1. Strategic Analysis: Southwest Airlines Co.

Shekera Alvarado MBA 700: Strategic

Management Southern New Hampshire University
2. 2. Running Head: STRATEGIC ANALYSIS 2 Executive Summary Southwest
Airlines Co. is a major airline company based in the United States. Established in
1967 and operating within the national and international airline markets,
Southwest Airlines is known for providing low-cost options to its customers, and
striving for un- matched customer service (Kelly, n.d.). As a consultant to
Southwest Airlines, the following report offers an in-depth look at the strategy
and corporate management of the company. Based on detailed research, the
recommendations provided throughout the report should be used to enhance the
existing strategic management offerings for Southwest Airlines.
3. 3. Running Head: STRATEGIC ANALYSIS 3 Contents Executive
Summary........................................................................................................................ 2 Strategy &
Strategic Management Process..................................................................................... 5
Strategy within the Airline Industry ....................................................................................... 5
External Environment & Competitive
Position.............................................................................. 6 Driving Forces of
Change....................................................................................................... 6 Five Forces Model of
Competition......................................................................................... 7 External Environment
Recommendations .............................................................................. 8 Internal Environment
& Competitive Position ............................................................................... 8 SWOT Analysis
...................................................................................................................... 8 Core Competencies &
Value Chain Activities ..................................................................... 10 Internal Environment
Recommendations ............................................................................. 11 Competitive Strategy
.................................................................................................................... 11 Low-cost Generic
Competitive Strategy............................................................................... 11 Competitive
Strategy Recommendations.............................................................................. 12
Strengthening Competitive Position .............................................................................................
13 Generic Strategy.................................................................................................................... 13
Complementary Strategic Option ......................................................................................... 13
Competitive Position Recommendations.............................................................................. 14
The Global Marketplace ............................................................................................................... 14
Corporate Strategy: Business
Diversification............................................................................... 15 Diversification Strategy
........................................................................................................ 15 Diversification Future
Proposal............................................................................................ 16
4. 4. Running Head: STRATEGIC ANALYSIS 4 Ethics, Social Responsibility, &
Environmental Sustainability.................................................... 16
Ethics..................................................................................................................................... 17 Social
Responsibility ............................................................................................................ 18
Sustainability......................................................................................................................... 18
Strategy Execution: Building the Capability to Execute
Strategy................................................ 20 Internal Strategy
Execution................................................................................................... 20 Strategy Execution:
Managing Internal Operations...................................................................... 21 Best
Practices at Southwest .................................................................................................. 21
Strategy Execution: Leadership ....................................................................................................
22 Leadership Recommendations..............................................................................................
22
5. 5. Running Head: STRATEGIC ANALYSIS 5 Strategy & Strategic Management
Process Strategy within the Airline Industry Southwest Airlines Co.’s CEO, Gary
Kelly said it best, “I LUV this time of year— looking forward to what’s on the
horizon and planning to accomplish the goals and resolutions that we set for
ourselves” (Kelly, n.d.). As a company that is constantly evolving, Southwest
Airlines Co. is always trying to strive for their ultimate mission of providing the
“highest quality of customer service delivered with a sense of warmth,
friendliness, individual pride, and company spirit” (Southwest Airlines Co.,
2013). With this winning strategy the company has continued to develop as a
strong industry leader. Southwest has been able to prove adherence to their
mission, vision, and value statement time and time again. This constant evolution
of positive developments for the company has and always will include one of the
most important aspects of a successful company – training for their employees.
As Blanchard discussed, a vital part of an employee friendly workplace means
providing them with “high impact training programs. These need to be aligned
with specific, measurable goals that are fully supported and in alignment with
organizational objectives” (Blanchard, 2007). With that, in 1998, a brand new
$10 million flight operations training center opened as the “key element of
Southwest’s flight training services for its more than 2,600 pilots” (Southwest
Airlines, 1998). On average the training center will properly train and process
250 new pilots per year, in addition to the pilots who are currently on staff and
gain an additional 1,000 hours of training throughout their careers (Southwest
Airlines, 1998). If the description itself is not already an indication, Southwest’s
vice president of flight operations, Paul Sterbenz states “this state-of-the-art
training center makes Southwest well-equipped to handle the flight
6. 6. Running Head: STRATEGIC ANALYSIS 6 operations training needs of the
airline well into the next century” which positions the company in a favorable
light given the tumultuous history of air travel. This is definitely an example of
positive development as this strong growth and development is a result of their
mission to build sustainable value and hold true to their strategic objectives.
