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INTRODUCTION
The current paper attempts to underpin various frameworks that presented in strategy management
literatures that would better improve the overall performance of the firms. The paper first discusses
the case of southwest airlines, the first successful low-cost carrier in USA. Two problematic situations
have considered from southwest Airlines cause experiences, which was to some extent associated to
the new leadership management that appointed in 2001. These difficulty are the dramatically change
in southwest culture, and the cost increasing in fuel and wages. These problems also have also
associated with the expansion of southwest business. The following section briefly presents the case
problem of southwest airline and highlights some important facts about their status. After, the paper
will investigate and analyses southwest airline strategy and the external environment. The analysis
primary considered how southwest airline achieved a competitive edge and posted on the top five
corporations in USA. After that, the paper discusses two academic journals that provide useful
frameworks for southwest airline to overcome its difficulties. One of these academic journals provides
framework (Goolsby Leadership Model) that underpin culture aspect, and the other one provides
framework (Porter's Generic Strategies) that considers cost effectiveness and competition in market.
After presented these two academic journals and its literatures, the current paper attempts integrate the
theoretical concepts and apply it to the case southwest airline. Finally, the paper presents some
suggestions and recommendation that would better improve the work in this company.
2. CASE PROBLEM
The current paper discusses leadership changes that occurred in Southwest airlines in the 2001 when
herb Kelleher promote two of his close aids for leadership positions; Colleen C. Barette, Vice-
presidents for customers, promoted to be the president and chief operating officer, and James F.
Parker, general counsel promoted to be the chief executive officer. Since Southwest's airlines
experienced leadership change, radical change in the organizational cultural experienced too. Instead
of working as teamwork, there were increasingly distance between employees, managers and top
management. Before changes, the top management was very close to its employees and personally
contacts them and celebrates their birthday and events.
However, after changes, keeping in close touch with personnel become an increasingly challenging
task to the new leaders. Furthermore, warm employee relations at southwest seemed to be absurd over
time. Unions played a great role in the game and were becoming more aggressive in expressing their
frustration. Employees uttered that the new management spend too much time in the back offices of
Southwest while managers uttered that the feel their organization culture is at risk because of the
actions taken by Southwest's new management during negotiation with Unions. The paper argues that
the growth of the company and the consequent in crease in the number of employees also posed
challenges of keeping the culture intact.
Furthermore, Southwest was experiencing cost increasing in fuel and wages. For example, the cost per
average seat mile (ASM) went up from 7.07 cents in 1995 to 8.8 cents in 2006. Most of Southwest's
Airlines customers reserve online (71.2 %) and the labor cost advantaging narrowing between major
airlines after restructuring, the new management expressed that further cost reductions are very
difficult and only could be achieved though increase modest fare increase and employee layoffs.
These two available solutions for the new management are directly contradicting southwest culture.
Moreover, the new management faces growing competition in the low-fare segment as most of other
airlines have copied their business model. Competitors has make restructured and adapted Southwest
airline model, and then develop various business model to attract customers. For example, they use
leather seats and in-flight entertainment system for almost the same fare. Few years after their great
victory that post them among the top five corporation in USA, the company now questioned whether
loyal customers would still stick with the airline when they could get more value for their money
elsewhere. In short, Southwest airlines can say that the current paper thus investigates to what extent
changes in culture, costs and competition were related to leadership change in Southwest Airlines.
Whether thing would be the same after Kelleher left the scene completely was another important
question facing southwest.
Strength
Weakness
Concentrating on the niche market
Cost-consciousness
Speed and Efficiency
High Service Quality
Flat Organization
Successful Internal Marketing
Successful External Marketing
Strong leadership (Herb Kelleher, Colleen Barrett)
Excellent relations with customers
Excellent relations with employees
Culture/Values/Spirit
Image of fun/excitement
Dependence on single aircraft supplier (Boeing)
Retirement of Herb Kelleher
The current Boeing 737 jets may not be enough to fly long-haul flights
Increasingly costs
Entertainment and food are two unavoidable issues for Southwest when it comes to long-haul flights
and international flights.
Weak relations with labour unions
Leadership management and challenges
Opportunity
Threats
Short-haul business traveller market is a potential market. Point-to-point trips between cities are a new
niche in airline industry.
Few low-cost competitors that fly internationally (JetBlue, Virgin Atlantic)
Code-sharing with other airlines can save costs of expanding into this market by themselves
International destinations are desirable places to visit for leisure
The market segment to grow in the future
Uncertainty of economy - not so much money for holiday travels
High fuel costs (not a current issue, but perhaps in the future)
Other large-scale airlines could offer lower fares to compete with Southwest.
decline in customers' need for affordable short-haul carriers.
