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Southwest Case Analysis

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Southwest has made an organization out of providing low-fare, short haul routes between city pairs. It has concentrated specifically on offering low-fares on all of its flights by maintaining its no frills attitude and high frequency of flights. This has afforded Southwest Airlines with the lowest cost structure in the industry. Southwest has created a niche for itself by flying a network of flights between smaller U.S. cities that average just one hour apart. This has differentiated them from their competition and avoided many clashes with industry giants who concentrate more on coast-to-coast flights. Kelleher, who is the president, chairman and CEO of Southwest Airlines is the companies single biggest asset and driving force. Kelleher runs the company very tightly and makes all the major decisions through a very centralized decision making process. This brings to light two potential problems. Firstly, how can a company such as Southwest airlines maintain such a centralized organization in the face of growth. Secondly, how is this company going to survive once Kelleher is no longer running it.

The problem that Southwest Airline is facing, is how are they going to survive in an aggressive industry without Kelleher's leadership. It is a significant problem as the company is a symbol of Kelleher. However, unlike the company, Kelleher has a limited life-span and therefore the company will likely outlive him. This problem therefore requires some urgency as the succession of Kelleher could be the airlines biggest problem. The consequences of Kelleher leaving could be that the company loses its corporate identity. Employees may not respond well to new management. Customers may perceive that the company will not be run in the same manner and will therefore lose its niche market. This could also apply to stakeholders, who will see the departure of Kelleher as a serious decrease in the value of the company. Competitors may also try to take advantage of the company during this unstable period.

Kelleher is the face of Southwest airlines, even going as far as starring in most of their TV commercials. He also personally maintains an excellent relationship with a virtually all-union workforce. He has single handedly given Southwest the lowest employees turnover rate in the industry. Kelleher's personal motivational style has put the company on the map. It is therefore critical to understand the importance of Kelleher to Southwest Airlines and how is departure will create a serious problem for the company.

The first solution obviously would be to do nothing. This involves letting Kelleher retire and then searching for someone to take his place. This solution is reactive to its environment and the company will therefore be left at the mercy of how well the new person will be able to fill Kelleher's shoes. Stakeholders may be happy about this solution as they have some say in Southwest's new president. However if the new president is not able to meet the challenges ahead, then stakeholders may see this as a managerial mistake that was not preemptive enough. The benefit of this solution is the lack of expenses involved in formulating a strategy. However, the costs can be very high and can potentially mean the demise of the company.

The second solution would be to develop a management team that could potentially take over from Kelleher. This solution requires anticipating change and planning strategies to ease the transition. This solution does not guarantee anything, but at least the management team will be highly proficient and ready to take over the company and run it like Kelleher. Stakeholders should not be adversely affected as the management team will be run the company as if nothing ever changed. However, there may be some stakeholders who feel that the company needs fresh management and would have liked to have seen a change in the style of management to enhance growth potential. The



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