Category: Southwest Airlines

Organizational culture is a set of shared assumptions that describes the common interests, beliefs and attitude of an organization that guides it through defining appropriate behavior and values. Defining of organizational culture involves three levels, which include behavior pattern, shared values, and the basic beliefs and assumptions of members. The idea behind organizational culture always revolves around the realization by the employees about the collective responsibility toward the larger good of the company.

Consequently, it is an expectation from the employees that behavior is in a common way hence each employee knows the work output required from him or her. The advantage of organizational culture is that it helps in establishing the required guidelines, output capacity of the organization and organization rules that will help catapult the company toward achieving its goals (Jex & Britt, 2008).

Organizational culture on organizational development and change at Southwest Airlines

Southwest Airlines is an organization that deals with provision of air travel services. The organizational culture of Southwest Airlines focuses on the development, improving, refining the originality, identity, and personality of a people.

Southwest Airlines has an organizational culture that devotes its services to the community that use their services through offering friendlier and affordable air services. The organizational culture that Southwest Airline nurtures considers voluntary offers that range from monetary to in-kind donations (Southwest Airlines, 2011).

Effects organizational culture at Southwest Airlines

Organizational culture develops within a sustained period because it helps an organization in adapting to the competitive environment. Because of this, organizations need to change on their cultures to survive for the longest time possible.

Organizational culture affects organizational development because culture change mostly affects the top management team of an organization. The effects of organizational culture differ, depending on the cultures that the organization nurtures, which can either, be strong or weak cultures (Jex & Britt, 2008).

First, possessing a strong organizational culture in place attracts talents to the organization. A strong culture attracts high-level talents because they believe that the organizations will offer them opportunities for advancement of their careers and be able to show off their talents. Another effect of a strong organizational culture is that it withholds the top-level talents to the organization. Having a top-notch culture retains the existing talents whereas still attracting new ones.

Third, a strong organizational culture helps in motivating the employees because they will believe to be valued and be able to express themselves with ease. Southwest Airlines practices the spirit of having a servant’s heart. This they achieve through treating one another with respect and the employees putting others first, before themselves (Southwest Airlines, 2011).

The other effect is that organizational culture should be able to change how employees perceive their work. If the workers love what they do, their job output will increase. Southwest Airlines have this positive attitude of having fun in what they do, celebrating success, and working as a passionate team player.

Last, strong organizational culture assists the organization in nurturing employees into efficient workers willing to be successful in what they do. Southwest Airlines has a culture of a spirit of a warrior whereby they value hard work, desire for being the best, perseverance, and being innovative (Southwest Airlines, 2011).

Effects of change on the organization

Change in an organization has varied effects. Some of the effects include loss of self-confidence. Change in an organization makes employees think that they are powerless and incompetent in their work. Another effect that change can bring to the organization is confusion.

When change takes place in an organization, there is alteration in the regular routine of doing work in an organization. Last, change brings about conflict through creating a situation in which there is complete difference in meaning and purpose. Explanation to this is through the lack of will by the employees to let go the old ways of carrying out tasks (Jex & Britt, 2008).

Conclusion

Conclusion is arguably right that an organization that nurtures strong and positive organizational cultures has a good market niche in the business that they do. Organizations should have values that represent what they want to be associated with because it will attract new employees and retain the already existing crop of talents at their disposal. It is a good practice for organizations to nurture good cultures because it is the building block to strong competitive nature in the future (Jex & Britt, 2008).

References

Jex, S. M., & Britt, T. W. (2008). Organizational Psychology: A scientist-Practitioner Approach. Hoboken, NJ: John Wiley & Sons, Inc.

Southwest Airlines, (2011). About us: Our Culture. Retrieved from https://careers.southwestair.com/

Change management is a response to inherent threats and opportunities emanating from a competitive market. Due to high rate of change within the business environment, organizations are compelled to change their operating strategies accordingly.

In cases whereby departments in an organization are not positively responding to demands from the business environment, top managements usually opt to overhaul their operations. As a result, contemporary business organizations have found it quite challenging to manage change effectively.

It is against this backdrop that the government of Malaysia thought of restructuring Malaysian Airline to reflect modern management. Because of high flow of demand in airline business, companies should change tact in operational management. Most importantly, the company has to change its culture to reflect international management styles.

Change management in any Airline company is crucial in meeting demand from consumers mainly due to the widening international market. The government of Malaysia has restructured its top management on the basis that a number of programs had failed to cope with modern forms of international standards of management (Rashid, Sambasivan & Rahman, 2004).

Change management is an effective way of transforming a non performing entity to a performing organization. In particular, the company should review organizational culture and attitudes held by employees on a regular basis.

According to the authors of this article, the ability to manage change effectively can indeed improve the performance of a company (Rashid, Sambasivan & Rahman, 2004). Besides, the article offers a critical analysis of how change management leads to labor mobility, market transparency, instantaneous communication, and global capital flows.

Southwest Airlines and change management

Southwest airlines is an example of companies with effective change management. For instance, nurturing a good corporate culture has been instrumental in uplifting the status of this airline to become one of the largest airlines in the United States of America.

Even though its regular review of culture has raised questions on sustainability, the performance of the company in the airline Industry is still impressive. Southwest airline has maintained a positive and unique culture. In 2008 for instance, the company was noted as one of the organizations in the United States of America as performance management fun.

Regularly, the company re-evaluates its management styles to ensure that it complies with the concept of “total quality management.” Over the years, the company has changed operational management styles. The philosophy of the company in changing styles of management is to be unique from other market competitors. The focus is on making employees proud while working with the company. A survey carried out among employees of the airline firm revealed that most of them loved working for the company.

The basic operating principle in the company is that effective customer service is everything in making a reputable company. Whenever there is changed management style, the focus has been on improving customer satisfaction, employee involvement, and management commitment. The company is still a local carrier but, it is slowly emerging as one of the most trusted companies in the United States of America.

In some cases, the airline has obliged to respond to some issues in retrogressive manners. For example, at one time, the company had to review its working hours for employees from 12 to 13 hours. Despite this undertaking, its reputation among employees and customers did not decline. So far, the Southwest airline has managed to dominate the local market by creating a firm competitive edge and stable financial standing. Its financial performance over the last few years has been continually progressive in comparison to its competitors.

Some employees do express doubt whenever they hear that Southwest Airline is embarking on performance management change. The fear is that the company may resort to retrench some employees to cut down costs of operations. However, the company continually has in its employees whenever embarking on any form of organizational change. In addition, there is established culture of trust between junior employees and top management of the company.

It is crucial to mention that there are many factors that have contributed toward the success of this airline company. For example, frequent collaboration between the company and other stakeholders alongside improved flow of communication has been key toward growth. Some of the stakeholders include employees, consumers of its products as well as development partners.

The most valued attribute in management of this company is changed initiative. There are several benefits that have been accrued through leadership initiative. These include self sufficiency, strong financial standing, significant competitive niche in American Airline Industry, low overhead costs, dramatic improvements in the company and committed internal stakeholders.

The company has also improved its information delivery after changing some of information channels. The company is an example of organizations with a good model in change management. Because the company has managed to survive some problems emanating from the business environment, its change management styles is therefore effective in retaining customers, attracting new ones, satisfying employees as well as meeting targets in terms of financial growth.

Reference

Rashid, Z. A., Sambasivan, M. & Rahman, A. A. (2004). The influence of organizational culture on attitudes towards organizational change. Journal of Leadership & Organizational Development, 25 (2), 161- 179.

Introduction

Customer loyalty is a vital component in the operation of businesses. One of the ways through which a firm can develop customer loyalty is by ensuring effective service delivery. In order to achieve this, the firm must have a well implemented service delivery system.

According to Bennett and Strydom (210), service delivery system entails a number of components which include people, processes and elements. The firm’s management team must ensure that there is creation of an optimal service encounter. Bennett and Strydom (211) defines system encounter as the moment of interaction between the customer and the service firm.

The service delivery system entails a framework of activities referred to as the service encounter cascade. This is mainly common amongst firms offering services such as tourism and travel firms. Southwest Airlines is a firm which operates within the airline industry in the United States.

Over the years it has been in operation, the firm has managed to attain a substantial performance. The firm has a well designed service encounter sequence in an effort to ensure a high level of customer satisfaction. The paper is aimed at evaluating the service encounter cascade in relation to Southwest Airlines.

