The standard explanation of Southwest's success is that it applied a low‐cost competitive strategy. This paper aims to address this issue.
The paper argues that Southwest was actually employing a disruptive strategy. Financial data show that Southwest's results were highly variable during the time it was growing into a national carrier.
The paper finds that Southwest's disruptive strategy of innovative operational cost reduction did not produce striking financial returns until it adopted more efficient aircraft, which made its fuel costs competitive.
Cost efficiencies alone do not make a firm a disruptor. What is required is the combination of a low‐cost business model and enabling technologies.
This paper points out that managers should learn to see operational innovations and cost savings in the context of disruption, not just price advantage.
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