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Southwest Airlines Strategic Plan

Question

Unit 10 Final Assignment: The Strategic Plan Presentation

The Final Assignment, due in Unit 10, is your chance to bring it all together. This Strategic
Management Presentation is an in-depth case study analysis and strategy for the company of your
choice. Final Assignment Guidelines are also available in Doc Sharing.
You may choose either a large, well-known Fortune 1,000 company that has information readily
available, or a smaller company in your city or town which has information in the local press (the
larger company may be easier). Pretend that you are a business and strategy consultant hired by
one of your chosen company’s executives to present the new strategic plan to the Board of
Directors (BoD).
You will create this project in a PowerPoint presentation format. The Final Assignment PowerPoint
template is available in Doc Sharing. Use a bulleted list for each slide (page) and support the bulleted
ideas in the Notes section of the slide. Use the current APA style and format in the Notes description
section of the slide. Include a References page at the end of the presentation for the outside sources
you used and integrated in the presentation itself.
Final Assignment Guidelines: Strategic Plan
A strategic plan is designed to be in use for three (3) to five (5) years. For your Final Assignment, you
will write a strategic plan providing the following information:
• Company Background
Identify the Fortune 1000 organization that you have chosen for your strategic plan. Provide a
brief background of this organization including its products, services, and customers. Include
the organization’s strategic planning model and include the history of successes and failures
associated with its processes.
• Company Vision Statement and Mission Statements
What is the company’s vision statement and mission statement along with its purpose, values,
goals, and philosophy? How do these support the organization to realize its goals and
objectives?
• Leadership and Organizational Culture
Discuss how the new grand strategy will affect the company leadership infrastructure, and the
organizational structure and culture. How can the company move to a more agile and virtual
organization? How will the company manage the strategy-culture relationship due to the new
change?
Final Assignment Grading Rubric
Course: MT460 Unit: 10 Points: 125
Copyright Kaplan University
• Corporate Social Responsibility, Business Ethics, and Policies Empowering Action
What is the company’s stakeholder approach to social responsibility? What types of social
responsibility does the organization practice and tout? What are the major trends in today’s
corporate social responsibility? How does the company create and utilize policies to empower
employees to become socially responsible inside and outside of the organization? Describe
the company’s code of conduct (ethical principles and guidelines) and how the executive and
management team practice these?
• External Analysis (Opportunities and Threats) and Global Environment
Describe the company’s external environment including the remote environment (economic
factors, social factors, political factors, technological factors, ecological factors, and
international environment). How does the company currently contend with the external forces
and operating environment? What is the company’s global strategic plan and how does it use
firms in foreign markets for global reach?
• Internal Analysis (Strengths and Weaknesses), Strategic Control, and Continuous
Improvement
Define the company’s internal environment. What Balanced Scorecard software or other
strategic control software would you recommend to the company to manage, monitor, and
sustain the implementation i.e. continuous improvement? Please explain the choice of
software and illustrate the use of controls to guide and monitor strategic implementation.
• Innovation and Entrepreneurship
Describe the concepts of incremental and breakthrough innovation, and the risks to be aware
of. Define the new strategy as being either an incremental or breakthrough innovation process
and how this supports the idea of continuous improvement. Is your recommended strategy
entrepreneurial or intrapreneurial in nature? Please explain the benefits.
• Strategic Analysis and Choice
Explain why a grand strategy is more beneficial to the company than a generic type of
strategy.
• Generic and Grand Strategies
Generic strategies are low-cost leadership, differentiation, speed-based, and marketing
focused. Grand strategies include concentrated growth, market development, product
development, innovation, horizontal acquisition, vertical acquisition, concentric diversification,

Sample paper

Southwest Airlines Strategic Plan

Speaker notes

Southwest Airlines Company is a Dallas-based passenger airline that concentrates its operations in the United States, with only a few overseas destinations. Founded in 1967, its customer base has grown by over 20 million customers a year. According to a report from Bureau of Transportation Statistics, the company is currently the second largest domestic carrier in the United States, having transported over 8.569 million customers in 2014 (Smallen, 2014). Southwest Airlines was second only to Delta Airlines, which recorded 8.850 million customers in 2014. Other close competitors such as American Airlines and the United Airlines recorded 7.104 million and 6.755 million passengers respectively in the same year. These figures reveal the high level of competition in the domestic market.

Southwest Airlines is a Dallas based airline and America’s largest low-cost carrier. The airline concentrates operations in the domestic market, with only a few overseas destinations established over the last 3 years (Southwest, 2015a). With a combination of low fares and unique customer service, the airline has been able to maintain the leading position as the leading airline in terms of domestic flights and the volume of customers. Southwest Airlines’ strategic planning model focuses on keeping fares low. As such, the airline is branded as the largest low cost carrier in the U.S. Southwest Airlines’ fares are on average 30 percent lower than most of its competitors. The airline has achieved a low cost leadership position in the industry through a number of strategies such as a single class of seating, point-to-point flights, high employee productivity, and lack of meals during flights. In 2015, the company marked its 43rd consecutive year of profitability (Southwest, 2015a). Its low cost strategy has ensured profitability throughout the years even during period of recession.