“Firms build sustainable value by actively engaging stakeholders in the decision-
making process, and by doing it earlier rather than later” (Bansal, 2005).
Throughout the research and planning stages of this training facility project, the
company made a vital point of gleaning input from the training center’s own
future staff members; the goal of course to make it as user-friendly and practical
as possible (Southwest Airlines, 1998). Learning their mission, vision, and value
statements, as well as their stance on perpetuating the culture within the
company, it is easy to see that the leadership at Southwest is certainly dynamic.
External Environment & Competitive Position Driving Forces of Change Some of
the driving forces of change in the industry in which Southwest Airlines
competes include socioeconomic forces and regulatory forces (Rodrigue, 2009).
Socioeconomic forces such as aggregate demand for goods and service and
regulatory forces such as operational costs including oil for airplane fuel is a
force that Southwest Airlines deals with on a daily basis. Soaring fuel costs and a
very soft economy have forced many airlines to cut back on flights, increase costs
to their customers in every facet of their operations, lay off thousands of workers
and, in some cases, go out of business entirely. While this is taking place all
around the globe, Southwest Airlines continues to be successful and has just
posted its 69th consecutive quarterly
7. 7. Running Head: STRATEGIC ANALYSIS 7 profit” (Southwest Airlines Reports
First Quarter Results, 2012). This is due to their strategy of added value. The
airlines reputation for greatness and consistency in the economic, political and
civil spheres identifies their integrity and continued goal to provide the best
service in the industry. Five Forces Model of Competition The Five Forces Model
of Competition framework “holds that competitive pressures on companies
within an industry come from five sources. These include (1) competition from
rival sellers, (2) competition from potential new entrants to the industry, (3)
competition from producers of substitute products, (4) supplier bargaining
power, and (5) customer bargaining power” (Thompson, Peteraf, Gamble, &
Strickland III, 2015). In order to determine the nature and strength of
competitive pressures for Southwest we must first recognize the individual
forces involved. Potential entrants into the market include the smaller niche
airlines that may offer the same services, but on a smaller scale. The buyers are
the customers who appreciate the value added that Southwest includes with
their services and offers the further bargaining power when they opt for an
airline like Southwest who does not charge extra bag fees. It would be tough to
be a firm in another industry trying to offer substitute services being that air
travel is within its own right. Suppliers would be the fuel companies who may
subsidize the prices of fuel for the airlines seeing that they purchase in advance
according to the status of the industry. Lastly, the rivalry among competing
sellers would include those airlines who are in direct competition with
Southwest such as American Airlines and Jet Blue. According to this framework,
the closest rival for Southwest would be American Airlines. However, Southwest
is already in a favorable position given the competitive analysis.
8. 8. Running Head: STRATEGIC ANALYSIS 8 The force that exerts the most
pressure on the company would be rivals who introduce competitive pressures
from within the industry. Even though they are not providing the same quality of
product, they are the other option for buyers who would not hesitate to use their
services over Southwest if they fit the requirements which are still overall
supportive of the high industry profitability. In order to help relieve the
pressures from rival companies Southwest has continued to build on its value
added strategy. Southwest is known for their commitment to customer service.
