Southwest

5. What is the nature of the business-level strategy that allows a company to attract customers away from its competitors in the industry? How well do the strategic managers adopt for using functional-level strategies to create a competitive advantage over its rivals?

Customer segmentation

While many airlines are using mileage-based segmentation, Southwest Airlines is applying needs-based segmentation to gain better insight of their customers. Southwest Airlines focuses on price sensitive consumers who will forego meals and assigned seating for low prices. In contrast, most airlines offer high priced tickets to those who are inflexible (that they cannot tell in advance when they need to fly, usually business travelers) an then sell some of the remaining seats to more price sensitive customers who can buy two weeks in advance and stay over.

Dell’s business-level strategy

Southwest Airlines succeeds even in poor economic conditions because of its integrated cost leadership/differentiation strategy (Broad differentiation strategy). Southwest Airlines offers low fares, like many other low-cost airlines, but also has fewer customer complaints than major airlines. Southwest Airlines is able to attract employees that treat customers well and has an excellent on-time performance. Southwest, therefore, appears to achieve low cost and differentiation simultaneously.

By adopting functional strategies, Southwest Airlines makes use of integrated cost leadership/differentiation strategy (Broad differentiation strategy) which offers superior efficiency, and superior customer responsiveness to create superior value over its rivals. This strategy enable the firm to operate with differentiated features at lower costs, thus the customer realizes value based both on product features and a low price.

To become superior customer responsiveness, Southwest Airlines treat employees with the same concern, respect, and caring attitude within the organization that they are...