Operations
Management
Operations Strategy in A Global
Environment
Outline
♦Global Company Profile: Boeing
♦Identifying Missions and Strategies
♦
♦
Mission
Strategy
♦Achieving Competitive Advantage Through
Operations
Competing on Differentiation
Competing on Cost
♦ Competing on Response
♦
♦
Chapter 2
Some additions and deletions to this slide set have been made by Ömer Yağız.
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Outline - continued
♦Ten Strategic OM decisions
♦Issues in Operations Strategy
Research
Preconditions
♦ Dynamics
♦
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Learning Objectives
When you complete this chapter, you should
be able to :
♦Identify or Define:
Mission
Strategy
♦ Ten Decisions of OM
♦
♦
♦
♦Strategy Development and Implementation
Identify Critical Success Factors
♦ Build and Staff the Organization
♦ Integrate OM with Other Activities
♦
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♦Describe or Explain:
Specific approaches used by OM to achieve
strategic concepts
♦ Differentiation
♦ Low Cost
♦ Response
♦
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Global Strategies
Global Strategies
; Boeing – sales and production are worldwide
; Benetton – moves inventory to stores around the
world faster than its competition by building
flexibility into design, production, and distribution
; Sony – purchases components from suppliers in
Thailand, Malaysia, and around the world
; Volvo – considered a Swedish company but it is
controlled by an American company, Ford. The
current Volvo S40 is built in Belgium and shares its
platform with the Mazda 3 built in Japan and the
Ford Focus built in Europe.
; Haier – A Chinese company, produces compact
refrigerators (it has one-third of the US market) and
wine cabinets (it has half of the US market) in
South Carolina
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1
Some Multinational Corporations
Home
Country
Company
% Sales
Outside
Home
Country
% Assets
Outside
Home
Country
% Foreign
Workforce
Some Multinational Corporations
% Sales
Outside
Home
Country
Home
Country
Company
% Assets
Outside
Home
Country
% Foreign
Workforce
NA
Citicorp
USA
34
46
NA
ICI
Britain
78
50
ColgateColgatePalmolive
USA
72
63
NA
Nestle
Switzerland
98
95
97
Netherlands
94
85
82
Dow
Chemical
USA
60
50
NA
Philips
Electronics
Siemens
Germany
51
NA
38
Gillette
USA
62
53
NA
Unilever
95
70
64
Honda
Japan
63
36
NA
Britain &
Netherlands
USA
57
47
51
IBM
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Boeing Suppliers (777)
Firm
Dassault
Country
France
MessierMessier-Bugatti
Thales
France
France
Diehl
FRFR-HiTemp
Germany
UK
Smiths Aerospace
UK
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Component
Design and
PLM software
Landing gear
Electrical power
conversion system
and integrated
standby flight display
Interior lighting
Fuel pumps
and valves
Central computer
system
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Boeing Suppliers (777)
Firm
Teijin Seiki
Mitsubishi Heavy
Industries
Chengdu Aircraft
Group
Hafei Aviation
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Country
Japan
Japan
Component
Hydraulic actuators
Wing box
China
Rudder
China
Parts
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Boeing Suppliers (777)
Firm
BAE SYSTEMS
Alenia Aeronautics
Country
UK
Italy
Toray Industries
Japan
Fuji Heavy
Industries
Kawasaki Heavy
Industries
Japan
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Japan
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Component
Electronics
Upper center
fuselage &
horizontal stabilizer
Carbon fiber for
wing and tail units
Center wing box
Forward fuselage,
fixed section of wing,
landing gear well
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Reasons to Globalize
Reasons to Globalize
Tangible ; Reduce costs (labor
(labor,, taxes, tariffs, etc.)
