Big Slick
Well-known member
- Joined
- Oct 18, 2004
- Posts
- 284
NUTS page 49.
Even at the height of its success, Southwest exercises the discipline not to stray from its strategy. It does not, for example, buy jumbo jets, fly international routes, or go head-to-head with the major carriers. While other niche carriers have been lured by the temptation to step outside their niche, Southwest Airlines has maintained the discipline to stay focused on its fundamental reason for being.
SAY NUTS TO MARKET SHARE
In serving its specific market niche, Southwest Airlines is obsessed with keeping costs low to maximize profitability instead of being concerned with increasing market share. Kelleher believes that confusing the two concepts has derailed many firms that were otherwise on track in fulfilling their fundamental purpose. “Market share has nothing to do with profitability,” he says. “Market share says we just want to be big; we don’t care if we make money doing it. That’s what misled much of the airline industry for fifteen years, after deregulation. In order to get an additional 5 percent of the market, some companies increased their costs by 25 percent. That’s really incongruous if profitability is your purpose.”
Southwest is successful because it is willing to forgo revenue-generating opportunities in markets that would disproportionately increase its costs. By focusing on profitability instead of market share, the company has demonstrated the discipline to do without market segments that don’t fit its niche. And no carrier knows its niche as well as Southwest.
Interview with Gary Kelly, SWA CEO (26 Feb 2006)
Since taking over the airline three years after charismatic founder Herb D. Kelleher retired, Kelly has led development of a more aggressive airline, adding airports, challenging traditional carriers on their turf and forming a partnership with ATA Airlines that could give it an opening into the international market.
No, you don't stand still. You grow or you shrink. There is no in-between.
We're also off to a fast start in Denver, and we're trying to get more gates in Philly.
These destinations are just the beginning for Southwest in Denver.
We don't have international capabilities. We are constructing that within our reservation system right now.
Even at the height of its success, Southwest exercises the discipline not to stray from its strategy. It does not, for example, buy jumbo jets, fly international routes, or go head-to-head with the major carriers. While other niche carriers have been lured by the temptation to step outside their niche, Southwest Airlines has maintained the discipline to stay focused on its fundamental reason for being.
SAY NUTS TO MARKET SHARE
In serving its specific market niche, Southwest Airlines is obsessed with keeping costs low to maximize profitability instead of being concerned with increasing market share. Kelleher believes that confusing the two concepts has derailed many firms that were otherwise on track in fulfilling their fundamental purpose. “Market share has nothing to do with profitability,” he says. “Market share says we just want to be big; we don’t care if we make money doing it. That’s what misled much of the airline industry for fifteen years, after deregulation. In order to get an additional 5 percent of the market, some companies increased their costs by 25 percent. That’s really incongruous if profitability is your purpose.”
Southwest is successful because it is willing to forgo revenue-generating opportunities in markets that would disproportionately increase its costs. By focusing on profitability instead of market share, the company has demonstrated the discipline to do without market segments that don’t fit its niche. And no carrier knows its niche as well as Southwest.
Interview with Gary Kelly, SWA CEO (26 Feb 2006)
Since taking over the airline three years after charismatic founder Herb D. Kelleher retired, Kelly has led development of a more aggressive airline, adding airports, challenging traditional carriers on their turf and forming a partnership with ATA Airlines that could give it an opening into the international market.
No, you don't stand still. You grow or you shrink. There is no in-between.
We're also off to a fast start in Denver, and we're trying to get more gates in Philly.
These destinations are just the beginning for Southwest in Denver.
We don't have international capabilities. We are constructing that within our reservation system right now.
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