Fast-Cycle Capability for Competitive Power - Case Study Example

CASE STUDY: SOUTHWEST AIRLINES Executive Summary The case study focuses on the reasons behind the success of Southwest Airlines, possible challenges the airlines may face in the future, the probable strategies the airlines may adopt and the role of Gary Kelly, the new CEO for maintaining the profitability for the airlines. Table of Content 1 CASE STUDY: 1 SOUTHWEST AIRLINES 1 Executive Summary 2 Introduction 4 To what do you attribute the success of Southwest Airlines? 4 How significant is the 10 to 15 minutes turnaround time of Southwest’s aircraft in terms of savings in investment and utilization of its aircraft compared to competitor’s? 7 What challenges is Southwest facing in the future and how should they meet those challenges? 9 What should their business and operations strategy be for the future? 11 Operation management & operation strategy 11 Product design 12 Process selection 12 Process flow analysis 12 Quality control 13 Will Gary Kelly, the new CEO, be able to maintain the profitability of Southwest Airlines while insuring the continuation of their unique culture? 13 Conclusion 15 Reference 16 Introduction Southwest Airlines has been one of the largest airlines in the US, which recorded profitability for 31 consecutive years. This case study focuses on the role of its dynamic chief executive officer (CEO) Herb Kelleher in helping the company become successful, while discussing the future challenges that the airlines may face, together with providing various strategies for mitigating such issues. Further, the role of its new CEO, Gary Kelly is also being analysed in this paper. To what do you attribute the success of Southwest Airlines? Southwest Airlines started its business in 1971 in state of Texas has become one of the largest airline company in the US. On an average till the 2004, the company flew approximately around 65 million passengers per year covering around 59 cities and 30 states (Schroeder et al. 2011). Having expanded its business to mostly all the states at the present times, the company enjoys favorable customer response with all services provided to the client. The success of Southwest Airlines was predicted by the competitive advantage that the company enjoyed over the last three decades. With not many companies in the industry, it was able to gather the market share pretty well (Wild 1980). Along, with the competitive boundary, the management style which was unusual by the company with the CEO Herb Kelleher. He helped the company stride through unique management style aiding it to hit the bottom-line positively. The unique or perhaps unusual negotiation skills helped the company establish business deals very uniquely. This also helped the company in creating newer approach to either win new mandates or allying with other companies for navigating into new ventures. As an example, for settling the dispute to use the slogan which was 'Just Plane Smart', he arm-wrestled with Kurt Herwald, who was the chairman of Stevens Aviation, who had laid the claim that the slogan was made by their company. The concept of taking on with the competition was very unique to his style and made it sure that he is able to keep his peers busy as well. Analysts opine that the 'disarming' behavior or style that was followed by Kelleher was another reason that helped the company to stride through the problems and helped it in staying profitable with earning profit for 31 consecutive years (Hill 2000; Sasser et al. 1978). Southwest Airlines: A Brief Profile Founded in: 1971 Headquartered in: Texas Average no. of passengers flew per year: 65 million Area of operation: 59 cities and 30 states Profit trend: Earning profit for 31 consecutive years Kelleher was also known for his unusual approach and often times appeared in varied get ups and performed during the company functions. Once he masked as Corporal Klinger - M*A*S*H Television- for exhibiting the feeling of unity among the mechanics who were working beyond the normal time for the company so that they were able to achieve the target. The concern when exhibited by CEO instantly brought the loyalty amongst the staff. Being very aware of the fact that employees had to be kept motivated, he made several attempts to make sure that he is able to win the loyalty as well as trust of his team so that the set targets could be achieved and the company is able to remain in positive throughout. While motivation and creating an environment of harmony is one of the most essential responsibilities of the CEO, Kelleher was able to achieve both and make sure that employees are constantly kept agile by organising parties and get-together. By keeping the morale high, he was able to make sure that all his plans were appreciated by the people and were fully engaged in realizing the common goal set by the company (Murdick et al. 1990). Despite having an unusual style of working with people, he was very positively favored by the employees and was able to earn profits throughout his work period. His success was rewarded with promotion as well as maintenance of the culture of the company which focused on people and then includes a consolidated strategy for its business. All these methods were simple and could be thought through. By these methods he was able to consistently become very successful through years. He opined that, customers always wanted high quality services to be provided at a low price rate, and this could be possible only for the person who truly enjoys what he does at his workplace. These consistent methodologies helped Kelleher in reducing overall cost and also earning profits through the years (Wild 1995). SWOT analysis Strengths Record profitability for 31 years, Dynamic CEO Herb Kelleher Motivated employees Positive brand image Strong company culture Sound operations Weaknesses