Reasons ; Improve supply chain
; Provide better goods and services
; Understand markets
Intangible ; Learn to improve operations
Reasons ; Attract and retain global talent
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Figure 2.1
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2
Reduce Costs
; Foreign locations with lower wage rates
can lower direct and indirect costs
;
;
;
;
;
Maquiladoras
World Trade Organization (WTC)
North American Free Trade Agreement
(NAFTA)
APEC, SEATO, MERCOSUR
European Union (EU)
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Provide Better Goods
and Services
; Objective and subjective characteristics
of goods and services
;
;
;
On-time deliveries
Cultural variables
Improved customer service
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Learn to Improve Operations
; Remain open to the free flow of ideas
;
;
General Motors partnered with a Japanese
auto manufacturer to learn
Scandinavian design ideas have been used
to improve equipment design and layout
Improve the Supply Chain
; Locating facilities closer to unique
resources
;
;
;
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Understand Markets
; Interacting with foreign customer and
suppliers can lead to new opportunities
;
;
;
Cell phone design from Europe
Cell phone fads from Japan
Extend the product life cycle
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Attract and Retain Global Talent
; Offer better employment opportunities
;
;
;
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Auto design to California
Athletic shoe production to China
Perfume manufacturing in France
Better growth opportunities and insulation
against unemployment
Relocate unneeded personnel to more
prosperous locations
Incentives for people who like to travel
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3
Cultural and Ethical Issues
; Cultures can be quite different
; Attitudes can be quite different towards
; Punctuality
; Thievery
; Lunch breaks
; Bribery
; Environment
; Child labor
You May Wish To Consider
;
;
;
;
;
;
;
;
National literacy rate
Rate of innovation
Rate of technology change
Number of skilled workers
Political stability
Product liability laws
Export restrictions
Variations in language
; Work ethic
; Tax rates
; Inflation
; Availability of raw
materials
; Interest rates
; Population
; Number of miles of
highway
; Phone system
; Intellectual
property
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Match Product & Parent
; Braun Household
Appliances
; Firestone Tires
; Godiva Chocolate
; Haagen-Dazs Ice Cream
; Jaguar Autos
; MGM Movies
; Lamborghini Autos
; Alpo Petfoods
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1.
2.
3.
4.
5.
6.
7.
8.
Volkswagen
Bridgestone
Campbell Soup
Ford Motor Company
Gillette
Nestlé
Pillsbury
Sony
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Match Product & Country
; Braun Household
Appliances
; Firestone Tires
; Godiva Chocolate
; Haagen-Dazs Ice Cream
; Jaguar Autos
; MGM Movies
; Lamborghini Autos
; Alpo Petfoods
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1.
2.
3.
4.
5.
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Great Britain
Germany
Japan
United States
Switzerland
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Match Product & Parent
; Braun Household
Appliances
; Firestone Tires
; Godiva Chocolate
; Haagen-Dazs Ice Cream
; Jaguar Autos
; MGM Movies
; Lamborghini Autos
; Alpo Petfoods
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1.
2.
3.
4.
5.
6.
7.
8.
Volkswagen
Bridgestone
Campbell Soup
Ford Motor Company
Gillette
Nestlé
Pillsbury
Sony
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Match Product & Country
; Braun Household
Appliances
; Firestone Tires
; Godiva Chocolate
; Haagen-Dazs Ice Cream
; Jaguar Autos
; MGM Movies
; Lamborghini Autos
; Alpo Petfoods
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1.
2.
3.
4.
5.
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Great Britain
Germany
Japan
United States
Switzerland
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4
Mission
Mission
♦ Mission - where are you
going?
♦
♦
♦
♦
♦ Mission: overall purpose of an organization
(misyon; varoluş nedeni). The mission of an
organization defines its reason for
existence.
Organization’s purpose for
being - reason for existence
Provides boundaries & focus
Answers ‘How can we satisfy
people’s needs?’
Expressed in published
statement
© 1995 Corel Corp.
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Mission
; Answers ‘What do we provide society?’
; Provides boundaries and focus
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Sample Mission - Merck
; Organization’s purpose for being
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It asks the question “Why are we in
business?”
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Some Examples of Mission
Statements
♦Eastern Mediterranean University, as an
institution of higher learning, is dedicated to
the dissemination (yayma) of knowledge
through high-quality teaching; to promoting
the discovery of knowledge through
scholarly research; and to the application of
knowledge for the good of humanity.
The mission of Merck is to provide society
with superior products and services innovations and solutions that improve the
quality of life and satisfy customer needs to provide employees with meaningful work
and advancement opportunities and
investors with a superior rate of return
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Some Examples of Mission
Statements
NETAŞ‘S MISSION
To provide excellent telecommunication
solutions within the framework of Total
Quality Management philosophy.
CLICK THE IMAGE
CLICK THE IMAGE
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5
Some Examples of Mission
Statements
Some Examples of Mission
Statements
ARÇELİK’S MISSION
TURKISH AEROSPACE INDUSTRY’S MISSION
Fully satisfying customer expectations and
requirements is the guiding mission of Arçelik. In
order to achieve and maintain the high standards it
has, Arçelik has a continual programme of
investment which encompasses plants,
manufacturing equipment, research & development
and most importantly personnel.