Southwest Airlines service encounter cascade

Ensuring customer satisfaction within the airline industry is challenging. During service delivery, it is paramount for a firm’s management team to ensure a positive impression is created during the first contact. In addition, firms must ensure that a high level of customer experience is attained.

This arises from the fact that a small degree customer encounter can result into a high level of customer dissatisfaction. In order to develop a comprehensive service encounter, a firm’s management team must develop a comprehensive understanding of the various types of encounters which are necessary in the delivery of a certain service.

In addition, a high degree of collaboration between the employees and the management team is necessary. This ensures that there is effective formulation of service standards. Southwest Airline service encounter cascade entails a number of activities as outlined below.

• Making reservations
• Checking in
• Security check point
• Customs clearance
• Clearance through the boarding gate
• Meeting the ground hostess
• Meeting the air hostess
• Serving the customers with a meal and drink during the flight
• Greeting the air hostess upon dismemberment
• Meeting the ground hostess

Personal experience

As an entrepreneur, I have on several occasions travelled using Southwest Airlines in an effort to scan the environment for business opportunities. As a result of their high level of expertise, I was very pleased by their service delivery. For example, Southwest Airlines has a well implemented reservation system.

This is attained through implementation of the Amadeus technology which is a travel technology. The technology ensures that there is a high degree of efficiency when making travel reservations. This arises from the fact that a customer is able to make travel reservations online. Through the firm’s online reservation system, I was able to obtain information about the firm’s fare tariffs, and airlines schedules.

Not only does the firm’s reservation system enable a customer to book a flight but also to make a reservation on the best hotels and restaurants. This arises from the fact that the Airlines Reservation System (ARS) is connected to the Global Distribution System (GDS). As a result, I was able to attain a high degree of effectiveness with regard to time and financial management.

Customer satisfaction

The customers consider the airline to be effective with regard to a number of aspects as discussed below.

Safety

In its operation, the firm has considered airline security to be of paramount importance, as a result, the firm has implemented a comprehensive security check.

In-flight services

The firm has recruited well experienced airhostesses who ensure that there is a high level of in-flight services. The firm serves diverse meals so as to cater for the customers’ tastes and preferences.

Pricing system

The customers also consider the airline’s price system to be cost effective compared to other airlines. This is arises from the firm’s low cost strategy.

Flexibly

The firm has a well developed flight schedule. This has been achieved through integration of flexibility.

According to findings of a study regarding the level of customer satisfaction conducted on the employees, it was revealed that the firm has managed to develop a substantial performance as a result of high level of customer satisfaction. The employees interviewed obtained the information from the firm’s customer relationship software.

A large number of customers are of the opinion that Southwest Airlines brand is the best small and midsized airline brand in US. According to the employees, the high level of customer satisfaction has been attained as a result of effective and efficient management. This ensures that there is efficiency in the implementation of customer satisfaction strategy.

Dealing with service delivery failure

In certain occasions, the firm experiences customer complaints with regard to customer satisfaction. In order to deal with the failure, the firm has implemented an employee training program. The program ensures that the employees are acquainted with skills necessary to ensure effectiveness in service delivery. Considering the fact that customers are dynamic in their consumption pattern, training ensures that the employees are acquainted with the changes. The resultant effect is that the firm is able to move with industry changes.

Conclusion

Service encounter can result into a high degree of customer satisfaction. During this period, the customer develops a certain perception regarding the service being offered. Through service encounter, a firm has an opportunity to build trust, reinforce quality and to build brand identity.

This arises from the fact that the first impression created results into development of either a positive or negative attitude. By creating a positive attitude, the firm is able to develop customer loyalty. This means that service encounter is a building block with regard to customer satisfaction.

Works Cited

Bennett, Alf and Strydom, Joham. Introduction to travel and tourism marketing. New York: Jute and Company Limited, 2001.Print.

Background information

Southwest Airlines operates in the US airline industry as a passenger carrier having been incorporated in 1967. Since its inception, the firm has been focused at profit maximization. Consequently, it has integrated expansion as one of its strategic management practices in its quest to stimulate high growth rate.

By 31^st December 2011, the airline operated in 72 US cities and transported approximately 106 million passengers. Its average annual revenue at the beginning of 2012 amounted to $15 billion. The firm’s adoption and continued sustenance of the low cost structure has enabled it to sustain its success (Hawkins, Misra, and Tang 3).

Mission statement: Southwest Airline intends to offer its customers the highest level of customer service, which will result to the creation of a friendly and warm environment. Southwest Airline holds that such an environment will result in development of individual pride and enhanced company spirit.

Southwest airline is committed towards the creation of a conducive and stable work environment that provides all employees with an equal opportunity for personal growth and learning. The firm encourages its employees to be creative and innovative in its quest to attain high effectiveness and efficiency in its operation.

In the quest to attain a high level of employee retention and public image, the airline is focused at ensuring that its customers are treated with respect and caring attitude(Hawkins, Misra, and Tang 3)..

Analysis of the external business environment

Porters’ five forces

Rivalry: Currently, the US airline industry is characterized by intense competition and a high degree of volatility. Additionally, the industry is extremely technology and capital intensive, heavily regulated, and taxed hence reducing the profit margins of domestic firms.

Over the past decade, firms in the industry have experienced a conundrum emanating from the increment in cost of operation. Rise in the cost of fuel is one of the major challenges that the firms have faced in the past. From 2000, the cost of fuel has risen with over 300% hence making it a challenge for firms to operate (Hawkins, Misra, and Tang 12).

Threat of entry: Despite the rise in cost of fuel, Southwest Airline is grappling with a high degree of industry concentration. The concentration has emanated from an influx in the number of new entrants. Deregulation Act of 1978 has provided a window for foreign companies to venture into the industry.

Minimal differentiation in the industry is another major hurdle that Southwest Airline is currently facing. Price has become the main market variable that firms in the industry are hedging their competitiveness against in their operations.

Therefore, firms in the industry are continuously experiencing a significant reduction in their profit margins. However, the threat of entry is currently minimal due to the high startup and operational cost and the intense competition from incumbents. New entrants into the industry usually fail while those that survival will take a considerable duration to position themselves as credible competitors (Hawkins, Misra, and Tang 13).

Threat of substitute: Over the past decade, the industry has been experiencing an increment in the number of substitute due to the development of alternative means of transport such as car, train, and bus (Hitt, Ireland, and Hoskisson 65).

Most individuals prefer these means of transport when travelling for a short distance, which is a major challenge for Southwest Airline as it focuses on short hauls. Emergence of intercity railroads also presents a major threat to the firm’s future survival. The high cost of fuel and an increment in baggage fees in the US airline industry are pushing consumers to train transportation hence making it a viable substitute.

The pressure on the US government to upgrade the country’s rail system and develop high-speed rails is a major threat that Southwest Airlines will have to deal with in the future. In a bid to counter the threat of substitute, Southwest Airline has integrated an effective reservation system that makes customers to prefer the firm as their travel alternative (Hawkins, Misra, and Tang 14).

Supplier power: The primary sources of supplier bargaining power in the airline industry include labor, jet-fuel, and aircrafts (Hawkins, Misra, and Tang 15). Over the past few years, jet-fuel has become a major source of supplier bargaining power in the US industry. However, Southwest Airlines has effectively addressed the threat of high supplier power by adopting a hedging strategy.

This adequately shields the firm from experiencing enormous swing in its operating expenses (Carter, Rogers, and Simkins 3). Aircraft manufacturers have a relatively high bargaining power, which emanates from a high switching cost. The main aircraft manufacturers, which include Airbus and Boeing, can increase the price.

In its operation, Southwest Airline solely procures aircrafts from Boeing, and it might be affected in the future in the event of Boeing increasing the price of its airplanes (Hawkins, Misra, and Tang 14). Labor costs also form a significant proportion of supplier power.

The US airline industry has experienced an increment in the number of unions seeking for premium wages over the recent years. However, this trend is changing constantly due to increased bankruptcies in the industry.

Consequently, most airline companies are cancelling their pension plans hence diminishing the threat of supplier bargaining power. Additionally, firms in the industry are reviewing their employee compensation policies.

Buyer power: the buyer power in the US airline industry is minimal. The low bargaining power has emanated from the prevailing price wars amongst industry players in the quest to remain competitive. Consequently, buyers are unable to push the price down.

