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Southwest Airlines key success factors

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 Southwest Airlines Term Project
                      Services Marketing
                        Dr. J. Chris Lin
                          Fall, 2008


                              Group 10
                                      Yi-Ping
                                       Dani
                                       Judy
                                        Joy
                                       Ann
                                       Peter
                                      Frank
                                        Ted




“We tell our Employees we are in the Customer Service business—we just happen to
 provide airline transportation. It is a privilege to serve your air travel needs.” –
                          Southwest Mission Statement.
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Question 1:

A. Targeting the niche market
      Southwest Airlines‘ secret to its success is very straightforward. Southwest
clearly defines its existing purposes, which is to provide the lowest fares for business
and leisure travelers traveling between states. Instead of competing with large-scale
airlines to fly international routes, Southwest focuses on ―point-to-point‖ interstate
short trips, and more on maximizing the profitability than focusing on market share.
This strong vision outweighs the allurement of international flight market, keeping
Southwest airline concentrated on its own niche to gain profit.
B. Cost-consciousness
     Since low fares have become its selling point, decreasing the cost becomes very
important. Southwest Airlines tries to save money by simplifying its operating process.
Utilizing strategies such as having ―One type of aircraft‖, ―cash-register receipts as
tickets‖, ―no computer reservation system‖ and ―no meal service‖ are some examples
of its low cost strategies.
C. Speed and Efficiency
     Southwest knows that airplanes generate revenue only when they are in the air.
Accompanied with the ―point-to-point‖ strategy, Southwest chooses to operate by the
most efficient way of adopting the concept of ―high average velocity‖ instead of
conventional ―hub-and- spoke‖ system.
D. High Service Quality
     Furthermore, Southwest understands that its ―low fares‖ strategy cannot be
achieved at the sacrifice of good service. Southwest defines the essence of its business
as service, stating, ―We are not an airline with great customer service. We are a great
customer service organization that happens to be in the airline business.‖ According to
the five dimensions in SERVQUAL, Southwest has great performance in the
dimensions of reliability, responsiveness, assurance, and empathy.
E. Flat Organization
  (a) Southwest has a lean structure and informal code of conduct. The leanness leads
to the cross-functional communication. Employees can connect with managers or
even the president immediately whenever they want to deliver opinions and
suggestions. Its hierarchy is quite simple so that department supervisors can manage
employees very well and both sides can maintain good and direct communication.
  (b) Southwest realized that the real ownership of an organization doesn‘t come
from how much stock one owns. Southwest claims, ―Ownership is the result of
believing that you can make a difference, then acting on that belief in everything you
do.‖ Southwest empowers its employees to solve service problems in a timely manner
                                                                                      3

without asking supervisors for permission. They are encouraged to offer extraordinary
service and their judgments are trusted, whether they are flight attendants or
engineers.
  (c) Southwest believes the more employees know, the more they care. The most
updated information about Southwest is easily available for every employee. It lets
employees know the profit of Southwest is not only the president‘s concern, but also
related to your employment security. If every employee understands how the company
makes money and how a single customer would influence on the performance of
profitability, they would know their service to each customer mean a lot. In this case,
they are more eager to suggest solutions for reducing cost and the front-line service
providers can be in a better position to provide better services.
F. Successful Internal Marketing
   (a) The Southwest culture is to serve people in a fun and innovative way, but at the
same time, make profits. Southwest‘s human resources department, also called‖ The
People Department,‖ has its own principles to select employees. The motto is,
―Employees are hired for attitude and trained for skill.‖
  (b) Southwest believes that it should satisfy its employees first and then they would
satisfy its customers. The secret for the success of Southwest Airlines is that it never
sacrifices happy employees in order to satisfy customers. In other words, Southwest
uses the Market-Focused Management Model. It believes that the company should
trust and stand on its employees‘ side because sometimes customers might be wrong.
  (c) Southwest lets inexperienced workers be hired as interns to learn from a good
well-experienced employee for a period of time. This is done so that a newbie can
observe the essence of Southwest culture from the demonstration of the experienced
one. It also trains employees to put their own shoes on other colleagues of different
departments. They have the chance to experience other department‘s work so that they
can understand others‘ difficulties and become more willing and natural to help. Also,
managers often come to walk around to work with the front line employees to
understand their working and difficulty.
  (d) Southwest tries to let employees know that it is not a company but a big family.
The profit sharing plan is an example. Also, Southwest promotes celebration. Every
year, there are many times to celebrate for the new opening of an airport or for
someone to be the best server of the year. They care about each other and even the
president can know somebody is sick and needs encouragement.
G. Successful External Marketing
  (a) Southwest doesn‘t promise one thing and deliver the other. Southwest is very
careful with the promotion and advertising it delivers to its customers. Southwest
applies risk reduction strategy to its advertising. Southwest tells customers directly
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what it can offer, such as the lowest prices and exceptional service, but does not
promise any meal service; utilizing this strategy, customers would not have the wrong
expectations. However, Southwest often uses an, ―Under promise and over deliver‖
strategy to demonstrate its reliability.
  (b) Its ads attract customers‘ attention in the very beginning and create some kinds
of humor to impress them. While facing competitors, Southwest defends itself also
with correct truth by a humorous tone in the ads. Southwest keeps its stance while
reflecting its culture and good quality in ads.
H. Successful Interactive Marketing
  (a) Because of the success of internal marketing, employees of Southwest are
satisfied. Employees provide service from the bottom of their hearts, and they often
think that this performance is just ―doing the right thing.‖
  (b) In the moment of truth or critical incidents, they are willing to provide extra
services even though it might not be their duty.
  (c) Southwest encourages employees to exert individuality while providing service.
They regard every customer as special guests and give them personal attention
according to their specific needs. Thus, they are more capable of creating a ―legendary
service,‖ which might be beyond customers‘ desired services.


