Singapore Airlines Strategic Analysis - Processes and Tools - Case Study Example

Singapore Airlines Strategic analysis is the use of business tools like SWOT (strength, weakness, opportunities and threats), PEST (and value chain of a business with the aim of understanding the business. It helps select the best way for businesses reach a desired goal using available resources. Zanoni (2011) states strategic analysis as the use of qualitative and quantitative analysis to understand resources available to a business and their competitive contexts. For the past four decades, Singapore Airlines have received a stellar reputation in an extremely competitive aviation industry through its high quality services and domination of business-travel areas. As one of the airlines in Asia they implement cost effective operators for their business. External analysis is reviewing elements externally affecting a company. Its main focus is on threats, strategic uncertainties and choices, trends and opportunities faced by a business to reach a desired goal. (World Economic Forum Report) shows Singapore as the best environment for business in the world with its attractive and competitive world class property. Therefore, Singapore has attracted more corporations locally, internationally and globally. Kotler (2010) states that the least external change could greatly impact a corporations development and existence. The aviation industry has been proved to be the most affected sector from external changes. External analysis involves politics, economics, socio-cultural, technology and legal matters. Political factors involve government policies generating economic growth of the country and goods and services the government can provide its people. Singapore has open policies that provide a friendly environment for both local and international corporations. The government of Singapore is Singapore Airlines main shareholder, therefore, the Airlines has always received government support from fuel prices to tax (Viborg, 2005) The countrys economic health determines company operations as exchange rates, the economic crisis, tax legislation and tariffs (Kotler, 2010). It impacts both customer needs and the relationship between suppliers and partners of the company all over the world. The last time fuel prices were hiked aviation businesses were the most hit and Singapore Airlines was not exceptional. Offering services while still maintaining competitive prices became very difficult. (Viborg, 2005) Culture can also affect a business in that peoples beliefs, opinions, values and lifestyle must be considered. Singapore being a multi-cultural state with Malaysians, Indians and Chinese, must consider all cultures before building brands and when performing business operations. Technological factors also have the potential to affect businesses. Aaker, D, A (2005) argues that technological factors can produce opportunities or threats to people in a position to benefit. With the law of natural environment outlook, consumer and fair trading, Singapore has been able to guarantee its regulation and create many development advantages. Therefore, Singapore Airlines need to know changes made in their laws to ensure their strategies in marketing comply with carrier reliability and safety of passengers. Porters five forces model comprises of threat posed by substitution and entries, buyers and suppliers’ power and competitive rivalry. Threat of entry shows entry on the influence of the market on a competition degree depends on the barriers to new entrants (Kotler, 2001). Due to the increased number of foreign investors in Singapore, it will need to increase its differences with potential competitors from airlines all over the world through excellent qualities in the market leaders. Threat of substitutes refers threat posed when managers put too much focus on their competition and forget to meet customer demand (Kotler, 2001). Substitutes are services or products that provide similar benefits to products and services of the industry through a different process. They need to focus strategic marketing of their neighboring countries to provide better services promoting customer satisfaction. Buyers can have a high power of bargaining making suppliers unable to make profits (Henk & Waalewijn, 1999). As Singapore has many airlines, it offers customers with a variety of choices, therefore, Singapore Airlines need to find ways of giving their customers attractive and quality services that will leave them no choice but to prefer Singapore Airlines. Singapore has got so many suppliers in the aviation industry that they run a threat on competitive capacity. In order for Singapore Airlines to eliminate this threat, they have partnerships with other airlines and suppliers to provide the airbus, materials and fuel. Competitive rivalry is an organizations provision of similar service and products to the same market (Kotler, 2001). The framework of Singapore Airlines VRIO has been successful in setting unique characteristics like replacement of fleets more frequently than its competitors. Its fleet is young and full of energy operating at much lower costs. SIA rarity is in their cost effective services that are difficult for other corporations to adopt. The cost effective service is maintained and combined by the airlines business strategies. Strategies in management resources is maintaining and creating joint ventures and subsidiaries help SIA to improve its services and standard in management. Furthermore, SIA as the leading airline industry in Singapore, it continues to improve its modern fleets through introducing hot meals, free non-alcoholic and alcoholic beverages, hot uniquely and patented scented towels and entertainment systems like video-on-demand on all cabins. In addition, the airline has employees branded Singapore girls who symbolize a charm, gentleness, grace and courtesy. The