Southwest Airlines is an almost legendary firm that amazed the world with its adaptability and strategic planning. The peculiarity of its business model is the combination of differentiation and low-cost services. The high level of operational productivity and customer-friendly prices allowed it to grow large capital. The company has the perspective to become a corporation if it develops its hybrid strategy properly and expands the distribution of its routes.
First of all, Southwest Airlines is notable for its adherence to the low-cost strategy that has been providing it with high revenues for years. According to the data mentioned on the firm’s website, the company is huge, as its market share exceeds the fifth in the whole industry (Southwest Airlines, n.d.). The relatively broad range of resources and capital allows Southwest to set low prices oriented for an extensive customer category, a significant firm’s competitive advantage (Joshi, 2021). However, the concession to public demands in the pricing should be managed carefully so that the strategy may not cause losses for a low-cost company (Alderighi et al., 2019). In brief, the ability of Southwest Airlines to supply cheap routes for the customers is an important advantage.
On the other hand, a minimal production costs strategy prevents some clients from choosing the company since it lacks a non-general requests option. In research by Simon and Fassnacht (2018), low-cost organizations should monitor the quality of their services. Aiming at low prices, companies might try to reduce the expenses on the performance as much as possible, decreasing the worth of their products as well. In the case of Southwest Airlines, the firm does not deliver dishes and the opportunity to pick a seat in advance, even for additional pay (Martin, 2020). People that can afford a charge for food but prefer cheap airlines may be dissatisfied with such a policy. Therefore, low-cost firms necessary have to provide inexpensive but still adequate service.
The other aspect of Southwest Airlines’ successive strategy is differentiation through the distinctive company’s method of adapting to the changing business conditions. Although Porter’s implication about the importance of product uniqueness is credible, the current economic situation distinguished an innovative business model as the most significant source of profit and superiority over rivals (Bahir & Verma, 2017).
As illustrated in the article from Joshi (2021, para. 2), Southwest satisfies the industry’s demands on this point since its plan is reckoned upon “extremely efficient operations, low-cost pricing, and innovative logistics solutions.” Additionally, the company selects the staff participants deliberately, choosing only those with capacities to serve the customers on the highest level in order to keep its reputation as a client-sensitive enterprise. Consequently, the firm is remarkably adaptive to the changing business sphere and effectively applies the practical solutions of the differentiation strategy.
Nevertheless, Southwest airlines’ distinctive features of flights and services are not enough for a differentiation-based organization. Namely, a company that pursues a goal of being unique in the industry should ensure that its branded propositions are still relevant. The competitors may be initiative in replicating the services if they are low cost and produced without particular efforts (Grünig et al., 2018). For example, free checked bags and different beneficial passes could be modified and implemented by other companies with ease (Martin, 2020). Thus, the firm’s distinctiveness is endangered by rivals that attempt to gain profit from other companies’ innovations.
Finally, the strength of Southwest Airlines is the combining of two generative strategies simultaneously. Nowadays, the customer demands have changed as well as their ability to pay for more services. Both high performance and low price have become essential, so the success lies in providing both (Tischner et al., 2017). Consequently, the company that acquires positive sides from different plans has a competitive advantage over others.
After all the matters discussed, a range of initiatives could be proposed. The most significant step for the company is implementing the hybrid strategy with an equal proportion of price attractiveness and distinctive quality offering. For example, the pricing could be segmented for different classes and routes. Next, the firm may change its policy concerning meals and offer inexpensive dishes (or fast food) for people who cannot bear the flights without eating. Additionally, Southwest Airlines may try to extend its services to the international level. The experimental novel route to Hawaii demonstrates the potential success of such a step. The tourism level has grown rapidly as cheap airlines became available (Lenhart, 2019). Thus, further moves toward expansion of the company may prove progress, elevating the company to a transnational corporation. Henceforth, Southwest Airlines should concentrate on balancing the differentiation strategy part with low-cost and proceed with the spread of its facilities.
Nonetheless, the rapid growth of the company might be paused or suspended due to the pandemic crisis. Southwest Airlines has already suffered significant losses and even had to resort to the cut wages policy that has never been practiced before (Josephs, 2020). A solution can be suggested related to the previous proposals. Namely, the firm could offer routes for higher prices where all the requirements for safe traveling are followed. As a result, a category of customers that can afford such emergency flights would remember the initiative even after the virus situation and probably retain its loyalty. Accordingly, the company could use its resources and unfavorable conditions for gaining more profit.
To conclude, Southwest Airlines already has a strong strategy, credibility, and popularity among various customer categories. Nevertheless, it needs to emphasize its distinctiveness and improve the quality of its services for further development. Moreover, the low-cost strategy’s advantages could not be abandoned, so the prices should not increase significantly, and the costs of new steps ought to remain minimal.
Alderighi, M., Nicolini, M., & Piga, C. A. (2019). Is low-cost carriers’ revenue management a firm capability? Journal of Air Transport Management, 78, 15–22. Web.
Bahir, M., & Verma, R. (2017). Why business model innovation is the new competitive advantage. He IUP Journal of Business Strategy, XIV(1), 7–17. Web.
Grünig, R., Kühn, R., & Montani, M. (2018). The strategic planning process: Analyses, options, projects (2nd ed.). Springer.
Josephs, L. (2020). The coronavirus pandemic tests Southwest Airlines’ record of no pay cuts, furloughs. CNBC. Web.
Joshi, V. (2021). How Southwest Airlines has won over travelers. Investopedia. Web.
Lenhart, M. (2019). The Southwest effect is already impacting Hawaii tourism. Skift. Web.
Martin, M. (2020). The pros and cons of flying with Southwest Airlines in 2019. Skyscanner US. Web.
Simon, H., & Fassnacht, M. (2018). Price Management: Strategy, analysis, decision, implementation (1st ed.). Springer.
Southwest Airlines. (n.d.). Proven business strategy. Web.
Tischner, G., Funcke, P., Tischner, G., Gökce, K., & Herse, R. (2017). Hybrid strategies. Evolutionizer. Web.