Southwest: Evaluating The Purpose Of Transformational Leadership

Transformational leaders encourage group work, as they connect each follower’s identity and self to the project and collective identity of the corporation. They are role models for other staff and this inspires them and makes them

Transformational leadership theory applies four factors for leaders to influence employees to perform beyond their abilities. These factors describes leaders that promote leadership through idealized influence, inspirational motivation, intellectual stimulation, and individual consideration (Shresh & Rajini 2013).Transformational leaders are deem as the most effective leadership style because of their character strengths as a excellent role model who leads by example and manage people based on their strengths and weaknesses to optimizes the organization performance (Shresh, & Rajini, 2013). Transformational leaders are known to reward, encourage and mentor people based on performance through inspiration, creativity, and innovation to solve problems to exceed expectation of the organization (Smith,

According to Tully (2015), Southwest plans to expand into a newer market of making longer haul trips in order to capitalize on business travelers. Kelly is quoted as saying that, “Southwest service levels are the best in the business, their costs are the lowest of the major airlines, and their brand puts us in a prime position to grow faster than they will” (Tully, 2015). This change in direction or strategy could prove to be a great decision for Southwest or could derail them causing decreased revenue and profits.

Southwest has based their original strategy on maintaining low fares, high frequency of flights, on-time arrivals and focusing on the customer experience. However, Southwest has altered their strategy, which previously made them unique in the industry, due to a rising amount of competition from larger airlines that have developed alternative low-cost carriers, essentially diminishing that competitive advantage the “Southwest Effect” once had. Kelly notes that there is “new competition from leaner, larger airlines, low-cost carriers as JetBlue Airways Corp. and Spirit Airlines Inc.”7, making the competitive advantages that Southwest offered less and less sustainable.

The airline industry is becoming extremely saturated and competitive. Fares are getting lower and new airlines are forming in order to combat the increase in operating costs. In order for Southwest to keep with its competitors, the company must stop relying on just their low prices and customer service. They must differentiate themselves for

This can be viewed as a negative point because Southwest generates all of it’s revenue directly from it’s fixed assets (Planes) and if they are not re-investing into their main revenue driver it is hard to continue to grow sales.

Southwest Airlines has high growth and high profitability. However, its cost advantage is not as big as in prior years.

Southwest Airlines earned a reputation for being very aggressive and proactive about containing fuel costs as a key to maintaining profit margins. [19] With fuel being an airline 's most important variable cost, Southwest 's measures have become a model for the industry.

Three alternative strategies are proposed in this analysis, but only one option is deemed possible for success. It is important for Southwest Airlines to remain in the low fare business and offer the Southwest Spirit. That is

An effective strategy Southwest could adapt to inflict damage to its competitors is to further slash its already low prices. This “squeezing” would be particularly effective because most of the airlines are already at or have filed for bankruptcy.

From an operational standpoint, Southwest will need to adjust their plan in order to achieve the most effective and least costly daily processes to gain revenue. Management needs to assure that employees are fulfilling their role of increasing customer satisfaction to maintaining Southwest’s reputation of good customer service. Good customer service keeps customer’s returning and keeps revenue coming in.

On the other hand close attention to costs produced its competitive advantage of having the nation’s lowest fares, and created a phenomenon in this industry known as “Southwest effect.”

Southwest Airlines, the nation’s largest carrier, employs more than 53,000 people and service over 100 million customers a year (Southwest Airlines Honored, 2016). They differentiate themselves from other airlines with the level of customer service that they offer those who chose to do business with them. Southwest entices customers with its policy of not charging for the first two checked bags. They also do not charge change fees for flights that a customer may need to change, however, the fare may be a different price based on timing of the flight. The company has shown a profit every year since its inception (Ross, 2015). After 9/11, when no other carrier was profitable, Southwest was able to make a profit (Southwest Airlines Honored, 2016). According to their website, “the airline’s performance and productivity is directly affected by its triple bottom line approach and its focus on the people and communities they serve, as well as their overall commitment to efficiency and the planet” (American Airlines, n.d.).

Southwest Airlines has been a strong growing company over the last 4 decades. Using its low-cost, no-frill, customer friendly, point-to-point operational strategy, Southwest has been able to sustain considerable growth over the years and reported straight profits since its inception. Southwest Airlines now has a market capitalization of $9.1 billion and is positioned as one of the strongest airlines in the struggling airlines industry. Over the last decade, many airlines have reported record losses in the US while many have filed for bankruptcy. However, Southwest has been able to remain profitable and continued to grow. However, with the airline reaching its maturity, it remains to see whether this growth can be sustained for the upcoming years. This external and internal analysis is aimed to guide the strategic management of company in understanding the environment its business operates in, and how it can respond to that environment by realizing its internal resources.

Based on my analysis of the case, I discover that one of the biggest problems facing by the Southwest is the dilemma that whether they should maintain their focus on short-haul flight or they should alter their strategy to generate more revenue. To be more specific, can Southwest continue to be profitable under stiff competition if they stick with their initial focus. Southwest usually flies mainly to uncongested airports with less competitions; nevertheless, as they gradually expand to more busy areas, they are confronting with more competitors. If they provide short-haul flight service only, there is not much room for them to earn profits. Besides, another problem that Southwest facing is how they can reduce cost since their operating costs continue to rise. Labor and fuel are inevitable for Southwest’s operation. However, as the cost of both continues to grow, Southwest’s cost advantage comparing with other airlines will get narrower,