Critical Review of the Article about Singapore Airlines Success - Term Paper Example

Introduction: The chosen article has examined Singapore Airlines’ success; it explored how SIA was able to stand against other competitors. The s proclaimed that SIA has achieved an exceptional performance and constantly is taking advantage from its competitive advantage. The Authors (relying on facts and data from different sources, also using different methodologies) argued that SIA has successfully applied a strategy which was dual: differentiation through excellence, service and innovation, alongside with cost leadership in its strategic planning. Importantly, the authors also investigated the organizational factors that have facilitated SIA’s chance to implement its inspirations; they used the method of illustrating its strategic position. Finally, they drew their conclusions and explored the prospective challenges for SIA. Reviewing the structure and contents of the article: The authors reviewed the available literature that investigated the differentiation and cost leadership, they referred to the work of (Porter, 1985) who claimed that differentiation and cost leadership has to be mutually exclusive as they require various kinds of investments across the value chain. Porter’s recognized generic strategy framework and suggests that companies when looking for sustainable competitive advantage they must choose between a cost-leadership or differentiation approach, alongside with a preference about the scope of the market they are seeking to compete in. Porter argued that if a company tries to apply both would lead to inconsistency and the achievement of neither strategy. And as a result the company would be “stuck in the middle” (Porter, 1985). Since each selection should be supported and applied through relevant resource allocation decisions and other strategic actions. However, the authors have argued that SIA has effectively blended differentiation regarding market positioning and quality of offering, with a low-cost strategy regarding internal operational costs to achieve greater results. Indeed, both advanced quality and high levels of efficiency have been part of the aims and objectives of SIA since its creation, there purpose was to: offer the top-notch quality of customer service that is safe, reliable and economical; produce earnings that offer enough resources for investment and sufficient returns to shareholders; offer human resource management that intrigues, increase, inspire and retain employees who contribute to the company’s objectives; and exploit productivity and utilization of all resources, (Wirtz, Heracleous and Pangarkar 2008). The authors have used several of resources and different methodologies; the most important among them is the interviews with experts which significantly helped to draw their conclusions and outcomes. Additionally to examining database resources on SIA and the airline industry, authors have undertaken 18 in-depth interviews. The authors argued that the interview data have given them an opportunity to achieve a greater understanding of how SIA has applied its operations and internal processes to improve the main competency of cost-effective service excellence, attain sustainable competitive advantage and surpass other airlines for a long time. Authors have transcribed and analyzed these interviews to determine procedures and general themes and then they discussed them and drew the outcomes and conclusions. The selected case study ‘Singapore Airlines’ was researched for over seven years and it investigated the company’s strategy and competitiveness, specifically its organizational competencies which influenced the delivery of service excellence in a cost-effective manner. Then the article examined how these competencies are expanded and sustained by SIA’s operational configurations and functional strategies, examples of supportive sectors; the human resource planning and internal innovation developments. The authors collected both primary and secondary data in relation to the relevant areas. Authors started their article with defining the market, they referred to relevant market data to do this, and then they defined the company’s position in the market. However, whether they used the relevant data and whether they said on what basis they are positioning the company is the rational of this essay. When they defined the market they mentioned the different levels including socio-economic factors which can affect the aviation industry. They named factors such as increasing oil prices, the pandemic crisis, i.e. bird flu, the Asian tsunami, and rising terrorism and stated that these can negatively affect the profitability side. Based on IATA they said that in 2006, the global airlines industry suffered a net loss of $500m, or 0.1% of revenues, accumulating net losses of $42bn between 2001 and 2006 (International Air Transport Association, 2007). However, in 2007, the airline industry made a reasonable net profit of $5.6bn on revenues of $490bn, equivalent to less than 2% margin (International Air Transport Association, 2008). Following to the definition of the market the authors have tried to position SIA in the relevant industry environment. They mentioned the reasons why Singapore Airlines has constantly surpassed its competitors. According to the authors SIA has never posted a loss on an annual basis, and has successfully attained a considerable and higher return compared to its industry, and has received hundreds of industry awards for its service quality. The article justified this on the fact that SIA has successfully accomplished its exceptional performance by applying a dual strategy: differentiation in the course of service superiority and innovation, along with simultaneous cost leadership in its associated group. These are actually the main themes which were discussed in the article. It is important to note at this stage that the article has considerably provided a very strong argument that SIA succeeded when applied dual strategy. However, it did not contrast their arguments against other