SWOT analysis for Southwest Airline


A. Strength
(a) Concentrating on the niche market
(b) Cost-consciousness
(c) Speed and Efficiency
(d) High Service Quality
(e) Flat Organization
(f) Successful Internal Marketing
(g) Successful External Marketing
(h) Successful Interactive Marketing
      All the success factors mentioned above are the strengths for Southwest. All of
these are combined to be the strong culture of Southwest which is difficult to be
copied.


B. Weakness
(a) Sticking to its niche forces Southwest to think small and make effort to simplify
the business operation.
(b) Consistent low fare has been always an advantage for Southwest airline. However,
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a ―small company ―operating strategy and the promise to keep price low also inhibit
the company from expanding. To some degree, Southwest is limited to explore more
possibilities.


C. Opportunity
     Short-haul business traveler market is a potential market. Point-to-point trips
between cities are a new niche in airline industry. It‘s easy to understand that anybody
can offer high fares and high service quality, and low fare with poor service. However,
Southwest is committed to provide low fares with great service. It‘s unusual and quite
difficult in the industry, which also differentiates Southwest from other airlines and
gives Southwest more opportunities in the airline industry.


D. Threats
     Other large-scale airlines could offer lower fares to compete with Southwest.
With the improvement of other ground transportations, Southwest might face the
decline in customers‘ need for affordable short-haul carriers.
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Question 2:

Service Gap
The difference between a customer‘s expectations of a service and perception of the
service actually made.
   Most passengers would expect that an airline company would impose one
    particular seat per passenger, but for Southwest Airlines, passengers can choose
    their seats according to the in sequence of the time that one checks in to board.
     This may cause passengers who want to choose seats that enable them to stretch
     their legs or seats that is along the aisle, or besides the window to consider other
     airline companies in order to reserve seats according to their own preference.
   With cheap tickets, new customers may assume that Southwest Airlines might
    perform services less professionally based on low training budgets or acquire
    cheaper facilities to lower the cost. This may prevent the company from earning
    business from pickier travelers. Although this kind of customer would be happy to
    pay less for tickets, they may not be willing to endure poor service or have poor
    equipment.