CLICK THE IMAGE
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Some Examples of Mission
Statements
TAI is a company of dedicated, dynamic and
resourceful people searching for excellence and
continued growth in the field of aerospace. Our
mission is to fulfil the aerospace requirements of
our nation and world markets with commitment to
high quality, value and on time delivery.
CLICK THE IMAGE
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Philosophy &
Values
Mission
Customers
Public Image
Benefit to
Society
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Mission/Strategy
♦Mission - the purpose or rationale for
existence “where you are going”
♦Strategy - how an organization expects to
achieve its mission and goals. It is an action
plan - “how you are going to get there”
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Profitability
& Growth
Environment
CLICK THE IMAGE
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Factors Affecting Mission
FEDERAL EXPRESS’ MISSION
“To produce outstanding financial returns by
providing totally reliable, competitively superior
global air-ground transportation of high priority
goods and documents that require rapid, timesensitive delivery.”
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Strategy
♦ Action plan to achieve
mission
♦ Shows how mission will
be achieved
♦ Company has a business
strategy
♦ Functional areas have
strategies
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© 1995 Corel Corp.
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6
Achieving Competitive Advantage
Through Operations
Strategy Process
Company
Mission
Business
Strategy
FunctionalArea
Area
Functional
Strategies
Marketing
Decisions
Operations
Decisions
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Fin./Acct.
Decisions
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competitive advantage: a unique advantage
over competitors
♦Competing on differentiation - “uniqueness”
“better”
♦Competing on cost “cheaper”
♦Competing on quick response
“more responsive”
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Competing on Differentiation
♦Uniqueness - can go beyond both the
physical characteristics and service
attributes to encompass everything that
impacts customer’s perception of value
SONY - 100 mhz TV
HONDA in Arab countries
♦ MS mouse - 3 buttons (one is actually a wheel)
♦ Landsend stores in the U.S. “Guaranteed. Period.”
♦ “Replay Radio” software (for recording streaming
radio on the Internet)
♦
♦
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Germanwings
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Competing on Cost
♦Maximum value as perceived by customer
♦Does not imply low value or low quality
computers made in Taiwan
Wal-Mart stores in the U.S.
♦ Landsend stores in the U.S. (quality at a low price +
fast service)
♦
♦
♦
♦
Amazon.com in the U.S.
Germanwings airlines (European flights; as low as
19 euros)
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Competing on Response
Leaders in safety and comfort
Top marks for Germanwings. The readers of Europe's
biggest business magazine "Capital" have awarded
Germanwings best no-frills airline in the categories
"Feeling of Safety" and "Comfort of Seats". In the latest
edition of the business magazine Germanwings is also
named as best value for money among the German nofrills carriers.
For the 17th year running, "Capital" asked its readers
and online users to rate the performance of
international airlines. With more than 6,000 responses,
the 2003 flight survey of this respected business
magazine was bigger than ever, with the participants
drawing on their collective experience of around 40,000
flights.
"We are delighted that we at Germanwings were able to
beat the competition and claim the top ranking among
business travellers, not only in the categories which are
the most important for us: "Feeling of Safety" and
"Comfort of Seats", said Dr. Joachim Klein, Managing
Director of Germanwings. "We see it as particularly
positive that this market sector which is so important to
us views Germanwings as the best value no-frills
airline." The results of the survey can be seen in the
latest edition of "Capital".