The company will “intentionally avoid entering markets where destination
airports have highly concentrated airport structure or congested facilities” (Oh,
2002). Even though providing the market to the customer would mean more
money in their pockets, they decide to go beyond the normal financial gain and
create additional benefits for their patrons. By focusing on the interests of their
customers they are able to stay at the top of the list for providers. External
Environment Recommendations My recommendations would include sticking to
their strategy with providing the best customer service and continuing to align
their actions with their mission and vision. History has shown that it is difficult
to find a substitute for Southwest Airlines since they have achieved so well at
aligning themselves in such a specific niche. Internal Environment & Competitive
Position SWOT Analysis “In evaluating a company’s overall situation, a key
question is whether the company is in a position to pursue attractive market
opportunities and defend against external threats to its future well-being”
(Thompson, Peteraf, Gamble, & Strickland III, 2015). In order to make this
9. 9. Running Head: STRATEGIC ANALYSIS 9 determination a SWOT analysis is
used. “At first-rate SWOT analysis provides the basis for crafting a strategy that
capitalizes on the company’s strengths, overcomes its weaknesses, aims squarely
at capturing the company’s best opportunities, and defends against competitive
and macro-environmental threats” (Thompson, Peteraf, Gamble, & Strickland III,
2015). The following is a detailed SWOT analysis for Southwest Airlines Co. A
strength enhances a company’s competitiveness in the market in which it
operates. A strength for Southwest Airlines is the centrality of customer service
to their mission; which has motivated the company to identify key drivers of
customer service and focus its operational efforts on those drivers. “A weakness,
or competitive deficiency, is something a company lacks or does poorly…
(Thompson, Peteraf, Gamble, & Strickland III, 2015). A weakness that Southwest
has recently corrected has been the fact that they did not have any international
flights. Just recently the company has added international flights to their list of
destinations (Hethcock, 2015). New technology in an old industry is always a
sign of an opportunity. Such is the case for Southwest Airlines. Not only does this
allow for new services, it also may mean a shift in new products for air travel
that can make it more appealing to customers and therefore increase sales and
their bottom line. A threat that is always viable for Southwest would be the cost
of fuel. The cost of fuel directly relates to ticket sales being that customers tend
not to travel as much (for pleasure) when the price of tickets increase as a result
of the increase in fuel price being filtered down to the customer. Southwest does
not represent a special case when it comes to the weaknesses, opportunities and
threats for the industry. Competitors for Southwest would have the same being
that they are in the same industry and subject to the same environments. The
only place where Southwest does represent an advantage is in their strengths.
This is one of the reasons in which
10. 10. Running Head: STRATEGIC ANALYSIS 10 the company has done so well. They
have unparalleled customers service; which highlights their mission and vision.
As previously mentioned “as a company that is constantly evolving, Southwest
Airlines Co. is always trying to strive for their ultimate mission of providing the
“highest quality of customer service delivered with a sense of warmth,
friendliness, individual pride, and company spirit” (Southwest Airlines Co.,
2013). Core Competencies & Value Chain Activities The core competencies for
Southwest Airlines include: efficient operations, outstanding customer service,
and innovative HR management practices that all enable the company to follow
its stated mission and vision. Not only does this speak to the integrity of the
company, it also allows them to remain a leader within the industry. A value
chain includes “all the various activities that a company performs internally, so
called because the underlying intent ultimately lead to a created value for
buyers” (Thompson, Peteraf, Gamble, & Strickland III, 2015). Southwest has
learned to use their support activities and costs, including: technology, human
resource management and general administration to provide a mainframe for
their primary activities and costs including: supply chain management,
operations, distribution, sales and marketing, service and profit margin. They are
able to do this by building upon and continuing to reference their mission and
vision in their daily operations. This in turn enables them to improve their
competitive position. For example, the foundation of Southwest's corporate
message is not that customers are number one; rather, employees always come
 first with the company, with customers a respected second. Southwest, in turn,
expects its staff to extend customers the same level of warmth, respect, and
responsiveness they, themselves, receive. Along with this corporate mentality,
the company has taken “corporate measurements to insure progress toward
meeting company goals” (SNHU, 2014). For example,
11. 11. Running Head: STRATEGIC ANALYSIS 11 the Southwest Supplier Diversity
Program “supports suppliers that share Southwest’s ideals. Its policy for
suppliers states, “As a company, Southwest Airlines Co. values diversity and
seeks to create an environment that encourages it, both in the workplace and
among our supplier base” (Lauer, 2010). The company maintains assessment of
these implementations through their corporate extensions in the forms of
newsletters publications and web logs. Their Environmental Stewardship Report
“was created to communicate to our Customers, Employees, Shareholders, and
other Stakeholders what Environmental Stewardship means to Southwest. For
2008, we are publishing this more comprehensive “Southwest Cares” report to
show how Southwest does the right thing by Our Planet, Our Communities, Our
People, and Our Suppliers” (Southwest Cares, 2008). Internal Environment
Recommendations In regards to their competitive advantage, if the company
continues to take strides to represent themselves in such a positive manner,
while paying homage to their mission and vision in their daily work they should
have no problems with remaining a powerhouse in their industry. They have
already created a distinct advantage using these proven systems. In most cases
the hard part would be keeping it up. But given the fact that their success has
been woven into their culture research shows they will be just fine. Competitive
Strategy Low-cost Generic Competitive Strategy In the United States, Southwest
Airlines has, by most measures, been the most successful airline in its industry.
