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Strategic Issue
Southwest Airlines has never deviated from its niche: short-haul, high frequency, low-fare service, all delivered with award-winning customer service.1
-- Herbert D. Kelleher, Chairman, President, and CEO
Southwest's current strategy is to position itself as a cost leader with a focus strategy. The company's management and employees aim to cost-effectively and reliably fly large number of customers on short, non-stop flights, and to have fun doing it. They are devoted to making flying available to everyone. The company has been successful in implementing this strategy, having experienced strong growth and profitability. Southwest is now the 5th largest carrier in the U.S. in total customers. It has operated profitably for 24 consecutive years in an industry with a volatile earnings history. The main strategic issue facing Southwest at this time is to evaluate this strategy and determine its future course of action.
SWOT Analysis
An evaluation of the internal strengths and weaknesses, and the external opportunities and threats--based on the case study and additional references--is as follows:
Strengths
1. Southwest has successfully adopted a cost leadership strategy.
? Southwest maintains operating expenses per available seat mile at 15-20% below average.
? The company has no baggage handling, no meals, no central reservations, and no assigned seats.
? Because all of its planes are Boeing 737s, maintenance, turnaround, and training costs are contained.
? The company has embraced technology that will reduce costs (e.g., ticketless travel).
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