INTRODUCTION
The sole reason for conducting an assessment in an organization’s internal environment; is to ensure that the organization is capable of achieving the intended strategic goals in line with the company's mission with the delegated resources and capabilities. Therefore, the internal environment assessment determines the organizations' portfolio of its entire resource and capability. Through internal analysis, a firm can determine the relationships between resources, core competencies, and capabilities (Hitt et al., 2014).
Also, the market dynamics have changed to global; therefore, the organization needs to develop a global mindset to have the ability to contend with similar firms that are coming into the market on a global scale. Hitt et al. (2014) state that it is common for firms to differ in the amounts of resources accumulated or rather the type of resources’ which increase the competition within the market and a company’s competitive advantage may not be guaranteed without innovating (Hitt et al., 2014).
Kinicki (2015) adds that the internal environment comprises of the employees, the board of directors, and the owners; the internal environment at times may also consist of stakeholders and people whose interests are inclined with firm performance (Kinicki, 01/2015). Therefore, supporting Hitt et al. (2014) idea of innovation as the most critical aspect in any firm to sustain its competitive advantage, whereby human capital is the essence and critical resource for achieving the goal. Therefore, it is essential for the organizations to be able to identify and successfully utilize talented individuals for innovation, creativity, and economic growth.
This paper seeks to explore how Southwest airlines utilize its resources and capabilities to achieve the company’s strategic goals; how the company has managed to create services of value to its customers (Hitt et al., 2014).
Southwest internal analysis
Human Capital Strategy
Hallowell (1996) asserts that "Southwest Airline's success is dependent on its organizational capability, which enables them to convert some of the value created for employees to customer and shareholder value." Southwest understands the value of innovating human capital and utilizing them as a resource to attain the firm strategic goals and objectives. Also, as a result of the capability of adequate use of its human resources, the employees deliver quality service at low prices, which is Southwest's competitive advantage.
Therefore, for Southwest to maintain its competitive advantage that it has formed through people, the company requires to employ motivation, organization capabilities, and strategic positioning. Southwest uses its resources to ensure that its employees feel valuable; the sense of feeling value inspires the employees to work hard. The value instilled into the employees; some of it rubs off to the customers. Therefore, "creates value, convert value, capture value cycle which may apply to some extent in competitive advantage (Hallowell, 1996).
Airline Strategy
Southwest Airlines is a low-fare passenger airline that provides services in the US and near international markets. The company serves 97 destinations in 40 states and international destinations, including Jamaica, Mexico, Bahama, Aruba, among others. Southwest is primarily operated by one segment, which is the passenger and freight transportation services; the company provides point to point air transportation service. Therefore, the company is high frequency, short-haul routes with nonstop long-haul hauls for designated states and cities (MarketLine Industry Profile, 2017).
Strengths, weaknesses, and resources of Southwest airlines
1. Strength
Fleet network
In the most recent data from the US department of transportation, Southwest Airlines is the largest carrier of originating domestic passengers. In 2018 the airline operated a total of 750 Boeing 737 by December 31; the airline also served 99 destinations, 40 states, and offered international services to 14 destinations through 23 international gateway cities. Besides, the airline added 26 new 737-800 aircraft, 18 new 737 MAX 8 aircraft, and one pre-owned Boeing737-700 aircraft. The strong airline fleet is a big resource, which enables the company to deliver its services effectively and efficiently to its customers and a quick response to opportunities (Southwest Airlines Co. SWOT Analysis, 2019).
Point to point service strategy
Hub and spoke system is the popular service strategy with many airlines; however, Southwest uses the point to point strategy, which was a great fit that ensures maximum usage of its fleets and "reliable on-time performance. The point to point strategy offers nonstop flights; 77% of Southwest customers flew nonstop. Also, the southwest point to point It to provide its target market with frequent conveniently timed flights at low fares. Also, the company "balances its high-frequency short-haul with nonstop long hauls (Southwest Airlines Co. SWOT Analysis, 2019).
.
Low-cost fares
The airline fare structure comprises of; “wanna get any away”, anytime and business select; also, the fare includes two free checked-in luggage, soft drink, and snack. On some flight, they are also on-demand or live television. Wanna get away fares are the cheapest and nonrefundable; anytime and business select are refundable. Southwest is focused on reducing fuel costs by upgrading and buying new fleets and taking advantage of other fuel initiatives (Southwest Airlines Co. SWOT Analysis, 2019).
.
Weaknesses
Reliant on single aircraft and engine supplier
Boeing is Southwest sole supplier for aircraft, and many of its spare parts. Hence, the company may be "materially adversely affected " in the event of a regulatory or mechanical issue with the Boeing 737 aircraft. The company has a total of 750 Boeing 737, and 51 of the aircraft are on operating lease. In addition, if Boeing were unable to deliver any of its services to Southwest Airlines, the impact would be dire to the company's operations (Southwest Airlines Co. SWOT Analysis, 2019).
Limited presence in the freight market
In 2018 Southwest freight transportation was limited when comparing its total revenue to all the airlines; its total revenue was $175 million, which was 0.8 percent of the entire company’s revenue (Southwest Airlines Co. SWOT Analysis, 2019).
Southwest Airlines' structure of the organization and the influence this has on its performance.
As mentioned earlier, Southwest values its human capital; employees are viewed as the heart of the delivery system; though high-quality service with low costs. Therefore, the management strives to fulfill employees' needs as a means of motivating and creating a value that will, in turn, be converted to the organization's use. The value in Southwest airlines is created by " FUN and LUV. The value created by employee's management utilizes it to convert it into a high value, which can accrue customers a shareholder (Hallowell, 1996).
Below is a Southwest Virtuous cycle of the organization and the influence it has on the performance.
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Figure 1 Southwest Airlines' virtuous cycle (Hallowell, 1996)
Southwest airlines in comparison with other airlines
Most airlines have strategic strike alliances to which has ultimately led to stiff competition to non-members; also, with an added advantage of operating in an environment where competitors are under bankrupt protection, which creates uneven grounds for competition. "The alliances pose threats to routes within which they would fly"(Riwo-Abudho, 2013). However, Southwest has not established any alliances; as a result, Southwest is under immense strain to maintain its position in the industry while running a smaller fleet (Southwest Airlines Co. SWOT Analysis, 2019).
References
Dearinger, R. L. Organizational Behavior Evaluation of Southwest Airlines.
Hallowell, R. (1996). Southwest Airlines: A Case Study Linking Employee Needs Satisfaction and Organizational Capabilities to Competitive Advantage. Human Resource Management, 35(4), 513–534. https://doi.org/10.1002/(SICI)1099-050X(199624)35:4<513::AID-HRM5>3.0.CO;2-Z
Hitt, M. A., Ireland, R. D., Hoskisson, R. E. (2014/01/01). Strategic Management: Concepts and Cases: Competitiveness and Globalization, 11th Edition [VitalSource Bookshelf version]. Retrieved from vbk://9781305217188
MarketLine Industry Profile: Airlines in North America. (2017). Airlines Industry Profile: North America, 1–42.
Riwo-Abudho, M., Njanja, L. W., & Ochieng, I. (2013). Key success factors in airlines: Overcoming the challenges.
Kinicki, A., Williams, B. (01/2015). Management, 7th Edition [VitalSource Bookshelf version]. Retrieved from vbk://1259723542
Pidun, U. (2019). Corporate Capabilities. In Corporate Strategy (pp. 33-53). Springer Gabler, Wiesbaden.
Southwest Airlines Co. SWOT Analysis. (2019). Southwest Airlines Co. SWOT Analysis, 1–8.
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