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Southwest Airlines: Core Competencies & Internal Sources of

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Jeff Prokaski

on 24 February 2015

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Transcript of Southwest Airlines: Core Competencies & Internal Sources of

Jeff Prokaski, Ryan Trompeter, Sam Prentice, Matt Petermann, & Adam Newsom
Southwest Airlines: Core Competencies & Internal Sources of Competitive Advantage
Started as an intrastate airline serving major cities in Texas
On-Time Departures
Low Fares
12-Time Triple Crown Recipient by 1993
Brief Background
How to protect our inimitability and utilize our core competencies to maintain our competitive advantage over our competitors.
Problem Statement
Primary Activities
Reservations & Ticketing
Pre-Flight Ground Operations
In-Flight Operations
Post-Flight Ground Operations
Service (Lost Baggage, Complaint Resolution etc.)
Value Chain
Value Chain Cont.
Supporting Activities
Human Resources
Materials Acquisition
Strategic Planning & Decision Making
Primary Activities
Reservations & Ticketing
Ticketing Is NOT Outsourced
Pre-Flight Ground Operations
Seats are not assigned
In-Flight Operations
Provided "love potions", peanuts, and family-fun service
Post-Flight Ground Operations
Quick Turnarounds
Fun and Friendly Atmosphere Created by the Staff

Human Resources
Customers Help Determine Who Gets Hired
Materials Acquisition
Only Use Boeing 737s in Their Fleet
Emphasizes Low Fares & Convenience
Strategic Planning & Decision Making
First Mover Advantage Guaranteed Fast & Smooth Operations
Supporting Activities
Sources of Value Creation
Southwest promotes a fun and friendly "family-style" corporate culture transfers to their passengers.

Short flights at low prices give customers the option to fly rather than drive.

Valuable & Rare
Ultra-low Fares with Unbeatable Service.
Friendly & Memorable Staff Provide A Unique Experience.
Primarily served cities in the southwest region of the country.
Avoided "Hub-and-Spoke" Operations.
Utilized Second Tier Airports That Were Less Congested.
Unassigned Seating
Core Competencies
Good Labor Relations with Employees despite allowing unionization.
Uses one type of aircraft which reduces training and maintenance costs.
Contracts with fuel suppliers allow them to save money
HR operations kept turnover rates as low as 7%!
Second tier airports and efficient use of gate times keep costs low.
Their "family-style" culture creates a fun and personable experience for their passengers.

Low fares and low cost structure
Poses a dangerous risk of a price war with competitors.

When able, they will store excess fuel in planes if it's cheaper
Competitive Advantage
Low-Cost Operations

Heavy Focus on Employer-Employee Relationships

Efficient Operations within airports

Due to their competitive advantage, they were the only profitable airline in 1992, unofficially winning the triple-crown for the entire year!
Barriers to Imitation
Substantial Organizational Change
Competitors would have to:
Restructure training processes
Replicate another company's culture
Purchase new equipment
Alter marketing strategies
Cut-costs to afford low fares

Weak Barriers to Imitation
Unassigned Seating
Low Fares
Hedging Fuel, when available
Altering In-Flight Food Service
Friendly, Interactive Flight Attendants
Geographic Concentration of Flights
Sustainable Advantage
Employee Brand Image ensures passengers consistently receive a positive experience when flying Southwest.

Maintaining company culture

Southwest needs to invest and protect their company's family-style culture that puts emphasis on the importance of their relationships with their employees. In doing so, they create a friendly and fun experience for their passengers. Additionally, maintaining the low fare image continues to keep customers loyal to the brand.
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