SWOT analysis

Strengths

1. Incorporation of point-to-point route strategy has provided the firm with flexibility with regard to selecting the most profitable routes.
2. The firm mainly relies on secondary airports located in major cities thus resulting into improved on-time reliability.
3. Short turnaround duration enable the firm to utilize its aircrafts optimally.
4. Effective customer relations leading to high level of customer satisfaction
5. Integration of strong marketing campaign hence leading to improved customer reputation

Weaknesses

1. The firm’s rapid growth presents a major challenge with regard to sustenance of its reliability in offering services. The firm’s on-time performance has continuously dwindled. In 2011, its on-time performance in Alaska increased to 88.2% from 87.6% in 2011 and 81.3% in 2010 (Stevens Para. 3). The acquisition of AirTran in 2011 is likely to worsen the situation.
2. The firm also faces a challenge emanating from increasing its fleet by incorporating 88 Boeing 717s. The firm did not have such type of planes.

Opportunities

1. The firm’s acquisition of AirTran presents a unique opportunity for the firm to grow by increasing the number its routes and venturing into new markets.
2. The firm can improve its customer base by integrating internet technology such as WiFi. This will attract customers.
3. In 2013, Southwest Airline started to offer customers onboard. With live television and satellite-enabled WiFi Internet technology through its contract with Row 44 (“FierceWireless” Para. 1)

Threat

1. The firm is experiencing intense competition from other major industry players such as EasyJet and Jetblue. If the firm does not focus on improving its competitiveness, it might experience a reduction in its growth.
2. The firm is also facing a major threat emanating from increment in cases of terrorism.
3. Increase in the cost of operation if not addressed may result in a decline in the firm’s level of profitability. The firm is currently facing a major threat emanating from the fuel price volatility.
4. Changes in the legal environment for example institution of environmental sustainability rules and regulations may limit the firm’s ability to compete with regard to price.
5. Occurrence of another economic recession such as the one that occurred in 2008 may adversely affect the firm’s operation

Conclusion

From the above analysis, it is evident that Southwest Airline is facing a dynamic business environment. The competitive nature of the US airline industry is a major challenge that the firm has to deal with in its operations. Therefore, to sustain its growth, Southwest Airlines will be required to formulate and implement effective business and corporate level strategies.

This move will enable the firm to sustain its competitive advantage. Additionally, the firm’s management team will also be required to deal with external challenges such as rise in oil prices, economic recessions, and terrorism, which are some of the major challenges facing the industry.

Works Cited

Carter, David, Daniel Rogers, and Betty Simkins. “Hedging and value in the US airline industry.” Journal of Applied Corporate Finance18.4 (2006): 1-33.

FierceWireless: Southwest Airlines and Row 44 announce milestones in WiFi partnership 2013. Web.

Hawkins, Owen, Rahul Misra, and Hao Tang 2012. Southwest Airline Company. PDF file. Web.

Hitt, Michael, Duane Ireland, and Robert Hoskisson. Strategic management: Concepts and Cases: Competitiveness and globalization, Mason, OH: Cengage Learning, 2007. Print.

Stevens, Suzanne. Alaska, Southwest Airlines rank high in quality, 2012. Web.

Introduction

Purpose

Contemporary businesses are currently faced with a new marketing principle: creating added value for customers.

Creating added value, however, is compounded with diverse challenges in its definition, with some theories claiming that creating value does not only entail providing customers with services that are within their expectation, but providing them services that are beyond their expectations(Craven 2002, p. 57). But how can a firm successfully create value for its customers?

This report will focus on the case study, “Southwest Airlines” to give an informed review of added value by critically analyzing two business strategies adopted to create value for the customers: servicescape and service innovation.

Servicescape model is critical for creating added value because physical appearance is the first experience that customers are exposed to, while service innovation is critical because any company wishing to prosper must keep its business operation in line with the dynamic technological changes.

Definition of Value Creation

Added value is a term that is related with customers’ feelings after they take a step of purchasing a product or a service. Thus, creating value for customers can be defined as assessing the benefit the customers get after they deduct their expense from purchasing a product or service (Craven 2002, p. 59).

It is, indeed, true that many customers expect more than a service or a product from the firm, as a vast majority of them depict the need for mental and emotional relationship with the companies, because they think that this creates value for them (Christopher & Ballantyne 2002, p. 83).

An overview of the Company

Southwest Airlines is a service industry that aims at offering its customers with distinctive air transport services. The company started in 1971, with an aim of providing its customers with air transport at a lower cost (Southwest Airlines Co. n.d.).

Eventually, the company adopted a strategy that seeks to provide its diverse customers with added value by making sure that the services exceed the price paid by the customer as well as what the customer expects to pay for the services. The company believes that creating value is one of the crucial activities the firm would take to attain a competitive edge.

Even though the company started with purchasing products that were diesel powered, it has managed to replace its components and equipments with modern equipment, which are environmentally friendly, at a reduced cost (Southwest Airlines Co. n.d).

More so, it has managed to come up with more innovative products in the new airport lounges and the business class products. The company has also managed to come up with a number of trained personnel who take care of the children while their parents are in the “business class.” This new experience within the industry creates an added value for the customers.

The value creation in the Southwest Airlines has been attributed to effective value creation models. This report will critically analyze two value creation models that have been adopted by Southwest Airlines, namely, service innovation model and servicescape model, with a view of establishing the viability of the models in creating value for the customers.

Through a number of recommendations, the report will shed light on how the company can improve its value creation for its customers.

Analysis and Findings

Value Creation through Servicescape Model

Sevicecsape model involves recognizing the rationale behind considering physical attributes of a service industry as a key marketing point (Grönroos 2007, p.176). This plays a critical role in enhancing first impression for the customers, and hence the overall brand image of the company.

In the Southwest Airlines, the customers have many opportunities of getting in touch with the company’s environment as they await their flights. Thus, servicescape is a critical model that is able to assess added value for the customers of the Southwest Airlines.

Using the servicescape framework, one is able to concur that the physical attributes of the airplanes and the exterior attributes of the airport are critical in value creation (Looy & Dierdonck 2001, p. 183). And in a bid to explain the rationale of considering physical factors as critical in value creation, the model groups these factors into three categories: ambient condition, size and symbols category, and the spatial layout category.

This model aims at assessing whether these environmental factors add value to the customers by evoking positive impression.

Value Creation in the Southwest Airlines through Servicescape Model

The Southwest Airline takes advantage of its attractive airplanes in the “business class” to provide added value for its customers. Using the ambient condition, the customers are provided with added value by preventing them from pointless noise, which emanate from the aircrafts as well as the outside environment (Southwest Airlines Co. n.d).

The soundproof components facilitate this, while noise from one passenger to the other is eradicated by the use of earphones provided to each passenger. The strategy provides sanity in the “business class,” making sure that the customers are not adversely affected by adverse environmental factors within the setting.

More over, this strategy does not only endeavor to make sure that sound pollution is minimized, but it provides an avenue for ensuring that the plane gets enough oxygen at all times.

Sight is another critical component that has been put out into consideration in a bid to create added value for customers. This has been achieved by making sure that the airplanes receive enough amount of light, taking into account different periods within the “business class.”

For case in point, during the business hours, the customers are provided with different lighting from the sleeping hours (Southwest Airlines Co. n.d.). The sound absorbers, which facilitate control of noise, are kept out of the customers’ sight.

Attractive design is also put into consideration in the “business class.” The interior layout is designed in such a way that it offers sufficient décor, given that this class provides services to businesspersons. Thus, customer value is created through maximizing the space in a manner that facilitates efficient placing of briefcases, and thus enhancing their business discussions.

The company takes into account that providing best product /service among the alternatives should be based on what is best for the guests: using guests’ emotions, and not the emotions of the decision makers (Dibb et al. 2005, p. 57). In this regard, the company uses signs and symbols that have a connotation with the customers’ emotions, thus facilitating an increase in services.

This idea stems from the fact that increasing customer value entails making sure that they are more inclined to purchasing emotional products as opposed to the non-emotional products (Falkowski & Grochowska 2009).

With regard to staff, the Southwest Airlines exude confidence that the company is able to create added value for customer by not only improving the internal environmental factors of the Airplanes’ “business class,” but also managing the attitudes affecting the customers with regard to environmental factors (McColl-Kennedy 2003, p. 67).

In this regard, the company has created social relations and collaborated with other companies’ practices that are in line with the Servicescape strategy. And it is for this reason that the Southwest Airlines has taken the initiative of benchmarking its uniform with industries that provide designers’ clothing, which catch the eye of the customers.

Additionally, the company has already come up with a differentiation strategy that defines the dress code for the “business class,” which facilitate a business culture within the “business class,” and this add value to customers through improved cohesion between them (Bowie & Buttle 2008, p. 34).

