Organization Science (INFORMS)

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s!iration Management
Organizational "eha#ior
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"out Human resource management
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' Merkle( )udith * Management and Ideolog$* +ni#ersit$ o% Cali%ornia ,ress*
IS-N ./01./.2323/0*
' Ma$o( 4lton (5670)* 8Ha9thorne and the Western 4lectric Com!an$8* Har#ard
-usiness School* Retrie#ed 1: ;ecem"er 1.55*
' 8"out CI,;8* Chartered Institute o% ,ersonnel and ;e#elo!ment* Retrie#ed
11 ;ecem"er 1.55*
' 8"out Cornell I&R8* Cornell +ni#ersit$ School o% Industrial and &a"or
Relations* Retrie#ed 1.5./.5/16*
' a " 8"out SHRM8* Societ$ %or Human Resource Management* Retrie#ed 11
;ecem"er 1.55*
' O<-rien( Michael (Octo"er :( 1..6)* 8HR<s =ake on =he O%%ice8* Human
Resource 4>ecuti#e Online* rchi#ed %rom the original on 5: ;ecem"er 1.55*
Retrie#ed 1: ;ecem"er 1.55*
' 8Cat"ert sho9s tougher side to human resources8* ,ersonnel =oda$* ugust 2.(
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' +lrich( ;a#e (566?)* Human Resource Cham!ions* =he ne>t agenda %or adding
#alue and deli#ering results* -oston( Mass*: Har#ard -usiness School ,ress* IS-N ./
:30:7/356/?* OC&C 273.76.7*
' =o9ers( ;a#id* 8Human Resource Management essa$s8* Retrie#ed 1..3/5./53*
' a " )onathan 4* ;e@ra%% (15 Fe"ruar$ 1.5.)* 8=he Changing 4n#ironment o%
,ro%essional HR ssociations8* Cornell HR Re#ie9* Retrie#ed 15 ;ecem"er 1.55*
' Wright( ,atrick* 8=he 1.55 CHRO Challenge: -uilding Organizational(
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' Conat$( -ill( and Ram Charan (1.55)* =he =alent Masters: Wh$ Smart &eaders
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' 8Human Resources( =raining( and &a"or Relations Managers and S!ecialists8*
+*S* -ureau o% &a"or Statistics* 1.55* Retrie#ed 12 ;ecem"er 1.55*
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1.55*
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' 8HR @raduate ,rogram Rankings8* HR ,atriot* 1..6/.7/1?* Retrie#ed 1.5./
.3/.0*
' SHRM We"site: "out SHRM
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Categories:
Human resource management
South9est irlines 1..1: n Industr$ +nder Siege
Harvard Business School: 9-803-133
4>ecuti#e Summar$
Southwest Airlines in 2002 faced a serious of imortant mana!ement decisions
after the 9"11 tra!ed# in order to continue the record $rea%in! coman# !rowth that
Southwest had e&erienced since the 19'0(s) Southwest Airlines revolutioni*ed the
airline industr# with what is %nown as the Southwest +ffect: low cost fares, oint-to-oint
service, -10 minute turnaround. and an en/o#a$le friendl# atmoshere) After the Airline
0ere!ulation Act of 19'8, Southwest adoted a olit# that irre!ardless of the rofita$ilit#
of e&ansion oortunities, the coman# wanted to commit to a mana!ea$le annual
!rowth rate of a$out 10-112) 3he followin! 4uestions and discussion will address the
historical challen!es of Southwest airlines, the direction the coman# contemlated in
2002, and a $rief loo% at the challen!es of toda#)
5)* What is the com!etiti#e "usiness en#ironment
3he airline industr# has alwa#s $een cometitive) 5n an anal#sis of the most
rofita$l# investments as er our class discussion, surrisin!l#, airlines come in at the
lowest return on each dollar invested at around 2)12)
Southwest Airlines e&erienced 30 consecutive #ears of rofit a mere two #ears
after it(s foundin! in 19'1) 6an# airorts $e!an re4uestin! Southwest service for their
assen!ers, $ut throu!hout Southwest(s e&ansion, the coman# aimed to maintain a
mana!ea$le !rowth rate and focus on their core cometencies of low rice fares that
would comete with the cost of drivin! to the destination)
5n the mid 1990(s, the ma/or carriers entered into rice wars to undercut
cometition) Althou!h, these dealin!s did affect Southwest(s $ottom line, Southwest still
mana!e to continue to turn a rofit and e&and due to their e&ansion into a reservation
s#stem and their commitment to a culture and e&erience that assen!ers were drawn to)
1)* What is the com!etiti#e ad#antage that the com!an$ o"tained as discussed in the
caseI
1
Southwest Airlines cometitive advanta!es are their oint-to-oint services which
are !enerall# tar!etin! the fre4uent $usiness traveler) 7ith several re!ular fli!hts er da#,
if a assen!er haens to miss their fli!ht, the# will $e automaticall# $oo%ed onto
another fli!ht) Secondl#, Southwest strate!icall# secured routes throu!h secondar#
airorts which !enerall# had lower fi&ed costs for the airlines and less con!estions for
assen!ers ease) 8inall#, Southwest focused on 4uic%, relia$le turnaround time usin!
onl# one version of aircraft, allowin! for familiarit# amon! staff and !reater efficienc# in
turnaround) 9assen!ers were not assi!ned seats, siml# $oardin! sections, which allowed
for assen!er loadin! to $e conducted more efficientl#)
3he traditional airline model is the Hu$ and So%e model, which in essence ta%es
most assen!ers from the ori!ination, throu!h the hu$, and then transfers them to their
destination) Southwest(s oint to oint s#stem was more relia$le $ecause it did not
deend on the on time arrival of an earlier fli!ht for dearture)
Southwest also imlemented the first and most simlistic fre4uent-flier ro!ram:
urchase ei!ht fli!hts and !et one free) Southwest(s initiall# connected with four
comuter reservation and tic%etin! s#stems and also the owerful SAB:+ s#stem) 3his
allowed travel a!ents to view fli!ht information and even rint tic%ets) 5n 1994,
Southwest was onl# connected throu!h the SAB:+ s#stems which ushed Southwest to
develo the -tic%etless. travel ro!ram as well as Southwest)com)
2)* What strateg$ andCor model 9as used or im!lemented in this caseI
Southwest airlines does stru!!le a!ainst the threat of su$stitutes much li%e an#
other airline and in this case the threat of su$stitutes is the decision to use an alternate
form of travel, such as drivin! or ta%in! a train) 3he airline industr# is sensitive to
-tra!ed#. such as when there is a lane crash or an event li%e 9"11; consumers tend to
switch to a su$stitute or chose not to travel in the first lace) Southwest(s $est defense is
-argaining
!o9er o%
"u$ers
=hreat o%
su"stitute
-argaining
!o9er o%
su!!liers
=hreat o% ne9
entrants
South9est #s* ll
other irlines
=hrea
ts
-argaining
,o9er
9orter(s 1 <ometitive 8orces 6odel
=
a stron! 9: camai!n, which we saw after 9"11 when the coman# launched ads sa#in!
that when America is read# to fl# a!ain, Southwest will $e there)
'