Posted by: Matthew Molinari | February 16, 2011

Southwest Case (Blog #4)

Southwest seems to have the best business plan out there: come along after the competition has demonstrated how to fail and do the complete opposite. Whatever Southwest saw American, United and Delta do, they went the opposite direction or at least did it better. If American takes 30 minutes to turn a flight, Southwest would take half that. If serving meals meant adding $40 per passenger, cut the meals.

The unfortunate thing for the competition was that they couldn’t copy Southwest. Passengers were used to structured seating on the big boys, so when they tried to mimic Southwest, the customers complained. Southwest didn’t have this problem; they never offered the perks so not having them didn’t seem like cutting back – just business as usual.

To me, it seems like customer’s viewed Southwest as practicing smart business to keep costs down but the same policies at American  or  Delta were seen as skimping.

Also, how did Southwest convince their employees that “We’ll pay you less than the competitors but also expect you to do more than you would there” was not only ok but actually desirable? 95,000 applicants a year wanted to sign up for that. I guess it shows that having a reputation as a better company really is more important than pay.

Southwest can pay their people less because they treat them so much better than any other airline and that is why their employees work harder than they would for Delta without Southwest having to make them. When the major airlines tried to convince their employees to do things that Southwest employees do on their own, they basically said no way.

Everything seems to be going so well for Southwest that I am left wondering what the big problem will be and how they will deal with it since their success has come relatively smoothly. It sounds like their growth will actually become their biggest obstacle as they try to keep that small business feel while becoming one of the larger carriers.

That is why Southwest was able to capitalize in the beginning – they were able to fill the need the big providers couldn’t. It will be interesting to see how long they maintain that high level of success as they face the same problems that made Delta, United and American vulnerable.



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