Background
Southwest Airlines is an airline specializing in point-to-point flights. Founded in 1967 by Herb Keller and Rollin King, Southwest Airlines has managed its airline services since its inception. Southwest Airlines began with an aircraft with a capacity of 4 passengers and expanded to more than 700 on a single carrier (Inkpen, 2017).
Through management, the company realized that it would perform exemplarily in the industry if it dedicated operational energy to serving convenience- and time-centric travelers, as well as price-sensitive leisure clients, according to each customer’s needs. Southwest Airlines’ advanced value chain competencies, achieved through corporate governance, include customer prioritization, employee recognition, high-standard infrastructure, intellectual capital, and a legendary culture, which have enabled it to achieve breakthroughs in the aviation industry and gain a competitive advantage.
Organizational Goals
Southwest Airlines’ vision is to become the world’s most preferred airline, operating efficiently and profitably in the aviation industry. The firm’s values include the warrior spirit, which calls for working hard and striving to be the most outstanding provider of airline services (“Proven business strategy, 2023”). The other value is the zeal to display urgency, perseverance, and innovation.
Southwest Airlines aims to link people to what is essential in their lives through friendly, reliable, and cost-effective aviation services. Southwest Airlines’ strategic objectives include a robust route network, brand improvement, and a superior financial position in the airline industry (“Proven business strategy, 2023”). The company has worked diligently to uphold its values, vision, mission, and objectives, offering satisfactory services to its customers.
Corporate Governance, Stakeholder Management, and Culture
The airlines’ success has since been driven by sound corporate governance. First, the company’s former Chief Executive Officer (CEO), Herb Keller, believed in a leadership style that combined flamboyance, fun, and unique perspectives, resulting in effective workforce management (Inkpen, 2017).
Keller implemented a leadership strategy for the board of directors that emphasizes unconventionality and maverick values in driving the development of new industry standards. Until today, the board of directors of Southwest Airlines has been inspired by Keller’s spirit of customer service, which extends far beyond the common (Inkpen, 2017). As a result, the firm invented a remarkably effective service that motivated employees to dedicate themselves to satisfying customers.
All employees are encouraged to understand the key aspects of operations and take important and necessary actions. Keller asserted, “We give people the opportunity to be a maverick. You don’t have to fit in a constraining mold at work—you can have a good time. People respond to that” (Inkpen, 2017, p. 7). The company’s emphasis on providing opportunities is evident in its approach to employee recognition, appreciation, and invitation to attend its annual events.
The company established a culture of cooperative labor relations, resulting in more than 83% of workers joining various unions (Inkpen, 2017). The company introduced employee profit sharing, under which 13-15% of the firm’s stock was owned by employees (Inkpen, 2017). Thus, corporate governance facilitated stakeholder management, leading to a legendary culture at the firm.
Value Chain Analysis
The value chain for Southwest Airlines is evident through its primary and support activities, which demonstrate organizational capabilities and core competencies. In terms of operations, the firm reduced flight turnaround time, enabling it to fulfill its freight management responsibilities on time. The sale of their seats is approached on a first-come, first-served basis, with no reservation about where to sit (Inkpen, 2017). The firm offered customers long-distance telephone calls or booked a hotel room in case of unanticipated delays for those who had booked flights.
Southwest operated without a major hub, and its point-to-point service offered clients maximum convenience, which led to the breakthrough. As of 2016, the company was among the top companies in revenue passenger miles (RPM) in the US, as seen in the figure below (Inkpen, 2017). However, the company has experienced a competitive disadvantage due to its high operational costs.
In terms of technology, Southwest needs to improve its key operational areas. Additional challenges arose when a cascade of system constraints led to numerous cancellations during adverse weather (Rosenbaum, 2023). Southwest marketed itself through advertisements aired in mainstream media, such as in-flight magazine ads in which Keller appeared as Elvis Presley (Inkpen, 2017).
Regarding infrastructure, Southwest acquired new airports and aircraft, with 581 of the 737 fleet owned by the company and the remainder leased under capital and operating leases (Inkpen, 2017). Its human resources comprise more than 50,000 employees as of 2015. By 2017, the company had served more than 97 US and Southern American cities (Inkpen, 2017). Southwest acquired JetBlue Airways, where the stock rose significantly after a short period of operations.
Resource-Based View and VRIN Analysis
Southwest employees provide corporate services, such as in-flight control, while management focuses on developing strategies to counter challenges. The intellectual capital that specifically drives Southwest’s breakthrough is the ability to combat competition, expand, and practice flexible leadership (“Proven business strategy, 2023”). The company began by offering low-priced seats, which significantly increased sales volume.
For instance, the firm developed a two-tiered pricing strategy, charging $20 to fly between Houston, San Antonio, and Dallas and selling all the seats at $26 until 7 p.m. and 13$ on weekends (Inkpen, 2017). Southwest trains its workers to be socially active with passengers. That has been seen in several humorous flight takeoff announcements and random appearances when customers inspect their luggage in the cargo area. Putting the customer first enabled the company’s core values to take effect, resulting in the airline’s breakthrough. Table 1 shows the VRIN framework of Southwest’s value chain.
Table 1: VRIN indicators for Southwest Airlines.
Strategy Implementation
As a key player in the aviation industry, Southwest Airlines must develop and implement strategies to streamline operations and maximize profit. The company must maintain the existing participative leadership, in which all employees play key roles in delivering services (Schraven, 2021). Instead of relying on foreign companies to offer the same, the firm’s engineers should undertake all the maintenance work internally.
That means the business can avoid threatening the jobs of its key operational team, which is responsible for maintaining and ensuring the safety of its customers (Reed, 2021). Southwest needs to foster a ‘mindset of conquerors’ in its staff to stop the underdog mentality that may lead to a competitive disadvantage in the aviation industry.
Conclusion
Southwest Airlines is an American airline, which specialization is point-to-point flights. The company was founded in 1966 and had a fleet of over 800 vehicles, along with a human resources department comprising approximately 50,000 employees. The firm’s vision is to be the preferred airline service provider, while the mission is to offer exemplary services globally, grounded in the values of hard work. Southwest prioritizes its customers as the primary stakeholder by offering convenient, price-sensitive services. The firm has created a legendary culture where employees are empowered to participate in operations that require key actions.
References
Balasaygun, K., & Rosenbaum, E. (2023). Can Southwest Airlines fix its tech problems? We asked aviation experts. The answer wasn’t encouraging. CNBC.
Cao, I. (2022). Why major companies should follow Southwest Airlines’ servant leadership. EnvZone.
Cui, S., & Li, Z. (2022). Airlines benchmarking analysis based on financial performance: Emirates, Southwest Airlines, Singapore Airlines and Lufthansa. Academic Journal of Business & Management, 4(2), 11–17.
Inkpen, A. (2017). Southwest Airlines. Harvard Business Review, 2(8), 1–13.
Proven business strategy. (2023). Southwest Airlines.
Reed, D. (2021). Happy 50th birthday, Southwest Airlines. Here’s to doing things very differently and succeeding. Forbes.
Schraven, J.-C. (2021). From airline network development to airline operations. In S. Jan-Christian (Eds.) Aviation systems, management of the integrated value chain (pp. 184-222). Routledge.