Highest Quality of Customer Service of Southwest Airlines - Report Example

Business Assignment The Company Chosen: Southwest Airlines Introduction Southwest Airlines (SA) is one of the leading passenger airlines withits headquarter at Dallas. SA launched its operations in June 1971 with its round-trip services between San Antonio and Dallas and subsequently, between Houston and Dallas. Besides exploring vision and mission statement of the company, the paper attempts to explore how the company fares on Porter’s five competitive forces. The paper will also accomplish SWOT analysis to determine its major strengths, weaknesses, opportunities, and threats in the market place. Based on these analyses, a strategic and communication plan will be formulated. Mission Statement “The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit” (SA Mission and Vision Statement, 2011). Vision Statement SAs vision is to work for a sustainable future keeping balance “between employees and community, the environment and financial viability” (SA Mission and Vision Statement, 2011). Five Competitive Forces Porter’s five forces of competition will help determine how SA faces competition in the market place (Porter, 2008). Rivalry among Existing Competitors Competition begins with existing players – large or small. SA faces competition with a host of players such as Delta Airlines, American Airlines Group Inc., JetBlue Airways and many more in the field. Airlines business is fiercely competitive and ever since 9/11, airlines business faces stiff competition among its major players. However, it is pertinent to note that SA has been making consistent profits since inception through cost reduction strategies, operational efficiencies and luring the customers through its low fares (Thompson & Gamble, 2010). Source: http://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy/ar/1 Supplier’s Bargaining Power Boeing and Airbus are the major suppliers of large carriers with the seating capacity over 100 passengers. Large airlines prefer to deploy these aircrafts for their operations. Aircraft cost constitutes the largest component of fixed costs and airlines do not have not a considerable bargaining power except placing bulk orders to take some quantity discount. On operating cost aspect, aviation fuel constitutes major component of this cost; however, its prices are decided in the free market and no one has monopoly in its supply. Major suppliers are Chevron, Exxon, and British Petroleum and the market is highly sensitive to demand and supply equation (Thompson and Gamble). Buyer’s Bargaining Power Ever since 2008 financial crisis, overall economy of the world and the US has taken a downward stride and business traffic has reduced significantly. Consequently, buyers tend to explore cheaper airlines for travel in their fixed budgets. In other words, buyers are highly sensitive to the price charged and prefer to travel at the economical costs and where ‘extras’ are not charged in the name of some other services (Thompson and Gamble, 2010). Threat of New Entrants Aviation business is highly capital intensive and one of biggest obstacle for anyone to enter into the airline business in the difficult market conditions. A very high level of operational efficiency is necessary to sustain the operations in a fiercely competitive market. Though fares keep on fluctuating depending upon the traffic yet it is most challenging for any new entrant to carve a niche in the fiercely competitive market. Threat of Substitute Products SA is operating within the US where distances between the major urban centers are enormous. People need to travel for business and various other reasons quite often. They cannot move by road as time is precious. There is no other mode of travel except airlines so in that sense no substitute products are available that can take replace air travel. SWOT Analysis While Porter’s five forces suggest how the company can face competition in the market place, SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis will inform about the company’s strong and weak points to avail opportunities and thwart threats. Strengths The company’s low operating cost is its biggest strength and that is why it has been always in profit even during most difficult times. The company is known for its low-fare among customers. It has been possible through its efficient operations and skillful management. The company has earned several accolades such as Triple Crown Awards of industry several times in a row for fewest customer complaints, best baggage handling and best on-schedule record. The company has introduced a simple fare structure; on ticket cancellation, though, the fares are not refundable but it can be availed in future without paying any fee. The company offers deep discount if the tickets are purchased online through its website. While other airlines charge extras such as fees for checking bags, change fees, fuel surcharge, in-flight snacks or beverages but SA is a customer-friendly airline and charge a single fare – all-inclusive to customers. The company deploys Boeing 737 for all its operations that save time and resources for training of employees and maintenance of spares (Thompson and Gamble, 2010). Certain core values such as hiring best people and treating them as family; caring for customers with warmth; keeping operations safe and efficient and keeping fares lower than other airlines are the key features that drive SAs success in the market place. The company is not only customer-friendly but employee-friendly too. Its policy guideline reads: “No Employee will ever be punished for using a good judgment and good old common sense when trying to accommodate a customer– no matter what our rules are” (Thompson and Gamble, p 405). Weaknesses On service front, it has been noticed that Southwest does not provide baggage transfer services to other carriers (Thompson and Gamble, 410). Many customers are not pleased with this policy. SA employs the point-to point scheduling of flights and not the hub-and-spoke systems employed by other airlines. The company may find difficulty in getting traffic with point-to point scheduling for its international operations. Opportunities Being a customer-friendly, low-cost and low-fare airline, the company has tremendous growth opportunities in future. While its rivals always believed that the company would soon be out of business, the company has grown phenomenally in all these years. From mere three aircrafts in 1971, the company currently