Strategic Operation Management of Singapore Airlines - Case Study Example

STRATEGIC OPERATION MANAGEMENT OF SINGAPORE AIRLINES (Student Name) (Course No.) (Lecturer) (University) (Date) Introduction In the history of competition among the world’s largest airlines, Singapore Airline has managed to be listed among the best performing airlines for a long time. The airline business has been experiencing some challenges due to several factors, for instance, overcapacity, and commoditization of offerings, rivalry, and competition by airlines that offer low price cost carriers. The other calamities that have also hit the airline industries are macro level, and socio-economic factors like the increase in the oil prices, the eruption of diseases like bird flu, hurricanes, calamities like the Asian tsunami and terrorism have messed with Airline businesses (Wirtz, et al, 2008). Between the years 2001 and 2006, the airline industry has experienced several losses globally and it had been rated as one of industries that are performing poorly in the international market. Despite all the speculations in the Airline business, Singapore airlines have proved to have performed better despite the challenges that faced the industry to outdo their competitors. The success is evident since they have not recorded loss over the past decades. They have been awarded on many occasions on their good performance too. It is believed that the outstanding performance has been achieved through the implementation of the dual strategy (Lee, et al, 2011). The company has employed a system of core strategies that seek to mix excellent customer service with the high rates of profitability. All these factors have made Singapore airlines to be seen as the most admired company that comes from Asia and being ranked as one of the world’s leading airlines. This paper tries to examine how this airline has managed to stay on top through effectively implementing a dual plan and in the end, highlight the most important challenges that the company faces now and in future. Methodology The case study in Singapore is based on researches that have been carried over the past decade. The company’s strategy and competitiveness have been examined, specifically the competency of this Company that assist in the provision of services through a cost effective way. Apart from that, this study shows in details how the company’s abilities to beat their competitors are created and assisted by operational configurations of the Singapore Airlines plus the practical strategies, for instance, development strategies based on human resource development plus the processes of the internal innovation. Both primary plus secondary information that are connected to the issue were gathered (Wirtz, et al, 2008). Apart from studying the database on Singapore Airlines and the airline industry, over eighteen people were interviewed. The interview that was conducted was meant to help in gaining a deeper appreciation of how the company has organized its operations and internal processes to develop the main competency that offers a cost effective service that is excellent. This is believed that it would assist them in having an advantage over their competitors and to outperform the other airlines for a long time (Lee, et al, 2011). The interviews that were carried by the researchers have transcribed and fully analyzed the views to know and be familiar with the practices and the familiar themes that are outlined in this paper. Just like other businesses, at Singapore Airlines, the top managers, and the frontline staff members are the main part of the offering, and they try their best to make sure that maximum and excellent services are offered to the customers. According to the interview that was carried on the senior managers and the flights experienced and senior crew members, the study revealed that five key elements make up the strengths of the Airline’s human resource management. The five elements include strength selection and the processes of recruitment, training, and retraining of their employees extensively, they make sure that they form a successful service delivery teams, empowering the frontline staff members, and lastly they try as much as possible to motivate their employees and workers (Lee, et al, 2011). Singapore Airlines Strategies Singapore Airlines follows a strategically connected diversification at the corporate level. The group has thirty-six subsidiaries and associated companies which are directly connected to them. The group supplementary includes the airport terminal services at Singapore, engineering company, and the Airlines Cargo (Wirtz, et al, 2008). In most of these subsidiaries, they own over eighty percent shares and own a hundred percent shares at the Silk Air, at budget carrier Tiger Airways, they have about fifty percent shares and Virgin Atlantic too. These help in covering the key customer sections within the industry (Heracleous, et al, 2010). In the year two thousand, Singapore Airlines joined the Star Alliance which is one of the main airline alliances as part of their international strategy. Different groups that are owned by this company have been investing in other countries, for instance, China and India through strategic alliances with the local organizations in these countries (Tidd, et al, 2013). For better performance and to stay on top of their game, the company decided to embrace the use of information technology fully as their essential feature. They use IT both in enhancing their customer service and at the same time they used it in increasing their efficiency. Their website has been ranked among the most advanced websites and pleasant to users in the airline industry. The website offers a platform where their customers can confirm the Airline’s schedules, buy tickets, check into flight plus all their promotions during flights like bonuses and food offered during flights. As the customers visit the website of Singapore Airlines, they are allowed to order for food that they