rival’s strategies. If they compare SIA with others, this could show the quality of using dual strategy. Also, it will present the weaknesses of other companies having not applied SIA’s distinguished strategy. Singapore Airlines is positioned as a finest carrier with high levels of innovation and outstanding levels of service. SIA applied a strategic choice of giving priority to profitability over size. The internal organizational practices, such as constant employee development and rigorous service design are central aspects of operational zing and sustaining this positioning and strategic choice. These themes were critically discussed throughout the article. With regard to corporate issue, SIA adopts a strategy of related diversification. The Singapore Airlines Group has 36 subsidiaries and associated companies (Singapore Airlines, 2008). According to (Doganis, 2006), through SIA’s strategy the use of information technology is a crucial element which helps to develop customer service, also SIA’s web site is one of the most superior and user friendly sites in the aviation industry, efficient use of IT can considerably decrease costs and improve service levels. In terms of business planning strategy, Singapore Airlines has managed to offer finest service to very demanding customers. The authors at this point argued that this aspect indicates to the achievement of ‘differentiation’. Therefore, they contrasted Porter’s recommendations that differentiation and cost leadership are mutually exclusive strategies. Authors therefore observed that Singapore Airlines applied dual strategy of differentiation and internal cost leadership. Any airline tries to apply service excellence and efficiency, but sometimes this is difficult to do. For example, Malaysian airlines has a very good service but the efficiency is not very well (Doganis, 2006). The article identified five essential components of SIA’s organizational activity arrangement, which are namely; rigorous service design and development, total innovation, profit consciousness ingrained in all employees, achieving strategic synergies, and developing staff holistically. 1) SIA awakes that to keep up its differentiation, it must sustain constant improvement, and is ready to rescind any schemes or services that no longer offer competitive differentiation or that could be offered in a different way. 2) Innovation is a main concern of SIA, “we just have to be better than our competitors in everything we do. Just a little bit better in everything. This allows us to make a small profit from the flight to enable us to innovate without pricing ourselves out of the market.’’ The previous is a statement of a senior manager at SIA (Yap Kim Wah). He further stated: ‘‘It is getting more and more difficult to differentiate ourselves because every airline is doing the same thing...the crucial fact is that we continue to say that we want to improve…that we have the will to do so. And that every time we reach a goal, we always say that we got to find a new mountain or hill to climb. You must be able to give up what you love’’. (Yap Kim Wah). Therefore, SIA is continuously tries to develop its innovation strategy to compete with other rival in the aviation industry. 3) SIA does not aim to be a largest company. But they want be the most profitable. SIA is claimed to have the second highest market capitalization in the airline industry internationally (after Southwest), despite the fact that its revenues are relatively modest compared to competitors such as the Air France–KLM Group, British Airways, or the Lufthansa Group. Therefore, a central objective of SIA is to make profit rather than being a huge company with high revenue but less profit. 4) SIA focuses to constantly produce skillful persons, all employees, no matter how higher are they, have to do a training and development plan with clear objectives. The well-known ‘‘Singapore Girl’’ go through training for 15 weeks, longer than any other airline and approximately twice as long as the industry average of 2 months. The required training includes not just functional skills such as food and beverage serving and safety training. It however, includes also range skills of personal interaction, personal poise, grooming and deportment, and emotional skills. 5) Dual strategy of differentiation and cost leadership (which is the main issue discussed in the article). Conclusion: Generally speaking the article is very rigorous in some aspects such as the exploration of SIA strategy in terms of corporate level and business level. In this regard the article offered excellent ranges of data and explanation based on different sources, material and methodologies. However, the article clearly has some weaknesses. Firstly, one must not ignore that fact that when the authors tried to position SIA in the market the omitted to provide the reader with relevant data from other rivals. They did not compare for example the profitability of SIA against other competitive rivals i.e. BA. Furthermore, one must note that the authors have not sufficiently explained SIA’s human resources development strategy which has greatly benefited the airline and helped to provide excellent services. On earlier article in 2008, they have broadly explained how important is the HRM for the increasing the efficiency, i.e. cost-effective service excellence. Previously, they also referred to the additional feature of human resource management practices and the resulting quality of human resources is that they are difficult for competitors to replicate, (Wirtz, Heracleous and Pangarkar 2008). More important is the rational of the article which is the excellent service and innovation. Authors could have done better if they explained and compared these themes against other rivals. They only provided information related to SIA. They tried to justify that by applying these methods and schemes SIA has achieved great results. However, it is a good idea to show the strengths of SIA against other rival’s weaknesses. They could have illustrated other rival’s plans which were applied but failed. Read More