Week 2 Summative Assessment - Business Administration Organizational Proposal_MGT-526

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[STUDENT NAME] UNIVERSITY OF PHOENIX MGT/ 526: MANAGING A CHANGING ENVIRONMENT [INSTRUCTOR’S NAME] NOVEMBER 4, 2023, 7:30 AM BUSINESS PROPOSAL Southwest Airlines Company TABLE OF CONTENT 1

S EXECUTIVE SUMMARY ............................................................................................................. 3 MISSION AND VISION ................................................................................................................ 3 ORGANIZATIONAL INITIATIVES ............................................................................................. 3 INTERNAL SWOT ANALYSIS FACTORS .............................................................................. 3-4 EXTERNAL SWOT ANALYSIS FACTORS ................................................................................ 4 ALIGNMENT EVALUATION ....................................................................................................... 4 PROPOSAL OF GLOBAL BUSINESS INITIATIVE ................................................................... 5 HIGH-LEVEL OUTLINE ............................................................................................................... 5 REFERENCES ................................................................................................................................ 6 2

EXECUTIVE SUMMARY Southwest Airlines Company (SWA) began servicing customers on June 18, 1971. SWA started out offering friendly, reliable, and low-cost air travel to only two routes; Houston and San Antonio, Texas with a fleet comprising of only three Boeing 737- 200 model aircraft. Currently SWA services 121 airports across 11 countries and is one of the world’s most admired and awarded airlines in the air travel industry. Homebased in Dallas, Texas, SWA is well-known for its Employee-first corporate culture, and its long running record to maintain zero involuntary layoffs. (CO., S.A, 2023) Mission and Vision The mission of SWA is to “Connect People to what’s important in their lives through friendly, reliable, and low- cost air travel.” The organization’s vision is to “Be the world's most loved, most efficient, and most profitable airline.” (Jordan, 2023) Organizational Initiatives Organizational initiatives at SWA include setting goals toward helping to improve the environment. SWA continues to invest in internal fuel savings from day-to-day through route optimization such as using only one engine for taxiing aircraft, engine washing which ultimately improves fuel consumption, weight savings by eliminating weight consumptive materials originally built into the aircraft, and a few other initiatives that have already been put into place. SWA future initiatives include achieving net zero carbon emissions by 2050. It plans on implementing this initiative using innovative technologies. By modernizing its current fleet with aircraft specifically designed for fuel efficiency as quickly as aircraft manufacturers continue to make progress toward delivering these high-tech aircraft and technologies. These types of improvements are also anticipated to be enforced by FAA sometime soon. By SWA proactively implementing these initiatives, and putting them in place as they become available, SWA anticipates a huge savings as the technology becomes more expensive due to popularity as SWA competitors begin to implement similar initiatives. (Jordan, 2023) Internal SWOT Analysis Factors Internal factors that SWA currently possesses are its fleet network. SWA currently operates 804 total aircraft. SWA almost exclusively utilizes Boeing 737 aircraft making it the world’s largest operator of the 737. The SWA brand portfolio remains strong due to the company’s ability to stay consistent with core values. It has maintained the ability to deliver on its brand promise, giving it an edge on its competitors. The company’s business performance or passenger revenue has also remained strong touting operating revenues of $23.8 billion in 2022; a 6.5 percent increase compared to full year 2019. Finally, the Southwest Airlines financial leverage was not the best, but ranked 4 th among its competitors in the last quarter of 2022. A financial leverage ratio of 3.3x placed it 4 th only behind 3 rd place SkyWest Inc. with a ratio of 3.3x as well, 2 nd place Industrials Sector with a ratio of 2.1x, and 1 st place American Airlines Group with a phenomenal ratio of -12.8x. Generally, a financial leverage rating of less than 1 is usually considered good which indicates that a company is using an acceptable amount of debt to finance its assets. (Co., S.A., 2023) 3

