Term Paper on "Implementation Strategic Controls Contingency Plans"

Term Paper 4 pages (1701 words) Sources: 2

[EXCERPT] . . . .

Strategic Controls and Contingency Plans at Southwest Airlines

As the only major airline to remain profitable following the terrorist attacks of September 11, 2001, Southwest Airlines is clearly doing something better than its competitors. One of the things that Southwest Airlines has consistently done better than its competitors is to provide reliable, no-frills, low-cost domestic air services throughout the United States using a standard type of aircraft for all of its routes. Recently, though, Southwest Airlines announced plans to expand its current fleet with the addition of twenty new Boeing 737-800s which are larger than the company's current standard aircraft and could provide higher revenues per flight. In addition, Southwest is in the process of acquiring AirTran Airways and its routes in Mexico and the Caribbean. These recent initiatives represent a sea change in the company's business model, making the need for an implementation plan for strategic controls and contingency plans at Southwest Airlines greater than ever before. To this end, this paper provides a review of the relevant literature to describe the objectives of these initiatives, related functional tactics and action items that must be addressed, as well as milestones and a deadline for the process to be completed. An analysis of the requisite tasks and task ownership involved is followed by a discussion concerning resource allocation and potential organizational change management strategies that could facilitate the successful implementation of these initiatives. Finally, a listing of key success factors, budget, and forecasted financials is followed by a risk management plan, including contingency plans for identified risks that are involved. A summary of the research and important findings are presented in the conclusion.

Review and Analysis

Objectives

The company currently lacks the visionary and charismatic leadership of Herb Kelleher which was largely responsible for the company's success during the last quarter of the 20th century (Blackwell & Gibson, 1999). Nevertheless, according to Haas (2007), despite the company's spectacular growth and performance over the years, Southwest Airlines' (hereinafter alternatively "Southwest" or "the company") current objectives remain relatively unchanged. For example, Haas notes that, "The initial goal of Southwest has not changed: to become the major short-haul carrier (under 600 miles) and to offer fares below those imposed by the 'brand-name carriers. Despite its low fares, [in 2006 alone], its profits totaled $179.3 million, a 16% jump from [2005]" (para. 3). Current signs indicate, though that this original objective has been amplified to include international air service in the near future as well. For example, a recent report from Sakuma (2010) notes that, "Southwest Airlines Co. is getting new, larger planes that could pave the way for the all-domestic airline to offer international flights. CEO Gary Kelly said that Southwest will change an existing order with Boeing Co. And get 20 new 737-800 jets beginning in March 2012" (para. 2). The new aircraft feature 175 seats compared to 137 seats on its current fleet of more than 500 aircraft, all of which are models of the one-aisle model of the Boeing 737. According to Sakuma, the existing 737s being flown by Southwest are "short- to medium-range jets that Boeing began producing in the late 1960s and has updated many times since" (2010, para. 4).

In addition, Southwest is in the process of acquiring AirTran Airways and its routes in Mexico and the Caribbean (Sakuma, 2010). Southwest currently plans to use AirTran's existing fleet of aircraft for the Mexican and Caribbean routes, with plans for using the new 737-800s for its heavily trafficked routes in the northeast United States; however, the company's CEO also indicated that these new aircraft may also be used for new routes to Hawaii, Alaska, Canada, Mexico and the Caribbean (Sakuma, 2010), making Southwest a truly international air carrier. To achieve these expanded objectives, though, will require careful implementation and administration and these issues are discussed further below.

Functional tactics

In order to be successful, the functional tactics that Southwest would employ to achieve the expanded objectives described above will require a reformulation of any previous functional tactics that were used (Harris, 2002) because the status quo is rapidly changing for the company. The company's break with its traditional use of a single type of aircraft to serve domestic routes only is being fundamentally altered by its plans to acquire larger aircraft and additional international routes. This does not mean, though, that previously successful functional tactics must be abandoned in their entirety, only that they must be fine-tuned to take into account the company's new situation. For example, Southwest's emphasis on high-quality customer service and low-cost fares should remain the backbone of the company's functional tactics in its acquisition of new aircraft and new routes, an approach that is congruent with Harris's observation that such revised functional tactics should "recognize the significance of achieving wider external goals, such as customer satisfaction" (2002, p. 132).

