MGMT 561 Jeddah University Southwest Airline Flying High With Low Costs Discussion

I don’t know how to handle this Management question and need guidance.

1. What are the key success factors for Southwest airlines? What are the key things it does to keep its costs lower than competitors?

2. What prevents larger competitors (e.g., American, Delta, United) from imitating Southwest’s approach?

3. What prevents new entrants from successfully imitating Southwest’s approach?

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Case Objectives:

•   First, it is to continue to solidify a framework of approaching strategy in the students’ minds. This framework defines strategy as a “plan to achieve competitive advantage that involves making four strategic choices. (see Strategic Management, Chapter 1: What is Business Strategy?)•   Second, this case examines how Southwest has achieved a cost advantage (one of the two “generic” strategies for offering unique value) despite the fact that the company has been much smaller (in terms of number of passengers flown, planes, employees) relative to its larger competitors (e.g., American and Delta airlines). The case shows how Southwest’s “point to point” business model and the activities associated with that business model create cost advantages. The concept of “reinforcing fit” helps to explain as a reason for its success at lowering costs—as well as a reason it is difficult for competitors to imitate. While earlier cases illustrate advantages gained from market choices, economies of scale, and product differentiation, this case illustrates Southwest’s cost advantage as the sum of many small decisions and activities (that help it turn its planes around quickly) and not one single decision.

Prof. Angela

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