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Response: set of values related to rapid,
flexible, and reliable performance
♦Flexible response - ability to match changes
in the market (design and volume changes)
♦Reliable scheduling for timely delivery
♦Speed in design, production and delivery
(quickness)
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7
10 Decision Areas of OM
OM’s Contribution to Strategy
Operations
Decisions
Specific
Strategy Used
Examples
Product
Competitive
Advantage
FLEXIBILITY
Sony’s constant innovation
of new products………………………………....Design
HP’s ability to follow
the printer market………………………………Volume
Quality
Process
Southwest Airlines No-frills service……..…..LOW COST
Location
DELIVERY
Differentiation
Pizza Hut’s five-minute
(Better)
guarantee at lunchtime…………………..…..……..Speed
Federal Express’s “absolutely,
positively on time”………………………..….Dependability
Layout
Human
resource
Response
QUALITY
(Faster)
Motorola’s automotive products
Cost
ignition systems…………………………......Conformance
leadership
Motorola’s pagers………………………..….Performance
Supply-chain
(Cheaper)
Inventory
IBM’s after-sale service
on mainframe computers……....AFTER-SALE SERVICE
Scheduling
Fidelity Security’s broad
line of mutual funds………….BROAD PRODUCT LINE
Maintenance
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Implementation of 10 OM
Decisions
♦ Operations managers implement these 10
decisions by
♦
Identifying key tasks and staff needs
♦ Implementation is influenced by nature of
goods & services
♦
♦
few products are either all goods or all services
many are mixtures
Let us take a look at goods and services vis-avis the implementation of OM decisions
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Goods & Services and the 10
Operations Management Decisions
Operations
Decisions
Location
Selection
Layout
Design
Human
Resources
and Job
Design
(Strategic OM Decisions)
♦ Goods & service design
♦ Quality
♦
Process & capacity design
♦
Location selection
♦
Layout design
♦
Human resource and job design
♦
Supply-chain management
♦
Inventory
♦
Scheduling
♦
Maintenance
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Goods & Services and the 10
Operations Management Decisions
Operations
Decisions
Goods
Services
Goods &
services
decisions
Quality
Product is usually
tangible
Product is usually
intangible
Objective quality
standards
Subjective quality
standards
Process
and
capacity
design
Customer not involved
in most of process
Customer may be directly
involved in process.
Capacity must match
demand to avoid lost sales
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Goods & Services and the 10
Operations Management Decisions
Operations
Decisions
Goods
Services
Goods
Services
May need to be near raw
materials or labor force
Layout can enhance
production efficiency
Workforce focused on
technical skills.
Labor standards consistent.
Output-based wage system.
May need to be near
customer (car rental)
Subjective quality
standards
Customer may be directly
involved in process.
Capacity matches
demand to avoid lost
sales
Supply-chain relationships
Supply chain Supply-chain
management relationships critical to important, not necessarily
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Inventory
Scheduling
final product
Raw materials, workin-process, and
finished goods
Ability to convert
inventory may allow
leveling of production
rates
2-48
critical
Most services cannot be
stored
Primarily concerned with
meeting the customer's
immediate schedule
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8
Goods & Services and the 10
Operations Management Decisions
Goods
Services
Maintenance Maintenance is often
Maintenance is often
preventive and takes "repair" and takes place at
place at the production the customer's site
site
High
Variety of Products
Operations
Decisions
An Example: Process Design
Process-focused
JOB SHOPS
(Print shop, emergency
room, machine shop,
fine dining
Moderate
Mass Customization
Customization at
high Volume
(Dell Computer’s PC)
Repetitive
(modular) focus
ASSEMBLY LINE
(Cars, appliances,
TVs, fast-food
restaurants)
Low
Low
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Operations Strategies for Two
Drug Companies
Brand Name Drugs,
Inc.
Generic Drug Corp.
Competitive
Advantage
Product Differentiation Low Cost
Product
Selection
and Design
Quality
Heavy R&D;
Extensive Labs
Little R&D
Quality is a major
priority;
Standards exceed
regulatory
requirements
Meets regulatory requirements on
a country-by-country basis as
necessary
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Operations Strategies for Two
Drug Companies - continued
Brand Name Drugs,
Inc.
Human
Resources
Supply
Chain
Inventory
Generic Drug Corp.
Hires the best; nationwide searches
Very experienced top executives
provide direction; other
personnel paid below average
Long term supplier
Tends to purchase competitively
relationship
to find bargains
Maintains high finished Process focus drives up WIP
goods inventory,
inventory.
primarily to ensure all Finished goods inventory tends
demands are met
to be low
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Product focused
CONTINUOUS
(steel, beer,
paper, bread,
institutional
kitchen)
Moderate
High
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Operations Strategies for Two
Drug Companies - continued
Brand Name Drugs,
Inc.
Processes Product & modular
production processes
Long product runs in
specialized facilities
Build capacity ahead
of demand
Still located in city in
Location
which it was founded
Scheduling Central production
planning
Generic Drug Corp.
Process focuses
General production processes;
Job Shop approach, short run;
Focus on high utilization
Recently moved to low tax, low labor cost
environment
Many short run products complicate
scheduling
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Operations Strategies for Two
Drug Companies - continued
Brand Name Drugs,
Inc.