brand was a unique approach by the airline (Chan, 2000). SIAs excellence in cost effective services, as well as its reputation, are contributed by its resources, relationship with its many suppliers and strategies. For instance, the airlines reputation and strong financial resources promote their economic scale advantage to improve their fleets and avoid fluctuation of fuel prices. It is very difficult to imitate their process. The core competency of SIA is built by their excellence in cost effective as service development and design, profit, total innovation and consciousness of cost adopted by its employees, staff development and strategies through world class infrastructure and diversification. Below is a VRIO diagram of Singapore Airlines showing all the elements of VRIO (Value, Rarity, Imitate and Organized)? Starting with the strengths of Singapore Airlines, the Singapore government strongly backs the airlines making them have a very strong performance on the financial ground. The airlines have also been considered one of the top airlines to capitalize on market and passengers it carries. In addition, it is famous for its excellence in providing cost effective services, hospitality and great customer service. It is also the first airline to provide hot meals and non-alcoholic as well as alcoholic beverages to its customers. The airline has one of the youngest fleet of aircrafts in Asia thus increasing frequent flight plans. Their brand value, Singapore girls, is unique and graceful and adopted all over the world by other companies especially the airlines. Employees working at SIA are very productive seeing as to how the airline is turning in profits. Asia is a wide market that could be used by SIA to serve more passengers through an expansion. Weaknesses of a company are viewed as its disadvantage points related to its competition. SIA weaknesses are like its serious reliance on international traffic, less market share due to increased competition and expensive cost of travel. Also, there was a destruction of relationship between labor union and management resulting from minimum sizing and decreased wages Opportunities of SIA that could serve as an external advantage for the airline are like introducing a brand new fleet to promote confidence from customers. The airline could also benefit from increasing its destinations internationally to leverage its image. They can explore the opportunity of expanding the airline across India, the Middle East and China. Finally, the airline can offer intensive training to its employees to ensure suitability and experience. Threats facing Singapore Airlines are increased competition, going for low cost flight, increased ticket price due to increase in oil prices and raised fuel costs. (Singapore Airlines) An organization requires performing a successful execution of strategies to increase its profitability. It can be achieved through elimination silos in the department level, utilizing indicators aligning with the strategy and promoting leadership growth at all levels. Strategies for customer growth are growth of core business, growth through sub-segmentation of customers and adjacent growth opportunities. Senior leaders start with considering potential for growth within the core of the business and opportunities and create propositions for customer groups that are under served. To identify growth opportunities that are profitable, the core business is first evaluated. The core business is customers, products, services and geographical areas generating profits. Overall performance of the core business is then evaluated. It involves measuring profitability, rate at which revenue grows and reputation of the organization has with its main customers. Certain questions are raised related to directions of key indicators, core customer identification, organizations competitive market, threats facing the organization and attractive growth opportunities within the business. Another strategy is based on the organizations current customers. It involves propositions of high impact value for new sub-segments of customers. The process needs to be created to help specialists and managers gain new ideas to attract more customers. It is the first step in identifying customers who have been under-served. Significant elements for this process are customer sub-segmentation based on new ideas, patterns of buying and revenue and profit contributions. Creating propositions that are innovative and have a high impact should be done in order to attract required sub-segments. The propositions will need to be tested in the field and scales made based on the test results. In order to increase profitability, SIA discontinued nonstop flights to the US, Los Angeles and Newark. It operated its last non-stop flight to Los Angeles in 20th October 2013 and 23rd November 2013 to Newark. The airlines fleet of five all-premium A340-500s was phased out. Since the end of the world financial crisis, SIAs load factors on non-stop flights have been quite reasonable. However, it is almost impossible to make profits due to reduction of proportions and frequencies responding to the sudden decrease in demand. It is believed that the elimination of flights and a fleet phase guarantees an improvement on profitability of the airlines operations on a long haul (Reading, 2002). SIA stands to lose its passengers who board flights to LA and Newark to other airlines as the airlines one-stop flight is similar to other US and Asian carriers. However, loss of the flights can be mitigated by its flagship A380. In January of 2012, SIA started using A380 on a daily basis for Singapore-Frankfurt-New York JFK flights while upgrades were done on its Singapore-Tokyo-Los Angeles daily service. The flight was upgraded to A380. Another strategy SIA is using to increase profitability is expansion on its capacity to the Asian-Pacific market through the addition