Southwest Airlines- Blue Ocean Strategy
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Research a well-known multinational company or a multinational organisation that you know well and propose an appropriate reward and pay strategy that you believe would best motivate employees to meet the overall organisational strategy and objectives.
Your Final Project will:
1. Assess the organisation in terms of its organisational strategy, objectives, mission and values.
2. Analyse the environment in which the organisation operates with regards to industry, business life cycle, etc.
3. Evaluate the organisation's current reward and pay strategies on two criteria: for meeting its overall organisational strategy and for maintaining competitive advantage in the face of new challenges and changing conditions.
4. Reach a reasoned and evidence-based conclusion about the level of success achieved by the organisation in motivating employees to reach organisational objectives and propose a reward and pay strategy that may better serve this purpose.
Naturally, a reference list of sources will be appended to the final analysis.
Your analysis and discussion should have a theoretical foundation based in library research and should demonstrate an awareness of the effect of cultural values on successfully managing a diverse workforce.
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Solution Summary
8 pages, APA format with executive summary and references.
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Southwest Airlines enjoys a successful blue-ocean strategy. Cost leadership, amplified by
differentiation provides Southwest with a competitive advantage in the airline industry. With a
cost advantage of greater than 30% over its nearest competitor in several major markets,
Southwest has achieved industry-wide cost leadership. This, added together with an emphasis on
friendly customer service provides the differentiation required to leverage a truly blue ocean
strategy.
Southwest operational architecture provides the backbone capability that enables its
cost leadership. Without the distinctive maintenance capabilities of Southwest‟s support assets, it
would not be able to keep operating costs low enough to translate into a profits. Very rapid
growth in recent years, however, threatens to dilute Southwest‟s focus on low-cost. More
mainstream (and therefore expensive) destinations continue to be added to Southwest‟s routing.
This, coupled with the threat of a single type of airframe in the capital fleet present challenges to
Southwest‟s continued success.
SOUTHWEST AIRLINES: STRATEGIC ANALYSIS 2
INTRODUCTION
Southwest Airlines is the most successful airline in the United States-it is the largest (as
measured by customer volume) and most profitable with 38 consecutive years of profitability,
(Southwest, 2010a). Southwest operates its airline under a winning "blue ocean" type strategy-
combining cost leadership with differentiation elements, (Kim & Mauborgne, 2009). In order to
keep Southwest Airlines profitable into the future, a SWOT analysis illustrates some discord in
the strategic decisions made by strategic business units (SBUs) of Southwest. The following
report illustrates several opportunities and threats for Southwest to configure their significant
resource and competency pool to take advantage of, or mitigate over near- to mid-term time
horizons in the Scheduled Passenger Air Transportation industry-NAICS code 48111, (NAICS,
2011).
BUSINESS STRATEGY- COST LEADERSHIP
Southwest Airlines primarily executes a strategy of cost leadership in the scheduled
passenger air transportation industry. This strategy seeks to "produce and deliver products of
comparative quality at lower costs [than the competition]," (Algasae, n.d.). Southwest operates
on this strategy effectively. Take an example airfare, approximately three weeks in the future,
from Los Angles to New York City. Southwest‟s best rate was listed on their website at $249.
The next closest competitor was Continental Airlines‟ online rate of $371. Southwest offers
comparable service between the same two destinations at a 32.8% discount to its next closest
competitor. Clearly, strategic choices are at work in order to enable such cost leadership in the
industry.
SOUTHWEST AIRLINES: STRATEGIC ANALYSIS 3
Successfully executing a cost leadership strategy must constitute a conscious decision on
the part of Southwest Airlines-or any enterprise for that matter. Merely lowering customer
prices only serves to reduce ...
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