owns over 500 aircrafts. The company has consistently shown average revenue growth of 12.90% in last 10 years that is above average when seen in the context of other airlines ((Thompson and Gamble, 2010). Threats SA faces biggest threats from the series of mergers of large airlines. For example, Delta Airline and Northwest Airlines merged in 2008 and Continental and United merged in 2010 to gain synergy in their operations. Last year, American Airlines and US Airways agreed for merger to become the second largest player in terms of revenue. The merged operations of some of these airlines may pose a great threat to the Southwest Airlines and the company will have to make greater efforts to maintain its market share. JetBlue that began its operations in 2000 is competing with SA on a low-cost and low-fare strategy. JetBlue has been able to achieve even lower operating costs than those of Southwest giving stiff challenges to SA (Thompson & Gamble, 2010). Strategies for Continued Success External environment for any firm is highly challenging; changing technology, demographics, macroeconomic upheavals and a host of other marketing strategies thrown by rivals keep on exerting constant pressure on any organization. Southwest has been able to thwart external challenges successfully in the last several decades. SA has carved a suitable niche for itself by employing a low-cost and low-fare marketing strategy; the company is leader in the low-cost segment retaining customer loyalty. The company needs to continue focusing on this strategy improving efficiency of its operations further. The company occupies second position in the industry with 15.7% market share based on revenue passenger miles where over dozen major carriers via for business (RITA, 2014). Communication Plan A communication plan is all about internal and external communications, media activities, priorities, resources, target audience, and resources. A communication plan is driven by the firms goals and outcomes based on its values and beliefs. SA’s communication plan will have the following characteristics. 1. Increasing the awareness among target audience 2. Teaching new skills to staff 3. Generating favorable support from the policy makers, public at large and customers aimed at community reforms 4. Creating favorable media coverage by developing relationships with media personnel and 5. Creating and implementing communication plans for crisis management and improved visibility (Strategic Communications, 2001). Corporate Government Mechanisms Southwest uses management information system to improve operating efficiency, decrease costs, and improve customer servicing capabilities. In 2007-08, Southwest implemented a next-generation technology to refurbish its back-office operations such as payroll, accounting, and human resource information along with ticketless system for its customers. The company further improved upon electronic ticketing and boarding system for ease and convenience of the customers. In 2010, the company converted to a new SAP to improve data accuracy, consistency lowering administrative costs. It is only through better governing mechanisms, the company has been able to lower its operating costs than those of Delta, Northwest, United, American Continental, Us Airways and several other major carriers (Thompson & Gamble, 2010 p.410). Recommendation for Improvement It is highly recommended to maintain a typical working culture within the company in the Southwest that Herb Kelleher, the ex-CEO, has established during his tenure aiming at complete customer orientation to sustain and improve competitive advantage regardless of any circumstances within the company. It is the customer-friendly attitude that has earned patronage from travelers; this will help thwart competition in the future from the formidable rivals. Ethical Practices Southwest Airlines supports environmental stewardship through efficient operations. The company places a high value on integrity, honesty and responsibility. The companys all business associates also follow this Code by agreement. When a law is in conflict with this Code, the law is followed. According to the company Code of Ethics any illegal payments to government officer at local, state or federal level is strictly prohibited. The company vies for their share in fair and honest manner. In no circumstances, any illegal or unethical business practices are adopted (Code of Ethics, 2013). It is noteworthy that in 2013, Southwest Airlines has been adjudged among the top 50 US companies on the Corporate Social Responsibility Index (CSRI) (Agnew, 2013). Conclusion The success of Southwest Airlines is attributed to its selection of excellent business strategy, maintaining cordial employee relations, meeting customers’ needs and managing efficient operations. It is a big feat that the company has never made any loss ever since its inception, especially after 9/11 when most of the other airlines were struggling to survive. Southwest’s management truly deserves a lot of appreciation for the phenomenal growth that the company has achieved among the formidable players. References Agnew, M. (2013). The Corporate Social Responsibility Index and Southwest Airlines. Retrieved June 10, 2014 from http://www.blogsouthwest.com/corporate-social-responsibility-index-and-southwest airlines/ Code of Ethics (2013). Investor Relations. Retrieved June 10, 2014 from http://southwest.investorroom.com/bylaws-articles-policies IBISworld (2014). Domestic Airlines in the US: Market Research Report. Retrieved June 9, 2014 from http://www.ibisworld.com/industry/default.aspx?indid=1125 Porter, M. (2008). The Five Competitive Forces that Shape Strategy. Harvard Business Review. Retrieved June 9, 2014 from http://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy/ar/1 RITA (2014). Airline Domestic Market Share. Retrieved June 10, 2014 from http://www.transtats.bts.gov/ SA Mission and Vision Statement (2011). Southwest Airlines. Retrieved June 9, 2014 from http://www.southwestonereport.com/2011/#!/thirty-thousand-foot-view/mission-and-vision. Strategic Communications (2001). The ABCs of Strategic Communications. Harvard Family Research project. Retrieved June 10, 2014 from http://www.hfrp.org/evaluation/the-evaluation-exchange/issue-archive/strategic-communications/the-abcs-of-strategic-communications Thompson, A. A. & Gamble, J. E. (2010). Southwest Airlines in 2010: Culture, values, and Operating Practices. Strategic Management. The University of Alabama. Read More