Southwest Airlines' Business-Level Strategy

Southwest Airlines’ business-level strategy is differentiation. The key to Southwest Airlines’ ability to maintain low-cost tickets is to do cost compression. For example, the company only used the Boeing 737 series at the beginning of the company, which reduces the cost of maintenance compared to companies that offer many models. Southwest trains its maintenance group to do maintenance and repair. The advantage of the strategy is that Southwest can deploy and arrange the maintenance team whenever and wherever needed. Only one SOP to follow and one guide for all the aircraft and one standard for all the procedures. Same as flight attendant and pilot. There is only one standard need to launch, and for all the employees, it is more efficient to train and learn.

Besides, Southwest Airlines only provides domestic short-haul point-to-point routes, non-stop flight, with short flight times and frequent shifts. If the consumer misses a flight, they can take the next flight of Southwest Airlines in an hour. Moreover, Southwest Airlines’ tickets do not assign seats, just like a bus, find a seat and sit down, which can reduce wasted time. This high-frequency and fast flight experience allows Southwest Airlines to lock up business travelers who need to travel through major cities, not only at a lower cost but also saves time compared to driving.

Southwest Airlines has no first-class seat to reducing space idleness and changing to ordinary seats. It does not provide airplane meals and only provides some soft drinks and peanuts because it is a short-haul trip. To save the space for catering equipment can add some more seats for the aircraft. The strategy also In this way of compressing costs, Southwest Airlines can decrease the ticket price and claim that the tickets it sells are the cheapest.

Southwest Airlines has transformed the value chain of ordinary airlines, omitting or crossing high-cost value chain activities, cutting the attachments of products or services, providing only primary non-additional products or services, and doing everything possible to reduce costs.

The company culture plays another critical role. Southwest emphasizes the importance of teamwork, then avoid bureaucracy. As a large company, Southwest Airlines maintains a simple and flat organizational structure to avoid forming a complex organization. Employees can communicate directly with the vice president level by phone, email, or face to face. The president goes to the parking apron to clean the plane with the ground crews in the early morning of the weekend. Southwest believes that when employees feel that they are treated with the humanity they deserve and are cared for and respected, they also provide passengers with more dedicated and considerate services and full respect for customers. As its founder Herb said, one of the crucial factors for Southwest Airlines’ success is that the company can always maintain an agile and rapid response to the outside world.

The business-level strategy of low-cost with simple business factors airlines has proven that it is effective. After several years, it also proves to be almost normal. The strategic advantage is gradually lost, and all low-cost airlines formed a competition situation within the circle. Conversely, if other traditional big airlines with secure resources also decrease their price and simplify some of the routes like domestic routes as Southwest. The advantage will lose fast since these big airlines have more massive capital to beat Southwest. Moreover, the challenge of aviation has also gradually risen. The establishment of low-cost airline subsidiaries to join the air space war, or adjust the specific routes, time slots to encounter the competitors, the result of industrialization blurring may bring more survival pressure to low-cost airlines.

Southwest Airlines tends to manage small companies and strives to simplify the company structure and simplify the rules and regulations to avoid the company’s rigidity. However, some strategy for a small company structure will not fit the middle size operation. Southwest is growing and trying to expand their market. The business-level strategy in value-chain might also lose the advantage. It is another crisis Southwest faced, how to make a new decision in front of the market to keep the position, is an important question.