What Are the Key Components of Southwest’s Competitive Strategy?

1. Which generic competitive strategy most closely approximates the competitive approach that Southwest is employing?

Southwest seems to focus on two different competitive strategies, cost leadership and differentiation. Cost Leadership is the strategy that most closely approximates with their competitive approach. Cost leadership means that the firm is setting out to be the low cost producer in its specific industry. Southwest has successfully employed this strategy by using several factors. From the beginning, Southwest strived to be the most economically feasible company in the airline industry. From the prices they offer customers, to their own careful spending this shows how Southwest truly used the cost leadership strategy effectively.

2. What are the key components of Southwest’s competitive strategy?

Cost Leadership: The key components to cost leadership are as follows:

Lowest fares: To this day, Southwest offers some of the lowest fares in the industry. When Southwest initially began, they offered $20 one way flights to fly the Golden Triangle as opposed to the typical $27 other airlines were offering. Southwest was also the airline that first introduced on-peak/off-peak pricing, making them especially attractive to people who just wanted to travel leisurely (instead of only business travelers).

Aircraft operation: Southwest decided to only operate one type of aircraft, the Boeing 737. By deciding to do this, Southwest minimized their “size of spare parts inventories, simplify the training of maintenance and repair personnel, improve proficiency and speed with which maintenance routines could be done and simplify the task of scheduling planes for particular flights.” Additionally, because they were limited to one type of aircraft, Southwest was able to acquire the planes at favorable prices.

Ticketless travel and website reservations: Southwest was the first major airline to offer ticketless travel as well as online purchase and reservations for tickets. By doing this, Southwest minimized their need to pay commission to travel agents as well as reduced the amount spent on processing and printing paper tickets. Ticketless travel accounted for “more than 95% of all sales in 2007.”

Airports: Southwest decided to fly in and out of medium-sized cities instead of major, large areas. This reduced fuel costs, and allowed Southwest to avoid paying high landing fees. By avoiding these more concentrated airports, Southwest also gained popularity from customers who were looking for easier routes and shorter travel time.

Point-to-point scheduling: By doing point-to-point scheduling, Southwest was able to keep personnel numbers down to accommodate specific flights. Unlike other airlines who would experience “swings,” Southwest never had