would desire to eat as they fly to their various destinations. Most of the airline's companies that use agents spend up to eight percent of their operating costs on these agents’ commissions and over five percent of the same operation costs on reservations and ticketing. To reduce these unnecessary costs the company decided to abolish the agents and replace their functions with online services (Heracleous, et al, 2012). It has proven that the use of IT can help in reducing costs and improve the level of services. The CEO who took over the management in the year 2003 decided to consider cost-cutting as one of the priorities on his agenda. He put more emphasis on cutting non-fuel costs by around twenty percent which was meant to be achieved within three years and at the same time outsourcing IT functions to IBM. By 2006, the company had increased the spread that existed between breakeven load factor and actual load factor up to 6.7% (Heracleous, et al, 2012). About strategy on a business level, the Airline Company has control over the distribution of their best services to their customers, thereby achieving differentiation at a level of costs that approach the ones consider as budget carriers (Tidd, et al, 2013).. Through this, the Porter’s idea of differentiation and cost leadership of being mutually exclusive strategies is challenged. According to the research carried on Singapore Airlines, it has proved that they support the dual strategy of differentiation and internal cost leadership, this is evident in the foundation of their competency in relation to cost effective service excellence. The strategy is protected by their unusual self-reinforcing system of methods and actions of the organization (Tidd, et al, 2013). Singapore’s Organizational Activity System The organizational has around five pillars through which they carry out their system, they include rigorous service and development, total innovation, profit consciousness that is ingrained on the employees, how to achieve strategic synergies connected through diversification and infrastructure and developing of staff holistically (Reason, 2016). Rigorous service and development A marketing scholar discovered twenty years ago that service of design and development were categorized through tests that were carried out unlike the structured process as it was seen in the case of manufacturing industries. There have been serious changes though in most organizations that dealt with service providing investments. This is not the case with Singapore Airlines Company; they view product design and development as a critical controlled attempt. When Singapore Airlines separated itself from the Malaysian Airlines in 1972, they started their commitment and to exceptional levels of service and innovation. It separated itself from the Malaysian airline after they realized that their rules were constraining (Tidd, et al, 2013). Before this company introduces any alteration, it is tested thoroughly by service development department that they created for this purpose. The departments have the responsibility of carrying out research, trials, plus other studies including assessing the reactions of their customers so as to be sure of the support of the innovation through the right procedures. The company not only believes that change is inevitable, but they say it is a way of life, and this is through underpinning the continuous innovation as a corporate culture (Santos-Vijande, et al, 2007). The company depends on the innovations for its differentiation and continuous improvement and be able to do away with programs and services that are no longer offering strength or success in the business. According to the senior manager of Singapore Airlines, they have decided to continue being innovative so as to be on top since every airline is trying to copy from them and try to beat them. One of the strategies under this docket is that the airline has realized that the competition that meat on their daily routine does not come from within the industry only. Their main aim, therefore, is to strive and be the best airline and be the best service provider in the market. To achieve this, the company has employed a comprehensive benchmarking to compete with their airline competitors and also to beat other service provider organizations (Tidd, et al, 2013). Total Innovation When coming up with innovations, they do not only aim at being far better, but they aim at being a little bit superior than their competitors. This means that they focus on total innovation on everything at all times. Significantly, this is also a way of ensuring cost-effective notion is supported (Santos-Vijande, et al, 2007). They only aim at improving their service a little bit so as not to have a running cost than their competitors which in the end leads to low profits or losses. The things that they research on are the issues that customers need to have service on and helps them meet their lifestyle (Santos-Vijande, et al, 2007). Profit consciousness Despite the fact that the company focuses on providing excellence services and being innovative, their managers plus the senior staff members are also concerned about the profit they make after embracing the innovations. According to the manager, he believes that if the make losses then the company will be closed down (Teo, et al, 2006). Their mission is not to be the largest airline, but their vision is to be the most profitable airline in the whole world (Lee, et al, 2011). This has made to be the second highest market capitalization in the industry of airline internationally. Achieving strategic synergies by improving the infrastructure Singapore Airlines makes use of all the connected diversification to gather cost synergies. Similarly, they try to manage the quality (Teo, et al, 2006). The airport terminal service subsidiaries, for instance, offer a lot of grounds to the Changi Airport. The ways their airports are managed have lured most passengers who travel to Australia and other parts of the world