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Understanding the Power of Market Growth

When Southwest Airlines carved out their specific market niche, there were many who wondered what would happen when their competitors started coming after them. With Southwest (LUV), there was a time that in spite of the competition, they never lost market share.

Here's what Kelleher said about the competitive forces at that time:

"But today we have a new wave of competition. Everybody's had an additional decade to learn -- and many carriers, including the majors, are very precisely defining new niches and executing their strategy very well. The competition is tougher than ever."

So in spite of that, why was Southwest able to maintain their market share? The market itself was growing within the niche they served. This doesn't mean that the company wasn't serving their customers well, and weren't running thing streamlined; in both cases they were doing it as good as anybody.

But as Kelleher said concerning their competitors they were "executing their strategy very well." Kelleher said that the reason they were able to continue like they were was because "... in virtually every market in which we compete, the market has grown. In California, for instance, where Shuttle by United has invested millions of dollars to win a piece of our business, we have maintained our 50 percent share of the market - but are now carrying many more passengers than we did three years ago.

In other words, their competitors were growing without cutting into Southwest's market share because the market they created in the first place was growing along with the competition.

Another way of putting in was that demand was so great for this type of service that Southwest pioneered, that even when others entered into it effectively, they were able to grow even more than before.

Market growth is one of the factors we need to keep a grip on as we grow our businesses. Competition doesn't always necessarily mean losses for someone, but can mean that the market for the service is so great that competition can even make it grow larger for a company. That's what happened with Southwest.

Other Herb Kelleher Sources:

A Culture of Commitment

HERB KELLEHER

The wild turkey

Herb Kelleher on the Record, Part 1

Herb Kelleher Talks about How Southwest Airlines Grew from Entrepreneurial Startup to Industry Leadership

Belief Model for The Leadership of Herb Kelleher (Southwest Airlines)

Herb Kelleher, Chairman, CEO and President, Southwest Airlines

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