Category: Business Essay
Competitive Advantage Business Essay

Southwest Airline Company started in 1971 and is based in the United States. It had a labor force of 195. At this time, its competitor was Continental Airlines, which employed every dirty trick possible to ensure that Southwest did not pick up well. For instance, Continental used a political trick when it used the then speaker of the House, James Wright make amendments on air transport routes. The amendment was deliberately meant to make logistics of the airline routes where Southwest flew difficultly but instead encourage the traffic where Continental flew. This trick did not succeed and it motivated the spirit of competing and winning at the Southwest Airlines to date. Since then Southwest Airlines believes that its competitive advantage lies on its personnel and how they are managed but not on pricing or any other thing. The 2010 revenues for Southwest Airlines were $10,351 million.

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How the company has developed a competitive advantage through its Human Resource.

Southwest has been able to stay on top of the business and maintain a competitive advantage by putting emphasis in various areas.

Salaries or Rewards. Employees earn lower salaries than the company’s competitors and work for longer periods. Pilots and flight attendants are paid per trip meaning that the more the trips one makes the higher the earning. Flight attendants are the second highest earning personnel in the company. Those who have managerial positions earn more. According to the Air Line Employees Association 2008, the salary of the Chief Executive Officer (CEO) is one of the lowest compared to other executive officers in Dallas. The employees own 12% of the Southwest’s total stock share. However, Southwest Airlines give collective rewards such as sharing profits and ownership of a stock by the employees. This has been facilitated by the discounted stock purchase program offer given by the company to its employees thus enabling 86% to 92% of its employees own stock. Southwest Airline gives benefits of the standard run of the mill common to other businesses. These comprise of dental, vision, medical and health coverage. Additional benefits include dependent care spending accounts, long-term care disability insurance cover, time off, and a retirement saving plan of (401k). The unique benefit is free available flying privileges.

Utilization. The company ensures that each plane in the fleet makes extra flights in a day. This makes it possible to save on the costs of training and maintenance. Their success has been due to the utilization of cost-effective revenue streams. In 1995, Southwest was one of the first airline companies to have a website. Online bookings contributed to 70% of the company’s revenue in 2006. Southwest earned the respect for thinking outside the box and proactive management of risks. This included fuel hedging in order to insulate against fluctuation of fuel prices. In considering the costs, Southwest has maintained $0.12 per seat mile, which is roughly 25% cheaper than other competitors are. The turnaround time for an airplane is 15 minutes. This made possible by the multitasking crew. The pilots and the aircrew clean the plan while on the ground. On average, there are 100 employees per aircraft in contrast to competitors who have 130, and the staffs at Southwest serve close to 2400 passengers annually on average compared to competitors 1000.

Service to the customer. Southwest delivers the best on-time performance, few cases of lost luggage and fewest customers complain making it maintains leadership in Triple Crown awards. They keep the fairs simple with no interline connections. Customers meet employees at Southwest who are uninhibited and empathetic. Jokes, stories and the behavior of flight attendants express the actual real person worthy of the job. Employees at Southwest are encouraged to be creative and have personality. Not only when dealing with customers but they are encouraged to behave as if they own a place in practicing business.

Recruitment procedure. The heart of Southwest’s success is the personnel who run the airline. Southwest recruits the best personnel available to the industry in order to maintain their position as the leading airline service company. Recruitment is done through an extraordinary selective process. Simply put there are 200,000 applications for the roles, and out of these, around 30,000 are interviewed and only 400 are selected for the jobs. The major focus during recruitment is teamwork and attitude with an emphasis on recruiting people of the same age bracket. The interview panel asks how the applicant has used his or her sense of humor. They ask how one is able to use humor to diffuse a difficult situation. In one occasion, applicants are asked to give presentations to other applicants about their personality. The interviewer then observes the observers and not the speaker to identify who applauds and encourages a speaker who is nervous. There was a case where one interview that had put on oversize clothes was asked to change on Bermuda shorts. Those who did not comply were disqualified right there because they lacked attitude. Those without extensive work experience are preferred in this case since the company believes that the new employees can be trained on whatever the job skills needed but no attitude. Southwest is was one of the pioneer companies to employ the system of referring employees. Training takes over as soon as the recruit is in the door. This is where doing things faster, better, and cheaper is emphasized. In doing this, each worker is expected to be familiar with the duties of other employees in order to deliver an outstanding customer experience, which in turn keeps the Southwest culture in continuity. Hiring the right people is a religion in the Southwest.

Labor Union. Southwest has an interesting model of the labor union. It is the most unified airline in the United States with close to 84% membership. They have a ten-year agreement with the aim of acquiring stock rather than wages. The union contract has no work rules. The workforce at Southwest is organized into nine unions in categories such as pilots, technicians, flight attendants, and ramp workers. The transportation workers union represents the flight attendants and Teamsters represent ramp workers, reservation agents and customer service fall under the International Association of Mechanists and the mechanics and the cleaners. The company has enjoyed peaceful and highly co-operative labor since it started its operations relations. The management keeps the representatives of the union informed on any changes. One case was when the company decided to implement the flexible benefits plan; it met with representatives of the union and explained its benefits.

Corporate Culture. The CEO Mr. Herb Kelleher’s relaxed management style and personality has imparted an attitude in the workers that work is important and it should not be spoilt by being so serious to customers. The CEO tries to get union leaders to talk to them at a personal level to know the difficulties that employees may be passing through in their execution of duties. He believes the main difference between him and other people in mind, spirit, and soul. In one of his letters to the employees, he quoted Winston Churchill: “Success is never final.” The CEO said that “success must be earned repetitively or else it disappears. I am betting on your minds, hearts, souls, and spirits to continue with our success.” This has helped to instill a sense of discipline at work thus promoting a peaceful working environment. Southwest human resource department stresses compassion and common sense. When employees are motivated to work harder when they realize that they are needed and appreciated. In addition, it is essential for the employer to take care of his employees so that they can trust the company. The degree of trust employees have in an organization is one of the biggest factors in the success of any company. Southwest gave room for employees to be themselves. The culture of an organization is the values shared among members of the organization.

Participation and empowerment. Southwest Airlines have given power to employees to make their own critical decisions without having to seek permission always. This makes an employee feel more confident and have a sense of ownership of the company. When an employee works where he or she limited to make decisions pertaining to his or her work, he or she becomes ineffective. Southwest has also encouraged creativity and has implemented many ideas brought forth by the employees.

Retention of talent. The human resource department at Southwest Airlines fights hard to retain the exemplary talent that they have. Keeping great performers from going to other companies have made southwest to remain a leader in the field of air transport. Their corporate priority is the war for talent and in addition, the company uses a lot of money to train their employees in order to build capacity. They do this through recognition, compensation, promotions and new assignments.


The company has utilized its human resources as a vital asset for attaining and maintaining a competitive advantage. Furthermore, it has made it clear to its internal workforce, customers who expect highly motivated and friendly labor force and high-quality services, and to the external investor community that still values the company high as indicated by the statistics of its favorable price ratios. The company achieves this success through the culture and leadership established by the CEO and the managers he has hired and promoted. The company also cooperates with unions that embrace the culture of the company and have not demanded a role in the process of management or governance. The emergence of acquisition of intensive knowledge based on information technology worldwide suggests that competition remains high and therefore the company should not relax because of what it has already achieved but put in more efforts to maintain its position in the market.

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