Critical Analysis of Servicescape Model Using “3 Performance Dimension”

Using three-performance dimension, which include the customers/ employees’ relationship, the market performance, and the financial performance, the Southwest Airlines has increased its financial performance by creating value through comfort and luxury.

This has been achieved by coming up with a viable strategy that provides the “business class” customers with what they need emotionally: physical evidence (Lovelock & Wirz 2007, p. 231). And more so, the knowledge obtained from the customers helps them build a long-term relationship with the employees.

However, while all the above are valid environmental factors that continue to create added value for customers, the notion of considering physical attractiveness as prime factor in creating value for the customers fall short of its expectation in as far as marketing performance is concerned.

This stems from the fact that the strategy does not provide an avenue for measuring added value by comparing its environmental features against its competitors in order to assess its comparative strength.

If this prospect is put in place, the Southwest Airlines will not only provide high quality environmental features with low pricing strategy, but also adopt a pricing strategy that the customers are willing to pay for, as creating added value for customers can also be achieved through premium pricing of luxurious environmental features.

Service Innovation

In the recent past, service innovation has been considered as one of the indispensable functions while creating value for customers.

As such, the strategy is able to introduce customers with services that are beyond their expectation. Service innovation, however, cannot be achieved if the firm lacks a proper implementation of Customer Relationship Management (CRM). According to Kotler, Bowen, and Makens (2010, p. 413), the success rate of innovation in a vast majority of firms has been on a downward trend, especially in the hospitality industry.

Thus, assessing service innovation for the Southwest Airlines entails taking into account its three key elements: customer focused, which tries to go beyond the customers’ expectations; processed focused, which tries to increase efficiency as well as productivity of the firm; and continuous improvement, which is a continuous process of providing innovative services to the customers(Lovelock & Wirz 2007, p. 237 ).

Creating Added value for the Southwest Airlines through Service Innovation

It is imperative to mention that the Southwest Airlines operates its business operations by taking into account the dynamic technological trends happening across the globe (Southwest Airlines Co. n.d). Based on findings on incorporating technology with the firm’s services, the Southwest Airlines has already launched a website with a good customer interface, which can be accessed quickly and easily.

The product categories are clear, the product names are clear, and the site offers a good search for the services provided by the firm (Southwest Airlines Co. n.d). Value creation through this strategy is enhanced by providing the customers with an opportunity to air their views, opinions, and comments concerning the services, as this acts as a customer service center (Knox et al. 2003, p. 123).

Communicating through email and interactive social websites ,such as the Facebook and Twitter, create added value as it enhances interactivity between the company and its customers through comments and feedbacks of their comments (Bowie & Buttle 2008, p. 34).

More so, the customers in the “business class” are entitled to free wireless internet, audiovisuals, and are provided with catering services that involve high-class technology (Southwest Airlines Co. n.d). For case in point, the food and beverage services take into account the time taken by customers from ordering their food and/ or beverage to the time of service provision.

Thus, the company has adopted a technique that limits this time. The customers are thus able to order foodstuffs using computer, which also makes sure that the nutritional value of the food is clearly displayed, thus providing customer value with respect to efficiency and knowledge.

Critical Analysis of Service Innovation using ‘Key Elements of Service Innovation”

Enhancing customer interaction through the social media depicts that the company is ‘customer focused’ and upholds ‘continuous improvement’ areas. Through this casual relationship, the company creates added value in terms of loyalty.

‘Continuous improvement’ is derived from the fact that websites call for a continuous upgrading in order to provide the customers with updated information. Providing the customers with services that are ordered via internet depicts that the company is “process focused,” and this creates added value in terms of convenience and time management.

Recommendations

Physical Evidence

Even though the Southwest Airline is able to create added value through the already adopted strategies, I would recommend it to allocate more space on waiting areas, as it has allocated more space for the flight services, leaving the clients with inadequate waiting facilities, including the lounges.

Although this is based on grounds that the surface area for the income-generating areas should supersede the waiting areas, it is paramount for the company to create added value by increasing the number of equipments and facilities within the waiting area to avoid views characterized with congestion.

Additionally, the waiting areas should display certificates of merit in order to create added value for customers with regard to trust and quality (Bruhn & Georgi 2006, p. 144).

Service Innovation

The services within the “business class” can be improved by making an effort of averting the technological terminologies and giving way to business terminologies.

This stems from the fact that adopting business terminologies is paramount since the first step of service innovation entails communicating with the customers using clear terms that would help them communicate with the company in an effective manner (Bowie & Buttle 2008, p. 43).

This strategy can be achieved by adopting universal language standard, including choice of language during the point of sale systems. More so, creating value for customer at the service innovation entails striving to provide the customers with diverse services that are of the same service category all at once (Kotler, Bowen, & Makens 2010, p. 421).

This can be facilitated by collecting customers’ information with regard to demand on services, as well as gathering personalized information such as information on the last call from a particular customer.

Conclusion

Creating value for customers cannot be defined without assessing the benefit customers get after they deduct their expenses. The process can be achieved through adopting a viable framework(s) that is in line with the business operations.

Using the servicescape model, the Southwest Airline has managed to create value for its customers though a number of dimensions, including the ambient condition, signs and symbols, and engaging the staff as well as the customers in the process.

Thus, the Southwest Airlines has been in a position of providing its customers with increased excitement, exclusive environment, as well as high quality values.

The service innovation, on the other hand, has facilitated added value creation through innovative products that are in line with the current technological trends. In turn, this has created room for exclusive services, including wireless internet connection in the “business class,” which has helped to provide the customer with services, which are beyond their expectations.

Thus, the service innovation creates room for fun, luxurious experience, trust, and relaxation. And despite the challenges faced by the company, it is, indeed, true that it has managed to create added value for its customer through service innovation models as well as the servicescape model, a value that is beyond their customers’ expectation.

List of References

Bowie, D. & Buttle, F 2008, Customer Relationship Management: Concepts and Tools, Elsevier/Butterworth-Heinemann, Oxford.

Bruhn, M. & Georgi, D. 2006, Services Marketing – Managing the Service Value Chain, Prentice Hall, Essex UK.

Christopher, M., Payne, A., & Ballantyne, D. 2002, Relationship Marketing: Creating Stakeholder Value, Elsevier Butterworth-Heinemann, Oxford.

Craven, R. 2002, Customer is King: How to Exceed their Expectations, Virgin, London.

Dibb, S., Simkin, L., Pride, W., & Ferrell, O. 2005. Marketing: Concepts and Strategies (5ed.), Houghton Mifflin Company, Boston.

Grönroos, C. 2007, Service Management and Marketing: A Customer Relationship Management Approach (3rd ed.), Wiley publishers, Chichester.

Knox, S., Maklan, S., Payne, A., Peppard, J., & Ryals, L. 2003. Customer Relationship Management: Perspectives from the Market Place, Elsevier Butterworth-Heinemann, Oxford.

Kotler, P., Bowen, J., & Makens, J. 2010, Marketing for Hospitality and Tourism (5th ed.), Prentice-Hall International, London.

Looy, B. & Dierdonck, R. 2001, Services management: an integrated approach (2nd ed.), Prentice Hall, London.

Lovelock, C. & Wirz J. 2007, Services marketing: people, technology, strategy, Prentice Hall. London.

McColl-Kennedy, J. 2003, Services Marketing: A Managerial Approach, Wiley, Milton, Qsld.

Southwest Airlines Co. n.d., We make it easier. Web.

Introduction

Marketing strategy incorporates marketing goals of a business and puts them into a cohesive whole.The strategy of low-price has been in use, in the southwest airline, from the beginning. They offer cheap flights and, therefore, able of crushing competitors. The strategy of pricing has been successful because it was the opposite of the competitors.

Their goal has been to offer some values required by the travelers such as, leisure to arrive to a new destination, efficiency, flexibility, and comfort all for an inexpensive and fair price. They are targeting business travelers since they travel frequently (Gittel, J 2005). Additionally, the use of non-airline partner services gives credit to the customers.

In 2007, the organization enhanced the program and established a new travelers’ business focused on a marketing campaign. It also introduced a freedom award, which allowed the members of immediate prize the chance of exchanging two award tickets that are standard for Freedom Award.

Strengths and weaknesses of Southwest’s competitors

Strengths enable every business to achieve goals while weaknesses make the business slag behind. Among the competitors are the AMR corporations and JetBlue airways. The AMR Corporation has a strong network across the world, strong alliances and ties-up of marketing which makes it compete with the Southwest.

