Hillary Joiner, Nathan Fisher,Brett Huey & Phillip DuffyJune 2013SOUTHWEST AIRLINES
• In 1982, Southwest Airlines had 27 planes, 270 million in revenues, andflew to 14 cities.• We now employ 538 planes, ope...
BUT…It’s time for a new strategy.
NEW LEADERSHIP• Herb Kelleher relinquishes power after building company around his image of customerservice and employee l...
CULTURE & GROWTH: EMPLOYEES• As company grows so does distance between employees and management• Small staff with increasi...
CULTURE & GROWTH: COMPANY• To increase productivity and convenience for customers, must expand to moreairports• Key acquis...
http://www.youtube.com/watch?v=DYA_ivyj3kE&t=0m40s
Strengths-Human Capital-Social Network-Culture-Overall Cost LeadershipWeaknesses-Accustomed to organic growthstrategies in...
• How do we continue to grow? (Alternative growthsolutions)• LUV our people (Internal Strategy)• LUV our customers• Focus ...
• Return to our core values• Herb Kelleher said: “We want people who do things well, with laughter andgrace.”• With over 3...
• Core Business• Customer Service – we just happen to provide airline transportation.• Triple Crown Award Winner• Our Phil...
• Focus on Product Positioning in New Markets.• Alert customers of our: Low-fares, short-hauls, high-frequency, and point-...
• Southwest Cities• Southwest Countries• Target Hispanic and elderly populationsOUR RECOMMENDATION:NEW MARKETS
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4380 Case 21 Southwest Airlines

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  • Herb Kelleher relinquishes power after building company around his image of customer service and employee loyalty Remained chair of board with focus on long rangeControlled schedule planning and aircraft acquisition Colleen BarrettFormer vice president for customers, New President and COOWas the culture keeper since early days of companyDifficult staying personal with 35K employeesJames Parker Former General Counsel, New CEOQuiet diplomat who was skeptical of celebrations but came around in 2002 Strong labor negotiator and speaker for Wall Street and MediaResigned in 2004 amid labor negotiations with flight attendants Gary KellyFormer CFO, Now CEOEnergetic leader with audacity of KelleherExpanded company to key airports through M&AUnderstood further cost reductions would be hard to come by without modest fare increases and layoffs
  • 4380 Case 21 Southwest Airlines

    1. 1. Hillary Joiner, Nathan Fisher,Brett Huey & Phillip DuffyJune 2013SOUTHWEST AIRLINES
    2. 2. • In 1982, Southwest Airlines had 27 planes, 270 million in revenues, andflew to 14 cities.• We now employ 538 planes, operate in 69 cities, covering 35 states, andrank 164th on the Fortune 500 list.• For the last 39 years, we have relied on an organic growth strategystemming from cost leadership and a unique corporate culture:• Dedicated employees allowed for competitive labor costs. Employeesare paid 30% less than competitors, but are offered valuable stockoptions as extra compensation.• Flies out of less congested airports to get quicker turnarounds.• Only operates on Boeing 737• No “frills”BACKGROUND
    3. 3. BUT…It’s time for a new strategy.
    4. 4. NEW LEADERSHIP• Herb Kelleher relinquishes power after building company around his image of customerservice and employee loyalty• Remained chair of board with focus on long range• Colleen Barrett• New President and COO• Was the culture keeper since early days of company• James Parker• Resigned in 2004 amid labor negotiations with flight attendants• Gary Kelly• Now CEO• Expanded company to key airports through M&A• Understood further cost reductions would be hard to come by without modest fareincreases and layoffs
    5. 5. CULTURE & GROWTH: EMPLOYEES• As company grows so does distance between employees and management• Small staff with increasing passenger load and frequency• Leads to more bags and shorter time, with no pay increase• Flight attendants asked to work longer hours• Boosted productivity but no pay increase, stock value also declining• Southwest is no longer underdog so their pay should match the success of thecompany
    6. 6. CULTURE & GROWTH: COMPANY• To increase productivity and convenience for customers, must expand to moreairports• Key acquisitions of gates in Chicago, Atlanta, Pittsburg, Fort Meyers• More online reservations and narrowing labor-cost advantage with major airlines• Leads to increase in rates and possible layoffs• Expansion of JetBlue & AirTran would be direct threats• Must increase amenities to compete with similar airlines• Leather seats & in-flight entertainment
    7. 7. http://www.youtube.com/watch?v=DYA_ivyj3kE&t=0m40s
    8. 8. Strengths-Human Capital-Social Network-Culture-Overall Cost LeadershipWeaknesses-Accustomed to organic growthstrategies in an industry that nowrequires nonorganic growth-No segmentation (first class, etc.)-Most employees are unionized.Opportunities-More U.S. cities-International Flights-New target markets: Hispanics andelderlyThreats-Economic recession- less people areflying-Fluctuating oil prices-Competition (Delta, US Air, etc.)SWOT ANALYSIS
    9. 9. • How do we continue to grow? (Alternative growthsolutions)• LUV our people (Internal Strategy)• LUV our customers• Focus on new marketsGIVE A LITTLE LUV
    10. 10. • Return to our core values• Herb Kelleher said: “We want people who do things well, with laughter andgrace.”• With over 35,000 employees and the acquirement of Airtran introduce a veteranmentor program to integrate new employees into OUR culture.• Number of Departures• Maximize productivity of people and machinery, add additional departures eachday.• Cost Cutting – “Airlines don’t have revenue problems, they have cost problems.”• Ensure pilots feel involved internally by contributing new ideas on how to savefuel.• Continues to keep service cost low, because who knows the skies better thanour pilots.LUV OUR PEOPLE
    11. 11. • Core Business• Customer Service – we just happen to provide airline transportation.• Triple Crown Award Winner• Our Philosophy- “Service for Smiles and Profits”• Encourage our employees to treat customers and customer service as the mostimportant aspect of their job.• Provide the best value for our target consumers dollar (frequentschedules, comfortable seats and on-time departures).• Add segmentation in seating for customers willing to pay more.• Our Mission• The mission of Southwest Airlines is dedication to the highest quality ofCustomer Service delivered with a sense of warmth, friendliness, individualpride, and Company Spirit.LUV OUR CUSTOMERS
    12. 12. • Focus on Product Positioning in New Markets.• Alert customers of our: Low-fares, short-hauls, high-frequency, and point-to-point carrying.• Southwest Cities• Between 2006 and 2010, we grew from 63 to 69 in numbers of cities served.• Recognize the new markets (Washington Dulles, Denver and Atlanta) throughpromotion (media blitz).• Continue to pursue more U.S. cities.• Southwest Countries• Begin working on expanding to international cities. International travel isgrowing and growing in today’s world.• Target Hispanic and elderly populations• “We want to have greater appeal to more customers nationwide,” Kelly said.NEW MARKETS
    13. 13. • Southwest Cities• Southwest Countries• Target Hispanic and elderly populationsOUR RECOMMENDATION:NEW MARKETS

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