Strategy Implementation and Control System
Southwest aims to increase international revenue; in 2017, it increased by 55% but accounted for only 3% of the company’s total earnings. SW spent $224 million on marketing in 2017. Thus, it can be estimated that the company spent $75 million of that budget on its global markets. To increase international income by 30% annually, Southwest should increase the budget by 17% (Asahi & Murakami, 2017). Accordingly, to popularize its services, it is also essential to allocate funding for advertising and review contracts with suppliers to calculate the exact amount that the organization can spend on development in the market. The management will oversee the costs necessary to enter the market. However, it will delegate the functions of financial calculations and evaluate the strategy’s success to other departments.
In order to take a significant share of the Caribbean market, a strategic plan must be made that includes certain steps and controls. To begin with, it is necessary to develop a detailed plan and evaluate the company’s current capabilities. Thus, to expect a 55% increase in profits, the company’s financial report must be evaluated over several years (Morrell, 2021). Already after the profitability estimates have been made, it is necessary to move on to the research phase. This is because one cannot just open flights in the direction of the Caribbean but must study consumer demand and the number of competitors. To do this, it is possible to contract with a special office, which will conduct a comprehensive assessment.
The next step is to review the departments that can fulfill the responsibilities of developing new markets. Certainly, a conference must be held to present the plan to improve the workers’ understanding of the changes and goals. One more position should be created immediately in the finance department to keep track of costs and revenues when entering the Caribbean market. At the same time, plans must be made to expand the operations department because more flight attendants and pilots are needed to open the new segment. It is essential to note, not least, that it is worth paying attention to the increase in aircraft and money for maintenance. Thus, additional contracts for reliable vehicles and fuel at favorable prices are necessary.
To ensure that the provision of services for the new market functions effectively, it is imperative to impose control over these processes. Accordingly, the finance department completely reports to management on the positive or negative balance of sales, and the company’s exit is in line with the original plan. At the same time, the operations department must first monitor the new employees’ quality and then report back to management. All departments involved must provide a single report to management, based on which progress or loss can be assessed. The company has implemented new technology and revenue management capabilities that have generated more than $200 million in additional pre-tax results.
Finance and Accounting
One of the main departments is finance because it will allocate funds to finance the steps mentioned above and select the best ways to obtain money. The control mechanism is the monthly reports of the department, which will include the cost of repayment of the loan, payment of bonuses to employees, and ensuring the functioning of new structural arrangements. At the same time, the finance department must obtain additional funds and distribute them between the advertising department and the operations department. To increase international sales by 30%, SW needs to add 17% to its marketing budget. SW spent $224 million on marketing in 2017, and if they increased by 17% in 2018, the marketing budget would be $262 million.
Therefore, the finance department needs to allocate an additional $38 million to this realization. To get these funds, it is necessary to take out a loan from a bank. The best choice for this is Wells Fargo, with interest rates as low as 6.25% per year. The finance department also has to allocate $10 million each for marketing and operations because they plan to expand their workforce.
At the same time, 2 million dollars for legal activities, for example, to pay the international lawyer and paperwork (renting premises, buying planes, official cooperation with social networks). Another 6 million is required for the and research department, but with fees for the special assistant investigating the market. Thus, exactly $28 million of the loan funds must be provided for the operation of the innovations. Another part of the amount must be used for unforeseen circumstances and training for new employees (Morrell, 2021). The organization has already managed to improve its financial performance, allowing it to receive a rating upgrade. Total liquidity was exceptionally strong at $4.7 billion and a fully available $1.0 billion bank line of credit.
The airline’s operations department interviews and hires potential employees and crew. At the same time, it schedules all flights, including the timetable for pilots, flight attendants, and crew. Airline managers also oversee changes introduced by the airports that accept their flights. The majority of the work is also aimed at logistical support of luggage transportation and registration of the company’s clients. Accordingly, the tasks assigned to employees must be performed first because they are indispensable for proper service provision. Thus, they ensure the coordinated functioning of the staff and control all processes related to the performance of the service. Administration can examine their readiness to receive passengers in the direction of the Caribbean; it is possible to simulate a test field for a small group of people. During which problematic points can be identified and corrected.
The activities of the legal service go beyond the state’s territory and are regulated not only by the norms of national law. Therefore, it is important to employ five international lawyers who will understand corporate law issues and know the peculiarities of the legislation of the Caribbean market. Furthermore, the legal staff must provide requirements for all contracts related to the market penetration plan (Asahi & Murakami, 2017). This will be done by creating a database designed to automate the process of filing, registering, and revoking documents to take any action on behalf of the company. The department will also analyze possible risks by using Haddon Matrix. Thus, when similar situations arise in the future, it will be enough just to apply the previous experience and open the saved file with the described ‘road map’ of the problem solution.