Service Quality
   Reliability
     1. Southwest Airlines is keen to keep its promises. For example, they have
          remained its low fares ever since they started to operate the firm.
     2.   The company has established a good personnel and communication channel
          which allows messages to circulate quickly within the company. The
          advantage of this is that all the employees are permitted to discuss the
          problem together and work out a solution that is welcomed by everyone.
          Customers are more likely to have the service presented to them correctly
          due to the fact that it has been well discussed.
     3.   Southwest does not use the more traditional "hub and spoke" flight routing
          system that is adopted into most other major airline‘s operating systems.
          Southwest prefers the "Point to Point" system instead. This means that
          Southwest can serves more cities with more flights than other airlines a day.
     4.   The company insists on an error-free record. Southwest Airlines uses the
          Boeing 737 for all their aircraft which has simplified training, maintenance
          and ground operations for the company. This decision is probably the reason
          why Southwest Airlines has never had a passenger fatality due to an
          accident.
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   Responsiveness
     1. Employees are supposed to answer the phone within the first ring of the call,
          making sure that their customer has people answering to them.
     2.   Southwest Airlines employee‘s are selected according to their passion for
          the job, and therefore shows the willingness and readiness to perform a
          service.
     3.   Southwest Airlines allows their employees to make major decisions on their
          own, giving them the authority to speak out loud, and also grants permission
          to deal with special circumstances the might occur during the flight. As a
          result, most of their employees can give prompt service when needed,
          without having to wait for their boss to report back before they are allowed
          to remediate the situation.
     4.   All the employees of Southwest Airlines work as a big family, and everyone
          in the crew share the responsibility of cleaning up the aircraft, and enabling
          their planes to have the take-off again after a spending very short period of
          time after the ground duty. Southwest Airlines have, in fact, pioneered a
          rapid turnaround service on keeping its aircraft on the ground for less than
          twenty minutes. Beside the fact that they have all the people working to get
          the plane ready for the next flight despite of the original duty , Southwest
          Airlines has also gone into the effort of change the internal design of the
          aircraft in order to speed up the time of ground duty.
   Assurance
     1. In 1995, Southwest Airlines started a non-ticket policy, which removed the
          possibility of customers losing their ticket before boarding the plane.
     2.   Employees of Southwest Airlines are consistently updated with the firm‘s
          business operations and have sufficient knowledge to answer questions that
          might be aroused by customers.
     3.   Southwest Airlines tries to create an image that they care for the passenger.
          Some of their slogans include "Just Plane Smart," "The Somebody Else Up
          There Who Loves You" and "THE Low Fare Airline". The airline's most
          current slogan is "A Symbol of Freedom", all has the traits that Southwest
          Airlines are in your shoes thinking what is best for you.
     4.   Southwest Airlines has a reliable safely record that makes customers feel
          that he/or she will not be in risk or danger.
     5.   Offers convenient operating hours.
   Empathy
     1. Southwest Airlines tries to make things simple for customers so that they
          will not be confused by its system. Southwest Airlines does not reserve
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           seats for customers so that customers will not have to go looking for their
           seats, but instead passengers can choose the seats that have not yet been
           taken.
      2.   Passengers on the Southwest Airlines have one less reason to feel sick
           because Southwest Airlines only serves peanuts, and not full meals. With
           less food in their stomach, passengers are deducing the risk of experiencing
           a queasy stomach during a plane ride.
    Tangibles
      1. Southwest Airlines and The Mark Travel Corporation entered into an
           agreement to give customers an option to buy complete vacation packages.
           These packages include the flight tickets, hotel accommodations,
           transportation options and guidance that you might need during your trip.
      2.   The employees of Southwest Airlines have worked hard to make their
           appearance innovative and appealing for their passengers.
      3.   Although is no in-flight entertainment, Southwest Airlines is known for
           colorful boarding announcements and crews that burst out singing. The
           crew tries to catch your attention in pursuit of living up your travel on the
           plane. This might be one of the reasons why Southwest Airlines can
           maintain such a high customer satisfaction.
      4.   Tickets used to be made out of plastic which can be recycled and used over
           and over again.


Customer Value
Product Value
1.    Southwest Airlines became one of the first airlines companies to have a web site.
2.    Southwest Airlines served smaller meals rather than the meals that are served by
      full service airlines, with small snacks and soft drinks for shorter flights and
      meriting the customers with "Snack Pack" of prepackaged goods for longer
      flights. In the 2000s these meals typically exceed the food served on full-service
      airlines.
Service Value
1.    Southwest Airlines has fought against the development of a high-speed rail
      system in Texas in order to bring convenience to its customers.
2.    Southwest Airlines has been persistently increasing the number of gates and is
      constantly on the search for unrestricted flights to new domestic destinations
      which allows people to choose the airport closer to their final destinations.
3.    Customers are left to choose their own seats on the plane, which helps the airline
      to board passengers faster. In addition, the company also has a rapid turnaround
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     rate which altogether gives passengers an image that Southwest Airlines can
     make a rapid recovery after a flight. This is ideal for customers who are in rush
     to get somewhere taking the plane.
Personnel Value
1.   Southwest Airlines lets it employees become one of the shareholders of the
     company. Besides meriting the employees for their hard work, it also motivates
     employees to put their efforts in making the company a more profitable company.
     Under this system, employees act on their own accord to treat customers well,
     due to the fact that their fate is connected more inseparably with the company.
Image Value
1.   Southwest Airlines have constantly promoted themselves to be a low fair airline
     in the term of pricing. It has tried to explain to their customer that they are not
     offering a special bargain for customer, but rather that they are selling the tickets
     continuously at a low rate. Even customers without a lot of money can now take
     a plane due to Southwest‘s low pricing.
2.   Southwest Airlines give a strong image of being capable to solve problems when
     they occur. Southwest Airlines was originally incorporated with many lawsuits to
     fight for. Some of the incumbent airlines of that time (Braniff, Trans-Texas, and
     Continental Airlines) initiated legal action, which consulted to legal battles in
     order to keep Southwest Airlines on the ground. In the end, Southwest won, and
     had from then on has been considered a company that has the ability to deal with
     difficulties.
3.   Southwest Airlines is one of the world's most profitable airlines, posting a profit
     for the 35th consecutive year in January 2008, giving its customers the good
     image that they are operating the company in good hands.
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Question 3:

