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 Organization History and Life Cycle  External Environment  Mission, Goals, and Strategies  Organizational Culture and Management  Interorganizational Relationships

 “ As company legend goes, the very first route map was drawn on a cocktail napkin during a meeting between Rollin King and Herb Kelleher.” 1967: Air Southwest Co. is incorporated; later in 1971 the company name was changed to Southwest Airlines Co. Rollin King and Herb Kelleher founded Southwest Airlines with one simple goal: To serve Dallas, Houston, and San Antonio with point-to-point flights.

Herb Kelleher, Attorney at Law (Co-founder)  1967: Files application with TAC to serve DAL, IAH, & SAT.  Rival companies Braniff and Texas International serve the same areas; hence, they fought through the legal system to keep Air Southwest grounded.  Herb offers to represent Air Southwest’s appeal to the Texas Supreme Court. He charged no fees and paid any costs out of pocket.  1970: Texas Supreme Court overturns lowers court ruling and clears Air Southwest for “take-off.” ‹#›

Lamar Muse: Joins Air Southwest in 1971 as President.  Sells promissory notes to raise $1.25M in funds for aircraft and startup costs  Makes agreement with Boeing to purchase three Boeing 737s (with Boeing holding 90% of the financing)  Hires “The Over the Hill Gang” (Dick Elliot, Jack Vidal, Donald Ogden, Bill Franklin)  Made initial public offering of stock (raising $6.5M in funds)  June 18, 1970: The “Love Airline” is born; starting service to DAL, IAH, & SAT.

1975: LUV made ticker symbol on American Stock Exchange 1976: Southwest Airlines expands service to 5 new cities in one year. 1978: Southwest Airlines purchases Midway Airline as a wholly owned subsidiary and enters the Northeast U.S. market 1978: Muse resigns as President; Herb is asked to step in as Interim President, CEO, & COB. 1981: Herb Kelleher assumes the permanent position of President and CEO

 Herb Kelleher served Southwest Airlines from  Profitable for 37 years  Largest U.S. based airline (by passengers)  547 Aircraft (Boeing 737)  3400 Flights A Day  One of first airlines to have a website  First airline to offer automated ticket services  “Southwest Effect”- term coined by the Department of Transportation ‹#›

Simple + Stable Low Uncertainty Complex + Stable Low Moderate Uncertainty 1.Small number of external elements, and elements are similar. 2.Elements remain the same or change slowly. 1.Large number of external elements, and elements are dissimilar. 2.Elements remain the same or change slowly. Simple + Unstable High-Moderate Uncertainty Complex + Unstable High Uncertainty 1.Small number of external elements, and elements are similar. 2.Elements change frequently and unpredictably. 1.Large number of external elements, and elements are dissimilar. 2.Elements change frequently and unpredictably. Uncertainty

 Air- Traffic Controller shortage  Competition  Fuel Prices  Air traffic disasters  Decline in customer demands  Economic downfall ‹#› Complex + Unstable High Uncertainty 1.Large number of external elements, and elements are dissimilar. 2.Elements change frequently and unpredictably.

External SWOT Analysis OpportunitiesThreats Falling interest rates New technologies increasing efficient Limited substitute products High entry barriers Bargaining power with Boeing Declining fuel prices Receptive business traveler Underserved markets Uncertainty in fuel prices Increased airport security Weather Strong power of buyers Substitute products in short- haul markets Intense competition New Northwest/Delta merger (increased competition) Labor union demands ‹#›

Porter’s 5 Forces  Threat of New Entrants (L) Capital Intense Government Regulations Excess to distribution channels Economies to scale  Power of Buyers (H) Switching cost Differentiation of products Information available ‹#›

Porter’s 5 Forces Cont.  Power of Suppliers(H) Switching costs Substitutes Difference between Products  Threat of Substitutes(M) Rental Car Services Rail Bus Ship ‹#›

Porter’s 5 Forces Cont.  Rivalry of Existing Firms (H) Mergers Competition ‹#›

SWOT Analysis StrengthsWeaknesses Strong culture Efficient operations Strong customer/ employee focus Low turnover Young, efficient fleet Low debt Strong financial position Strong leadership Strong web site Well respected company Pending/ potential expiration of fuel hedging contracts Increasing costs Expiring labor contracts ‹#›

— The mission of Southwest Airlines is dedication to the highest quality of customer service delivered with a sense of warmth, friendliness, individual pride, and Company spirit. — To Employees: — We are committed to provide our Employees a stable work environment with equal opportunity for learning and personal growth. Creativity and innovation are encouraged for improving the effectiveness of Southwest Airlines. Above all, Employees will be provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Southwest Customer ‹#›

 Ensure highest quality to Customers  Provide assistance to customers  Ensuring security and safety  To stay the most successful with low-fare and high frequency point-to-point carrier. ‹#›

 Low cost Leadership  Competitors eliminated  Tries to increase market share by keeping costs low compared to competitors  Peanuts  Bags fly free  Consistent Airplane ‹#›

—Chart on pg 73 — ess/21south.htmlhttp:// ess/21south.html — /southwest-airlines-agrees-to-buy- airtran-for-1-4-billion-in-cash-shares.htmlhttp:// /southwest-airlines-agrees-to-buy- airtran-for-1-4-billion-in-cash-shares.html  Defender strategy  Stability  Corporate Level Strategy  Pursed at an internal growth ( more equipment, employees etc.)  External growth (using joint ventures with WestJet to serve Canada etc) ‹#›

— Internal process approach — Human Resources Department — Happy Employees = Happy Customers

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Resource Dependence Population Ecology Collaboration NetworkInstitutionalism Organization Relationships Organization Type Cooperative Competitive DissimilarSimilar

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