Day: September 10, 2017

Southwest Airlines Case Study

Southwest Airlines Case Study

ENT 5193 Strategy in Entrepreneurial Organization Class Date: February 25, 2011 Chapter: 4 Case: 27-Southwest Airlines: Does “LUV” Last? Does “LUV” really last? Many relationship experts have stated that “LUV” is eternal and that it is like a muscle that must always be worked out to keep it in shape, in order for it to last forever. While some may disagree that “LUV” can’t last forever, when it comes to relationships, the “LUV” that is in question is Southwest Airlines.

What once was a small commuter air service, has now grown to be one of the largest and most successful major airline companies in the United States. So how did Southwest Airlines become so successful? It all began with the founders Rollin King, an entrepreneur, and Herb Kelleher, an attorney, who demonstrated strategic leadership from the beginning. The strategic leadership began when the these two gentlemen saw an opportunity that would be beneficial due to the inconvenience and expense of ground travel by either bus, train, or automobile between three major cities, which were Houston, Dallas, and San Antonio.

Due to this, the establishment of Southwest Airlines came into existence by providing point-to-point short haul flights to less popular and less congested airports. Shortly after its establishment, like any other new businesses, Southwest faced many barriers in the beginning phases, which pertained to safety issues, inspections, and flight operations, which Southwest was able to overcome due to Herb Kelleher’s legal experience. After overcoming the barriers, the strategic leadership continued with the incessant building of the organization.

Southwest Airlines’ organization is like an upside-down pyramid where upper management is on the bottom and the employees, who are the experts, are at the top. This was the leadership style of Herb Kelleher, who always believed that regardless of your title, the people who kept the business afloat were the employees of the company because they were the key to having satisfied customers. How important were the employees? The employees were so important, that they were given the opportunity to be themselves while on the job. Alongside with employees being themselves, there were policies and programs that were put into place y the committee in which the company had different events such as spirit and culture parties, new-hire welcome kits for new employees, job shadowing, and employee achievement recognition amongst different departments. Even though there were certain policies and programs that were put into place for employees to have a family-oriented work environment, the one thing that the employees did not have were competitive salaries, unlike their competitors. Not only were their salaries lower, but the amount of work hours employees worked were higher as well.

As Southwest Airlines continued to expand and be profitable, there was a change in leadership where the former CEO and founder Herb Kelleher relinquished his power to Colleen C. Barrett and James Parker. As we all know when it comes to change, sometimes it can be good and sometimes it can be a challenge, which it was for both Colleen Barrett and James Parker, due to the substantial growth of the company. The substantial growth was such a challenge that employees were becoming more aggressive and frustrated due to the demand of an increase in work hours, staff shortages and unresolved contract negotiations.

Change continued at Southwest Airlines when Gary Kelly took the helm as CEO. Gary Kelly’s leadership style was similar to Herb Kelleher where he was people-oriented, energetic, and most importantly, a go-getter. Mr. Kelly was such a go-getter, that he continued to seek opportunities similar to Herb Kelleher in the areas of flying planes point-to-point, short haul flights, low airfares, technological improvements, and code share agreements, which consisted of adding flights to underserved cities such as Chicago, Phoenix, Philadelphia, and Pittsburgh.

In conclusion, Southwest Airlines’ success was due to the strategic leadership of its founders in which the strategy consisted of “keep it cheap, and keep it simple,” offering low fares, devotion to their employees and customers, and aggressive marketing approaches. By continuing to do these strategies, Southwest will continue to be profitable and will remain the preferred airline of choice for consumers. Southwest has had more opportunities for growth than it has airplanes.

Yet, unlike many other major airlines, it has been able to avoid the trap of growing beyond its means thereby avoiding the need to merge, file for bankruptcy, or become non-existent. What I would recommend to Southwest in order to continue to avoid the trap, is by considering on experimenting their service to larger regions (i. e. flights overseas), upgrading of planes, and most importantly continue to monitor their competitors who can easily duplicate their current strategies.