Maintenance Highly trained staff;
Highly trained staff to meet
challenging demands
Extensive parts
inventory
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9
Issues in Operations Strategy
Strategic Options Managers Use
to Gain Competitive Advantage
Characteristics of High ROI Firms
♦High product quality
♦High capacity utilization
♦High operating efficiency (actual / expected)
♦Low investment intensity (amount of capital required
In a study, 248 businesses were asked to
indicate the importance of 32 categories that
led to competitive advantage
28% - Operations Management
18% - Marketing/distribution
♦ 17% - Momentum/name recognition
♦ 16% - Quality/service
♦ 14% - Good management
♦ 4% - Financial resources
♦ 3% - Other
♦
♦
to produce a dollar of sales)
♦Low direct cost per unit (relative to the competition)
From the PIMS (Profit Impact of
Marketing Strategy) study of the
Strategic Planning Institute
ROI = Gross profit/Total assets
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Management, 6E (Heizer & Render)
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PowerPoint presentation to accompany Operations
Management, 6E (Heizer & Render)
One must understand:
Low- cost product
Product-line breadth
Technical superiority
Product characteristics/differentiation
Continuing production innovation
Low-price/high-value offerings
Efficient, flexible operations adaptable to
consumers
♦ Engineering research development
♦ Location
♦ Scheduling
Strengths & weaknesses of competitors and new
entrants into the market
♦ Current and prospective environmental, legal, and
economic issues
♦ The notion of product life cycle
♦ Resources available within the firm and within the
OM function
♦ Integration of OM strategy with company strategy
and with other functions.
♦
♦
♦
♦
♦
♦
♦
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♦
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DynamicsReasons for Strategy Change
♦
Changes in the organization
♦ One example -- product life cycle
♦
Changes in the environment
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Introduction
Maturity
Growth
Decline
♦ economic, social, legal, political, market, etc.
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Stages in the Product Life Cycle
Growth rate
♦Strategies change for two reasons:
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Preconditions To Implement a Strategy
Strategic Options Managers Use
to Gain Competitive Advantage
♦28% Operations Management
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Strategy and Issues During a
Product’s Life
Growth
Maturity
Practical to change
price or quality image
Poor time to change
image, price, or quality
Competitive costs become
critical
Introduction
Company Strategy/Issues
Best period to
increase market
share
R&D product
engineering critical
Strengthen niche
Drive-thru restaurants
Defend market position
PDA’s
Fax machines
♦ Company
Strategy &
Issues
3 1/2”
Floppy
disks
Cell phones
Station
wagons
Internet
Color copiers
Introduction
Decline
Cost control
critical
CD-ROM
Sales
Strategy & Issues During Product Life
HDTV
OM Strategy/Issues
Product design and
development critical
Frequent product and
process design changes
Short production runs
High production costs
Limited models
Attention to quality
Forecasting critical
Standardization
Product and process
reliability
Less rapid product
changes - more minor
changes
Competitive product
improvements and options
Optimum capacity
Increase capacity
Shift toward product focus
Increasing stability of
process
Enhance distribution
Long production runs
Product improvement and
cost cutting
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Little product
differentiation
Cost minimization
Overcapacity in the
industry
♦ OM Strategy
& Issues
Prune line to eliminate
items not returning good
margin
Reduce capacity
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Strategy & Issues During Product Life
Best period to increase market share
R&D engineering are critical
Product design and development are critical
Frequent product and process design changes
Over-capacity
Short production runs
High skilled-labor content
High production costs
Limited number of models
Utmost attentions to quality
Quick elimination of market-revealed design
defects
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OM Strategy
& Issues
Maturity
Practical to change prices or quality image
Marketing is critical
Strengthen niche
Forecasting is critical
Product and process reliability
Competitive product improvements and
options
Shift toward product oriented
Enhance distribution
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Strategy & Issues During Product Life
Decline
Company Strategy
& Issues
OM Strategy
& Issues
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Strategy & Issues During Product Life
Growth
Company
Strategy
& Issues
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Company
Strategy
& Issues
Poor time to increase market share
Competitive costs become critical
Poor time to change price, image, or quality
Defend position via fresh promotional and distribution
approaches
OM Strategy
& Issues
Standardization
Less rapid product changes and more minor annual
model changes
Optimum capacity
Increasing stability of manufacturing process
Lower labor skills
Long production runs
Attention to product improvement and cost cutting
Re-examination of necessity of design compromises
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Process of Strategy Development
and Implementation
♦Identify critical success factors (CSF’s)
Cost control critical to market share
Little product differentiation
Cost minimization
Overcapacity in the industry
Prune line to eliminate items not returning
good margin
Reduce capacity
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♦
those activities or factors that are key to achieving
competitive advantage
“what tasks must be done particularly well for a
given operations strategy to succeed?”
