Case Study Analysis: Swa's Cost Leadership Strategy

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1. SWA’s competitive strategy and its execution
SWA adopts “cost leadership” strategy, which aims to become the low-cost leader in the airline industry. It has stressed on resources utilization and cost-saving activities for years in order to achieve the strategic goal.

In terms of resources utilization, SWA focuses on short-haul trips and point-to-point routes only. This would shorten the turnaround times and enhance equipment use – SWA’s flights can spend 3 hours more in the air per day than the industrial average. By having more frequent flights and increasing the capacity, these would allow SWA to enhance cost-efficiency despite its low fares.

SWA also adopts multiple approaches to save cost. From the hardware part, it only flies a single model of aircrafts, Boeing 737s, which is fuel-efficient. This
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On average, its employees receive a lower pay than other airlines like Continental and USAir. By offering a lower rate and not offering extra benefits, it could save cost. However, profit sharing scheme and discounted stock purchase program were introduced to motivate staff to provide quality services. In short, the system supports the cost-leadership strategy by nurturing a positive corporate culture and demonstrating cost consciousness, at the same time, without sacrificing the quality of the customer services.
3. Discussion on competitive threat from competitors and related recommendations
Continental and United begun their low cost strategies by launching “Continental Lite” and “The Shuttle” respectively. They wished to compete against SWA by cutting fares and more importantly, to capture market share. However, personally speaking, the two airline companies may not be able to challenge the “cost leader” position of SWA in the short run. This can be attributed to their ineffective management practices and it would take time for them to nurture a positive corporate

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