In 1994, both United Airlines and Continental Airlines launched low-cost airlines-within-an-airline to compete with Southwest Airlines. From 1991 to 1993, Southwest had increased its market share of the critical West Coast market from 26% to 45%. Considers how Southwest had developed a sustainable competitive advantage and emphasizes the role of human resources as a lever for the successful implementation of the strategy. Asks whether competitors can successfully imitate the Southwest approach. Publication Date: January 01, 1995 Source: Stanford Graduate School of Business.

1. Southwest Airlines

2. The case tells about how Southwest
Airlines competed with major airline
companies like Braniff International
Airways and Texas International
Airlines to establish their service in
Texas between the cities Houston,
Dallas and San Antonio by cost
leadership strategy.
The company faced a major challenge
when Braniff International Airways
cut down its ticket fare to half which
was put in effect from the day of
announcement for a 60 day sale.
Southwest Airline -
Background

3. Timeline - South-west airline

4. ● The constraint on marketing activities in the months before passenger operations were the planned, was
due to the issue of over $6 million of Southwest stock on 8th June 1971.
● The company’s lawyers had advised that a media campaign promoting the airline before the stock issue
might violate Securities and Exchange Commission regulations against promoting stock.
● Due to this reason, virtually any advertising conducted before June 8, was only for personnel.
Marketing Problem faced by Southwest Airline in 1971

5. ● The service by the two already existing aircrafts represented legs of much longer, interstate flights.For
example, a Braniff flight that had arrived from New York would travel from Dallas on its way to San
Antonio. So local customers got very few seats for booking
● The Braniff flights had a bad reputation for not being on time.
● The flying costs were comparatively higher.
● The TI flights were viewed as dull and subtle by the travellers.
● Whenever there was a mechanical problem the air routes suffered.
● People were not encouraged to use the airlines in comparison with other transportation medium like how
Southwest did by providing coupons and half price ticket sales .
Southwest Airline - Marketing Opportunities

6. The considerations for selecting an airline are as follows :
● The airlines costs should be budget friendly.
● There should be ample availability of flights at small intervals at all times.
● Ticket booking should be a fast and easy process.
● Flights should be on time always.
● Journey should be comfortable and relaxing with good facilities.
● Extra facilities are always an added bonus.
● Direct flights would be more preferred than connection flights
● Depending on the previous experience with the airline
Various Considerations For Selecting an Airline

7. a. Porter’s generic strategies were first set out by
Michael Porter in 1985 in his book, "Competitive
Advantage: Creating and Sustaining Superior
Performance.“
b. Porter's generic strategies are ways of gaining
competitive advantage – in other words,
developing the "edge" that gets you the sale and
takes it away from your competitors.
c. There are three generic strategies, either lower
cost, differentiated, or focus.
d. Further it is classified on the scope of market it is
applied that is either focused or industry wide.
Porter’s Generic Strategy - Implications and Opinions

8. Three Strategies of Porter
Cost Leadership strategy
a)This particular strategy an industry tries to take an edge by becoming a low cost producer in it’s Industry.
b) The Cost Leadership strategy is exactly that – it involves being the leader in terms of cost in your industry or market. This can
be done in two ways.
c)Increasing profits by reducing costs, while charging industry-average prices or increasing market share by charging lower
prices, while still making a reasonable profit on each sale because you've reduced costs.
Differentiation Strategy
a)Increasing Differentiation strategy involves making your product unique and more attractive than what the competitors of the
same product offers.
b)It selects one or more attributes that many buyers in an industry perceive as important, and uniquely positions itself to meet
those needs.
Focus strategy
a)Companies that use Focus strategies concentrate on particular niche markets
b)By understanding the dynamics of that market and the unique needs of customers within it, develop uniquely low-cost or
well-specified products for the market.

9. Analyzing the Southwest Airlines
● Southwest Airlines Co.’s generic strategy mostly was cost leadership, which creates competitive advantage based on low costs and
correspondingly low prices
● The company’s advertising campaigns frequently emphasize low fares as a selling point, in contrast to other firms that use the
focus strategy or the differentiation strategy.
● The other competitors like Braniff or Texas International charged more than 25 dollars Southwest Airlines charged only 20 dollars
for all the routes it initially flew
● While applying cost leadership model one thing that Southwest kept in mind was that they met the minimum break even point in
costing without getting pushed down to the primrose path and running out of money.
● The using of a new model airplanes (Boeing 737) which had lesser turn around time, low operating and maintenance cost added a
huge advantage to them in reducing the overall cost incurred which in turn reduced the charges of the flight tickets.
● One risk of following the cost leadership model is that it is a method which can be copied by competitors which exactly was what
Braniff and TI did.
● However Southwest already went ahead introducing more schemes which provide lower cost for tickets like the discount coupons
sent to 36000 influential business people, the 10$ fare on Friday after 9pm, or to increase traffic providing tickets at half cost on
weekend, or to increase traffic by reducing the cost by half in route were there was much less passengers.
● So always make sure that you find ways to provide the best valuable service for the cost that you charge in order to be successful
like how Southwest Airlines did.

10. Strategic Implications
● The strategic implications are the major consequences arising from not understanding and tackling the multitudinous impact of
forces and dynamics of change that can often impact a business from various angles like political, regulatory and legal economic
and monetary social-cultural technological ecological and environmental.
● The strategic planning provides basis for the activities in the business.
● Some of the most important aspects of strategic planning include the vision, mission, values and the strategy used in the
organization of interest.
● The situation of the business organization is also a major factor in the development of business strategic plans.
● Strategic planning has implications for several areas of the company like marketing implication , technological implication,
personnel implication.
● So strategic planning is a necessity to have a sustainable growth of an organisation.

11. ● Southwest's product positioning is unique in the industry.
● It focuses on travel service in market with low fares, frequent, conveniently timed flights.
● It's point-to-point route system, as compared to hub-and-spoke, provides for more direct non-stop routings for
customers and therefore minimizes connections, delays and total trip time.
● The airline also manages to create a fun and enjoyable experience for employees and passengers.
● Southwest only flies Boeing 737s.
● This increases the efficiency of maintaining the aircraft. Its maintenance people have to learn how to work on only
one model and become expert which gives Southwest a competitive advantage. They need to stock parts only for
737s.
● We can also say that Southwest Airlines accepts itself as a friendly, reliable, and low-cost company.
Positioning of Southwest Airline and Its Relevance

12. Key Takeaways
● Southwest Airlines talks about customer satisfaction and not just the Product.
● Exceptional Performance of Southwest Employees
● Gave Every employee an equal sense of responsibility
● Southwest Airline followed Customer-Centric Model
● Aims at Bringing People Together
● The company aimed for Customer retention and guaranteed profitability