This success is largely due to the competitive advantage Southwest has
12. 12. Running Head: STRATEGIC ANALYSIS 12 gained by effectively positioning the
organization in customers' minds. By pursuing a low-cost provider strategy the
company is able to sustain a distinct advantage over its rivals. “Striving to be the
industry’s overall low-cost provider is a powerful competitive approach in
markets with many price-sensitive buyer” (Thompson, Peteraf, Gamble, &
Strickland III, 2015). Such is the case within the airline industry. Southwest is
able to do this by incorporating features and services that consumers consider
essential; such as little to no extra charge for luggage. They call it the “Bags Fly
Free” campaign (Southwest Airlines Co., 2015). “Did you know… that Southwest
Airlines does not charge for your first or second checked bag? That’s right! While
bag fees have become the norm amongst our competitors, we've stayed true to
our reputation as the maverick of the airline industry by not charging for bags”
(Southwest Airlines Co., 2015). In keeping with their already lower than
competitors fare charges, Southwest has gained an advantage even further by
not passing additional fees onto their customers with bag fees. These strategic
methods come with even further cost advantages by allowing the value chain to
be performed more cost-effectively than rivals. Falling under the service branch
of their value chain the company is more than doubling their recuperation on
costs by announcing the savings for customers with just the first two bags.
Competitive advantage is thereby sustained when customers see the value that
comes along with their ticket price which leads to an increase in market share
for Southwest. Competitive Strategy Recommendations It is my recommendation
 that Southwest continue to add value by differentiation. “The centrality of
customer service to the Southwest mission has motivated the company to
identify key drivers of customer service and focus its operational efforts on those
drivers” (Miles &
13. 13. Running Head: STRATEGIC ANALYSIS 13 Mangold, 2005). This “branding
process enables the organization to consistently deliver its desired brand image
to customers, thereby solidifying a clear position in the minds of customers and
employees alike. When done well, it provides a competitive advantage” that
further enables added savings throughout the value chain. Strengthening
Competitive Position Generic Strategy By pursuing a low-cost provider strategy
Southwest Airlines is able to sustain a distinct advantage over its rivals. This
success is largely due to the competitive advantage Southwest has gained by
effectively positioning the organization in customers' minds in addition to
finalizing a merger with a top competitor, a complementary strategic move.
Acting proactively, the company has done its research, studying the voice of its
customers and understanding exactly how to make Southwest Airlines the best
option. As we have come to learn, excellent execution of an excellent strategy is
the most reliable recipe for turning a company into a standout performer over
the long term. Complementary Strategic Option A merger is a complementary
strategic option “which involves more shared ownership and can be used either
to consolidate what the merging companies have or provide the companies with
additional diversification, especially into a new industry for the acquirer
(Swaminathan, Murshed, & Hulland, 2008). This was the action taken by
Southwest Airlines in the fall of 2011. With a lack of presence in the international
market prior to the merger, this action allowed Southwest entry in to
international markets and put the company on the path of growth; accelerating
the company’s profits by 75% per year to $946 million in the first three
14. 14. Running Head: STRATEGIC ANALYSIS 14 quarters of 2014 (Team, 2014).
These offensive actions to improve strategic position have definitely paid off.
“This international presence has positioned Southwest to expand to Central
America and northern parts of South America – regions that are seeing fast
growth in demand for air travel” (Team, 2014). By using the merger as a
complementary strategic option, Southwest has taken a strategic turn for the
better and focused planning on growth in the international market. Competitive
Position Recommendations In order to continue to strengthen its competitive
position, Southwest Airlines must extend its strategy and possibly complete an
acquisition of a top competitor. By staying abreast of the continuously changing
“market conditions, competitive landscape, and their own strengths and
weaknesses,” Southwest must also continue to revise and extend their strategies
to options that will allow them to remain in majority share of the market. One
way they can do this is by completing an acquisition of a foreign airline service
based in an overseas market. This will enable the company the access it needs to
branch out into the foreign market as well as the customers. The Global
Marketplace Used primarily as an opportunity for growth and competitive
advantage, Southwest Airlines was able to successfully merge with AirTran
Airways in the fall of 2011. This deliberate act of strategy has enabled the
company to remain a leader within the airline industry by having a direct result
of access into foreign markets. Not only did this action expand the possibilities
for further growth for the airline giant, it also proved immediately successful.