Southwest Airlines mission statement is to deliver the best quality of customer care to its customers. As the mission reads, the company has a “dedication to the highest quality of Customer Service delivered with a sense of warmth. Friendliness, individual pride, and Company Spirit” (Southwest, 2015b). The airline focuses on providing low cost flights but with the greatest quality of customer care. The company believes that by taking good care of their employees through proper remuneration, benefit packages and by providing a conducing work environment, the employees are able to extend their sense of pride and happiness to customers. Southwest Airlines’ vision statement is “to become the world’s most loved, most flown, and most profitable airline” (Southwest, 2015b). This aims at developing customer loyalty, and thus the achievement of its goals and objectives. The purpose of the company is to provide connectivity among people, while part of its values are to provide a friendly customer service, ensure safety and reliability, develop a servant’s heart, provide low cost flights, and others. Southwest Airlines’ philosophy is to accord employees proper care and to consider them before the customers. The airline’s goal is to be the most loved company.

The marketing grand strategy will significantly impact the leadership infrastructure, organizational structure and culture of Southwest Airlines. The aim of the marketing grand strategy is to expand the operations of the airline to overseas destinations. The leadership infrastructure will have to add the position of a Global Operations Manager to handle operations involving international flights. The Global Operations Manager is in charge of establishing new business processes and offices to facilitate operations. The grand strategy will have minimal impacts on the functional structure of the airline. There could be challenges among employees from overseas countries in adopting the Southwest Airlines’ culture especially if there are significant cultural differences in terms of ethics, values and language to the U.S. Southwest Airlines can move to a more agile and virtue organization by modernizing its IT infrastructure. This can enable the company develop mobile applications and other IT applications that enhance its interactivity with customers and employees. The company can manage the strategy-culture relationship be training employees.

Southwest Airlines is engaged in a number of corporate social responsibility (CSR) initiatives. Southwest Airlines takes a community approach in CSR, which involves supporting programs and organizations in the local communities. The major types of social responsibility practiced by the airline include charitable giving, environmental initiatives, and community outreach & volunteerism (Southwest, 2015c). There are a number of trends in today’s CSR field. Some of the new trends include action on climate change, advocacy on social justice issues, mandatory CSR reporting, setting of long-term CSR goals, and among others. Southwest Airlines encourages employees to become socially responsible through community volunteerism. Southwest Airlines employs the concept of community neighborhood to encourage social responsibility among employees. Southwest Airlines’ code of conduct is in accordance with the Sarbanes-Oxley Act of 2002 (Southwest Airlines Co., 2008). The code of conduct emphasize on personal responsibility, honesty, and integrity. Some of the aspects covered include: compliance with laws and rules, conflicts of interest, corporate opportunity, record keeping, company property, and compliance procedure.

The external environment has perverse and profound impact on the operations of the airline. The economic factors such as inflation rates, interest rates, costs and prices, and others directly affect the ability of businesses to generate positive returns. When prices increase in the economy, operational costs increase. Social factors such as family, religion and wealth affect the lifestyle of individuals. Over the recent past, air travel has increased due to changing travel preferences among the millennial generation (16 – 34 years). The airline industry is highly impacted by political factors such as war, terrorism, international trade policy, taxation, and others. For instance in 2001, air travel was negatively affected following terrorist attacks in the U.S. Technological factors affect the operational efficiency of an airline. For instance, the advancement of IT infrastructure enables customers to book flights online, thus reducing congestion at booking terminals. The airline industry is highly sensitive to the international environment. Ecological factors have little influence on the airline industry. Factors such as international trade, industrial production, and business confidence impact air travel demand. Southwest airlines contends with these forces through hedging of fuel, domestic operations, and charging low fares. The company’s global strategic plan is to expand its international operations mainly through acquisitions. Southwest Airlines can develop partnerships or make acquisitions for global reach.

The internal environment comprises of those factors that the company can be able to control. A company should ensure that it works towards fulfilling its mission and vision. This ensures the achievement of set goals and objectives. The competitive strategy is one of the most important internal environment factors (Thompson, Peteraf, Gamble, & Strickland III, 2015). Southwest Airlines maintains a low-cost competitive strategy. The low-cost competitive strategy attracts consumers in an industry where price sensitivity is rife. Southwest Airlines maintains a “Bags-Fly-Free” policy that means customers do not face extra for their hand luggage. The best Balanced Scorecard Software is Corporater EPM Suite. The choice of this software is based on a number of key variables. First, the software enables businesses to gain real time insights into various situations and business processes. Second, it is easy to extend the software across cloud deployments and to all premise installations. Lastly, thee software creates value for business processes. The four types of control include premise control, special alert control, implementation control, and strategic surveillance. These are the common controls in Southwest Airlines.

