. B. (2011). Strategic management: Formulation, implementation, and control (12th ed.). Boston, MA: McGraw-Hill/Irwin. Received January 26, 2011 from University of Phoenix Student Website https://portal.phoenix.edu/classroom/coursematerials/str_581/20101214/ Southwest.com (2010) Fact Sheet received January 17, 2010 from website Southwest.com Thomas, J. (2011) Generic Competitive Strategies. Received January 26, 2011 from website: http://www.referenceforbusiness.com