to pass through Changi Airport through Singapore Airlines. The airline believes that best infrastructure attracts passengers and it is good for business, so they put a lot of emphasis on the development of the infrastructure. Developing staff holistically The top most managers believe that training with them is the best one can ever have. It does not support the position that one holds in management, but everyone must have a clear development goal while undergoing training with them for fifteen weeks which is said to be longer than other airlines that take at most two months to train their staff members. The training does not include only functional skills, but it also includes personal skills like the best ways to interact with people. The staff members are trained on the best ways to manage their emotions, especially when dealing with demanding passengers (Teo, et al, 2006). Apart from the training, Singapore Airlines has also come up with crew members who are responsible for organizing plays to entertain passengers. They also participate in charity work where they visit the locals and the less privileged as a way of giving back to the community. Conclusion Singapore Airlines has proved beyond reasonable doubt that they try to achieve success as time goes. Their efficiency, cost effectiveness, and service delivery to the clients and passengers have led to their big achievement in the airline industry. All the way from the past, their industry has been identified with good strategic operation management that is different from other airlines, something that has, made them to survive in the unforgiving environment and to stay on top. Their success has been linked to the skilled and experienced managers that the company has. Another thing that has attributed to their success is the way the corporate culture that has been embedded in their operational strategies. They have a way of balancing their innovations through the assistance from the service development department which helps in managing the performance productivity, the benefits they get, the cost they incur in the process of delivering their services and the benefits that they anticipate from their customers. This is a flexible company that can adapt to new changes for their benefit, for instance, the use of the website to reduce the cost of hiring agents. Recommendations Due to the competitions and the threats that company faces, it would be necessary for the company to exploit their government connections plus their brand and good reputation to explore and establish new markets in countries that might seem to have a high demand for their services. Due to the company’s ability to flexibly operate under financial crisis, they should start considering diverting to low profitability routes to those nations that are experiencing financial crisis currently (Yeo, et al, 2009). Chances of mixing strategies are high, but if the company applies the objectives of managing profitability by continuous to use the strategy of service excellence, cost leadership strategy. It would, therefore, appropriate to recommend that the airlines to use cost-cutting measures to lower down the fleet size. To do this, the company should consider selling their excess aircraft to other low-cost carriers that are said to be expanding at the moment. They should also take into consideration on the training their staff members on how to bond their relationship with the passengers through the creation of personalizing services that help in differentiating Singapore Airlines with other competitors (Tsui, et al, 2007). As it has been witnessed Currently, the speed of doing business globally is becoming more technical day by day this is because of the advancement in technology, it would be therefore advisable for Singapore Airlines Company to use its flexibility and ability to adapt to harsh conditions that bring the other airlines down. Ability to adapt to changes will enable the company to continue staying on top of the game (Tsui, et al, 2007). Lastly, through the application of strong Review and Develop resources Singapore Airlines should consider it to help in a marketing campaign by using the internet to help in reducing the marketing cost. References Heracleous, L. and Wirtz, J., 2010. Singapore Airlines’ balancing act. Harvard Business Review, 88(7/8), pp.145-149. Heracleous, L. and Wirtz, J., 2012. Strategy and organisation at Singapore Airlines: achieving sustainable advantage through dual strategy. In Energy, Transport, & the Environment (pp. 479-493). Springer London. Lee, D.Y. and Tsang, E.W., 2011. The effects of entrepreneurial personality, background and network activities on venture growth. Journal of management studies, 38(4), pp.583-602. Reason, J., 2016. Managing the risks of organizational accidents. Routledge. Santos-Vijande, M.L. and Álvarez-González, L.I., 2007. Innovativeness and organizational innovation in total quality oriented firms: The moderating role of market turbulence. Technovation, 27(9), pp.514-532. Teo, T.S., Devadoss, P. and Pan, S.L., 2006. Towards a holistic perspective of customer relationship management (CRM) implementation: A case study of the Housing and Development Board, Singapore. Decision support systems, 42(3), pp.1613-1627. Tidd, J. and Hull, F.M. eds., 2013. Service Innovation: Organizational responses to technological opportunities & market imperatives (Vol. 9). World Scientific. Tsui, A.S., Nifadkar, S.S. and Ou, A.Y., 2007. Cross-national, cross-cultural organizational behavior research: Advances, gaps, and recommendations. Journal of management, 33(3), pp.426-478. Wirtz, J., Heracleous, L. and Pangarkar, N., 2008. Managing human resources for service excellence and cost effectiveness at Singapore Airlines. Managing Service Quality: An International Journal, 18(1), pp.4-19. Yeo, S.L. and Sriramesh, K., 2009. Adding value to organizations: An examination of the role of senior public relations practitioners in Singapore. Public relations review, 35(4), pp.422-425. Read More