A unique take on Southwest Airlines Strategy - TheStrategyStory

Point to Point model– Southwest, being a low-cost carrier, focused more on the point to point model and bought significant process improvements, ... AdvancedStrategies AuniquetakeonSouthwestAirlinesStrategy By VinitJoshi March23,2021 8MinsRead Share ShareonFacebook ShareonTwitter LinkedIn Email ListentotheStory AnyonewhohasstudiedbusinessmanagementeitherasadegreeorasanelectivewouldhavedefinitelystudiedMichaelPorter’s5Forcesframework.Thisframeworkwasfirstpublishedin HarvardBusinessReview in1979.Themodelisverymuchrelevantin21st-centurybusinessaswellduetoitsdeep360-degreeviewofabusiness. Oneofthe5forcesiscalled“BarrierstoEntry”andmoreoftenthannoteitherOil&GasorAirlineindustrywouldserveasanaptexampleofanindustrywithveryhighbarrierstoentryduetoitshighCapexandOpexrequirements. Butwait,thenwithsomanybarrierstoentry,whydoairlinesstillbleedred?Therearemanyreasonsforthis,butoneofthemisstiffcompetitionwithlow-costcarriers,the5th,andtheframework’scentralforce(competitionamongtheplayers). Beforewemoveon,thebelowisaninterestingtweetresponsefromAnandMahindra,onbeingaskedtobuytheailing“JetAirways”. Rememberthequote:“Ifyouwanttobeamillionaire,startwithaBilliondollarsandthenstart(buy)anairline!”https://t.co/dYRdwup3kK—anandmahindra(@anandmahindra)June29,2019 TheUSAirlineIndustry Followingthe9/11attacks,theUSairlineindustryhasbeenthroughroughweather.20+airlineshavefiledforbankruptcyprotectionunderChapter7.60+airlineshavefiledforbankruptcyprotectionunderChapter11. Thislistalsoincludesthetop3outof4airlinesnamely,AmericanAirlines,United&DeltaAirLines,howevertheywereabletoexitthebankruptcywithinafewyears. Thelandscapehasbeenconstantlychangingwithahighvolumeofmergersandacquisitions,resultinginchangingmarketsharestatistics. ThegraphabovecoveringtheperiodJanuarytoDecember2020showcasesthatthetop4airlinesconstituteapprox.65%ofthemarketshare. Inthisstory,wearefocusingonSouthwestAirlinesthatwasfoundedonthenotionsofthelow-costcarrierbutwithitsuniquestrategyhasbeenprofitableforthelast45yearsinarow.  ThetakeoffstrategyofSouthwestAirlines SouthwestAirlinesCo.,typicallyreferredtoasSouthwest,isoneoftheUnitedStates’majorairlinesandtheworld’slargestlow-costcarrierairline.TheairlinewasestablishedonMarch15,1967,by HerbKelleher as AirSouthwestCo. andadopteditscurrentname,SouthwestAirlinesCo.,in1971,whenitbeganoperatingasan intrastateairline whollywithinthestateofTexasfirstflyingbetweenDallas,HoustonandSanAntonio.  Mostairlinesbackinthe1960sfollowedthemostpopular“HubandSpoke”modelfortheiroperations. HubandSpokemodel–Asthenamesuggests,thereisadefinedhubfromwheretheflightsoriginate,andthedestinationsarethespokes. Thebenefitofahubandspokemodelisthatithasfewerroutes,butthemajordrawbackofthismodelisitsrigidity,andifthereisaslightchangeintheairlineroutingduetoweather,etc.,itcanhavecascadingconsequencestotheotherplannedflights. Source PointtoPointmodel–Southwest,beingalow-costcarrier,focusedmoreonthepointtopointmodelandboughtsignificantprocessimprovements,inawaymasteredittoachieveveryhighoperationalefficiency. Inthepoint-to-pointmodel,eachflightisasinglejourney.Theoriginanddestinationareconnectedviaasinglenon-stopflight.Thepoint-to-pointmodeloffersmoretraveloptionsandflexibilityascomparedtothehubandspokemodel. Forpassengersundertakingfurtherjourneys,theywillhavetocollectthebaggageandrecheckthemforleg2oftheirjourney.Thismodelhasconsiderablyledtosavedtravelhoursanddoneawaywiththenecessityforconnectingflights. Source KeyDifferentiatingFactorsinSouthwestAirlinesStrategy SouthwestairlinesisthethirdlargestairlineintheUnitedStatesofAmericaandarguablythebiggestinthelow-costcarriersegmentacrosstheglobe. So,wastheoperationalefficiencygainedduetothechangeintheflightoperationsmodeltheonlyreasonwhySouthwestairlinesisthe#1low-costcarrierintheworld? NO,let’sunderstandwhatdifferentiatedSouthwestairlinesstrategyfromitscounterparts. CustomerEccentricity ForSouthwest,theykeepthecustomersatthecenteroftheirbusinessoperations.Theyoffercertainbenefitstoflyerswhicharenotofferedbyotherairlines,like Southwestallowstwochecked-inbags,freeofcost,unlikemanyofitscompetitors.FlightchangethirtyminutespriortothedepartureisallowedbySouthwest.Southwestoffersfreein-flightentertainmentlikeLiveTV,Movies,useofwhatsappandimessage.ItoffersWi-Fiservicesatverynominalrates. AllthesehaveresultedinSouthwestbeingtheairlinewiththeleastnumberofcomplaints,accordingtotheDepartmentofTransportationoftheUnitedStatesofAmerica. Onlyonetypeofaircraft