Case Study Description of Rapid Rewards at Southwest Airlines
Used as part of the first module of a course on Managing Service Operations, which addresses managing the operating role of customers (606-032).Southwest Airlines is well known as the low-fare airline that has achieved ongoing financial success in one of the most financially troubled industries in the United States. Told from the perspectives of two Southwest customers--a frequent flier and a more typical customer--the case revolves around two customer service requests from the frequent flier, both of which provide a compelling temptation to cater to the satisfaction of the airline's highest revenue customers. The requests are intriguing because they would neither add cost nor increase the turnaround time of Southwest's service.
Swot Analysis of "Rapid Rewards at Southwest Airlines" written by Frances X. Frei, Corey Hajim includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Southwest Flier facing as an external strategic factors. Some of the topics covered in Rapid Rewards at Southwest Airlines case study are - Strategic Management Strategies, Supply chain and Technology & Operations.
Some of the macro environment factors that can be used to understand the Rapid Rewards at Southwest Airlines casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, wage bills are increasing, increasing government debt because of Covid-19 spendings,
increasing household debt because of falling income levels, increasing energy prices, etc
Introduction to SWOT Analysis of Rapid Rewards at Southwest Airlines
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Rapid Rewards at Southwest Airlines case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Southwest Flier, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Southwest Flier operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Rapid Rewards at Southwest Airlines can be done for the following purposes –
1. Strategic planning using facts provided in Rapid Rewards at Southwest Airlines case study
2. Improving business portfolio management of Southwest Flier
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Southwest Flier
Strengths Rapid Rewards at Southwest Airlines | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Southwest Flier in Rapid Rewards at Southwest Airlines Harvard Business Review case study are -
Diverse revenue streams
– Southwest Flier is present in almost all the verticals within the industry. This has provided firm in Rapid Rewards at Southwest Airlines case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Low bargaining power of suppliers
– Suppliers of Southwest Flier in the sector have low bargaining power. Rapid Rewards at Southwest Airlines has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Southwest Flier to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy in the Rapid Rewards at Southwest Airlines Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Southwest Flier digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Southwest Flier has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Organizational Resilience of Southwest Flier
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Southwest Flier does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– Southwest Flier has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Rapid Rewards at Southwest Airlines Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
High switching costs
– The high switching costs that Southwest Flier has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Highly skilled collaborators
– Southwest Flier has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Rapid Rewards at Southwest Airlines HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Technology & Operations field
– Southwest Flier is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Southwest Flier in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management
– Southwest Flier is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to recruit top talent
– Southwest Flier is one of the leading recruiters in the industry. Managers in the Rapid Rewards at Southwest Airlines are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Effective Research and Development (R&D)
– Southwest Flier has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Rapid Rewards at Southwest Airlines - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses Rapid Rewards at Southwest Airlines | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Rapid Rewards at Southwest Airlines are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Rapid Rewards at Southwest Airlines, it seems that the employees of Southwest Flier don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Slow decision making process
– As mentioned earlier in the report, Southwest Flier has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Southwest Flier even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Products dominated business model
– Even though Southwest Flier has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Rapid Rewards at Southwest Airlines should strive to include more intangible value offerings along with its core products and services.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Rapid Rewards at Southwest Airlines, in the dynamic environment Southwest Flier has struggled to respond to the nimble upstart competition. Southwest Flier has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Southwest Flier has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Aligning sales with marketing
– It come across in the case study Rapid Rewards at Southwest Airlines that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Rapid Rewards at Southwest Airlines can leverage the sales team experience to cultivate customer relationships as Southwest Flier is planning to shift buying processes online.
Lack of clear differentiation of Southwest Flier products
– To increase the profitability and margins on the products, Southwest Flier needs to provide more differentiated products than what it is currently offering in the marketplace.
Workers concerns about automation
– As automation is fast increasing in the segment, Southwest Flier needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Rapid Rewards at Southwest Airlines, is just above the industry average. Southwest Flier needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Need for greater diversity
– Southwest Flier has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Increasing silos among functional specialists
– The organizational structure of Southwest Flier is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Southwest Flier needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Southwest Flier to focus more on services rather than just following the product oriented approach.
Opportunities Rapid Rewards at Southwest Airlines | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Rapid Rewards at Southwest Airlines are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Southwest Flier can use these opportunities to build new business models that can help the communities that Southwest Flier operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Developing new processes and practices
– Southwest Flier can develop new processes and procedures in Technology & Operations industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Southwest Flier can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Rapid Rewards at Southwest Airlines, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Southwest Flier is facing challenges because of the dominance of functional experts in the organization. Rapid Rewards at Southwest Airlines case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Creating value in data economy
– The success of analytics program of Southwest Flier has opened avenues for new revenue streams for the organization in the industry. This can help Southwest Flier to build a more holistic ecosystem as suggested in the Rapid Rewards at Southwest Airlines case study. Southwest Flier can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Southwest Flier to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Southwest Flier to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Southwest Flier to hire the very best people irrespective of their geographical location.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Southwest Flier can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Southwest Flier in the consumer business. Now Southwest Flier can target international markets with far fewer capital restrictions requirements than the existing system.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Technology & Operations industry, but it has also influenced the consumer preferences. Southwest Flier can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Buying journey improvements
– Southwest Flier can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Rapid Rewards at Southwest Airlines suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Southwest Flier in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Technology & Operations segment, and it will provide faster access to the consumers.
Learning at scale
– Online learning technologies has now opened space for Southwest Flier to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Threats Rapid Rewards at Southwest Airlines External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Rapid Rewards at Southwest Airlines are -
Shortening product life cycle
– it is one of the major threat that Southwest Flier is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Rapid Rewards at Southwest Airlines, Southwest Flier may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Southwest Flier needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Southwest Flier in the Technology & Operations industry. The Technology & Operations industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Easy access to finance
– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Southwest Flier can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Southwest Flier has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Southwest Flier needs to keep up with the evolution of technology in the Technology & Operations sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Southwest Flier.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Southwest Flier can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Rapid Rewards at Southwest Airlines .
High dependence on third party suppliers
– Southwest Flier high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Consumer confidence and its impact on Southwest Flier demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Stagnating economy with rate increase
– Southwest Flier can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Southwest Flier will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Southwest Flier in the Technology & Operations sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Rapid Rewards at Southwest Airlines Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Rapid Rewards at Southwest Airlines needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Rapid Rewards at Southwest Airlines is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Rapid Rewards at Southwest Airlines is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Rapid Rewards at Southwest Airlines is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Southwest Flier needs to make to build a sustainable competitive advantage.