1. Key Characteristics


The heart for service
Southwest exists to serve a purpose, which is not just to make a profit .They are not
focused on themselves and their individual departments. Their focus is on servicing
the needs of people they care about, even if this involves some self-sacrifice.


Humor
Every employee of Southwest is creative and has his or her own personality. Their
original clothing and dress, humorous conversations, and interesting broadcasting lead
to a relaxing and delighted atmosphere. It can relieve the stress and pressure for
passengers that take Southwest Airlines as well as create additional entertainment for
everyone onboard without spending additional money.


Sincerity
Too much emphasis on deference can build a wall between people. It‘s hard to express
ones true self in an environment that is focused on providing the most professional
service. Instead, Southwest employees always treat everyone properly with their heart,
and they do it not because the company requires them to, but because they want to.
This is part of the Southwest spirit.


Enthusiasm (P.287)-
Every employee of Southwest is emotionally-connected with their company, and as
such is willing to do anything for the beneficial growth of Southwest. Every employee
infects each other with an extreme sense of joy and satisfaction; therefore as a result,
customers are also influenced by the employees‘ delight and are, consequently, may
also feel happiness. This is how Southwest became one of the most efficient airlines.


2. Satisfaction with Southwest


Employee’s perspective:


Relaxed work environment
Just as wearing one‘s favorite clothes can help let someone relax, Southwest Airlines
also has many ways to let their employees relax as well. There are gadgets, games,
and other creative outlets readily available on planes and in the corporate offices to
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make it easy for employees to engage in breaks. Having a humorous time cuts down
on the time spent on feeling stressed and creates a work environment that is
interesting and fun.


Hold the new information
The more employees know, the more they care about the company. If employees are
armed with latest information, they are more likely to make a correct decision. It is
also important to let employees hold important pieces of new because it allows them
to feel that they are important, and within a community of people who also care. This
allows the employees to feel a sense of self-confidence.


Horizontal organization
The leaders of Southwest are not in a prominent or unreachable position. Any
employee can enter their offices to discuss anything at any time. If there are
suggestions to be made, the leaders are there to hear them. The leaders also,
surprisingly, help with ground work such as baggage handling. This type of
organization allows Southwest employees to feel free to do their job and continuously
improve upon whatever needs to be improved without many restrictions or pressure.


Trust (p. 296)
Southwest has confidence in its employees‘ abilities to make wise decisions. This trust
grants its employees a very elastic sense of freedom to do what they feel is right. Due
to this sense of freedom, Southwest employees work harder and are able to do their
jobs the way that they think is the best when unique situations arise.


Inspire each other
Southwest employees are full of morale and work to inspire one another within the
organization. Southwest has established LUV LINES Magazine, in which employees
who see a colleague offering positively outrageous service are encouraged to write up
the scenario for all other employees to read about in the magazine. Every year there is
an awards ceremony that is held to encourage exceptional service and through this,
helping the employees to understand the value of Southwest even more.


Customers’ perspective:


Price
The purpose of the low price fares is to allow almost anyone to have the opportunity
to travel by planes. Southwest is happy to devote their best efforts for their customers.
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All passengers are welcome, be it full-time workers, single parents looking to spend
time with their separated children, or just travelers looking to go somewhere where
they have not be able to afford to go before. Southwest also has the ability to increase
the number of flights that they serve per day instead of raising their fares. This allows
everyone to arrive at their destinations without having to pay a higher fare.


Simplification
Unlike traditional airlines, Southwest simplifies its business. Southwest considers
customer convenience and provides good service. Southwest does not rely on the seat
reservation model. It also takes very little time to get tickets and one can sit at any
available seat when they check-in.


Service, on time
Southwest can turn its plane in 10 minutes. One poignant example of Southwest‘s
exceptional turnover speed is when a student wrote to Kelleher, and told him they
were arriving 15 minutes late to class, Kelleher changed the flight schedule to
accommodate them. They are willing to pay more to let customers feel respected.