15. 15. Running Head: STRATEGIC ANALYSIS 15 “Three years after the merger,
Southwest’s operating costs are still well below those of other major airlines
including top competitor, Jet Blue Airlines. In terms of capacity, AirTran
expanded Southwest’s network by about 25%, making Southwest the largest
domestic carrier based on the number of passengers flown” (Team, 2014). The
move was a direct catalyst for international growth. “Overall, the AirTran
integration has played a crucial part in taking Southwest’s stock to its current
lifetime high” (Team, 2014). Additional actions the company can take in order to
continue to gain a competitive advantage in foreign markets include preserving
the cost advantage already realized by operating a single type of aircraft.
Southwest is currently playing this card by leasing out AirTran’s fleet of 717s to
Delta Airlines, another top competitor. Value is created by saving costs and
outsourcing goods to another company (Team, 2014). Corporate Strategy:
Business Diversification Diversification Strategy It has been said that “a
corporate strategy tries to create synergy, where the diverse businesses under
the corporate umbrella achieve more than they would as separate, disperse
business units and thus expand shareholder value” (Porter, 1987). The opposite
can be said for Southwest Airlines. Being a company that is completely dedicated
to the industry in which it operates, Southwest does not boast of a diversification
strategy, related or unrelated. One thing that the company does that can be
similar to diversification is the divestiture of their Boeing 717 fleet of plans to
Delta, a rival company. “Southwest's commitment to a single type of plane—the
Boeing 737—has played a big part in its success. Southwest is so devoted to the
737 that after it acquired AirTran, a rival carrier that was a leading operator of
the Boeing 717 (once known as
16. 16. Running Head: STRATEGIC ANALYSIS 16 the MD-95), it decided to lease the
defunct airline's entire 717 fleet—88 planes—to Delta” (N.B., 2012, par. 2). Chris
Wahlenmaier, VP of Ground Operations for Southwest Airlines explained their
reasoning: "We only need to train our mechanics on one type of airplane. We
only need extra parts inventory for that one type of airplane. If we have to swap
a plane out at the last minute for maintenance, the fleet is totally
interchangeable—all our on-board crews and ground crews are already familiar
with it. And there are no challenges in how and where we can park our planes on
the ground, since they're all the same shape and size." (N.B., 2012, par. 3). This
strategy has proven to boost revenues for the company as well as significantly
decrease operating costs. Not to mention the huge discount received by the plan
manufacturer. Diversification Future Proposal A future proposal for business
diversification would involve possibly partnering with a travel destination
company such as Expedia or Priceline. This move may help ease the company
into the top spot within the industry by offering more of the market and
broadening their service line. However I am not sure it would be largely
supported by stakeholders being that it is not warranted. To date the company
has achieved an unprecedented “60 consecutive quarterly profits, a record of
profitability no other carrier can touch” (Reed, 2006). Ethics, Social
Responsibility, & Environmental Sustainability Southwest Airlines is a great
representation of a company whose focus is embodied by the three spheres and
corporate social responsibility. To express an understanding in both the
17. 17. Running Head: STRATEGIC ANALYSIS 17 economic and political spheres a
quote was noted stating, “activities undertaken in a space (middle ground)
 where economic and ethical activities overlap, are likely to generate a source of
long-term, stable profits, and result in a higher level of employee, shareholder
and corporate well-being” (Bansal, 2005). Ethics Southwest demonstrates these
sorts of activities in their daily execution of business by choice to meet the rules
and regulations set by the government. An example is their willingness to comply
with and make the most out of industry regulations for both their business and
their shareholders. For example, one section of “the second phase of the
Department of Transportation’s Passenger Protection Regulations Rule #2,
which goes into effect for all airlines on January 24, 2014 for most provisions and
on January 26, 2014 for the Full Fare Advertising provision states: If a flight’s
status changes by thirty or more minutes or the flight is cancelled, Airlines must
inform Customers within thirty minutes of that change” (Anderson, 2012.).