Additionally, it has an outlook to airline passengers that are positive. However, it has a decline in operation efficiency and a performance of DOT Domestic that is weak that becomes a weakness. It is also facing a threat of price discounting and intense competition, and obligations of security among others.

The JetBlue Corporation has a unique relationship, which the company enjoys since its inauguration with the workers. It managed to keep its costs low and involved high profits with efficiency of employees. It used its workers roles to play. Its weakness is that of economy and the oil prices that are rising on top of the debt the company has.

Plan to differentiate with other competitors

There are some essential things required by southwest airline so as to differentiate itself with other competitors keeping of low costs and treating workers well is an obsession and a commitment to manage the company. A sense of futurity and historicity is necessary in order to keep the company going.

Having a strong relationship with the employees does not necessary involve rise in the pay roll but rather creating a favorable environment. Treating them well will give them a heart of also treating the customers well hence, success of the business (Lauer, 2010).

Southwest intentions to be a leader

The Southwest airline, unlike its competitors in the industry, did not use strategies that are convectional, or which focused on barriers of entry like networks of hub and spoke. Furthermore, it did not use complicated customer segmentation, and information via systems of computer reservations. This strategy was unusual.

As described by the southwest’s management, its fundamental strategy was competing against the car. They proposed to compete by providing reliable, friendly, and a service that is of low cost on flights. They required to deliver more for less, which translated to the derivation of more from their workers for monetary compensations of the same kind. Consequently, the company thought of ways that would help to increase the component of non-monetary compensation for its work.

By this, value of its employees would be created and thereby the employees would be motivated in conversion of values to customers, and designing processes of operation in order to acquire firm value. Additionally, behavioral norms that are encouraging would enable workers to improve their services and reduce costs.

The motivated and happy workers of the southwest company adopted the systems and processes and went an extra mile by making things happen. Resistance and chaos comes with change, but it was not so to the southwest since it captured the value through superior service and low costs (Gittel, 2005).

The environment created by the southwest company respected the individuality of the employee and ensured they fit into the culture of the company. It introduced fun at work for workers in order to motivate them and fun games for their customers. Furthermore, it encouraged employees to dress up casually all through the summer period, and aligned its processes of operation and practices of human resource with the culture of the company.

Macro-environment issues

Macro-environment factors are relevant in every firm. It considers economical, political, technological and social issues. Politics influences many companies and determines how the company should work (Lauer, 2010). A political climate that is harsh makes a company lose its profit. Therefore, politics determines the extent of the business. The southwest is in a stable country that enables it to grow.

Economy is another aspect that determines whether or not the objectives can be achieved. Some of the things looked upon are inflation rates, budget limits, salary structure, maintenance of equipments and how a business should operate. The southwest looks for a fair price that is affordable to the travelers.

Consideration of social factors in the Southwest airline is essential since it concerns safety. Security is the focal point determining how airlines should operate. Southwest should maintain a healthy relationship with its travelers in order to succeed in business.

The other aspect of macro-environment is technology. Most of the airlines are hoping that a new and cheap form of fuel comes to the existence in order to cab the problem of high costs of gasoline. Furthermore, automated kiosks of ticketing are adding up like never before. The south west airport continues to introduce machines in order to enable streamline of the business (Lauer, 2010).

Trends to impact a business

Trends entail analyzing historical data of a certain time in order to determine the growth of the business. It also helps in predicting the future and shapes the decisions of strategy in a business.

Trends used to impact a business should understand the market currents and make decisions on the good time for going with the current economy. Some of the markets are growing and other going backwards (Gittel, 2005). A business should encourage technology in order to experience a significant growth. The trend gets attractive by looking at the services of models of business.

Bibliography

Gittel, J (2005). The Southwest Airlines way: using the power of relationships to achieve high performance. New York: McGraw-Hill Professional. Reprint.

Lauer, C (2010). Southwest Airlines. London: ABC-CLIO.

Introduction

All business organizations operate in a dynamic environment that keeps on changing from time to time. This environment refers to all the elements that exist either outside or within the organization that affect the organization both positively and negatively.

Therefore, for an organization to ensure its continued survival, it has to adapt accordingly to these changes. Failure to which, it risks collapse. This paper, therefore, seeks to analyze ways in which an organization can implement changes so as to ensure its survival. Southwest airlines will be used as a case study for better understanding.

Changes That Could Occur

Every business, irrespective of the industry in which it operates, faces the risk of change in the business environmental conditions. Some of these changes may be due to; changes in technology, political instability, terrorist threats, natural disasters, rising prices of energy, changes in consumer preferences, increased costs of production and many more.

However, since this case study is in the airline industry, only a number of those mentioned above will be applicable. Southwest Airlines is a renowned airline in Dallas which, due to the recent upheaval in the business environment, has had to come up with measures to ensure that it remains in business. It is one of the few businesses that have managed to make profits despite the constant changes (Kathleen, 2008).

Before going into detail, it is critical to analyze the problems that the airline industry encountered as a whole. Being an industry that heavily relies on energy, it is, therefore, normal that the fluctuating prices in energy, specifically oil, will be a significant set back. Fluctuating oil prices have been an enormous headache to the economy as a whole.

In the airline industry, a rise in oil prices means a subsequent rise in fuel prices. Airlines are, therefore, forced to transfer these increasing costs to passengers through increased air fare. As a result of this vicious cycle, airlines have been experiencing low demand for their services hence reduced revenues as compared to increased unit costs.

Another significant problem has been the rising inflation rates which have led to a general and persistent increase in the prices of labor, airport cost and maintenance costs. The current weather conditions have also been a dominant problem. It has led to losses in revenue in the airline industry due to cancellations in flights emanating from poor visibility. Others include increased competition within the industry and rising unit costs.

Measures Taken by Southwest Airlines

With this in mind, we shall now concentrate on the measures that southwest airlines have taken so as to ensure continued growth, profitability and customer satisfaction. One of the effective measures taken that has seen Southwest Airlines emerge as one of the most profitable firms in the United States is the low air fares that it offers compared to its competitors.

Southwest Airlines, unlike its competitors, chose to stick to charging lower rates despite the low demand of airline services by customers without compromising the quality of services offered. By using this strategy, it aimed at increasing the number of people who chose to fly with the airline despite the reduced demand. This has seen them increase their revenues as more people opt to fly with them especially in these hard economic times as opposed to their competitors (Kathleen, 2008).

To ensure its survival and its continued market dominance, Southwest airlines also introduced new products, which included the “early bird check in”, and a package that allowed passengers to travel with their pets at an affordable rate. The “early bird check in” gives passengers the luxury of checking-in in advance.

These new products have contributed to increased revenues, due to an increase in the number of passengers using the airline as it has given them an edge over other airlines. To deal with the increasing rise in costs, the airline, instead of downsizing in the normal way, the airline has come up with a plan that gives the employees an option to retire earlier than they are required by law.

This move has worked to their advantage as a number of employees have welcomed this plan. This has enabled the company to reduce the number of employees to a reasonable size without causing any conflict between senior management and lower level employees. This has also ensured that the employees remain loyal and highly motivated towards their work (Hewlett, 2006).

The airline, in these turbulent business environmental conditions, has given great importance to financial management. It has done this by ensuring that it maintains healthy cash balances by constantly looking at a new way to generate revenue. It has also resorted to selling and leasing some of its aircrafts as a way of raising more money to cater for the rising unit costs.

The airline is also keen on maintaining a minimum level of debt so as to reduce chances of insolvency. Due to the ever changing consumer behavior and preferences, the airline has introduced a range of new products so as to enhance customer loyalty and attract new customers. Some of these products were mentioned above.

They include the “early bird check in”, the package that allows passengers to travel with pets, and an internet package that allows passengers to browse while on board, a Wi-Fi enabled aircraft and not charging the passengers for their luggage. This has seen an increased market share and has warded off some of competition from other airlines (Hall, 2008).

In these turbulent business environmental conditions, the airline recognizes that it does not have enough capital at its disposal and has, therefore, taken to postponing the expansion of the airline. It has instead identified the unprofitable areas in the business and ceased their operations with the aim of transferring this man power to areas that are more profitable. This has led to a significant increase in the airline’s revenues.

It should, however, be noted that there are certain elements that are beyond an organization’s control. In our case, they include; natural disasters, unfavorable weather, for example, the recent case of snow which has seen many airlines cancel their flights and lose billions of dollars in revenues, and political instability (Yilmaz, 2008).

