Southwest Airlines: A case study linking employee needs satisfaction and organizational capabilities to competitive advantage

Abstract

This article analyzes the sources of Southwest Airlines' competitive advantage using an integrative approach, employing economic analysis tools to illustrate the roles of commitment and organizational capabilities in delivering competitive advantage at Southwest. A framework is presented illustrating that much of the value Southwest generates is (1) created through employee needs satisfaction, (2) converted to customer and shareholder value via organizational capabilities, and (3) captured by the firm as a result of its cost advantage and superior service. This three-part framework may be applicable to other labor-dependent service organizations. © 1996 by John Wiley & Sons, Inc.