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

Employee needs satisfaction has played a significant role in the development of organizational capabilities in Southwest Airlines that has enabled it to enjoy competitive advantage. The starting point of the airlines' virtuous cycle of competitive advantage is its ability to create value for its employees, which increases their motivation, through the company's culture and HR practices. Southwest then converts some of that value to customer and firm value through the design of operating processes and the encouragement of behavioral norms that allow employees to minimize costs as well as improve service. Finally, the company captures value via low costs and superior service. This value-creation, value-conversion, value-capture cycle may apply to other organizations, particularly those providing labor-dependent services.