Kotter’s Eight Step Change Model

One can use Kotter’s eight step change model to describe the changes that have been implemented by the airline. Kotter’s model recommends that the first step to change is dependent on the top management identifying the need for change and subsequently creating pressure and urgency for the change to occur.

With respect to this, it is clear that the management of the airline identified the current turbulent business environment conditions and quickly created the urgency and need for change as they realized that change was necessary if they were to thrive in the airline industry. The second step in this model is to educate and communicate the need for change to other subordinate employees so as to minimize chances of resistance in the implementation stage (Global Literacy Foundation, 2010).

Based on the successes of the strategies that the airline implemented, it can therefore be said that they successfully carried out the second step of Kotter’s model of change. Kotter then goes on to give the third step as generating ideas or coming up with a vision. This idea or vision could be a model or a concept that could be implemented by the organization.

In the case of the airline, the changes that were implemented in the end were the ideas that were generated in this step (Global Literacy Foundation, 2010). Some of them include; the introduction of new products by the airline, sticking to their low air fares policy, coming up with the voluntary early retirement policy and many more.

The fourth step is communicating the ideas to every one in the organization to allow for debating and also to ensure that everyone in the organization is involved and catered for so as to avoid future resistance especially in the implementation stages. Still, given the success of the changes that were implemented by the airline, it can be safely assumed that this step was also carried out successfully (Hewlett, 2006).

The fifth step, according to Kotter involves eliminating the objects or the people who are resisting the change. This can be done through educating the people who are resisting the change and allowing them to air their grievances. The organization should also ensure that the leaders in charge of supervising are qualified for the jobs.

This step still falls in the planning stages of Kotter’s model for change and, therefore, we can only assume that it was a success for the airline given that they were able to see their visions and ideas to the end. The sixth step according to Kotter is to create short term goals which are achievable. It should be noted that it is of vital importance for these short term goals to be achieved by the organization.

Failure to achieve these goals will only prove the critics and the people resistant to the change right. This will in turn make it very difficult for the organization to progress with its plans hence making it vulnerable to failure. It is also a very important step as the achievement of short term goals motivates the employees of the organization (Hall, 2008).

Southwest Airlines in light of this ensured that they put in place short term goals. These goals were in the form of quarterly reports, which were supposed to show the airline’s progress in terms of it financial position, its market share, its efficiency in managing its finances and whether its aim to reduce capital spending had been achieved. The seventh step entails seeking to improve the changes already realized through the short term goals. This plays a key role of ensuring that the organization remains keen on continued growth and improvement.

Using the Southwest Airlines as an example, it can be seen that the airline did not stop at the successes that were achieved as shown by their quarter year reports. They went the extra mile and looked for more ways in which they could improve the changes already implemented. They did this by looking for more products that they could offer the passengers, more ways of raising more capital that they could use for other profitable ventures (Yilmaz, 2008).

The last step according to Kotter’s model is reinforcing and implementing the change into the organization. It is the responsibility of management to ensure that the changes are accepted and internalized by everyone in the organization. This step requires the change to be introduced on a large scale level, with the result being its absorption into all parts of the organization.

In addition to the reinforcement, there should be a regular follow up of the changes that have been implemented, so as to ensure that things continue to run smoothly and also to provide room for improvement. Using the Southwest Airlines as an example, it can be noted that these changes were reinforced and they became a part of the airline. Some of these changes have largely contributed to the airline’s success (Yilmaz, 2008).

It can be seen that the airline made the strategy for charging low air fares a part of it and the airline even became popular because of this. In addition, it adapted a plan that gave its employee the option of leaving employment voluntarily even before they had reached the proper retirement age.

This brought about a culture of respect among the employees and management. The new products that were introduced by the Southwest Airlines for example “the early bird check in”, the package that allowed passengers to travel with pets and the package that made it possible for passengers to access the internet also became a part of the organization. The importance that the Southwest airlines attached to proper financial management also became a part of the organization (Hewlett, 2006).

The Effectiveness of the Changes Implemented by the Southwest Airlines

Every organization is always faced with a dilemma when it comes to change. This is because of the uncertainties that change brings with it. However from the above analysis, it is evident that for an organization to survive in the current turbulent times, change is inevitable. The effectiveness of the changes implemented by the Southwest Airlines can be seen in their annual reports.

The airline’s returns have greatly improved despite the current poor economic conditions. The company recorded losses in the first quarter. However, the airline was able to turn this around and report profits unlike it competitors. The effectiveness of these changes can also be seen as passengers have increasingly become more loyal to the airline compared to others. The airline has also recorded an increase in new passengers who now prefer the airline as opposed to other airlines (Hall, 2008).

Southwest airlines have also experienced a reduction in operating costs due to the measures that it put in place to curb the rising costs of operation for example the postponement of expanding the airline, introducing a voluntary retirement scheme for the employees, and looking for different ways to deal with the rising energy costs.

Due to its insistence on the need for proper financial management, the airline has been able to maintain very low levels of debts hence eliminating the possibility of insolvency. It has also been able to find new and innovative ways to improve its liquidity position. Therefore, when all is said and done, the changes that the Southwest Airlines implemented have been more effective than disadvantageous (Kathleen, 2008).

References

Global Literacy Foundation. (2010). Kotter’s 8-Step Change Model. Web.

Hall, A. (2008). Organizational Pay Analysis: A Case Study of Southwest Airlines. Web.

Hewlett, R. (2006). The Cognitive leader. London: Rowman & Littlefield Pub Inc.

Kathleen, B. H. (2008). From Analyst to Leader: Elevating the Role of the Business Analyst Management Concepts. London: Free Press.

Yilmaz, A.K. (2008). The Corporate Sustainability Model for Airline Business. Web.

Corporate Culture

South West Airlines began operations in 1967 and continues to dominate the larger United States domestic airline market. The company offers the lowest travel rates in the United States.

This is part of its culture. It has entrenched this culture throughout the economic dynamism experienced over the years it has been in operation. The company offers low rates but cuts down on other in-flight services. These services include airport lounges, first class offers and seat reservations.

The company argues that by cutting down on these services, it increases customer numbers. Its target market is the low-end market that is interested in flying the different states in the country. These people travel to visit their loved ones and conduct business.

Hence, this group may not be interested in high class services to do that. The company has earned itself the tag ‘low cost carrier’ because of that. This does not mean that the services at South West Airlines are not high-end. It only means that the company’s interest is to charge customers as little as possible for flights across the United States.

The company uses only one flight to conduct its operations. The Boeing 737 has been in operation for a considerably long time now. The company argues that this gives it identity in the wide sea of airline operators. The company in-flight services are also different.

It hires stewardesses and flight attendants that have unique body shapes. They must, for instance be tall. They must wear short skirts while at work. Hence, the term ‘long legs and short skirts’. The selection of the employees is quite detailed and includes the need to face a committee (Hewlett, 2006).

Competitive Advantage

The company has been in operation for over 5 decades. During this time, it has maintained this same culture. The company has expanded and grown to be the biggest airline company in the United States that deals in domestic market. The company attributes this to the culture described above.

The argument is that other operators adopted the ‘cool’ travel tag while it maintained its core business: travelling. The various economic slowdowns and falls that have characterized the United States have played to the advantage of the company.

This is because people faced by those situations have reverted to using South West Airlines as the travel partner of choice. The other companies have resorted to too much advertising to win back customers.

It is understandable that change is hard in organizations. It is especially impossible if it is counter change. This change is not proactive and it only responds to a situation. This is what most airlines have been grappling with in the receding economic turmoil of 2008.

In an attempt to cut down on travel budgets, many people in the United States have employed the services of south west airlines. This is because of the culture it has maintained from the start. Therefore, in more than one occasion, South West Airlines business culture has worked to its advantage.

It has offered it the competitive edge in the domestic market. This has positively affected company performance. The company continued to report growing customer and profit numbers when all other operators were reporting losses (Yilmaz, 2008).

Financial Performance

Leadership Styles and Strategic Decisions

It can be seen that the airline made the strategy for charging low air fares a part of it and the airline even became popular because of this. In addition, it adapted a plan that gave its employee the option of leaving employment voluntarily even before they had reached the proper retirement age. This brought about a culture of respect among the employees and management.

The new products that were introduced by the Southwest Airlines for example “the early bird check in”, the package that allowed passengers to travel with pets and the package that made it possible for passengers to access the internet also became a part of the organization. The importance that the Southwest airlines attached to proper financial management also became a part of the organization.

