Southwest Airlines Corporation

1. What is Southwests strategy? What is the basis on which Southwest builds its competitive
advantage?

Southwest follows low cost leadership strategy. Southwest have been offering the lowest fares due to its
strategy of improving efficiency and pass cost saving to its passengers by offering them low prices.
Southwest has lowest operational cost due the the various initiatives taken to cut cost. This
helps it to offer lowest fares. Southwest flies point to point unlike other airlines which use hub & spoke
model. It uses a short and medium haul approach. Crew is paid per trip. Pilots are unionized
independently,allowing them to fly far more hours than pilots at other airlines, who are
nationally unionized. It usesless congested airports, which helps it ensure fewer delays. The turnaround
time from landing to takeoff and crew required is lesser. 80 % of itspassengers fly on non- stop flight
routes. This helps to save flight time, operate more flights, cut other additional cost on crew,
gas and maintenance. Low employee turnover rate helps Southwest to save on cost of hiring and
training. About 60% of Southwests passenger revenue was generated by onlinebooking via
Southwest.com resulting in cost, time and manpower savings.
The bases on which Southwest builds its competitive advantage is by putting employees first.
Employees first philosophy helps the organizationto keep its employees highly engaged, which in turn
motivates the employees to serve the customers better resulting in high customer satisfaction. Loyal customers
in turn result in generation of revenuesfor the company, thus increasing shareholder value.
Moreover, Southwests culture was instilled to each and every employees such as hardwork,
high-energy, fun, local autonomy, and creativity.

2. How do Southwests control systems help execute the firms strategy?

Southwests main objective is to have goals congruence within the company. The actions people are led to
take in accordance with their perceived self interest are also in the best interest of the organization. Southwests
control systems helps in influencing behavior of its people in a goal congruent manner. Its control system help
execute the firms strategy of low cost leadership by implementing short haul andmedium haul,
encouraging on-line booking, ensuring lesser time spent at the gate, hedging fuel and oil(It
used hedging for 85% of its fuel & oil needs & saved about $455 million). It has an open and inclusiveculture.
It boosts of a culture of hardwork, high energy, fun, local autonomy, and creativity. The hiring process at
Southwest is unique. Peers screen candidates & conducted interviews. E.g: pilots hired pilots,gate agents
hired gate agents etc. Also, it initiated the 1st profit sharing plan with its employees in theU.S.
airline industry, through which the employees owned about 10% of the company stock. Theseinitiatives have
helped in developing feeling of ownership in employees. Southwest has a charismaticleader in CEO Herb
Kelleher. Southwest encourages proactiveness by providing recognition to personalinitiatives taken by its
employees. It ensures task control thorough automation (e.g: 60% revenuethrough online
booking, Ding! The desktop application that provides customers with exclusive deals).