Key Components of Strategic Planning: Southwest Airlines Essay

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Analysis of Key Strategies
Stephanie Peete
Embry-Riddle Aeronautical University
Business Capstone
William Reed
February 23, 2014
Analysis of Key Strategies
When a company creates a strategic plan, it should reveal the future direction of the company. The strategic plan should outline the organization’s purpose, goals and the methods that will be used to accomplish those goals. The major key components of strategic planning are outlining the company’s vision and mission statements. The vision statement summarizes how the organization wishes to be recognized and operate in the industry and the mission statement tells the purpose of the organization. There are several other key components involved in creating a strategic plan that should illustrate the company’s marketing, financial, manufacturing, and legal strategies. The leadership and performance strategies are also important steps in this plan as well as any international strategies.
The functional level of the organization is the level of the operating divisions and departments. The strategic issues at the functional level are related to business processes and the value chain. Functional level strategies in marketing, finance, operations, human resources, and R&D involve the development and coordination of resources through which business unit level strategies can be executed efficiently and effectively (Cile, 2014 ).
Southwest Airlines utilizes its functional level to explore and answer the following question to access how the company is progressing in the industry. How are we utilizing human resources, information technology, finance/accounting, marketing, or other functional areas to gain a competitive advantage? The primary marketing strategy for Southwest Airlines is to target business travelers because they are the most frequent buyers, most loyal, and are willing to pay more money than the average vacationer. The secondary marketing strategy is to focus on budget travelers who look for good airfare deals with the cheapest price.
The product strategy for Southwest Airlines is flights with “no frills” which means no first and business class seating section and in-flight meals have been eliminated. It markets itself as a “no fees” brand, but does gives business travelers the option to opt-in to value added features like Business Select seating and $5 Wi-Fi. Customers receive several benefits from these features. They feel a sense of community because everyone on the flight is treated the same and has the same access to seats and flight service. Southwest’s “no fee” promise also includes minimal costs for switching flights and limited price increases for last-minute flights. Business travelers have been historically taken advantage of by other legacy carriers with those types of fees. Most of the “legacy” airline leaders offer similar frequent flier program, airport lounges, first and business class seating and amenities and even the same $25 baggage fee. As a no frills airline that offers free baggage, Southwest is doing exactly the opposite. Their focus on one differentiation factor suggests they are using a reverse positioning strategy. Southwest Airlines positions itself as the only low-fare, short-haul, high-frequency, point-to-point carrier in America that is fun to fly. This fun experience is carried out by its employees. Southwest employees record high job satisfaction levels, less stress, and above average wages. Southwest believes that happy employees are essential to an excellent customer experience, and its customer satisfaction ratings support this claim (Sanner, Swider, Uszynska, & Vierela, 2012, p. 18).
The financial strategy is offering a lot of incentive for a low price to all travelers. When Southwest Airlines can’t compete with competitors pricing, they offered services that are at no cost to the travelers such as no baggage fees. Maintaining a budget airline is the type of financial strategy that