Manyairlineshavedifferenttypesofaircraftintheirfleet,butnotSouthwest.SouthwestoperatesbyusingonlyBoeing737aircraft.Itsavesalotofmoneyby: Trainingcabincrewsandsupportstaffononlyonetypeofaircraft.Maintenanceofinventoryofsparepartsforoneaircrafttype.Incaseofbreakdown,alternateaircraftcanbearrangedimmediately.Itspolicyofnotassigningseatshelpstremendouslyascustomerscantakeanyavailableseatwhenboardingtheaircraft,therebyreducingtheboardingtime.Inthecaseofalternateaircraftalso,thispolicyhugelybenefitstheairlinereducingtheturnaroundtime. Rightrecruitmentpolicies Southweststressesalotonthecustomerexperienceandhenceitisveryimperativefortheairlinetohiretherightkindofpeople.Southwestfocussesonhiringpeoplewhohaveanattitudeforservingcustomers. Employeesundergovariouspiecesoftrainingwhichalsoincludescross-training.Trainingisheavilycenteredaroundteambuildingandcollaboration. Conclusion TheSouthwestAirlinescasestudyisalessoninculturalstrategy.Anorganizationbuiltonthefundamentalsofcustomereccentricity,effectiveprocesses,andadedicatedteamismeanttoachievesuccessandovercomechallenges.Thismodelofexceptionalcustomerservicecanhelpabusinessearnanimpeccablereputationintheindustry.That’swhatmakestheSouthwestmodeluniquelypriced,yetoneprofitableinthiscruelairlineindustry. Southwest’sabilitytobedifferentandnotfollowtheherd—nottomentionbecomingAmerica’slargestairline—canbetracedinlargeparttotheAirlineDeregulationAct.Thankstothisact,HerbandRollinrealizedtheirVisionandthetravelingpublicbenefitsoneveryflight,everyday.GaryKelly,Chairman&CEO,SouthwestAirlines Also,checkoutourmostlovedstoriesbelow JohnnieWalker–Thelegendthatkeepswalking! JohnnieWalkerisa200yearsoldbrandbutitisstillgoingstrongwithitsmarketingstrategiesandboldattitudetochallengetheconventionalnorms. Starbuckspricesproductsonvaluenotcost.Why? Invalue-basedpricing,productsarepricebasedontheperceivedvalueinsteadofcost.Starbuckshasmasteredtheartofvalue-basedpricing.How? Nikedoesn’tsellshoes.Itsellsanidea!! Nikehasbuiltoneofthemostpowerfulbrandsintheworldthroughitsbenefitbasedmarketingstrategy.WhatisthisstrategyandhowNikehasusedit? Domino’sisnotapizzadeliverycompany.Whatisitthen? HowonesteptowardsdigitaltransformationcompletelychangedthebrandperceptionofDomino’sfromapizzadeliverycompanytoatechnologycompany? BlackRock,thestoryoftheworld’slargestshadowbank BlackRockhas$7.9trillionworthofAssetUnderManagementwhichisequalto91sovereignwealthfundsmanaged.Whatmadeitunknownbutamassivebanker? WhydoesTesla’sZeroDollarBudgetMarketingStrategywork? Toutedasthemostvaluablecarcompanyintheworld,Teslafirmlystickstoitszerodollarmarketing.ThenwhatisTesla’smarketingstrategy? TheNokiaSaga–Rise,FallandReturn Nokiaisaperfectcasestudyofabusinessthatonceinvinciblebutfailedtomaintainleadershipasitdidnotinnovateasfastasitscompetitorsdid! Yahoo!Thestoryofstrategicmistakes Yahoo’sstoryorcasestudyisfullofstrategicmistakes.Fromwrongtomissedacquisitions,wrongCEOs,thelistisendless.Nomatterhowgreattheproductwas!! Apple–AUniqueTakeonSocialMediaStrategy Apple’ssocialmediastrategyisextremelyunusual.Inthispiece,weconnectApple’suniqueandsuccessfultakeonsocialmediatoitscorevalues. 1 Author VinitJoshi VinitJoshiisCorporatePlanning&Strategyprofessionalwith15+yearsofexperienceacrossrenowned&diversifiedbusinessgroups.Whennotworkingorspendingtimewithfamily,Vinitloveslisteningtoavarietyofmusic LinkedIn RelatedPosts HowdoesKlarnamakemoney|BusinessModel December11,2021 HowdoesKhanAcademymakemoney|BusinessModel December9,2021 HowdoesQuoramakemoney|BusinessModel December7,2021 Ola’sbusinessmodel-EverythingYouNeedtoKnow December2,2021 HowdoesMeeshomakemoney|AnalyzingBusinessModel November30,2021 HowdoesSlackmakemoney|Slack’sFreemiumbusinessmodel November29,2021 Thehyper-localdeliverybusinessmodelofDunzo November25,2021 BusinessStrategybehindPixarAnimationFilms November23,2021 LinkedIn:Redefiningitscontentstrategy November10,2021 MyGlammtoGoodGlamm:TheJourneyofanOn-DemandBeautyService November7,2021 CarbonNeutralWorld–LongRoadtoEnergyTransition November2,2021 HowdoesZillowmakemoney|BusinessModel October27,2021 HowdoesZoommakemoney|BusinessModel October23,2021 Zalando’splatform-basedbusinessmodel October19,2021 M&M’sMarketingStrategy:BringingSweetnessandColortotheWorld October16,2021 WriteACommentCancelReply Savemyname,email,andwebsiteinthisbrowserforthenexttimeIcomment. 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