Pay scale not at par with industry standards Large employee base hinders direct communication Opportunities Expansion in aviation industry Threats Growing competition from low-fare airlines How significant is the 10 to 15 minutes turnaround time of Southwest’s aircraft in terms of savings in investment and utilization of its aircraft compared to competitor’s? In the initial years, the company only had three airplanes in operations that often times resulted in constraining the plans which were set for scheduling. With the analysis conducted on-the-ground turnaround time along with the flight time, it proved that the airlines would be able to offer flights between Dallas and Houston with an interval of nearly 75-minutes. Along with this, a flight could be scheduled from Dallas and San Antonio at 150-minutes interval. This helped the airlines in making some 12 round trips on a daily basis between Dallas and Houston as well as six round trips between Dallas and San Antonio. With another plane as well the scheduling became much tighter and the airline was able to make a turnaround by 10 minutes (Schroeder et al. 2011). This majorly helped the company to turn the negative into a big positive and again proved beneficial as far as business was concerned. That said, it also made sure that the competition could be kept at bay and they were able to gather clients rapidly. While giving hourly services between Dallas and Houston as well as two hours from Dallas and San Anotonio proved beneficial as travelers were able to stick to the airlines per the schedule. It also meant that the maintenance was done with highest servicing operations. This again required precision, the stay time for the halt for conducting the services on the aircraft was kept under strict vigil. The stay time for the flight was limited to 10 minutes or less. This again helped the company in keeping time under strict vigil and making sure the unique methodology adopted by the firm could be kept in the similar way to earn maximum out of the initiative taken. This innovative idea helped the company to ease a lot of problems with regards to time and made sure that they were able to keep the customer satisfied. As the industry was involving methods like this helped the company on creating the benchmark for themselves. Also, with these unique characteristics, the company was able to gain a lot of visibility (Hill 2000). What challenges is Southwest facing in the future and how should they meet those challenges? Some of the factors that may affect the company’s future have been the stiff competition from the low-fare airlines. These may include issuance of low fare tickets by these companies and other benefits given to the customers, who may be on the stride to save money. With the influx of the low cost airlines in the battle, the competition in the sector may just become severe. As an example, JetBlue, which is a low cost carrier has been able to offer low fares and maintain the high quality as far as customer service is concerned. The airline has been providing leather seating and live television on every seat that makes it attractive for the customer. With that, it has also provides with pre-assigned seating system and are able to restrict the number of seats per the booking and not over book its flight, thus maintaining a complete decorum as far as operations for the customer is concerned. One of the other airlines, namely Ted offers pre-assigned seats along with the music videos as well as NBC sitcoms episodes as a part of the in-flight entertainment. Also, going upwards, it also provides Atkins and margarita bars for its passenger, thus making the travelling experience very unique (Schroeder et al. 2011). In the previous years, South West had faced challenges when other companies were introducing newer technologies as well as visual appeal. Alongside this some of the companies also revamped the interior and the exterior of the planes for providing a comfortable travel experience for its passengers. Also, the travel area was made very friendly for the passengers so that they are very comfortable with flying with the airline. They also added a new Boeing 727-700s for giving technologically advanced picture to its fleet and improving the performance of the aircraft for saving fuel and keeping the maintenance cost at the minimum. Also, several automation techniques were used for streamlining the operations. Some of the other initiatives were the computer generated tags that were captured by the on the luggage while checking in. Also, the customer was given the boarding passes by using rapid-check-in kiosks. However, these strategies were used by other airlines, and it needed them to come up with innovative methodologies for going front of the competition (Schroeder et al. 2011). The labour issue may also be another problem that the airline may face. As seen, most of the employees have been happy or satisfied with the airlines at the present time, they may resent if the pay scale is not very competitive as offered by other airlines in the industry. One of most successful and profitable airlines, the comparison as far as pay is concerned may be a sensitive issue for the employee. With more than 35,000 employees with the airlines now, the communication quality from the management and to the people may have seen a fall that might also hinder the growth. This tension between the management and employees may also impact the relationship and steer more unstable environment. In the past the company had negotiated with regards to labor costs. Per Gary Kelly, who is the new CEO of the airlines, these labour contracts can hit the profitability margins (Schroeder et al. 2011). The management turnover is another issue that the airline is facing. What should their business and operations strategy be for the future? Operation management & operation strategy