Culture
Southwest airline has ―Southwest spirit‖, which is deep in everyone‘s heart. They treat
each other like family members. Good interpersonal relationship and communication
ability won‘t leave with Kelleher. If Kelleher leaves Southwest, the organization
would still be able to function with the same dedication as before.


Storyteller
Southwest is much more than a one-man show. It gives opportunity to everyone to
create their own stories. Kelleher is a storyteller, who attracts everyone and affects
everyone through him stories. The company has created a tribe storyteller, but surely,
based on the legendary service Southwest has provided over the years, Kelleher is not
the only one.
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Question 4:

     Despite the economic downturn in the United States, Southwest‘s position will
continue to remain unassailable by competitors and industry environments. Southwest
is the leader of all of the airlines in the United States for its ability to attract customers
based not only on its low-fares and exceptional service, but also on its ability to
change and evolve as it needs to. In recent years, the global price of oil has caused
many airlines to collapse as airlines were forced to raise ticket prices and lose
customers. Airlines were also hurt by low ridership rates. Southwest Airlines was able
to overcome these issues, and it will continue to do so.


     In the greater part of 2008, the price per barrel of oil soared to the highest that
the world has ever seen. As a result of this, world gas prices also increased and as
such, it became more costly to operate airplanes. Due to rising oil costs, and other
factors such as a weak economy (leading to poor ticket sales), many different airlines
went bankrupt and were subsequently absorbed by other airlines. This has affected
many airlines, but the airlines that are the most affected are low-cost airlines because
they run on a lower operating income compared to normal carriers. Although
Southwest Airlines is also a low-cost carrier, it has effectively escaped this fate.
   Southwest’s oil contracts (Source: Bailey article under works cited)
     1. Starting in 2000, Southwest, under Gary C. Kelly as C.E.O., purchased
          hedges against higher fuel costs
     2.   Southwest, through 2009, is able to purchase oil for $51 a barrel
     3.   While other airlines were forced to bear $90 barrels of oil, Southwest didn‘t
     4.   Other airlines had to drastically raise their tickets costs to keep up with oil
          prices, but Southwest didn‘t as much.
   Sluggish economy
     Due to the sluggish economy, many potential passengers are mainly concerned
     about price before other factors. Southwest is suitable for this type of customer in
     the current economic environment. This is an advantage for Southwest because it
     is typically the lowest-cost airline.


    Southwest Airlines is also protecting its position as the dominant airline in the
United States by looking into new ways that it can continue to evolve. Southwest is
not stagnant; it is the only airlines in the United States to consistently post profits
because it continuously grows and cuts areas that posts losses for them. Southwest is
also currently looking to try new strategies that it has not tried in the past—namely, to
expand service into international travel markets within the next two years.
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   Southwest adding stops at airports with good potential markets (Wikipedia)
     1. Southwest is continuing to expand to new markets that it doesn‘t already
         serve. The next major market that it is poised to enter is Minneapolis/St.
          Paul in 2009.
                 Currently, Southwest does not serve an airport between Wisconsin, all
                  the way to Wyoming. With the addition of this new point in
                  Minneapolis, Southwest will drastically open up the regional market,
                  and in the future, possibly create more opportunities for additional
                  expansion if demand calls for it.
     2.   Southwest is also continuously adding new routes that are demanded
           Southwest has purchased ‗rights‘ at New York‘s LaGuardia Airport,
                  which is considered one of the most convenient airports in terms of
                  location within the city. Southwest had previously lost its rights there,
                  but had it reinstated because of popular demand
   Southwest cuts flights with poor sales
     1. Southwest is cutting 196 daily flights by January 11, 2009.
          Reasons include fuel costs, the state of the economy, and practical
                  reasons such as cold weather causing engine problems
     2.   Southwest cuts unpopular flights to free up planes for more popular routes
     3.   Not every route is a success, and to remove the poor sellers means that there
          is more chance to find a new winner.
   Southwest’s expansion into international travel under code-sharing
     1. Southwest is planning to expand from domestic travel also to international
          travel
                 Some of the countries in negotiation include: Canada, Mexico,
                  England, and Caribbean island nations
                 Contracts are already under negotiation, should be completed by 2010
     2.   In order to codeshare, Southwest works with other airlines such as WestJet
          (Canada) and Volaris (Mexico). It can then share the routes that these
          airlines own and use it for their name as well.


