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Bite-size Case Study

Southwest Airlines and American Airlines: aligning operations with strategy

Published on November 30, 2017 Originally recorded 2012   7 min
0:04
You may be familiar with Airline Southwest, and it stands out for various reasons. But one of which that has become very important is the fact that they say "bags fly free." This is an important aspect because, according to a study of Consumer Reports, what annoys travelers most is additional baggage fees. So, here, we must ask, why is it that Southwest would follow this kind of policy while other airlines such as, for example, American Airlines, have a strategy to charge for a luggage? We will try to answer that question using the framework that we will develop soon.
0:54
An operations strategy can also be evaluated more qualitatively in terms of alignment. To apply that assessment, it is easiest to ask three questions. The first question asks, what is the operations strategic position? In other words, how does the organization compete in the market and what is the value it provides to customers? As we just discussed, that value can be expressed by prioritizing how important price, time, quality, or variety are to the customer. The second question then makes the connection to what the operations must do particularly well. In other words, which competencies must be developed? Similar to the value proposition, it makes sense then to prioritize the internal competencies which also can have four different types. A low price position typically will require a low cost operation. Similarly, time, quality, and the flexibility of the operation become important. The third question then asks, given that we need these competencies in that priority ranking, how should we structure our operating system? In other words, which assets do we need? Which processes will we use? The importance here in the assessment is to ask, are these three decisions aligned? And the conjecture is that if they are aligned, the operations strategy is more likely to provide high value.
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Southwest Airlines and American Airlines: aligning operations with strategy

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