Southwest Airlines is an American airline that operates within the low-cost carrier category. The company was founded in 1967 by Herb Kelleher and began operating in 1971. It is now the largest airline in the United States when measured by number of passengers carried annually. Southwest has a fleet of over 700 Boeing 737 aircraft and flies to over 100 destinations across the country.
The company’s business model is based on offering low-fare air travel, and it has been successful in doing so for many years. In order to keep fares low, Southwest uses a variety of strategies including flying only one type of aircraft (the Boeing 737), using point-to-point rather than hub-and-spoke routes, and maintaining a no-frills approach to customer service. These strategies have helped Southwest to avoid the problems that have plagued other airlines, such as high fuel costs and labor relations issues.
Southwest’s competitive advantage lies in its low-cost business model, which has allowed it to be profitable for 43 consecutive years. This is an impressive feat, especially when considering that the airline industry as a whole has been unprofitable for much of that time period. The company’s strong financial performance is due in part to its efficient operations, which are made possible by its use of technology and its focus on cost-cutting measures.
Southwest Airlines (SWA) is consistent in its culture, business model, and customer interactions and engagement, all of which help to lower costs while still providing their point-to-point efficient low-cost pleasant service. Their culture focuses on personalized connection, togetherness, recognition, support, and love. For decades, SWA’s “luv” has been the dominant theme in terms of client interactions.
Even their hiring practices focus on individuals that will fit the culture and maintain the brand’s identity of being fun, casual, and efficient. Their business model is unique within the airline industry as they only fly point-to-point (no hubs) which further reduces costs associated with flying. Additionally, they have a single aircraft type (Boeing 737), which also cuts down on operational costs. And finally, their customer engagement strategy is to “wow” customers with low fares and great service.
SWA’s value chain begins with Primary Activities, which inbound logistics would include receiving fuel, food, airplane parts/maintenance, and other necessary materials to get their planes ready for takeoff. Operations would be the actual flying of the planes to various destinations.
Outbound logistics is getting the plane turnaround time as low as possible so it can take off again quickly, and also delivering any lost baggage to customers. Marketing and sales would be working to get customers to book with SWA through special promotions and offers, as well as maintaining relationships with business partners.
Service is a key differentiator for SWA and is considered a primary activity. Their focus on customer service has led to high levels of customer satisfaction, which in turn drives repeat business and referrals/word-of-mouth marketing. Finally, SWA’s back-end support activities include human resources (hiring & training employees), information technology (maintaining website & online booking portal), and procurement (negotiating with vendors & suppliers).
In order to continue providing low fares and great service, SWA must constantly strive to improve their value chain. They have done this by investing in new technology, such as self-service kiosks and online check-in, which reduces labor costs and speeds up the check-in process. They’ve also invested in fuel efficiency initiatives and worked on reducing turnaround times. These investments have allowed SWA to maintain their low-cost structure while still providing an excellent customer experience.
Luv improves the value chain of the SWA, which includes corporate vision, operations, marketing, cost control, people, and corporate culture. As a result of this value-add process, you create value by lowering costs and increasing bottom lines; maximizing (minimally spent) marketing money; capturing consumer attention; sustaining customer loyalty; and maximizing employee productivity.
In order to appreciate how luv functions as a strategy within the value chain, it is important first to understand the general concept of the value chain and how it applies to businesses. The value chain is a model that was developed by Michael Porter in his book Competitive Advantage: Creating and Sustaining Superior Performance. It is composed of five main activities:
1) inbound logistics,
2) operations,
3) outbound logistics,
4) marketing and sales, and
5) service.
These are also known as primary activities because they directly create value for the customer. There are also four supporting activities:
1) human resources management,
2) technology development,
3) procurement, and
4) firm infrastructure.
These activities do not create value for the customer but are necessary for the primary activities to function.
Southwest Airlines has managed to create a competitive advantage for itself by focusing on its strengths within the value chain. One of its key strengths is its low-cost structure, which allows it to offer low fares to customers. This is possible because Southwest has a very efficient operations system. It has a simplified fleet of only Boeing 737s, which reduces maintenance and training costs. In addition, it uses a point-to-point routing system instead of the hub-and-spoke system used by most other airlines. This allows it to reduce flight times and thus increase its aircraft utilization.
Southwest has also managed to create a unique corporate culture, which is based on the idea of “Luv.” This culture includes things like having employees who are passionate about their work and who are willing to go above and beyond for customers. It also includes a commitment to taking care of employees and treating them well. This culture has helped Southwest to attract and retain high-quality employees, which has in turn helped it to keep costs low.
The combination of these factors has allowed Southwest to create a competitive advantage for itself within the airline industry. Its low fares have helped it to attract customers, while its efficient operations and unique corporate culture have helped it to keep costs low. This has allowed Southwest to generate strong profits and to become one of the most successful airlines in the world.
Its most important assets are its people. Its tangible assets, such as planes, are valuable, but not unique. The ability to create amazing customer and people-centric goals is also a key resource and capability for SBA. Its human resources and business model are extremely precious, rare, expensive to imitate, and structured to capture value.
SWA’s primary activities are:
– Inbound logistics: coordinating incoming materials and resources
– Operations: transforming inputs into outputs
– Outbound logistics: distributing finished products and services
– Marketing and sales: creating demand for the product or service
– Service: providing after-sales support
Each of these primary activities is supported by a set of secondary activities, which add value to the product or service. The secondary activities at SWA are:
– Procurement: acquiring materials, parts, and services
– Technology development: creating new technology and processes
– Human resource management: attracting, training, and retaining employees
– Infrastructure: maintaining facilities and equipment
– Firm organization: designing and managing the organizational structure
SWA’s value chain is configured to support its low-cost/no frills business model. For example, its procurement function focuses on negotiating lower prices from suppliers, and its technology development function focuses on developing simple, efficient processes. Additionally, SWA has outsourced many of its non-core activities, such as baggage handling and aircraft maintenance. This allows SWA to focus on its core competencies of customer service and operations.