Q1. What is Southwest’s strategy? What is the basis on which Southwest builds its competitive advantage?
Q2. How do Southwest’s control systems help execute the firm’s strategy?
The Southwest Airlines strategy is best explained by its co-founder Herb Kelleher during a talk at Wharton: “It’s an obsession with keeping costs low and treating employees well and a commitment to managing the company during booms with an eye to the busts that will inevitable follow. Do that and most of the rest takes care of itself.”
As long as this strategy is well known in its industry it has proved hard to copy. Let see what Southwest does and others do not.
There are two main strategic areas:
1. Operating Costs
1. Operating Costs
Southwest Airlines has the lowest fares among its competition. Its lowest fares partly came from low operational costs. What Southwest is doing?
Southwest flies one airplane type, the Boeing 737 series. The competitors are using all kind of airplanes and models. That saves millions for Southwest in maintenance cost, spare-parts inventories and mechanics training. More, every pilot and crew members will be familiar with every plane. On the other hand, using one type of airplane gives Southwest the opportunity to move the aircrafts through the route network without costly reconfigurations.
Southwest is using less congested airports (secondary or downtown) and of course they have lower average fares.
Most of Southwest flying is point-to-point rather than competition that is hub-and-spoke. That strategy and shorthaul approach with an average flight time of 55 minutes minimizes the time that airplane sit on the ground waiting delay-prone hubs. According to FlightStats, on-time performance in June was eight percentage points higher than the industry, and higher than any of its competitors. As a result 78 percentages of Southwest’s customers fly nonstop.
Southwest have the simplest in-flight services: No assigned seats, no meals, just beverages and snacks. This allows Southwest to unload a flight, clean and restock the plane and reload another flight in 20 minutes compared with United in 35 minutes.
That is not all.
Southwest pilots are the only pilots of a major U.S. airline who did not belong to a national union but they are unionized independently. That means Southwest’s pilots can fly many hours than competition. Other staff is nationally unionized but their contracts are flexible. That means flexible staffing who can jump in and help out. Southwest uses a ground crew of four people and other two at the gate and by comparison United is using a ground crew of twelve people plus three at the gate.
Airlines experts say that these savings allow each Southwest jet to fly an extra flight per day, which means extra revenue.
Herb Kelleher stated the company strategy: “If you are going to be a low-fare airline, you have to charge low fares even where you don’t have competition.”
On the other hand...