Southwest Airlines Analysis

Case 28 Southwest Airlines Analysis 1. What three things impress you most about this company? Why do you think Southwest appears on Fortune's list of the most admired airlines in the world? Well-prepared students should have little trouble citing three impressive things about Southwest Airlines. Any of the following would seem to qualify: ? The competitive power of the company's strategy and the tight fits among the pieces of the strategy-Southwest's strategy is quite well-crafted and well-conceived, having been thought through down to the last detail. And it has produced a very sizable and sustainable competitive advantage based on low-cost. In virtually every market where Southwest has presence, it has emerged as the market share leader and often dominates the market. Throughout the past 10 years, Southwest has consistently ranked first in market share in 80 to 90 percent of its top 100 city-pair routes and had an overall 65 percent share of the passenger traffic on its biggest 100 city-pair routes. Southwest carried the most passengers in the top 100 U.S. markets, despite serving only 40 of them. It is very, very tough for rival airlines to compete against Southwest, and there are few instances where Southwest has gone head-to-head against its rivals and lost out. ? Herb Kelleher and the management team he has assembled-this is a very well managed company any way you look at it, with few missteps and bumps in the road over the years. ? The cost-cutting capabilities the company has put in place-it is one thing to espouse low-cost leadership and quite another to figure out how to pull it off. Southwest has done a terrific job of keeping its costs below those of rivals, as is documented in case Exhibit 6. ? The Southwest spirit and fun company culture-the company has done a first-rate job of employee selection, training, and motivation; company employees really know how to create customer satisfaction and they seem to have a fun time doing it. Southwest's employees seem unusually committed to the company and to making it successful. The esprit de corps among Southwest employees is pretty impressive. The work environment at Southwest is very attractive-one can understand why Southwest has appeared on the Fortune list of the 100 best companies to work for. In 1998, Fortune named Southwest number 1 in its listing of the 100 best companies to work for in America; Southwest was ranked number 4 in 1999, number 2 in 2000, and number 4 in 2001. ? The execution of the strategy has been superb. Southwest has crafted a competitively powerful strategy and executed it beautifully-why shouldn't it be the most admired airline in the world? 2. What weaknesses or problems do you see at Southwest Airlines? This is a company with no glaring weaknesses or critical operating problems. But there are areas of legitimate concern: ? Whether Southwest can weather the adversity of the damage done to airline traffic by the events of 9/11. How long

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