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Southwest Airlines’ Corporate Strategy Case Study

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Updated: Aug 4th, 2021

Southwest Airlines (SWA) has remained a market leader in the airline industry dominating the domestic travel segment. The airline’s cost-cutting measures, exceptional customer service, positive organizational culture, and low-fare business model are the key pillars of its success. SWA’s measures to contain operational costs include cross-utilization of its workers to maintain low labor costs and improve turnaround time, operating without hub-and-spoke arrangements, e-ticketing, and focusing on short hauls, among others.

The SWA’s overall corporate strategy focuses on operational efficiency as a source of distinct advantage. It executes this strategy through innovative management style and unique organizational culture. Its unique organizational culture entails new-hire celebrations, customer service training, advanced training, ‘Red hearts and Luv’, and mentorship programs for employees. SWA maintains good relations with its staff and employee unions, which eliminates costly industrial actions. Its unionized employees exhibit enthusiasm and extroverted personalities that characterize the Southwest spirit.

HR practices have played a big part in SWA’s business success. Herb Keller, the airline’s former CEO (1981-2001) exhibited an engaging management style and commitment to his staff and customer service saw the airline reach new heights in the industry. The SWA’s HR practices of training and mentoring of new staff, supporting employee initiatives, e.g., fuel conservation by pilots, and maintaining positive labor relations have been critical to its success.

SWA has recorded steady growth even during turbulent times in the industry. However, challenges related to increasing business rivalry, operational costs, and rising passenger demand threaten its competitive position. It faces stiff competition from low-fare operators like JetBlue and newly merged airlines like Continental/United with may diversify into the low-cost niche (Pisano 11). The airline plans to acquire larger aircrafts (737-800s) to meet rising passenger demand. In my view, SWA’s core competencies lie in the measures to contain operational costs, focus on customer service, and innovative HR practices.

The strategies are a source of competitive capabilities for the airline, enabling it to weather shocks in the market. For this reason, I am optimistic that SWA will weather its present challenges to continue recording sustained success in the future. In my opinion, the airline’s previous success in achieving operational efficiency is a critical success factor in its future growth. Higher operating costs, including labor and fuel costs, reduce profit margins. Therefore, measures to cut costs will help SWA improve its operational efficiency and profit margins.

Works Cited

Goold, Monroe and Allen Campbell. Strategies and Styles: the Role of the Centre in Managing Diversified Corporations. Oxford: Basil Blackwell, 2007. Print.

Hofstede, Geert. Culture’s Consequences: Comparing Values, Behaviors, Institutions, and Organizations across Nations. Thousand Oaks, CA: Sage Publications, 2001. Print.

Pisano, Gary. Creating an R&D Strategy. Boston, MA: Harvard Business School, 2012. Print.

Rodriguez, Robert. “Diversity Finds its Place.” HR Magazine, 51 (2006): 56-61. Print.

Sims, Robert and Mike Schraeder. “Expatriate Compensation: An Exploratory Review of Salient Contextual Factors and Common Practices.” Career Development International 10.2 (2005): 98-110. Print.

Williams, Steve. Making Better Business Decisions: Understanding and Improving Critical Thinking and Problem Solving Skills. Thousand Oaks, CA: Sage Publications, 2008. Print.

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