Final answer:
Southwest Airlines is known for its centralized decision-making at its Dallas headquarters, which allows quick responses to competition, as per the given scenario. Southwest's operational simplicity and focus on core competencies are part of their competitive advantage, validating the notion of the firm's ability to 'think small' and act efficiently.
Step-by-step explanation:
Regarding Southwest Airlines, the statement that 'Decision-making responsibility is centered at its Dallas headquarters, which allows the firm to respond quickly to competitive attacks' aligns with their operational approach. Southwest's corporate culture emphasizes efficiency and rapid response to market changes.
Centralized decision-making can enable quicker actions in competitive dynamics, such as when an airline might slash prices following a new entrant's attempt to compete on a particular route, as referenced in the scenario provided.
Furthermore, Southwest is known for focusing on a simple business model—often emphasizing point-to-point travel rather than the hub-and-spoke model used by many large carriers, and operating a single type of aircraft to reduce maintenance and training costs.
This focus on core competencies has indeed been a large part of their competitive strategy, relating to the business pattern where firms focusing on a few products or services tend to be more successful than those with a wider range.
This could be linked to the notion of Southwest Airlines' ability to 'think small' and maintain a strategic advantage through operational simplicity and focused business practices.