Stanford Case: Southwest Airlines

February 17, 2010

As I read this case above, I was just amazed at how effective SWA has implemented its strategy and operating style from the beginning of its operation back in June 18, 1971 flying with only three Boeing 737 aircraft at Love Field in Dallas, Texas, and now has over 200 of them, the only type of aircraft it flies, as competition of course was challenging to SWA with major airlines companies such as USAir, United, Continental, American, etc. back in the mid-1980’s, however when these latter made a number of marketing and service mistakes that made them retreated from challenge, SW saw and seized opportunity to expand its business as much as it became the leading airline in passenger boardings in 1993, and I would say to the present as it is one of the best domestic airlines nowadays due to the low fare and the simple frequent flights it operates with.  

As we notice, Stanford Graduate School of Business did a tremendous job and thorough case study on analyzing SWA organizational structure from top management to lower levels in the company, pointing out the most important strength that characterizes the success of SWA which undoubtedly rests with people since it was built around people working together with a common goal to deliver great customer service, and to have fun as well, that is better known as SW spirit. So we clearly see that for SWA its people really are the most valuable assets, since they have cultivated for decades a system “highly people-oriented company” that accounts for its success by developing not only an affective commitment on its workforce that leads to a greater job satisfaction, but also by promising its commitment to work-family balance. This is how SWA gets to meet their external customers’ needs by treating its employees as internal customers as well as they meet high standards from within.  This case clearly shows how a company can prosper just by imitating SW’s competitive advantage as it is very easy to do so; however according to the case every company that tries has failed. Why? Because I believe that a competitive advantage in a technology field is without doubt imitable, whereas people’s strengths are much more ambiguous and difficult to imitate as we can’t identify what makes people special. I am big on bullet points, therefore I broke down the main ideas I took away from this fascinating case study of SWA to better understand it, so see below what I summarized:

  1. Leadership at SWA: Herb Kelleher, CEO: inspires a citizenship behavior in the organization as people enjoy what they do; people enjoy their boss, aggressive, underdog spirit, listens to employees, fixes their problems, hands on, promotes party to have fun, and gets his job done!
  2. Operating strategy at SWA: 737s aircraft the only type it operates therefore it simplifies the job by saving on maintenance and training costs; keeps simple frequent flyer system, low fares, low costs, frequent flights, no meal service, no assigned seating, etc.
  3. Competitive advantage at SWA: it is its people; highly people-oriented process, employees are treated as internal customers which boost customer service, etc.
  4. People department at SWA: employees are their own bosses which enables them to make educated decisions in pro of the customers well being to keep them happy, increase revenues, support the growth,  preserve the values and maintain the special culture of SWA.
  5. Recruiting at SWA: they take the position that attitude can’t be changed,  therefore if you don’t have a good attitude they don’t want you, they look for extroverts, great personalities, service attitude, problem solvers, very few MBAs, etc.
  6. Training at SWA: they train their people from within, so they don’t sponsor schooling or tuition reimbursement program, they also bring burnt-out  high seniority people in and ask them questions to improve the work processes.
  7. The work force at SWA: the company is 89 percent unionized, 80 to 90 percent of the employees own stock in the company, young and diverse work force, the turnover is low.
  8. The spirit of SWA: spirit of growth, help one another, family, service, hard work, fun, commitment, trust, etc.
  9. The competitive threat of SWA: Continental, United, and many other airline companies try to rip southwest business model but they have failed at it since they have a scant culture and attitude toward their people’s needs and wants, and why not toward the customer service from within.  

In summary, I took away a whole lot of great real life situations from this case, and what is best, an example of an outstanding organization that is leading the airline businesses effectively nowadays.

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