Rise in ticket costs because of international airport taxes
Some threat of substitutes
Federal tax burdens (effect on price-conscious travellers)
Intense rivalry in industry
Concern about terrorism among travellers
4. ACADEMIC JOURNAL
Section 2 presents primary two challenges that face Southwest Company due to the leadership
changes, these challenges mainly happen because of expanding the company and thus its manpower.
Firstly, the communication become difficulty and obviously changes in Southwest culture, as
described by its management 'it becomes new creature'. Secondly, southwest experienced increasing
costs and competition in the airline industry. Related to these two problems, which briefly presented in
section 2, the following section attempts to provide two academic articles that would be the
framework for this paper. Primary the paper address 1- how a company by adapting Goolsby
Leadership Model, could enhance its organization healthy and better creates a culture that personnel
work in good and satiable environment, and 2- how a company could use Porter's generic strategies to
reduce its costs and sustain its competitiveness edge.
Courage
As figure 1 shows, Courage as the second factor in the Goolsby Leadership Model. In his study, James
Campbell (2007) defined courage as "the capacity to act, even in the presence of adversity, fear, and
danger". Previous studies explained that Courage are three combined factors; purpose, energy, and
character. In his investigation study, Thomas (2005) conducted an investigation study and interviewed
28 senior executives, he concluded that a wide variation in leadership concept, leadership attributes
and leadership characteristics existed (Thomas, 2005). On contrary, other studies indicated that there
was no discrepancy along the dimension of purpose (Macik-Frey et al., 2006). In his study, Levinson
(2006) explain that the purpose, goals, and objectives are at the crux of good leader where character is
found.
In their study, Loehr and Schwartz (2003) suggested that while some leaders focus on time
management, energy management is very important to healthy productivity and achievement.
Moreover, studies indicated that Character is very important to courage, and it may be defined as who
you are when no one is looking (Murray, 1998). In his study, Gavin et. al (2003) explained that
character has an important role in a leader's health because it leads to consistency in actions and
behaviours based on core values and principles. Studies explained character can be empirically
measured and the strength of character is powerful as an enabling force for leaders to act with courage
in the midst of business crises or disasters (Cooper et al., 2006).
Impact
Finally, studies explained that great leaders have high impact on their management and staff and on
the businesses, they lead (Boyatzis, 2005, Watson and Petre, 2000). As presented in figure 1, the
Goolsby Leadership Model suggests that the important impacts of integrity and courage are individual
and organizational health, each of whose dimensions are vitality, productivity, and flexibility as
previously identified by Mott (1972) in his research on the characteristics of effective organizations.
When individuals and organizations function in a healthy way, they get results and make a positive
impact for a range of organizational stakeholders (Edwards and Gill, 2006; Laird, 1929).
Differentiation
Differentiation mean that a firm seek to provide a product or service that is perceived as unique
(Porter, 1980). If this strategy is to be successful, then the distinctive features should provide superior
value for the customer. Porter explained that a successfully company differentiate themselves and thus
rewarded for their uniqueness with a premium price. Porter explained that this strategic is generic and
it requires that the premium exceed the extra cost incurred in being unique. However, differentiation
strategies cannot be achieved without costs, firms that differentiate themselves should create a
defensible position in opposition to the five competitive forces. Porter (1980, pp. 37-8; 1985, p. 14)
explained that the firm that has differentiated itself to achieve customer loyalty should be better
substitutes than its competitors and thus better position.
However, studies explain that successful differentiation strategy of a company may attract competitors
to enter the company's market segment and copy the differentiated product (Lynch, 2003). in his
study, Porter, (1980, pp. 37-8; 1985, p. 14) explained "Differentiation provides insulation against
competitive rivalry because of brand loyalty The resulting customer loyalty and need for a
competitor to overcome the uniqueness create entry barriers. Differentiation yields high margins with
which to deal with supplier power and clearly mitigates buyer power since buyers lack comparable
alternatives and are thereby less price sensitive. Finally, the firm that has differentiated itself to
achieve customer loyalty should be better positioned vis-a`-vis substitutes than its competitors".
Focus
Focus is the last of the three generic strategies that proposed by Porter. In his study, (Porter, 1980)
explained that a firm that adopt a focus strategy target narrow segments of the market, rather than the
market segment as a whole. To be successful in doing this, firm should be either cost leadership or
effective differentiation while their market is more limited in scale (Porter, 1980). Through cost focus
or differentiation focus, a company attempts to benefit from differences between what they can do for
specific segments compared to what their competitors can do. Companies employ this strategy by
focusing on the areas in a market where there is the least amount of competition (Pearson, 1999).
In market there are some segments that are more poorly served by broad-based competitors, by focus
strategy to specific target segments, the focuser seeks better serve these segments and thus achieve
competitive advantage. Porter (198) stressed that one prerequisite for a focus strategy is that the target
segments are somehow different than other segments in the. Porter (1980, 1985) also stressed that a
firm should adopt at least one generic strategy, while failing in that a firm is thus "stuck in the
middle". Such firms lack " the market share, capital investment, and resolve to play the low cost
game, the industry wide differentiation necessary to obviate the need for a low cost position, or the
focus to create differentiation or low cost in a more limited sphere" (Porter, 1980, p. 41).