     As of New Years 2009, the world oil market has once against stabilized. It is,
however, already too late for the dismantled airline carriers to re-emerge. Some
bankrupt carriers like Delta are currently having a second chance to operate, and since
Delta‘s markets include business travelers as well as typical travelers, it is currently
posting some profits. Ultimately, however, Southwest will be able to maintain its
dominance in the market of U.S. air travels because of its ability to grow and change
with the times.
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Question 5:
        Southwest Airlines stewardesses always let passengers enjoy their journey by
telling some interesting jokes and stories, which make many customers enjoy their
flight, despite lacking other forms of entertainment. In a longer haul flight, such as in
a five to six hour flight, stewardesses would have a very difficult time to maintain
their enthusiasm. In such a situation, Southwest would have to upgrade its facilities,
or hire more stewardesses such that one could take a break while the other serves. It is
obvious, in this case, that hiring more stewardesses would not make sense because
they would just take up passenger space. Ultimately, this would mean that Southwest
Airlines would have to upgrade its airplanes to include in-flight entertainment, and
subsequently, Southwest‘s future passengers would have to carry the burden of these
costs.
        Southwest could choose to add some forms of entertainment without installing
costly equipment on every plane. However, this strategy would also be very costly in
the long run. When one takes into account that Southwest has over 300 aircrafts, it is
immediately obvious that even if Southwest provides newspapers and magazines, that
its daily or even weekly and monthly distribution costs would quickly add up to
become a financial burden. It would be cheaper in the short run to choose magazines
and books; however, in the long run, installing electronic entertainment would be
cheaper. Regardless of the choice of entertainment, Southwest would have to pay a lot
of money in order to entertain its passengers on long haul flights—and the fares
would also increase.
        A five to six hours transcontinental flight with no food and movies would be very
boring. As such, most consumers would probably choose to pay more for proper
amenities like movies and food. I think having no food or movies is tolerable for a
flight that is up to three hours. Any longer, however, the passengers would probably
be willing to pay more. An exception to this case might be if saving money is the
primary goal. Southwest provides nuts as a snack, which is terrific for a short-haul
flight, but in a long-haul flight, nuts will probably not be sufficient for many
American customers.


Yes or No: Should Southwest Airlines enter long haul flights?


Yes:
         Cheap low cost flights for faraway destinations
             o This is one of the main competitive advantages of the Southwest brand.
              o Convenient for consumers traveling from LA to NYC, that is also
                 looking for a cheaper alternatives compared to other major carriers.
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      More chance for profits due to new market opening up
         o If Southwest extends their brand into long haul flights, it would attract
              budget-conscious customers looking for no-frills flights without
              transfers.
      Not too many competitors in the low-cost markets for long-haul flights
          o JetBlue, TED, TransAir, and Virgin Atlantic are low-cost airlines;
              however, they are relatively more expensive than Southwest. It is true,
              however, that these competitors also offer many amenities that are
              available in other full-priced carriers that Southwest currently lacks.
No:
      Uncertainty of economy – not so much money for holiday travels
          o Long-haul flights are very costly, and the economy is not doing well so
              the leisurely travel segment has been hit particularly hard.
           o Reduced profits
      High fuel costs (not a current issue, but perhaps in the future)
          o It might be more costly to fill the gas tanks all the way full in order to
              support longer-haul flights. Short haul flights don‘t have this issue.
      Perhaps need to upgrade entertainment and/or serve more than peanuts
          o Longer-term flights would exhaust stewardesses that typically entertain,
              so there would be new forms of entertainment
           o The food might have to include more than peanuts because peanuts are
              probably not enough to sustain appetites of hungry Americans for long
              periods of time.
      In the short-term, might be more costly for passengers to travel Southwest
       than for its alternatives
           o If Southwest upgrades its facilities, then the costs would first have to
              be passed onto consumers, and perhaps later, can drop.


Yes or No: Should Southwest Airlines fly internationally


Yes:
      Code-sharing with other airlines can save costs of expanding into this market
       by themselves
           o Southwest doesn‘t have to establish brand new customers, but can
              share customers with other airlines.
      Few low-cost competitors that fly internationally (JetBlue, Virgin Atlantic)
          o Southwest would join JetBlue and Virgin Atlantic in being several of
              the only American budget carriers that fly to international destinations.
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             This is a major draw for budget-conscious travelers that are also
             looking to go to exotic locales.
     International destinations are desirable places to visit for leisure
     The market that their aircrafts can reach are considered major holiday venues
      (ex. Caribbean, Hawaii, England, Mexico, Canada)
     ―Southwest Effect‖ – when Southwest enters a new market and decreases
      prices up to 50% or more, flights increase by up to double or quadruple the
      former rates.
     The market segment to grow in the future
         o Southwest is one of the dominant players in the short-haul markets,
             and they are arguably the favorite carrier in this regards. In order to
             continue growing, Southwest may have to look into international travel
             as well.