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SWA weaknesses reside mostly in the organization’s operating performance. High spoilage rates play a huge role in exacerbating poor operational performance. A high-spoilage rate indicates how often clients miss pre-booked flights. Improving in this area is imperative, because high-spoilage rates cause the airlines a huge overage in the refund of tickets when passengers don’t make their flights. Another hurdle for SWA are the 1-hour long vendor- supplied network firewall outages. The loss of key systems for any amount of time is always going to negatively affect operational performance and reduce customer satisfaction. Lastly, SWA’s limited international presence continues to be a work in progress. External SWOT Analysis Factors External factors that SWA is currently facing are some of the same external factors that most of the organization’s competitors are dealing with. Threats like the fluctuations in fuel prices, increasing manpower cost in the U.S., and stringent airlines regulations are not directly controlled by SWA, and should be dealt with by developing better internal factors and regularly analysing market trends, economic conditions, and technological changes. Taking a proactive stance will assist SWA with anticipating the impact of these external factors on both performance and the organization. (Co., S.A., 2023) Alignment Evaluation The strategic alignment of Southwest Airlines is very important; especially in a market that depends on business and strategy being aligned properly for success. This is an area that is very high on the list of things to consistently do. The company’s purpose may never change, but it’s strategies and organizational structures do. All business elements including market strategy, and the overall way that the company is organized must be aligned to fulfil the company’s long-term purpose and to ensure that organization is work together toward the same goals. In the long run, the organization increases efficiency, productivity, communication, and tea cohesiveness. (Trevor & Varcoe, 2017) The one thing that Southwest Airlines has achieved absolute brilliance at is aligning business strategy with brand positioning. The company rates very high in alignment, and it appears to support its mission and vision perfectly. The following are a few examples.  Efficient boarding system to keep people moving: Southwest airlines conducted a study to determine that random boarding of passengers is faster than using the boarding from the last row method. And by using designated boarding numbers they can keep passengers from stampeding the gate all at once when the boarding call is given.  Free checked baggage to free up cabin space: Encourages passengers to take less into the cabin area of the aircraft. They offer 2 free checked bags of no more than 50 lbs. each.  Free snacks for the masses: It’s only a bag of peanuts and a bottle of juice, but freebies such as this in the U.S. are quickly becoming a thing of the past. Customers love freebies, and it keeps them coming back. 4

Proposal of Global Competitive Business Initiative To increase its competitive edge, Southwest Airlines needs to expand its current international routes. The expansion of global routes would allow for an additional source of revenue in the global market. Southwest Airlines would be able to implement its low-cost fares to compete on a much higher level with global giants such as Delta Airlines, American, and United. (Griff, 2022) One of Southwest Airlines biggest complaints from frequent flyers is the quality of its inflight Wi-Fi. A proposal has been submitted by Tony Roach, Southwest’s vice president of customer experience and engagement reported that Southwest Airlines plans to upgrade it entire fleet of 737s with better Wi-Fi access. (Griff, 2022) Southwest should propose adding free Wi-Fi to all its flights local and global to be more competitive. High-Level Outline Southwest Airlines President and CEO, stated, "As expected, we incurred a first quarter 2023 net loss that resulted from the negative financial impact of approximately $380 million pre-tax, or $294 million after-tax, related to the December 2022 operational disruption.” This occurred because of a reduction in bookings in January and February of 2023 travel. Cancellations of holiday return travel also  Southwest continues to maintain its competitive advantage through its low-cost business model.  The Southwest baggage policy remains strong as a competitive advantage. While most airlines charge fees for each checked bag, Southwest offers two free checked bags per customer.  Southwest Airlines has built its entire business model around the Boeing 737 aircraft. By only using one type of aircraft, Southwest continues to cut its budget enormously on labor, training, and operational costs, which enables the company to continue to offer ticket prices lower than the competition.  Southwest recently published a Supplier Code of Conduct and has begun to integrate sustainability questions in the Company's request for proposal process with its suppliers.  Southwest has proactively purchased offsets equivalent to the carbon emissions generated by the company’s employee business and charitable travel for 2022.  The company’s operational performance remained strong in first quarter 2023. Southwest ranked number two in domestic on-time performance year-to-date through March 2023, as the company successfully navigated nine named storms. (Mahr, 2022) 5

References Co., S.A. (2023, March 14). Southwest Airlines plans to boost operational resiliency to enhance support for employees and customers . PR Newswire: press release distribution, targeting, monitoring and marketing. https://www.prnewswire.com/news-releases/southwest-airlines- plans-to-boost-operational-resiliency-to-enhance-support-for-employees-and-customers- 301771093.html (Co., S.A., 2023) Griff, Z. (2022, December 3). 11 ways that Southwest is improving the travel experience in 2023 . The Points Guy. https://thepointsguy.com/news/southwest-travel-upgrades/ Jordan, B. (2023, May 3). Southwest one report: Southwest Airlines . Southwest One Report | Southwest Airlines. https://www.southwest.com/onereport/ Trevor, J., & Varcoe, B. (2017, October 5). A simple way to test your company’s strategic alignment . Harvard Business Review. https://hbr.org/2016/05/a-simple-way-to-test-your- companys-strategic-alignment 6

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