Moreover, legal software will be applied to control and coordinate activities and assign specific tasks to each employee. Lawyers will check candidates’ credentials through internal databases and, after legal assessment, will handle the onboarding process. Contract work accounts for up to 80% of the volume, so it is essential to create a maximum number of templates of standard contracts and additional agreements. The company has already managed to perform some legal best practices, especially regarding personal data protection, by implementing California’s standards.
Human Resource Management
The main departments in which the shortage of employees is observed are Operational, Legal and Financial, which involve new positions. The Caribbean is one of the top tourist destinations, and the Southwest must be prepared for the increased demand. Employees must be trained and culturally competent (Asahi & Murakami, 2017). To that end, there will be online training divided into blocks that include several topics such as national traditions, basic legal regulations, and typical gestures and behaviors. There will also be a separate language unit for employees from the United States. For the successful adaptation of new workers, professional orientation is necessary. On the first workday, each new employee will attend a special seminar. They will learn the history of the airport, its mission, goals, corporate values, and the quality management system and receive an initial briefing on health and aviation fire safety. During the probationary period (1 month), two or more meetings with a new worker are mandatory. Further work will be done based on results of the final testing.
Moreover, such tests will be conducted monthly to control knowledge and professional competence. They will include questions about general airport operations and more explicit about Caribbean specifics and language proficiency tests. Employees who pass them best will receive a bonus equal to one month’s salary, and those who fail will be allowed to retake after a one-week refresher course. Moreover, not only theoretical knowledge is important, but also its practical application. A system of bonuses will be created for this purpose. Thus, crews who will do the job qualitatively and without accidents will receive motivational payments of $300 per month. It is worth saying that the company is already a long-term leader in customer service, and the number of complaints has decreased by 19 percent compared to 2017, which shows the reliability of work.
For proper operation, the company needs specialists launching in the engineering department. Their responsibilities include technical support of aircraft and engines. Due to the fact that the corporation is entering a new market, it is necessary to hire more people who can organize the technical processes at Southwest Airlines. That is, the department must include more workers who can handle aircraft and engine modifications, asset management, work facilities, and a technical failure resolution. It must be ensured that such workers can produce technical reports that will be audited by the finance department and independent experts on the proper functioning of the equipment. Southwest Airlines has now opened positions to search for highly skilled workers and most of them have been successfully filled already.
Management Information Systems
An effective solution would be using a Building Management System, which can turn many disparate operations into a single organism. Its control desk will collect all the signals from sensors installed on the airport objects and monitor all dangerous situations with notification, event recording, and archive log tape. The system mimics diagrams, plans of halls, service, technical rooms, areas, platforms, and tables of parameter changes displayed on the screen. It will automatically control exterior and interior lighting depending on the day and degree of illumination in each area. The operator will monitor the general condition of the facility and the work of each selected system individually.
He will know about the emergency and the deviation of the controlled parameters from the set values by the visual and sound signals. The color of the emergency object will change on the diagram, and there will be a sound alarm with a possibility of a loud voice announcement. Prevention of cyber-attacks is also an important feature of the systems because special protective measures immediately react to suspicious activity and blocks it (Asahi & Murakami, 2017). The control system can be programmed so that the first level is intended for check-in and baggage claim, the second for the meeting of arriving and transit passengers, and the third for departing passengers. It also negates the risks of technical accidents by continuous automatic analysis of parameters and early prediction of approaching dangerous situations. In this area, the company has already succeeded in completing a multi-year initiative to fully migrate its reservation process to an automated system to improve flight planning and flight disruption management.
It is essential to consider that the marketing department has performed market research and the role of potential competitors in the market. Thus, to be successful in the marketplace, it is necessary to advertise services. For promotion is allocated 10 million dollars, which will buy 50,000 thousand clicks in Facebook $0.97 cost-per-click. It is planned to order 50,000 clicks a month. Although, funding has been set aside to increase the clicks threefold in case of insufficient demand. It is also significant to perceive that the agency that did the market research also provided information about the distribution of competitors’ advertising.
In this way, it is reasonable to get potential customers interested in signing up to receive information on its services. It is possible to get a 10 percent discount on the first ticket purchase if they provide e-mail data for mailing advertisements and promotional offers. Such a target can be verified through customer surveys; the form can ask where they know about the service (Karaağaoğlu, & 2019). In reality, it is essential to mention that platforms are already equipped with advanced marketing tools for detailed information generation, testing, monitoring, and targeting capabilities.
Asahi, R., & Murakami, H. (2017). Effects of Southwest Airlines’ entry and airport dominance. Journal of Air Transport Management, 64, 86-90.
Karaağaoğlu, N., & Çiçek, M. (2019). An evaluation of digital marketing applications in airline sector. Journal of Human Sciences, 16(2), 606-619.
Morrell, P. S. (2021). Airline finance. Routledge.