No:
     Code-sharing with other airlines could result in brand confusion and
      communication issues
          o Customers can go to the website of the carrier that Southwest
             code-shares with, and order tickets from there. This could cause a
             diffusion of Southwest‘s own brand and also create confusion.
     Rise in ticket costs because of international airport taxes
         o American domestic airport taxes are different than international taxes,
             and in addition, these taxes are uncontrollable to those that fly.
             International taxes that are particularly expensive could be turn-offs to
             the typical Southwest flyer.
     More bags to check, heavier, leading to higher fuel costs and room for
      mistakes
          o Because passengers are flying internationally, presumably for vacation,
             they typically would pack more. Packing more would also result in the
             plane weighing more, and as such, more fuel is consumed.
     Long flights are uncomfortable and Southwest would have to upgrade crafts,
      entertainment, and food
          o The current Boeing 737 jets may not be enough to fly long-haul flights,
             and Southwest may have to look into new options, which would raise
             their costs.
          o Entertainment and food are two unavoidable issues for Southwest
             when it comes to long-haul flights and international flights. These
             would add costs.
                                                                                     18

Short-haul international flights?


       Like its competitors JetBlue and Virgin Atlantic, Southwest could look into
destinations for short-haul flights as well. In this way, they can continue using their
current jets, and also continue serving peanuts, without sacrificing their current model
of operations and their culture. Some destinations that are closer to the United States
include:


        Puerto Rico
        Haiti
        Canada (Toronto, Montreal, Vancouver, Quebec)
        Mexico (Tijuana, Cancun, Acapulco, Mexico City)
        ―Upper‖ Central American countries (Guatemala, Honduras, Costa Rica)

   It can be assumed that most of these destinations are, in the eyes of most
Americans, leisurely destinations to have fun. This sort of market is also open for
Hispanic Americans looking to have a low-cost alternative to return to their home
countries. Caribbean destinations such as Puerto Rico and Haiti are easily reachable
from Southeastern US states such as Florida or South Carolina within a couple of
hours. Canadian and Mexican destinations have several options for travel, and are
widely reachable from many points as well. It is for these reasons that these countries
would be the most suitable ones for international short-haul travel. Central American
countries like Guatemala, Honduras, and Costa Rica are definitely reachable with the
current aircrafts, but these destinations are more of a matter of if passengers are
willing to bear longer-haul flights, and as such, as not as feasible.
                                                                                        19

Question 6:

I: Brief introduction to Bus Company Industry in Taiwan
     With the opening of the market in1995, there were not just two bus companies
(KUO-KUANG moto transport and Ubus) having the right-of-way on the freeway
(mostly on the western Taiwan); instead, lots of bus companies joined the market to
compete for which of them could have the most market share. Then, Taiwan High
Speed Rail started its operation in 2006, and this may put the bus company industry in
a more competitive situation for customers‘ changing preferences. Hence, the bus
company industry in Taiwan now faces many struggles such as pricing strategies,
providing services and the tangible decorations and equipment, and so on. It may be
inevitable that some changes should be made in order to survive.
 The target customers in this industry are people who do not care that much about
   speed and time, and people who are sensitive to price, like students and elderly.
 People took the bus to travel on the freeway for the two major reasons in the
   beginning:
a. the rising sense of environmental protection(the fundamental concept of public
   transportation)
b. the lower price compared to the Railway


II: Application of what we learned from this course and what from Southwest
Airlines to bus company industry and some suggestions for it.
   We analyzed Taiwan‘s bus company industry by using models, and by doing so,
we found that there are some things that can be desired when bus companies provide
services to its customers.
1. Servuction model
A. Inanimate environment: Companies that are not currently leading the market can
   attract new customers by making their buses neater and cleaner than the leading
   bus companies. They may also want to post some stickers inside the bus, such as
   on the windows, to advertise a telephone hotline that customers can call to
   complain or just to make suggestions on improvements.
B. Contact personnel/ service provider: They should not only be employees of the
   bus companies, but they should also treat customers as friends. One way that they
   can do this is to have the bus driver perform various tasks such as delivering hot
   tea to passengers, and not only drive.
C. Other Customers: Setting rules or punishments when someone talks on the phone
   very loudly or adjusts the volume of their personal TV to the top, so that they may
   not hinder other passengers‘ right or ruin the image of the company.
                                                                                         20

