Wednesday, April 12, 2017

How to alter growth strategy to successfully expand business

The two cases of GE and Southwest Airlines leave me a deep impression. They vividly describe how great corporations successfully alter the strategy according to the market change. The change of strategy of a company is a fundamental change of company’s development direction. So the process of change company’s strategy is not that easy. Many factors should be considered during the decision process. Anyways, GE and Southwest Airlines give us two perfect examples.

In the words of Kelly, the CEO of Southwest Airlines,” Outstanding, passionate, caring Customer Service combined with an efficient, simple, low-fare Customer experience provided with high reliability and operating expertise.” The company was firstly success because of its low-price service and unique joyful service culture. The management concept and HR policies all based on this culture. But since 2005 the company experienced a more that 35% rise in operating cost because of the increased energy cost. The change began to happen at that time. Southwest Airlines decided to improve the customer experience by add more U.S. destinations, add more code-sharing destinations and improve the boarding process. Apart from that, the company also tried to expand their market to some airport in the east coast. But the most important thing is Southwest Airlines never go against their basic creed, which is their low-fare brand and joyful customer service.

As for the GE corporation, which is a great multinational conglomerate corporation, the growth strategy is similar to the Southwest Airlines. GE also encounter downturn in post 9/11 days, but the company tried to counter the bad environment by several strategy changes. Management of the company focused on organic growth which means that expand the company by increased output, customer base expansion, or new product development. They invested in research and development department to stimulate the technology improving and strengthen their customer relationship. Besides, they also rebalanced the portfolio through merges and acquisitions. The acquisition focus on the media business and health industry which is considered has a good expectation.

The development of two companies’ strategy shares lots of things in common. First of all, the two companies both alter their strategy along with the change of market environment actively. But their changes are both based on the past. No matter what changes are made, Southwest will always provide the low-fare and joyful service. And GE will always position itself as a big, fundamental high-technology infrastructure company. Secondly, both companies are gingerly enough to avoid blind expansion. Southwest Airlines only expand its east coast business to Philadelphia, which is the largest market served by only one airport. And when GE launch an acquisition process, they always follow the normal discipline approach which is an initiative with a small acquisition in the well-expected growth platform and then allow it to invest in organic growth or further acquisition. Finally, both companies highly rely on organic growth including encouraging the technology breakthrough, strengthening the customer relationship and so on. These two cases are a perfect demonstration for how to alter the growth strategy of a company to successfully expand the business.

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