Though you will find that based on Southwest’s website, this rule does not
require any changes of the company. “This rule does not change what we are
currently doing. As has been Southwest’s since 2000, if a Customer cancels a
reservation within 24 hours of original booking/ticketing, a refund is
automatically processed to the original form of payment” (Southwest Airlines,
2013). In addition, Southwest goes above and beyond in providing ever essential
access for it’s’ customers to make any necessary changes quickly and easily
through their: mobile site or app, self-service kiosk, ticket counter, or departure
gate (Southwest Airlines, 2013). Through this example it is clear to see that the
“tug-of-war between people and profits known as “Economic-Ethics Tension” is
not viable in Southwest being that they place an equal value on both aspects
(Bansal, 2005); clearly conforming to their ethics policy.
18. 18. Running Head: STRATEGIC ANALYSIS 18 Southwest Airlines’ CEO, Gary Kelly
said it best, “I LUV this time of year—looking forward to what’s on the horizon
and planning to accomplish the goals and resolutions that we set for ourselves”
(Kelly, n.d.). As a company that is constantly evolving, Southwest Airlines is
always trying to strive for their ultimate mission of providing the “highest quality
of Customer Service delivered with a sense of warmth, friendliness, individual
pride, and Company Spirit” (Southwest Airlines Co., 2013); in doing so they have
continued to develop as a strong industry leader. Social Responsibility “Firms
build sustainable value by actively engaging stakeholders in the decision-making
process, and by doing it earlier rather than later”; and great companies focus on
more than one bottom line when gauging their performance (Bansal, 2005). Just
recently Southwest was praised for teaming up with the National Oceanic and
Atmospheric Administration (NOAA) to provide a “missing link” and help
revolutionize weather forecasting (Southwest Airlines Newsroom, 2013). This is
yet another example of how the company’s stage of development has been
reflected in its vision and value statements over time. The creativity and
innovation involved in the decisions that they make for the betterment and
effectiveness of the company provide a summation of their dedication to the
company vision. Sustainability One of the reasons Southwest Airlines is a well-
known and respected company is because of their commitment to remaining a
sustainable community. In doing so they are continuously researching on how to
make strategic decisions for a flourishing and environmentally sustainable future
that providing a foundation for growth. Employing a Combined Environmental
19. 19. Running Head: STRATEGIC ANALYSIS 19 Management System complete with
environmental and sustainability training for employees, and modernization
 program, “environmental stewardship is a responsibility Southwest Airlines
takes seriously, and efficient operations are the hallmark of our Company and
the foundation of our environmental commitment” (Southwest Citizenship,
2014). When referring to environmental initiatives, Southwest believes “our
planet sustains us all, so we feel it’s our responsibility to protect it. This focus on
efficiency not only makes good business sense, it is the right thing to do!”
(Southwest Citizenship, 2014). With the global village in mind, the company has
fully integrated their environmental management system into their current
sustainability management practices. Following standards set by the Global
Reporting Initiative (GRI), Southwest has communicated their sustainability
performance by adhering to and fully complying with this framework for the
fourth year straight (2012 Southwest Airlines One Report, 2012). Using
framework which includes reporting guidelines and sector guidance, the GRI
“enables grater organizational transparency and accountability by voluntarily
allowing a company to report their economic, environmental and social impacts
cause by everyday activities (Global Reporting Initiative, 2014). In my opinion
Southwest has gone above and beyond, surpassing set standards with intense
environmental and sustainability training. This excerpt was taken from their
2012 Southwest Airlines One Report: Our commitment to protecting our Planet
is integral to our operations, so we include the topics of environmental
stewardship and sustainability in our Employee training. At and above our
Supervisor level, we have enhanced Leadership courses to include sustainability
content. In these courses, we discuss sustainability, our fuel usage and its impact
on our greenhouse gas emissions and climate change, our initiatives to decrease
20. 20. Running Head: STRATEGIC ANALYSIS 20 emissions, and our recycling
programs. We also require annual environmental training for all operational
groups. Topics covered include storm water pollution protection, proper waste
disposal, air permitting compliance, and aircraft drinking water compliance.