With airline industry being hassled by the fuel prices and earmarking itself to technological advancement, it remains to be seen how these two combined forces are able to stabilize the operations for the company. People being the most important unit for managing so that the company is able to remain afloat, Southwest needs to be very careful as well as crafty in communicating with its people. Most of the decision taken for achieving operational excellence should be made through common interest of the people and company in itself so that each department is able to divert their effort to achieve the common goal (Hill 2000; Wild 1995). Product design With the advent of computerized yield management systems, marketing and pricing for the airline companies have seen an example change. The pricing of the airline that considers the prices to be dictated by the market should be given way to broader perspective and gives way to newer field in the company. Enhancing the value of the services provided to the customer can be provided with the right design of the product and with the complete understanding can help maximise the benefits (Walleigh 1989). Process selection It would be really wise to use project process type in case of product flow. All the process and sub proves should be well documented so that each department works together and are able to provide the services to the greatest. One of the processes should be to induct, highly skilled labor force who are able to bring experience and provide value addition as and when needed, this becomes an important process. It should be noted that everything should be kept under schedule and should meet the requirement of the people as well as the staff (Chandler 1990). Process flow analysis The process flow analysis should take into consideration that all the micro part is analysed from all the input to the output is examined. The intention of examining all the micro process should be to improve the procedure at each level. In order to improve the processes, it is very essential to measure process flow which would entail time, inventory, capacity, flow rate etc (Chandler 1990). Quality control Quality control exercise should be undertaken at each level, be it passenger safety or the services provided by the company, each step needs precision with unmatched quality so that the customers are able to value the experience of flying with the airline. Also, with this, following all the safety standards and procedure as per the strictures should be a laid procedure for the firm (Hauser and Clausing 1988; Townsend 1990). Will Gary Kelly, the new CEO, be able to maintain the profitability of Southwest Airlines while insuring the continuation of their unique culture? Kelly, the new CEO, has been given the helm of the airlines due to a very unusual situation, wherein the previous CEO had to quit because of union issues. Thus, Kelly’s promotion has been abrupt which means that the present CEO did not go through a thorough process to be promoted to an important leadership position. Therefore, it might be possible that Kelly may not be ready to take on this post and may falter in the future. Further, it is also difficult to match up with the quality of Kelleher and even Parker, who had proved their worth by helping the company achieve profitability even during tough times (Buxey and Lethbridge 1991; Prahalad and Hamel 1990). Kelly also faces many modern day challenges which the previous bosses did not face. These include the growing intense competition in the low-cost carrier space, which his resulting in price warfare in the market. Most of these growing airlines are offering cheap fares and are attracting passengers with profitable offers. This may dent the profits of the airlines as well. Further, the company is also facing issues with rising labour costs, which together with price competitiveness would eat up the profits of the airlines further. The growing costs of fuel prices are another major area of concern for the airlines. Also, maintenance and technological advancements of aircrafts also require resources. All these concerns need to be addressed in such a manner that the employees are not impacted and the corporate culture of the company remains intact as well. It is important for Kelly to ensure that the company culture should remain intact as it is one of the major motivation factors for the employees to work for the airlines despite the fact that the airlines does not pay its employees as per the industry standards (Davidow and Uttal 1989; Taguchi and Clausing 1990). Thus, the challenges presented to Kelly may result into his being under pressure and follow the run-of-the mill approach to deal with the issues. This would result in the ruin of the unique culture being followed in the company and therefore, denting the profitability of the company as well (Chase 1978; Bower and Hout 1988). Conclusion The case study showcases that unique and dynamic leaderships often result in setting a corporate culture that is profitable and ensuring profitability for the company, as being showed in the case of Southwest Airlines and its CEO Herb Kelleher. Further, the study highlighted the contemporary issues that are being faced by most low-cost airlines such as competing cheap tickets, better services and technological advancements and the possible solutions for these issues as well. The study also focused on how its new CEO Gary Kelly would be able to support the corporate culture being followed in the airlines while getting the profitability for the company as well. Reference Bower, JL & Hout, TM 1988, ‘Fast-cycle capability for competitive power’, Harvard Business Review, vol. 66, no. 6, pp. 110–18. Chandler, A 1990, ‘The enduring logic of industrial success’, Harvard Business Review, vol. 68, no. 2, pp. 130–40. 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