♦Build and staff the organization
♦
group activities into an organizational structure
♦Integrate OM with other functional areas
such as marketing, finance, HR, MIS, etc.
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CSF’s in OM are the 10 Decision
Areas of OM
♦ Goods & service design
♦ Quality
♦
Process & capacity design
♦
Location selection
♦
Layout design
♦
Human resource and job design
♦
Supply-chain management
♦
Inventory
♦
Scheduling
♦
Maintenance
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SWOT Analysis Process
♦Organizational & Environmental Analysis
♦Determine Corporate Mission
♦Formulate a Strategy
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Internal
Strengths
External
Opportunities
♦After the process of SWOT analysis, critical
success factors (CSF) should be identified.
♦What are “Critical Success Factors”?
CFS’s are those activities or factors that are key
(i.e. very significant) to achieving competitive
advantage.
Strategy
Internal
Weaknesses
Competitive
Advantage
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External
Threats
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Identifying
Critical Success Factors
Marketing
Finance/Accounting
Service
Distribution
Promotion
Channels of distribution
Product positioning
(image, functions)
Leverage
Cost of capital
Working capital
Receivables
Payables
Financial control
Lines of credit
Production/Operations
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Critical Success Factors
Microsoft & HP
They focus on one business (software and hardware
only)
♦ They are global
♦ Their senior management is actively involved in
defining and improving the product development
process
♦ They recruit and retain the top people in their fields.
♦ They understand that speed to market reinforces
product quality
♦
Decisions
Sample Options
Product
Quality
Process
Location
Layout
Human resource
Supply chain
Inventory
Schedule
Maintenance
Customized, or standardized
Define customer expectations and how to achieve them
Facility size, technology
Near supplier or customer
Work cells or assembly line
Specialized or enriched jobs
Single or multiple source suppliers
When to reorder, how much to keep on hand
Stable or fluctuating productions rate
Repair as required or preventive maintenance
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Identifying
Critical Success Factors
SWOT Analysis to Strategy
Formulation
Mission
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Activity Mapping: Southwest Airline’s
Low Cost Competitive Advantage
Activity Mapping: Southwest Airline’s
Low Cost Competitive Advantage
Courteous, but
limited passenger
service
Lean,
productive
employees
Competitive
Advantage:
Low Cost
High
aircraft
utilization
Courteous, but
limited passenger
service
Short haul, point-topoint routes, often to
secondary airports
Frequent,
reliable
schedules
Standardized fleet
of Boeing 357
aircraft
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Activity Mapping: Southwest Airline’s
Low Cost Competitive Advantage
• Lower gate costs at
secondary airports
• High number of
flights, reduces
employee idle time
between flights
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Short haul, point-topoint routes, often to
secondary airports
© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Activity Mapping: Southwest Airline’s
Low Cost Competitive Advantage
• Pilot training on only one type
of aircraft
• Reduced maintenance
inventory required because of
only one type of aircraft
• Excellent supplier relations with
Boeing has aided financing
Standardized fleet
of Boeing 357
aircraft
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•
•
•
•
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No seat assignments
No baggage transfers
Automated ticketing machines
No meals
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Activity Mapping: Southwest Airline’s
Low Cost Competitive Advantage
• High number of flights
reduces employee idle time
between flights
• Saturate a city with flights
lowering administrative
costs per passenger for that
city
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Frequent, reliable
schedules
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Activity Mapping: Southwest Airline’s
Low Cost Competitive Advantage
High
aircraft
utilization
• Flexible employees and
standard planes aids
scheduling
• Flexible union contracts
• Maintenance personnel
trained on only one type of
aircraft
• 20 minute gate turnarounds
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Activity Mapping: Southwest Airline’s
Low Cost Competitive Advantage
Lean,
productive
employees
•
•
•
•
•
High level of stock ownership
Hire for attitude, then train
High employee compensation
Empowered employees
Automated ticket machines
Activity Mapping: Southwest Airline’s
Low Cost Competitive Advantage
Courteous, but
limited passenger
service
Lean,
productive
employees
High
aircraft
utilization
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Competitive
Advantage:
Low Cost
Standardized fleet
of Boeing 357
aircraft
2-80
Short haul, point-topoint routes, often to
secondary airports
Frequent,
reliable
schedules
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