Every organization is always faced with a dilemma when it comes to change. This is because of the uncertainties that change brings with it. However from the above analysis, it is evident that for an organization to survive in the current turbulent times, change is inevitable. The effectiveness of the changes implemented by the Southwest Airlines can be seen in their annual reports.

The airline’s returns have greatly improved despite the current poor economic conditions. The company recorded losses in the first quarter. However, the airline was able to turn this around and report profits unlike it competitors.

The effectiveness of these changes can also be seen as passengers have increasingly become more loyal to the airline compared to others. The airline has also recorded an increase in new passengers who now prefer the airline as opposed to other airlines (Hewlett, 2006).

Southwest airlines has also experienced a reduction in operating costs due to the measures that it put in place to curb the rising costs of operation for example the postponement of expanding the airline, introducing a voluntary retirement scheme for the employees, and looking for different ways to deal with the rising energy costs.

Due to its insistence on the need for proper financial management, the airline has been able to maintain very low levels of debts hence eliminating the possibility of insolvency.

It has also been able to find new and innovative ways to improve its liquidity position. Therefore, when all is said and done, the changes that the Southwest Airlines implemented have been more effective than disadvantageous (Kathleen, 2008).

References

Hewlett, R. (2006). The Cognitive leader. London: Rowman & Littlefield Pub Inc.

Kathleen, B. H. (2008). From Analyst to Leader: Elevating the Role of the Business Analyst Management Concepts. London: Free Press.

Yilmaz, A.K. (2008). The Corporate Sustainability Model for Airline Business. Web.

Executive Summary

Problem Statement- This report is a study of Southwest Airlines, considering its strategies, strengths, weaknesses and the recent acquisition of AirTran.

Analysis

1. Southwest faces problems of drastic weather changes, natural calamities and inflation. These problems also apply to the industry as a whole.
2. The strongest force among the Porter’s five forces in the US Airline industry is the barrier to entry. This is attributed to the large capital requirements.
3. Southwest airline has an open office culture, which has ensured good labour relations.
4. The low cost strategy pursued by Southwest has been its core competence. Though this is a relatively simple concept, copying it would not be so straightforward.
5. Southwest airlines are doing very well in financial terms. This conclusion has been reached form the comparison made with its competitors.
6. The acquisition of AirTran is well timed.
7. The synergy management strategy if well implemented can result in great financial gain for Southwest Airlines.

Alternatives

1. Southwest Airlines could continue acquire more competitors in future to increase market share and ensure revenue growth.
2. The company has the option of focusing on being the best low cost airline in the industry.

Recommendation

Southwest airlines should continue with the merging and acquisition strategy as it guarantees huge market share and economies of scale. This will also increase barriers to entry for any potential competitors.

Implementation

Southwest Airlines has the capital base required to acquire most of its smaller competitors. The management team in place has also proved to be effective. The company also has a good reputation with its creditors. This will enable it to get any financial assistance needed for its expansion plans.

Problems Facing Southwest Airlines

Southwest airlines faces s few problems despite being a large industry player. The recent leadership crisis in the Middle East has greatly influenced the Crude oil industry. This industry is at the core of the operations of the Aviation industry.

These price increases have directly affected petrol and gas prices, which are a great proportion of operating costs in the industry. Needless to say. This has resulted in rising operating costs for Southwest airlines.

There have been drastic climate changes in the recent past. The western hemisphere has experienced very cold winters with snowstorms and avalanches. These have forced Southwest airlines to delay or postpone some of its flights. This translates to revenue loss for tickets that are cancelled.

The cost of housing travellers who are stranded also increases operating expenses. The Eastern hemisphere on the other hand has experienced very high temperatures. This leads to dust storms which reduce visibility while flying. These too have caused a few flights to be cancelled.

Natural disasters such as the tsunami in Japan prevent airlines from flying to the worst affected areas. Southwest airlines has had to cancel flights and change routes that required a stopover in these places. These changes in schedules are costly in terms of planning. Some airplanes are stranded in these disaster hit areas while others are actually damaged by the effects of the natural disasters.

Inflation rates continue to soar at an alarming rate. This rapid increase in prices affects Southwest Airlines by increasing operating costs. The result is reduced profit margins. Inflation also deals a blow to Southwest’s low cost strategy.

It is difficult for Southwest to pass on these increased costs to consumers since it has cut out a niche in the low cost criteria. The principal reason why most people fly with Southwest is its affordable cost. Any increase in prices comes with reduced customers. This is quite undesirable since Southwest Airlines is a profit making organization.

US Airline Industry and Porter’s Five Forces

Porter’s Five Forces assess an industry’s attractiveness based on certain forces within the industry and some without. The first factor is the degree of rivalry between the industry players. The American aviation industry has many players who exercise fierce rivalry. This is evident in the advertising campaigns and new offers that are unveiled daily. The aim of all the companies is to gain the largest market share and create customer loyalty.

The second factor is the barriers to entry. Entry into the aviation industry is relatively easy since it is not a government monopoly. The largest constraint is the amount of capital required. Airplanes and runways are expensive to buy. However, this is not a hindrance to most large investors.

The existing players have also created brand names that are not easy to erode. They also experience cost advantages due to their scales of operation. A new entrant may not be able to compete with the prices they offer.

The threat of substitutes is not strongly felt in the airline industry. This is because travel by air still remains the fastest among all available options. It is also quite convenient. International flights in particular cannot be substituted. However, the subway system provides competition for internal flights. This is because they offer the same services at a lower cost and are unaffected by most weather changes.

The fourth and fifth forces are buyer and supplier powers. Suppliers wiled a lot of power in this industry since the industry depends on well services airplanes for its prosperity. The airline manufacturers and maintenance engineers are quite crucial to this industry.

Buyers also have a lot of power since they have many options available to them and can switch anytime they wish. Southwest therefore has to take into close consideration the consumer demands.

This industry still has huge profit potential. This is evident from the existing players’ financial statements. However, a new entrant should ensure they have enough financial resources and be prepared to face fierce competition during the initial years. New entrants can find a suitable niche and focus on it. This way, they will be guaranteed success.

Culture and Success Strategies

Southwest has maintained an open door office culture that is very popular with employees. This has improved morale and led to good performance over the years. The company’s response to change is also relatively fast due to the willingness of employees to participate.

In 2008, during the financial crisis, when most companies were downsizing via compulsory retrenchment, Southwest chose to go the voluntary retirement way. Employees were given a choice to go for early retirement at will. This enabled the company to reduce labour costs without tampering with employee morale.

The strategy southwest has chosen to pursue is a no frills one. The company avoids providing services it considers unnecessary. This enables it to charge lower fares than most airline companies do. Southwest chooses to concentrate on its core business, which is flying its customers to their destinations of choice.

EasyJet has also adopted this strategy. It is not a difficult strategy to copy but efficiency is the advantage that Southwest has. The brand name is also hard to erode.

Financial Analysis

This paper employs financial ratios in comparing the performance of AirTran Airlines, Southwest Airlines and American Airlines. Most key financial ratios are computed using Microsoft Excel while a few are taken direct from the companies’ annual reports for 2009. The liquidity ratios computed include gross and net profit margins and return on assets.

The companies have similar gross profit margins, ranging from 1.73 for AirTran, 1.71 for Southwest Airlines and 1.66 for American Airways. The difference between the highest and lowest is a bare 0.07, meaning that all companies are earning almost equal GPM. The net- profit margin however, tells a different story.

South West Airlines is doing the best at 0.096, followed by AirTran with 0.057 and finally American Airways with -0.073. The net profit margin indicates the percentage of revenue that remains after adjustment for operating costs and other unusual items. In the case of American Airways, the operating costs exceeded the sales thus the negative figure.

This is not a good sign, as it will eventually translate to losses. Southwest Airlines is doing the best in cost control since it has the highest figure of 0.096. This could be attributed to the low cost strategy that the company pursues. This strategy has given the company great competitive advantage over its rivals.

AirTran posted the best return on assets at 1.06, followed by American Airlines with 0.755 and finally Southwest Airlines with 0.72. This is an indicator of AirTran’s ability to manage its assets better than its competitors.

The return on shareholder’s equity follows a similar trend, with AitTran posting the highest figure of 4.66. Southwest Airlines posted a figure of 1.88 while American Airways posted the lowest figure of -5.7. This shows inefficient use of shareholder’s funds in earning sales on the part of American Airways.

