finance 713

Essay by MAM2008B, September 2014

download word file, 5 pages 0.0

The primary factors contributing to Southwest's continuing success is embedded in the value it creates for its customers. The organization's value proposition has been established around price, convenience, and reliability. If we analyze the tools for building core competencies, we can understand how Southwest Airlines became more successful financially, than its competitors.

One of the primary success paradigms for Southwest was building Sustainable Competitive Advantage:

Valuable capabilities - Initially Southwest exploited opportunities by addressing the need for increased capacity on major travel routes between major Texas cities. This allowed revenue generation, which was strengthened by cost reduction efforts in the coming years.

Rare capabilities - Southwest has created a unique work environment, which resulted in high employee productivity and morale; which translated into growth and profitability.

Costly-to-imitate capabilities - Southwest chose to operate from less busy airports, did not serve any meal on its flights, and priced its services at 70% below competitors' prices.

Organized to be exploited - Focus on cost minimization and debt control was implemented in Southwest's strategy and ensured strong balance sheet year after year.

The other part of this success story can be derived from Value Chain analysis:

Primary activities - Most of Southwest's operations could be described as primary activities. Employees were encouraged to do "Whatever necessary" to get the job done, which meant that a process oriented environment prevailed in its daily operations.

Support activities - Frontline operations were almost separated from support activities; which is why there was less interdependency among the activities and any operational procedure could be done without further assistance from others.

From its initiation, Southwest's strategy was centered around the premise of lowering costs on all avenues. The organization's financial success can be attributed to the competitive advantages it has developed over the years. Among those, the major...