1. How would you characterize the business model of Southwest Airlines? How does this differ
from the business model used at many other airlines, such as United and American Airlines?
The business model that Southwest airline uses can be characterize as "keep it simple"
because they don't fly everywhere. They employ a point to point route system, no seating class
distinctions, no choices on type of aircraft and simplest pricing structure. Southwest Airlines flies
point to point which a lot differ from other operators like American Airlines and United Airlines
that they route passengers through hubs. Southwest also uses one type of plane that is the Boeing
737 to reduce training costs, maintenance cost and inventory cost while increasing efficiency in
crews and flight scheduling. Southwest operation is almost ticketless with no seat assignment that
helps reduce cost and back office accounting functions. There are no meals or movies in flight and
the airlines will not transfer baggage to other airlines which reduce the cost on baggage handlers.
Southwest is economize on amount of time it takes terminal personnel to check passengers in and
on-load passengers and also their operating cost is lower than its rivals hence they are able to offer
a
lower
fare
compare
to
the
competitors.
2. Identify the resources, capabilities, and distinctive competencies of Southwest Airlines.
The resources are about the capital or financial, physical, social or human, technological,
and organizational factor endowments. For Southwest airline, their resource is their employees
since they devoted enormous attention to people they hired. On average the company hires only 3
percent of the interview in a year also they emphasize teamwork and attitude. They believe that
the skills can be taught but a positive attitude and a willingness to pitch in cannot. The Capabilities
are the company’s skills at coordinating and using their resources. Southwest management creates
incentive for their employees. Their distinctive competencies are the low fares, which are often
some 30% lower than those of its major rivals. These are balanced by an even lower cost structure,
enabling it to record superior profitability even in bad times. In addition, they fly point to point
which differs them from their competitors.
3. How do Southwest’s resources, capabilities, and distinctive competencies translate into superior
financial performance?
Southwest’s resources, capabilities, and distinctive competencies can be translated into
superior financial performance through a rise in a simple formula: the harder employees work, the
more profitable Southwest becomes, and the richer the employees get.
4. How secure is Southwest’s competitive advantage? What are the barriers to imitation here?
Southwest’s competitive advantage is secured because their advantages are valuable, rare,
but not costly to be imitated which likely would put Southwest airlines into danger to loss
competition. But then, they can always balance their performance, innovate and be creative in
value creation to differentiate their services from their competitors.
The barrier is for the existing player of industry: to manage and has close relationship with
their employees like Southwest do is costly to imitate. Employee’s loyalty can’t be bought with
money and short time but is developed from time to time with work satisfaction.