5. BACK TO SOUTHWEST CASE
The first article illustrates to us the role of leaders in enhancing employee healthy. The case of
Southwest obviously indicated that the leaders are not interacting with employees and managers, and
they are spend too much time in the back offices. The expansion of the company and its manpower
was further obstruct to the new management to make communication. However, as argued by Little,
Simmons, and Nelson (2007), being away from employees, leaders would not contribute in enhancing
the organizational and employee healthy, which would negatively increase the aggressiveness and
destroy commitment and loyalty.
Goolsby Leadership Model provides an opportunity to the new leadership management to better
enhance and improve their image and contribute in building healthy organizational culture, where
commitment, loyalty and productivity are part of it. Goolsby Leadership Model explain to us the
urgent need of Southwest to have authentic leader who possesses good self-awareness, transparent to
others while being consistent, engenders positive psychological states within oneself and followers,
and is widely known for having personal integrity. the high quality management are thus requested to
enhance organization environment, relationship between employees and managers and thus
organisational culture.
Southwest new management also need to considered people feeling. People always like to talk and
express their feeling while leader should be emotionally competent and aware of his own feelings and
emotions as well as being aware of the feelings and emotions in other people. Goolsby Leadership
Model explains to us how the emotionally competent leader is able to act in ways to appropriately
managing their own emotions while accommodating the emotions of others. Referring the case of
Southwest airlines, managers uttered their concern about unions, they where afraid from the silent of
the new management. Managers feeling are considered reflection to what leaders feel. Goolsby
leadership mode, stress on the leader's courage that would enhance the courage of followers. To be
successful, Loehr and Schwartz (2003) stressed that courage management is thus requested. Thus,
courageous leaders are healthy because they are purposeful, energetic, and possessed of strong
character.
On the other hand, Porter's model of generic strategies are found to be particularly useful to the
Southwest airlines due to of the explicitness with which it captures the essence of the strategy
formulation process and the intensify of competition in airlines industry. Southwest face many
political, economic and technological changes of recent years, which have stimulated its cost
containment strategies. Related to the case study, the new management uttered that it is impossible to
make cost reducing without increase modest fare increase and employee layoffs, while these two
solutions are deemed as contradicting southwest culture.
The new leaders of Southwest have focused a great deal of attention on cost control measures in order
to protect themselves from competitive forces arising in the industry, but mainly to cope with
regulatory changes. A good example of cost control strategies used by Southwest is the low wages and
long working hours. By tight cost control southwest has attempted to demonstrate efficiency in use of
allocated resources to the resource providers. However, union take part in the game and thus change
some roles (increasing salaries). The competition also drives the company to adapt various
technologies (entertainment technologies) and incurring further costs.
Porter's model of generic strategies provides several activities could fall into the category of
differentiation strategy and thus recommended to Southwest. Examples of this generic strategy include
creation of "high technology" image among customers by adapting latest technologies (e.g. electronic
seats, C.D, D.V.D, internet service and public computers and laptops available to customer's usage).
southwest also can use electronic check up process that would reduce the queue and thus increase their
customer satisfaction. Southwest also, could benefit from their accurate and proper time schedules and
thus promote it to their customers using formal and informal marketing communications. By
demonstrating competence and high proficiency, Southwest should attempt to create institutional
loyalty and hence price inelasticity.
Finally, a focus strategy involves Southwest pursuing a cost leadership or differentiation strategy but
competing in a narrow segment - a specific type of low-fare segment. Low-fare segment pursuing this
strategy try to offer a unique service for the chosen market segment. Southwest new leaders
recommended to be aware about the importance of the three strategic orientations that represent three
fundamentally different alternatives to a firm seeking to establish a competitive advantage. New
leaders are recommended to use various measurements (e.g. employee productivity, comparative
parameter with heir rivals) to sure not to "stuck in the middle", which deemed to be a disadvantage
because the cost leaders, differentiators, and focusers are all able to concentrate their capabilities more
effectively.
6. CONCLUSION AND
RECOMMENDATION
The current study attempts to enhance our understating by exploring various situations that face
Southwest airline, which primary occurred because of the company desire to expand and the extensive
competition in the market. The competitor could not be developed without understanding the secret of
Southwest airline succession. While Southwest airline, as pioneer in the airlines industry should seek
effortful to exploit opportunities and develop various strategies that are complex and not easy to
mimicry by rivals. The new leader of Southwest should promote and encourage personnel by adapting
various framework and models that appears the in management filed. The current study underpin two
but important model that could be in one hand, change the attitude of employees and thus enhance the
organizational culture, and on the other hand, enhance the competitions and cost reducing of the firm
the market.