1. What is Southwest’s strategy? What is the basis on which Southwest builds its
competitive advantage?
Southwest follows low cost leadership strategy. Southwest’s strategy is to improve efficiency
and pass cost saving to its passengers by offering them low prices. The bases on which
Southwest builds its competitive advantage is by putting employees first. “Employees first”
philosophy helps the organization to 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 revenues for the company, thus
increasing shareholder value. Southwest has lowest operational cost due 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 useless congested
airports, which helps it ensure fewer delays. The turnaround time from landing to takeoff
and crew required is lesser (approx. 20-25 minutes & required a ground crew of 4+2 people
by the gate, as against United Airlines which took about 35mins & a ground crew of 12+3
gate agents). 80 % of its passengers 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
Southwest’s passenger revenue was generated by online booking via Southwest.com
resulting in cost, time and manpower savings.