Through this recurrent training, we teach our Employees about current
environmental policies and regulations that must be followed in our operations.
Strategy Execution: Building the Capability to Execute Strategy Internal Strategy
Execution Supporting its central based strategy, Southwest has been able to
prove adherence to their mission, vision, and value statements through its hiring
and training practices. As previously stated within this document, a vital part of
Southwest’s employee friendly workplace comes from providing them with “high
impact training programs.” These programs are structured to be aligned with the
specific and measureable goals as outlined and fully supported by leadership
(Blanchard, 2007). Following the strategy map for Southwest, an example of
successful implementation includes a more responsive ground crew. As a result
of the high impact training programs, this organizational capability has increase
response for ground crew who can help turn around the planes at a quicker rate
which would have a positive impact on on-time departures (a key business
process for airlines and metric air travelers potentially look at when deciding on
flights). This improved key business process results in higher customer
satisfaction, which in turn results in higher customer loyalty and profit”
(McKnight, 2009, par. 1).
21. 21. Running Head: STRATEGIC ANALYSIS 21 The leadership of the company is
functionally structured with two tiers of top level management which make all of
the important company-wide decisions. Given the success of the company I
 would suggest that the structure remains as is. The current executive team is
doing a remarkable job at keeping the company in a competitive position and the
current structure works given the ability to remain in direct control of company-
wide initiatives and strategies. Strategy Execution: Managing Internal Operations
Best Practices at Southwest As a vital key to this strategic analysis, I have had the
pleasure of interacting with Southwest Airlines employees and gleaning their
perspective of working for such a remarkable company. The following highlights
some of their responses from an internal standpoint. One common theme found
while researching the company from an employee’s perspective was the
appreciation for transparency. Using the company’s wildly popular blog Nuts
About Southwest, employees make remarks about best practices such as
transparency and accountability. The very fact that they use the blog not only as
an external but also internal communication tool is an example of how they use
information systems to better execute the overall strategy. As with recognition,
motivation comes from management on all levels and with the same emphasis
and excitement. Frequent company sponsored outings, picnics, and team
building sessions also lend a hand to the motivating factor. According to
Salary.com, Southwest executives are handsomely compensated for their service
to the company with a combination of monetary and non-monetary elements. A
common theme for the company’s top three executives, each are receiving a
larger percent of equity in the company than cash. The cash is a combination of
yearly base pay and bonuses (Salary.com,
22. 22. Running Head: STRATEGIC ANALYSIS 22 2015). The CEO of Southwest earns
a combined total of about $4,000,000. However, according to Salary.com, the
executives at rival American Airlines bring in almost double of what the
executives at Southwest are. Based on this comparison I would say Southwest
has a compensation rating of a five on a scale of 1 to 10. Based on this
information I would venture to say that the governing board for this company
would allow a slight increase in salary and benefits; especially given the success
rate. The culture is already one where the employee turnover is low, but it would
not hurt to increase salaries and bonuses to all employees if it is a financially
feasible option. Strategy Execution: Leadership Leadership Recommendations To
summarize, Southwest Airlines is doing a phenomenal job in becoming and
remaining one of the best airline travel options for consumers. In an effort to
show continuous improvement and to improve on business operations and
strategy, my recommendation would be to focus on strengthening its competitive
position by completing an acquisition of a top competitor in the international
market within three to five years. In addition, the company must continue to
revise strategies as applicable given the acquisition and international growth. In
order to achieve this strategic position, the company’s leadership must focus on
air travel in the international market, what is lacking in international service and
how to fill the gap. They must also be aware of which companies offer the largest
return in preparation for the acquisition and which international market would
benefit the most from increasing travel options.
23. 23. Running Head: STRATEGIC ANALYSIS 23 References Anderson, L. (2012,
January 24). Department of Transportation Passenger Protection Rules: Nuts
About Southwest [Web log post]. Retrieved from
http://www.blogsouthwest.com/department-transportation-passenger-
protection- rules/#sthash.ckBW2mq5.dpuf Bansal, P. (2005). Building
 sustainable value through fiscal and social responsibility. Ivey Business Journal,
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