Southwest Airlines posted the highest current ratio, 1.41, indicating its superior ability to pay its current liabilities as they arise. AirTran followed with a figure of 1.05 and American Airways trailed with 0.85. The quick ratio also shows a similar trend, with Southwest airlines posting the highest figure of 1.31. American Airways posted the lowest figure at 0.786, just below AirTran’s 1.019.

The working capital ratio computed was inventory days. This shows on average how long inventory stays in stock before being used. AirTran holds its inventory for the shortest period. The company could be employing a JIT system in managing its inventory.

American Airlines posted the longest inventory period of 16 days. Southwest airlines held its inventory for an average of 13 days. Southwest airlines are doing better than its competitors in terms of liquidity ratios. However, in one category, inventory days, AirTran is doing better than Southwest.

Leverage ratios deal with the level of debt a company has in its capital structure. American Airways has the best debt to asset ratio. It posted a figure of 0.83, almost double, what the other two airlines had. This could indicate either low asset base or good use of the existing assets.

AirTran and Southwest had 0.46 and 0.42 respectively. There was a huge disparity in the debt to equity ratio where American Airways had -6.0. This was because the airline had exhausted all its reserves in an effort to survive the 2008 financial crisis.

The only element of equity in its balance sheet was ordinary shares. Therefore, the debt outweighed this by far. AirTran did better than Southwest posting a figure of 2.11 while the latter had 1.12. The airline under study seems to be doing average in terms of leverage.

The P/E ratio of Southwest is higher than its competitors. The figure was 92.38 while American Airways and AirTran posted figures of 66.6 and 57.1 respectively. This indicates that investors think that Southwest has high prospects of success.

The market to book value ratios range between 1.4 for Southwest and 0.92 for American Airways. This ratio compares the market value of the company and its book value. AirTran had a ratio of 1.03. Southwest airlines are still the best in this category.

Operating Performance

American Airways had a Passenger Revenue Yield per Mile of 20.7B. This was the highest among the three. Southwest followed closely with 10.5B while AirTran trailed with 2.41B. The first two airlines did exceedingly well in this category while AirTran posted very poor results.

AirTran had a load factor of 76.6% while Southwest had one of 80.6%. These are average figures in the aviation industry. However, American Airways did poorly with a load factor of 71.20%.

Acquisition of AirTran

Acquisition of AirTran will increase Southwest Airline’s market share and make it a larger industry player than before. This move is well timed with the entry of new players into the aviation industry. The leverage ratios of Southwest Airlines are also likely to improve with this recent acquisition. This is because AirTran has better leverage ratios than Southwest.

The gross profit margin will also improve since AirTran has high sales in relation to cost of goods sold. The return on Shareholder’s equity is also likely to improve, given the fact that AirTran posted the best figure in this category for the year 2009.

Southwest airlines are likely to be pursuing a synergy management strategy in acquiring AirTran. This is a good strategy since both companies operate in the same industry. This is likely to result in a huge increase in the customer base. There might be a slight problem during rebranding, as customers may get confused. However, this can be easily curbed using good advertising.

The core competences of both companies can be combined for better performance. Synergy management usually results in better results if the companies’ competencies can be combined effectively. Therefore, I agree with management that this decision will help increase shareholder value.

Southwest Airlines should focus on exploiting the synergy that will be created by owning another airline. There will be lessons to be learnt from AirTran, especially about operations and financial management.

Southwest’s management should be open to cultural change and accommodate employees from AirTran. When these companies have been merged successfully, and Southwest has sufficient capital base, then another merger or acquisition can be effected.

References

New York Times. (2011, February 3). Times Topics. Web.

Ratliff, R. L., & Reding, K. F. (2002). Introduction to Auditing: Logic, Principles, and Techniques. New York: The Institute of Internal Auditors.

Russo, M. V. (2008). Environmental Management: Readings and Cases. New York: Sage Publications.

United States General Accounting Office. (2003, September 17). United States General Accounting Office. Web.

Introduction

Southwest Air Line is an American company with its head quarters in San Diego, California. The company was established by Herb Kelleher and Rollin King in 1971.

Questions

Determine how Southwest Airlines’ corporate culture differs from other airlines

Corporate culture refers to an organization’s standards, values and ideology. It is reflected through manager’s style of leadership, ways of communication and the pattern of work. In many organizations, the corporate culture is usually introduced and maintained by founders of the organization and those who take over from them.

Southwest Airline has a unique culture which is shaped by its founding leaders. The company has a reputation of suitable schedules, affordable fare, true concern for its passengers and joyful service. Unlike other companies who take every opportunity to increase there fares even when economic circumstances do demand such increments, Southwest Airline never executes unnecessary fare increments.

For example, it refused to charge customers who travelled with their checkered baggage. Instead they encouraged their clients to come with them by sarcastically having a poster in their premise which read, “We love your checkered baggage”.

These standards, values and ideology of South West Airline trickle out to its clients. This is because the company endeavors to make its customers happy. By motivating their workers, employees develop a feeling of belonging. Employee happiness is converted to customer happiness.

The driving principle for South West Air Line states that, happy workers leads to satisfied customers. One of the ways the company uses to motivate a team of over 32,000 employees is by involving them in decision making. When employees are involved in decision making, they easily implement solutions reached at in decision making forums (Boone & Kurtz, 2012).

Their method of hiring talented and service oriented employees is also unique to them. They use the phrase, “servant at heart” to refer to their employees. To make sure they only recruit the best among the best, interviews are conducted in groups and candidates are allowed to interact actively with other candidates. Managers identify candidates with high interactive skills and bring them on board. This hiring style is only unique to Southwest Air Line.

Another special feature of Southwest Air Line’s man power lies in its style of management. The company gives power to its supervisors, frontline employees and middle mangers to make decisions on ways of strengthening relationship between the company and its clients. This has made employees at South West to work for the company like it was their own (Elwood & Trott, 1996).

Therefore, one can conclusively say that Southwest Air Line’s culture is different from that of other companies because it puts true interest of the customer first by focusing on price and comfort, hires a talented and service oriented work force and adopts participatory decision making process. This is a corporate culture nurtured by founders of the company and maintained by current managers.

Analyze three (3) ways that Southwest’s unique culture has benefited the airline and its employees

The unique culture at south west company has benefited the company and employees in various ways. Firstly, the culture guarantees employees job security and a stable work environment. A stable work environment is achieved through employer’s willingness to listen to workers grievances and respond to them adequately. A stable work environment leads to job security.

In addition, employees are able to access and benefit from career development opportunities available at the place of work like training, scholarships and promotions. These opportunities are open to all employees irrespective of position one holds in the company.

The airline on the other hand benefits through employees who give their best services to customers which leads to increased customer satisfaction. Once customers are satisfied with the quality of service, they are more likely to come back with their friends. More customers therefore lead to more profits (Farris, Neil, Pfeifer, & Reibstein, 2010).

In addition, a peaceful relationship has been developed between employer and employees. This relationship eliminates the need of workers to join unions or to go to industrial courts to resolve disputes arising between them. The company does not waste resources in expensive court tussles. These harmonious relationship leads to higher production, a feature which is important to any company. This further increases employee loyalty, a motivated labor force and satisfied customers (Parasuraman, 1991).

Speculate how Southwest Airlines would continue to thrive as a company if its current corporate culture would need to change in the near future

According to my analysis, the culture at Southwest Air Line has stood the test of time and I would not recommend change of culture if the organization is to prosper. The customer satisfaction perspective adopted by the company is good for the growth of the business now and in the future (Kissel, 2002).

However, the company could consider expanding its business not only to destinations within Dallas, Houston and Sanantonio but also to destinations outside America. In this regard, the company could consider exploring other markets in Europe or/and Asia.

References

Boone, E. & Kurtz, L. (2012). Contemporary business. Hoboken, NJ: John Wiley & Sons.

Elwood, F. & Trott, J. (1996). Trends toward a Closer Integration of Vocational Education and Human Resources Development. Journal of Vocational and Technical Education, Vol. 12(2), 7-8.

Farris, P., Neil, T., ;Pfeifer, P., & Reibstein, D. (2010). Marketing Metrics: The Definitive Guide to Measuring Marketing Performance. Upper Saddle River, N J: Pearson Education, Inc

Kissel, G. (2002). Poor Sailors’ Airline: a History of Pacific Southwest Airlines. McLean, VA: Paladwr press.

Parasuraman, A. (1991). Marketing Services: Competing Through Quality. New York, NY: Free Press.