Breakthrough innovation is also known as discontinuous innovation. Breakthrough innovation involves the development of brand new or “cutting-edge innovations.” breakthrough innovations can lead to development of entirely new markets. They can also cause consumers to abandon existing products or innovations for new ones that are introduced in the market. Incremental innovations refers to the concept of leveraging on existing innovations to make improvements on them. Incremental innovation is less risky in nature and may take less time compare to breakthrough innovation. Breakthrough innovations risks include averse culture, inadequate finance, lengthy development period, inadequate planning and others. Incremental innovation risks include an averse culture, lack of customer insight, personnel knowledge and skills, and others. The international expansion strategy is a form of incremental innovation. This supports continuous improvement through development of new markets. The recommended strategy is intrapreneurial in nature since it is occurring within the company. The benefits is that it promotes motivation among employees. Another benefit is that it creates a sense of ownership and belonging to the company.

Grand strategy is a comprehensive and long-term plan detailing the actions set by the firm to help it achieve its main objectives. The main elements of a grand strategy include product, market, and organizational development activities such as diversification, acquisition, joint ventures, divestiture, and entering into strategic alliances. On the other hand, a generic strategy is an examination of how a company can achieve a competitive advantage in a specific market segment. The grand strategy is more beneficial since it focuses on the long term. Another benefit over the generic strategies is that a grand strategy is a comprehensive strategy that helps in achievement of overall goals and objectives of the business.

The grand strategy that can grow and sustain the company for many years is the market development strategy. Since its inception in 1967, Southwest Airlines has predominantly operated within the domestic market. Over the last 5 years, Southwest Airlines has failed to achieve any marginal growth owing to saturation in the domestic market. Southwest Airlines is the largest domestic carrier in the U.S. However due to saturation within the domestic market, the company must look for alternative areas for expansion and growth. The domestic market in the U.S. is already in the maturity stage, providing no more opportunities for growth or expansion. Venturing outside the U.S. market will offer the airline unlimited opportunities in terms of long run growth. Southwest Airlines should first expand in overseas markets close to the U.S. before venturing in far off areas such as Europe and Asia.

Southwest Airlines has established a number of long-term objectives to support its overall grand strategy. One of the objectives is continued low cost leadership in the industry. Southwest Airlines provides high quality services at low prices, which attracts price sensitive consumers. The other long-term goal is to maintain a superior financial position. For 43 consecutive years, Southwest Airlines has been able to maintain profitability. The next objective is to maintain reliability and hospitality standards by which the airline is famous. The generic strategy used in the past is low-cost leadership. Since its inception, the airline has maintained the top position as the low-cost leaders in the industry. In the recent past, Southwest Airlines is also leaning on other generic strategies such as marketing focused strategies. For instance, the airline has established promotional campaigns to entice more passenger. This report recommends horizontal acquisition as the best grand strategy for the future. Horizontal acquisitions will enable the company to expand easily into the international market.

Horizontal acquisitions involve establishing mergers with companies operating in similar market segments as with the company in question. Horizontal acquisitions enable companies to acquire additional equipment or products and thus expand their reach with ease. It also enables companies to expand their market share through acquisition of competitors. There are a number of short term objectives required to support the new grand strategy. One of the objectives is the expansion of the Dallas Love Field, the primary airport in which the airline operates. Expansion of the airport will enable Southwest to increase its fleet of airline. Another short term goal is to increase workforce so as to match the international expansion. Some of the functional tactics necessary are acquisition of slots and gates at various airports such as Washington Reagan National Airport and others.

Implementation of the new grand strategy requires some degree of restructuring a reengineering. Key among the need for restructuring and reengineering is the employee culture. Southwest Airlines must ensure that once an acquisition becomes successful there is merging of the different organizational cultures. Employees may become uneasy or skeptical especially when mergers and acquisitions occur. It is critical for a company to effectively manage change, else the acquisition may become unsuccessful due to clash of cultures. Southwest Airlines primarily operates one type of airplane, the Boeing 737s. This has enabled the airline to reduce maintenance costs and to obtain economies of scale in purchasing the model. This will be a major challenge for the company especially because majority of airlines use different airplane models. Southwest Airlines must develop a way of ensuring that the new acquisitions utilize the Boeing 737 models. The refocus will mainly focus on modular organization. Modular organization will enable the airline to analyze its business processes and recombine them in a way to work more effectively.

Southwest Airlines is the largest carrier in the U.S. in terms of passenger miles. The airline concentrates operations within the U.S. domestic market. Over the years, Southwest Airline has become famous for its low cost leadership strategy. In the recent period, Southwest Airlines has achieved minimal revenue growth mainly due to saturation of the U.S. domestic market. In order to reverse the trend and achieve growth, the airline is looking towards venturing into overseas market where there is unlimited opportunities for expansion and revenue growth. This paper recommends horizontal acquisition as the best grand strategy that can help support international expansion.