Action items

The salient actions items that are associated with the amplified objectives (i.e., the acquisition of larger aircraft and expansion into international air service) of Southwest include the following:

1. Accept delivery of the 30 new Boeing 737-800s;

2. Finalize acquisition of AirTran Airways;

3. Identify optimum use of existing smaller 737s; and,

4. Identify optimum use of newly acquired 737-800s.

Milestones and a deadline

The following milestones and deadline will be used to gauge the effectiveness of the ongoing action items delineated above:

1. Accept delivery of the 30 new Boeing 737-800s: March 2012 (first aircraft scheduled for delivery at this time)

2. Finalize acquisition of AirTran Airways: January 2013 (as currently planned)

3. Identify optimum use of existing smaller 737s: January 2012

4. Identify optimum use of newly acquired 737-800s: March 2013

5. Deadline for completion of foregoing: April 2013

Tasks and task ownership

In order to ensure appropriate oversight is provided and the above milestones and deadline are achieved, a top-down response is required. Therefore, the overall responsibility for the associated tasks required for the amplified objectives should be assigned to the company's chief operating officer and executive vice president, Michael G. Van De Ven.

Resource allocation

The costs that are associated with both of the initiatives that form the amplified version of the company's objectives have already been established and negotiations with Boeing and AirTran Airways have been completed; as noted further below, the resources required for the former initiative amount to about $81 million per aircraft (30 x $81 million = about $2.4 billion) although industry analysts note that Boeing will likely give Southwest a discount and $1.4 billion for the latter.

Organizational change management strategies that would enhance successful implementation

The change management strategy that would best enhance the successful implementation of the amplified corporate objectives would be based on the spectrum of responses that are required, either minimal or no change, incremental change, significant change, and breakthrough change (Hanlan, 2004). Based on the fundamental shift in corporate philosophy from flying a single type of aircraft domestically to adding new models and international routes is best categorized as a significant change, requiring a corresponding change management strategy. According to Hanlan, a significant change management strategy involves "Companies focusing on whether the right processes are in place to achieve the necessary results. Companies are focused on whether the correct process is even being considered. Existing processes are compared with desired results, and new alternatives are explored" (2004, p. 56). Companies undergoing significant changes can also benefit from establishing new metrics that better define and measure the success of new organization (Hanlan, 2004).

Key success factors, budget, and forecasted financials

Although Southwest has not disclosed the financial terms for the new order of 30 737-800s from Boeing, the larger aircraft are known to cost more than the current models being used by the company. According to Sakuma, "Boeing lists the average price of a 737-800 at $80.8 million, compared to $67.9 million for the 737-700. However, aircraft manufacturers routinely give discounts to good customers" (2010, para. 4). In addition, the agreed-upon price for the acquisition of AirTran Airways is $1.4 billion (Reed & Jones, 2010). Because of the unknowns, a break-even analysis is not possible but the known figures indicate that:

Fixed costs

~$2.4 billion for acquisition of new aircraft

$1.4 billion for acquisition of AirTran Airways

Variable costs

Unknown, but will include legal fees for the AirTran acquisition and airport fees, permits and licensure for new international routes

Revenues:

175 seats on new aircraft X

Risk management plan, including contingency plans for identified risks

The company has enjoyed decades' of solid performance and growth based on its original business model and corporate objective. Expanding operations into the international arena will involve a number of risks that the company will have little or no experience in resolving; therefore, the contingency plan for the amplified objectives should include the additional of an executive-level committee whose members have the requisite expertise and experience to guide the company through its acquisitions by mid-2014.

Conclusion

The research showed that Southwest Airlines is a leading air carrier in the United States with a… READ MORE

How to Reference "Implementation Strategic Controls Contingency Plans" Term Paper in a Bibliography

Related Term Papers:

Business Plan for MGM Business Plan

The potential for this to be achieved will be reliant on the way franchises are setup and the support is provided by MGM. This also leads to a final key… read more

Business Plan 5 pages (2379 words) Sources: 5 Topic: Business / Corporations / E-commerce

---

Strategic Control Term Paper

functions of management, strategic control has everything to do with feedback, with gathering information on performance, both individual and as a team, and on correcting the mistakes while improving the… read more

Term Paper 2 pages (530 words) Sources: 0 Topic: Management / Organizations

---

Business Plan for an Imaginary Software Company Business Plan

business plan for an imaginary software company, Techno soft which aims to enter South Asian market as a part of its international business expansion strategy. The paper is divided into… read more

Business Plan 16 pages (5030 words) Sources: 16 Topic: Business / Corporations / E-commerce

---

Strategic Plan Essay

Strategic Plan

Implementation of the Plan

Over the last several years, health insurance companies have been facing increased amounts of scrutiny surrounding their business practices. Part of the reason for… read more

Essay 4 pages (1130 words) Sources: 2 Topic: Healthcare / Health / Obamacare

---

Kudler Fine Foods Strategic Plan Business Plan

Kudler Fine Foods Strategic Plan

Strategic Plan for Kudler Fine Foods

This paper presents a strategic plan or Kudler Fine Foods. The paper starts with organizational background consisting of business… read more

Business Plan 10 pages (3431 words) Sources: 5 Topic: Business / Corporations / E-commerce

---

View 100+ more related papers  >>