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AIRLINES
STRATEGIC MANAGEMENT
SECTION F GROUP 13
SOUTHWESTS STRATEGY
Pilot Cost Lower cost per flight hour Higher cost per flight hour -
$100,000 for 70 hours $200,000 for 50 hours
MCKINSEY 7S FRAMEWORK FOR SOUTHWEST AIRLINES
Dynamic Leadership
Service Oriented
Committed
Style
Customer Friendly Horizontal
Efficient and Fast Lean
Skills Structure
Team work Shared Values
Multi-functional -Speed
-Cost Focus
- Team player
Low cost niche strategy -Fun Profit Sharing
Strategy Systems
Frequent flights Low Cost boarding,
Point to Point transit reservations, luggage
system Staff Standardized fleet -
Concentrates on Boeing 737 aircraft
underutilized airports
High employee productivity
Youthful
Customer focused
HOW DO THESE ELEMENTS REINFORCE EACH OTHER
III. How to compete in terms of Cost Leadership , Differentiation or Focus. Southwest Airlines
chose to compete on Cost Leadership .
After the strategy part ,comes the implementation part. Implementation requires choosing activates that are aligned with the
intended strategy . Alignment in term of People, culture , Leadership , Structure, incentives and Supportive activities.
CRITERIA TO CHOSE THE UNIQUE ACTIVITIES
The unique activities should go with the strategic positioning of the organization.
Supportive activities
These activities are the tool through which primary activities are achieved.
For example, low fares was the primary activity of the SW Airlines which they achieved by high aircraft utilization, limited used
of travel agent ,standardization of aircrafts and highly productive ground crews. These all activities are supportive and are
pertinent to achieve strategic goal.
IS ORGANIZATIONAL STRUCTURE A RESULT OF
STRATEGY OR IS STRATEGY CONSTRAINED BY
STRUCTURE?
Yes, organizational structure is a result of strategy and is very important for the success of any
organization. In the case of Southwest Airlines ,competition tried to imitate the strategy of the
Southwest Airlines without proper alignment of strategic goals with the tools and failed.
The Contingency Theory states that there is no best way to organize; it is dependent on the strategy
being pursued by the organization. So, the best way to deal with the dynamic market is to adopt
emergent strategies that develop during the process.
Strategy of the Southwest Airlines was cost leadership which was highly dependent employee
productivity. Motivating employees played a large role in increasing the productivity of the employees and
thereby reducing the cost .Also the flat structure of the organization helped in maintaining transparency
between the employees and the management. Employees felt part of the organization . The overall
structure complimenting the strategy is the reason for the success of Southwest.
IS ORGANIZATIONAL STRUCTURE A RESULT OF
STRATEGY OR IS STRATEGY CONSTRAINED BY
STRUCTURE?
While on the other hand we saw that United Airlines, tried to imitate Southwest by entering low-cost
aviation segment was not successful due to several reasons.
They could not imitate the organizational structure of the Southwest Airlines, which was flexible,
supportive opposite to that at United which was rigid, specially from the top. Leadership and culture of
the organization was not nurturing as well. Power struggle did not bode well with the strategy that low-
cost airlines require for succeed.
Add to that the authoritarian management, United did not involve employee from lower management in
the strategy formulation process which not only made employee felt motivated but also lost valuable
feedback . Management issues also led to poor labor relations which in turn was the reason behind low
labor productivity and low morale and happiness among the employees.
These reasons led to the failure of United in the segment
THANK YOU