of five weekly flights to Japan by end March of 2013. Also, they have increased their flights to Copenhagen and are considering introducing new flights to Stockholm with their joint partner Scandinavian Airlines which does not carry out operations to Singapore. SIA is also considering a reduction of costs after an improvement has been made on the long haul customers and cargo markets. In January 2013, the airline made an announcement stating its release of 4% of its pilots on fixed-term contracts. Over the past years, SIA has had more pilots due to capacity reduction occuring during the world financial crisis. Strategic brand positioning is another strategic option that increases an organizations competitive nature and profits (Sengupta, 2005). An example is SIAs creation of a new low cost airline that flew people over long distances. The new airline made a plan to reach its target market before selling their first ticket. First, they named the brand (Scoot) which was picked to represent a quirky but memorable brand name. Secondly, yellow and white was chosen as their brand color as they felt bright, happy and vivid. Before selling tickets, the new airline used the social media (Facebook, twitter and Instagram) as a means of engaging with the target market. By the time the first flight was taking off, Scoot had 70,000 Facebook followers. They consulted with other airlines about the brand name, tag line and what products to offer its customers on board. Communicating with their audience created an emotional connection between the brand and target audience. Strategic positioning of the brand helped SIA become more competitive while preserving its brand status. Although it is unlikely for returns to come anytime in the future, the launch of Scoot will help restore SIA; s growth. The strategy was a bid to take part in the rapid growth of occurring in the lower end market. Scoot was launched in June of 2012 and now operates four 777 fleets with an additional aircraft on its way in 2013. The best strategic option SIA used was the branding of its low cost carrier. By 2012, people travelled frequently due to the airlines new budget and increased income levels. 30% of passengers flew in and outside Singapore and flights took up 52% in Southeast Asia. It followed the no-frills budget airlines. Airlines carried more passengers but Singapore Airlines as well as other full-service carriers faced increasing pressure due to competitive pricing. SIA was faced with a dilemma. On one hand, new airlines that provided low cost services threatened to attract SIAs passengers who were price sensitive. On the other hand, Singapore Airline Group, SIAs parent company, saw the dilemma as a great opportunity for new developments. SAG wanted to introduce longer flights to further destinations for its price sensitive clients but the idea was not implemented. Because SIA had a stellar reputation on providing excellent services, the idea was not an option. Cutting costs would, therefore, lead to disastrous results as SIA was considered to be a premium brand. Alternatively, if SAG did not take any actions, they would face further encroachment of competition that offer low cost services for their medium- to-long-haul operations. The airline would implement a different model of business, target customers and service. The airline was launched within 12 months. The biggest problem the airline faced during its launching was the development of the airlines brand and identity. They had to distinguish the brand from other airlines even before selling the first ticket. A strategy to differentiate the brand name from other airlines was created so as not to contaminate the SIA brand. SIA brand had grown tremendously over the 40 years it had been in service. SIA is best known for providing an excellent and effective customer service and hospitality. The brand Singapore girls” that comprises of employees symbolizing the unique, courteous, gentle and graceful qualities of the airline is famous with their trademark beautiful sarongs. They are among the best airlines in Asia implementing cost effective operators for their business. They have shown brilliance in using business models as strategies and SWOT analysis. Their core competency is the main element that helps the airline make profits and increase its sales. SIAs excellence in cost effective services, as well as its reputation, are contributed by its resources, relationship with its many suppliers and strategies. The airline might have suffered during the global financial crisis but it has proved to be tough when waiting out the storm by introducing new development. REFERENCES Beretta, Z. A. (2011). Strategic analysis: Processes and tools. New York: Routledge. Liabotis, B (2007). Three strategies for achieving and sustaining growth. World Economic Forum Report Reading, C (2002). Strategic Business Planning: a dynamic system for improving performance and competitive advantage Kotler, P., & Kotler, P. (2010). Marketing. Frenchs Forest, N.S.W: Pearson Australia. Kotler, P., & Armstrong, G. (1991). Principles of marketing. Englewood Cliffs, N.J: Prentice Hall. Andersen, K. V. (2005). E-government and Public Sector Process Rebuilding. New York: Springer Science + Business Media, Inc. Aaker, D. A. (2005). Strategic market management. Hoboken, NJ: John Wiley. Lynch, R. L. (2006). Corporate strategy. Harlow, England: FT/Prentice Hall. Fadare, S. O., Adesanya, D. A., & Obafemi Awolowo University. (2009). Sustainable environment. Ile-Ife, Nigeria: Obafemi Awolowo University Press. Duncan & Lee (2012) Singapore Airlines. S.W.O.T analysis of Singapore Airlines Sengupta, S. (2005). Brand positioning: Strategies for competitive advantage. New Delhi: Tata McGraw-Hill. Swaan, A. H., & Waalewijn, P. (1999). A knowledge base representing Porters five forces model. Rotterdam: RIBES, Rotterdam Institute for Business Economic Studies. Read More