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Harvard Business School

Group 961
Dumitrescu Serban
Baldovin Bogdan
Steriu Mircea
INTRODUCTION

Background In time
Over 3200 flights on a daily basis
Started in 1971 as an intra-trade
37000 employees spread over 73
operator
cities
Budget airline philosophy
Southwest.com is the worlds largest
Operates out of Dallas Love Field
airline website by the number of
airport
visitors
Refers to itself as the LOVE (LUV)
By 2008, many airlines have been
airline
created based on Southwests model
Largest air carrier in the world by
A public entity built around customer
2001
and employee relationship
National carrier, serving major
Taking excellent care of our customers
cities
is just as important as filling our planes
Short-haul, high-frequency, low-
with fuel
cost strategy
Bob Young, SW Vice-President
The people who work here dont
think of Southwest as a business.
THE SOUTHWEST MODEL

Putting a lot of
Providing low- emphasis on
fare and short- the fair
haul flight treatment of its
services. customers.
Controlled
solid
growth
for the Building
Offering the
highest quality
company friendly
relationships
of customer with their
service. clients
TARGET MARKETS

Small business executives (mostly male)


Travel short distances
Cost
Prefer low-cost fares
(and value)
Frequent schedules
conscious
consumers

Groups of users (mostly senior citizens) of a


product or service to share information and discuss
common issues

Male, female, families


Best value for their money

Value-
conscious Evangeli
consumers sts
HOW DOES SW CREATE VALUE

CONSUMER COMPETITIVE
SATISFACTION ADVANTAGE
Customer-journey Trust
consistency Non-adversarial relations
Emotional consistency Transparecy
Communication consistency High productivity
Integration into internal
processes
COST CONTROL

1 3
COST CUTTING NUMBER OF
One type of airplane (Boeing 737) DEPARTURES
At least 20 departures per day
No premier seating classes Maximize the productivity of people and
No inflight meals or movies machinery

Southwest
No revenue problems,
Airlines
but cost ones

FUEL COSTS LOW COST


Pilots contributing with new ideas to save SERVICES
Offering great services at low costs:
fuels Average gate and landing fees (1993):
Buying fuels from vendors who offer the USD2.5/capita
best prices

2 4
SWs cost per passenger was 7.3 cents
*Carry inventory if possible (1993)
GROWTH STRATEGY

Ground
Economics
In-air
Economics
Total
Economics

Conservative Opportunity Consistent


Growth Strategy Driven Growth
Expansion Consistency
of the expansion was 85%
Anchored in throughout the
internal
Chicagos Midway system in the way
Airpot after the of doing business
collapse of the
Midwest Airlines
COMPETITION
Net positive income for the last 40 years

Fuel efficient compared to its peers

Lower salaries expenses

No baggage fees

American Delta Airlines United FedEx Express United Parcel


Airlines Group Continental Services
Holdings
MARKETING AND PRICING

INTRIGUE ENTERTAIN PERSUADE

Marketing strategies Pricing strategies


Southwest offers is built around flights Flying one kind of aircraft has
that target specific demographics and
ticket pricing that is simplified in a way assisted SW in achieving lower
that passengers know exactly what they training costs
get for what they pay.
No preferential treatment
Building brand loyalty towards frequent fliers led to
reduced traffic delay -> increase charging the lowest possible
passenger convenience fares
point-to-point strategy -> reduced * Instead of increasing fares when the
turn-around time market gets busier and a large number
emphasis on building good relationships of people is flying, SW simply
between attendants and passengers increases the number of flights
PERSONNEL

Enrolment Compensation

attitude rather than skill on par with the industry norm


rigorous interviewing variable based on position
peer-to-peer hiring 10% of the stock held by
no nepotism employees
One pension through a profit-sharing
organizati strategy
Structure on One Culture
family
centered on team-building We-feeling
promotes cross-training Promotion of informal teamwork
agreement by general employees = internal customers
trust
SWOT Analysis

Strengths Weaknesses

S W
Strong technical and operational
No segmentation of services
knowledge
Dependant on a single produces
Friendly approach with the
(Boeing)
customers
Innovative ideas to retain old
clients
Low cost per seat and free
baggage policy
Opportunities Threats

O T
Growing US Airline industry Stiff competition
Access to foreign markets Rising operational costs
Partnership with foreign airliners Restricted fare seat-mile
Expanding services for leisure or
business classes