Southwest Airlines - Case Study Example

?Southwest Airlines Introduction The Southwest Airlines was established in 1966, a brainchild of Rollin King, an entrepreneur from San Antonio (Thompson & Gamble, 2011). The business was formally incorporated in 1967 with Herb Kelleher as a shareholder. The business was established to offer reliable, affordable, and convenient air transport services to customers, mainly business people who needed to travel between Houston, San Antonio and Dallas. The company battled in court against its rivals in Texas to establish for almost four years. In 1971, Lamar Muse joined the company as the CEO and led the company to an attractive IPO (Thompson & Gamble, 2011). Together with funds from private investors, and the IPO, the company managed to raise lose to seven million USD, funds that were used to purchase aircraft, equipment, and start-up capital. The company hired several relented senior staff most of who were veteran executives from other airlines. The company’s first flight went through successfully. As of mid 2001, the company had a fleet of about 350 planes plying across 58 airports in the U.S., and boasted of enjoying a turnover of about 5.5 billion USD annually (Thompson & Gamble, 2011, p.281). The company used different strategies to grow and in 2010, the company emerged the share leader of US domestic air travel (1). The company transported more passengers to various destinations in the United States than any other airline in 2010. Furthermore, the company boasted of offering the most reliable schedule and made profits consistently over the years unlike many of its counterparts. Company Strategy The Southwest Airlines has applied several strategies to see its success in the competitive market environment. Some of its strategies included providing hostesses with attractive clothing, offering free drinks to passengers, using an attractive tagline, and increasing its operational capacity without having to buy more planes initially. The company also realised its main market segments (business travellers and price sensitive leisure travellers) and maintained lower turnaround times compared to its competitors (Thompson & Gamble, 2011, p.279). Yet again, the company applied a different pricing strategy by incorporating different fare prices for the on-peak and off-peak periods. Essentially, the airline pursued a strategy that revolved around low cost, no frills and low prices (Thompson & Gamble, 2011, p.285). The company presented a customer care service that was dedicated to customer satisfaction with a fun loving attitude and happy face. The Southwest Airlines low cost-low price and no delays strategy emerged a winning strategy going by the remarkable results it has achieved over the years. As previously noted, the company consistently made profits and its customer and revenue base kept growing against those of its counterparts. The strategy is lovely considering that it focuses on the very needs of the targeted market segments without forgetting about the employees (Thompson & Gamble, 2011). On a scale of 1-10 with ten being the best score, I would give the company a rank of 8. Southwest’s Culture An organization is said to have a strong culture if its employees respond to stimulus owing toe the way they are aligned to the values of the organization. The Southwest Airlines has a strong culture that is pegged on various elements. The employees of the company are well trained and respond to the needs of the customer and the values of the organization efficiently. The company maintains a culture of keeping employees happy and motivated so that they can offer quality services. Furthermore, the company maintains a culture of excellent customer service. The company also maintains a culture of hard work, innovativeness, and teamwork. With the departure of Herb Kelleher, Gary Kelly is bound to face a number of challenges with respect to maintaining the company’s cultural commitments. For one, the company’s reputation has been tarnished following some accident and safety incidences which may affect the morale of employees (Thompson & Gamble, 2011). Furthermore, the company’s change of strategy to acquire outstanding stock of AirTran Holdings Inc. will mean that the company will bring on board several employees who are not accustomed to its ways. The company will need to spend a lot of time and resources in training the new employees on its corporate culture and lead them away from the cultures that they are accustomed to and that contrast that of The Southwest Airlines. Southwest Management Performance The Southwest Airlines’ management has done a lot to ensure that the company maintains a good track record in the market. The strategies that the company relies on as developed by the company’s management have so far proved worthwhile going by the company’s reputation and financial records. By establishing strategies and accompanying objectives such as making the company a great place to work, ensuring high safety and quality standards, and maintaining a highly motivated workforce, the company’s management has done a lot in implementing its strategies (Thompson & Gamble, 2011). One of the greatest strategies that the company has adopted so far is its focus on the workforce. With a motivated workforce, service delivery is bound to be qualitative. The company’s practice of rewarding employees and creating a flexible and conducive environment for them at work is quite remarkable considering that employees have nothing to fear as they try their best to offer the best services to their customers. Although the company performs well on many grounds, one practice that holds down the company is its reluctance in maintaining as high a safety standard for its aircrafts as it proclaims. Occasionally, there have been complaints about dents in the bodies of the company’s fleets which pose safety risks to the planes and their aircrafts. Furthermore, the company has been accused of not paying attention to recommendations presented to it by authorities regarding the safety of the planes ((Thompson & Gamble, 2011, p.154). AirTran Acquisition and Financial Analysis Acquisitions are usually done with the aim of fostering the growth of a company. One of the challenges that the Southwest Airlines will face is in respect to corporate culture. The employees of the two companies may find it difficult to appreciate the new corporate culture thereby affecting the company’s performance. The employees of Southwest Airlines may also perceive the new employees as inferior and labour negative attitudes toward them. As a result, there may arise conflicts between the two groups leading to poor performance in the market. Yet again, some employees of AirTran may have to be retrenched for various reasons including incompetence and redundancy. In order to avoid such situations, the managements of the two companies should inform and train their employees on how to embrace the changes that are bound to occur once the deal is finalised. The employees of AirTran should also be assured that they would not lose their jobs or will be duly compensated in case they have to be retrenched. The new employees will need to be trained on the corporate culture of Southwest Airlines so as to mesh well with current employees. The Southwest Airlines has had a history of success since its establishment. Its economic performance has been remarkable over the years. In 2009, the company earned revenue of close to 10.4 billion USD (Thompson & Gamble, 2011). The company has god prospects for the coming years as long as it maintains its costs low relative to those of competitors Recommendations for the Company Going by statistics presented by the Southwest Airlines, its operational costs have risen significantly and almost match those of its competitors. The company needs to do much to ensure that its fixed costs remain as low as possible. However, with an expected acquisition, the fixed costs are bound to increase which may negatively impact on the company’s performance. In order to overcome this challenge, the company may need to employ some of its staff on temporary basis. Furthermore, the company may need to retrench some of the employees from AirTran based on qualifications and experience. Conclusion The Southwest Airlines has grown from a humble beginning to become one of the most financially stable, reliable and convenient airlines in the United States. The company’s success has not come as a result of chance but from the strategic decisions that its management has made as well as the efforts of its motivated employees. The company is a low cost, low price service provider that focuses on reliability and high quality service. With an acquisition deal almost getting sealed by the management of the company and that of AirTran, several challenges will be posed to the company especially in regard to corporate culture, employee motivation, change implementation and employee layoff. The company needs to prepare its current and new employees for the changes that are bound to occur once the deal is sealed to avoid possible conflicts. References Thompson A. & Gamble J. (2011). Southwest Airlines in 2010: Culture, Values, and Operating Practices. Place. Publisher. Read More