D. Invisible Organization/ System: the company may set some rules or cultures to its
    company, and this may be manifested much clearer when some unpredictable
    incidents happen. In other words, the company will have clear procedures on how
    to take care of incidents that don‘t often occur.
2. Service gap
    Delivery gap and service gap are the two important gaps that may appear.
Inadequate support and employees‘ unwillingness to perform the job may cause a
problem. Because the industry is highly connected with the service personnel, any
details like contact personnel having a foul mood on their face, or if a bus driver looks
fatigued and ill, then the passenger‘s mood would also be unhappy, and perhaps
worried.
3. Service quality
Reliability: the time of each ride on the timetable should be strictly followed; in other
words, punctuality is important and the company cannot delay departure to wait for
late customers or to fill up gaps for empty seats to fill the bus to capacity. (This is the
same concept as what Southwest Airlines has done)
The lack of empathy: individual attention is very hard to obtain in this industry, but
the bus company may try to strike a balance. For example, they can open the front
seats to the elders, pregnant women, and children, to show that there are preferences.
Tangibles: the cleanliness of the toilets can be improved. Some small-scaled
companies can have the uniforms made or create brand marks for customers to
recognize.
4. Servicescapes
    Colors of decorations, the slope of the armchairs, the height of the TV set, and so
forth could cause carsickness, so they should not be overlooked when designing them.
5. Others: they can provide some free drinks and sell some snacks to passengers.


What can be learned from Southwest Airlines?
   One of the significant factors why Southwest Airlines would stand out in its
industry is that they provide the service with well-recruited people. And if the
employees‘ moods are happy and their attitudes are responsible and positive, certainly
the emotions are contagious to passengers.
     Service innovation is very important, and we think that all the companies of the
bus company industry in Taiwan have to reconsider their policies pertaining to service.
Regardless of considering the human resource field, the training of its employs, or the
marketing strategies, everything is important to be considered, and making money
should not be the primary goal—which was the previous industrialist view. Humor
and relaxed style of service can be used, for example, smiling at customers or creating
                                                                                         21

a happy atmosphere and letting them have a very pleasant experience of taking the
bus.
       The companies should treat their employees as human beings and friends, not
just tools for making money. Once the employees feel satisfied with their companies,
they would make a lot of efforts to please their customers. Hiring the right type of
people to suit the culture of one company is important, too. Then, like what has been
done by Southwest Airlines, bus companies in Taiwan don‘t have to distribute their
workload to different employees to details because when one thing happens, each
employee would think ―it is none of my business,‖ and it would severely hinder the
efficiency of one company.
       Taiwan bus companies can also use some innovated ideas from Southwest
Airlines such as: setting an image of the company (like ―love‖), and developing some
products around the topic. As Southwest doesn‘t use normal boarding pass as the
other competitors for the sake of convenience, Taiwan‘s companies can use some
value-stored cards for the same purpose. Southwest Airlines calculated the average
speed of rate in advance in order to use the time well to its extreme, and this set a
good model for bus companies.
       Segmentation: Southwest Airlines focuses on the business passengers who seek
the shortest distance flight, so the bus companies should improve its segmentation for
making the most profit, like they are featured at low price, comfortable seats, or the
most stops in Taiwan and so on. If this is not contrived wisely, a company may lose its
customers to its competition.
       Customer retention: how to touch customers‘ hearts and let them develop kind of
brand loyalty. Besides providing well-reputed service, giving customers some surprise
is another choice such as telling he or she is the lucky one to get the free ride, coupons
or some gifts.
       Legendary service: some service that don‘t belong to the rule, or the special
service like when Southwest Airlines decided to turn back to the airport for an elderly
citizen who took the wrong flight. Or another instance where the manager helped a
handicapped passenger to transfer in her journey, and so on. We believe that if those
bus companies have done these kinds of good acts, then what they have to do is to
record them, and then to pass the story down among all staff in the company.
       Future scenario generation: always think, predict and vision the future. What
would happen next month or next year should be planned now. And always be
prepared for the changing of the market. In Taiwan, the efficient shuttle buses from
one big transfer stop to local town should be considered. Due to the HSR, the market
is more congested now than ever. To be prepared to reply to the threat requires senses
and wisdom.
                                                                                  22


                                       Works Cited


Bailey, Jeff. ―An Airline Shrugs at Oil Prices.‖ NY Times. 29 Nov. 2007 <http://www.


    nytimes.com/2007/11/29/business/29hedge.html>.


Freiberg, Jackie and Kevin Freiberg. Nuts! Southwest Airlines’ Crazy Recipe for


    Business and Personal Success. New York: Broadway Books, 1998.


―Southwest Airlines.‖ Wikipedia. 28 Dec 2008. 28 Dec 2008 <http://en.wikipedia.org/


    wiki/Southwest_airlines#International_service>.

								
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