Dual Strategy of Singapore Airlines - Research Paper Example

?Singapore Airlines’ Dual Strategy An Analysis of Organizational Change Introduction The Case, Airline Industry and Singapore Airline Aviation industry is one of the booming industries in the international market despite its greatest downturns. Such factors to industry downfall are oil price hikes, rising concerns on communicable diseases, the tsunami that hits Asia in 2004 and the increasing terrorist attacks (Heracleous & Wirtz, 2009). In an article of CAPA Centre for Aviation, IATA forecasted a decrease in the airline industry to $3 billion from the previous $7.9 billion in 2012 (“IATA Forecasts Industry,” 2012). Successive oil price increase over the years affected such forecast as one of industries with poor performance based from the Fortune Global 500 (Heracleous & Wirtz, 2009). However, this does not change the fact that airline companies exerts much effort to minimize cost and maximize profits in return. Being in the business, specifically in the airline industry, requires constant modification and innovation to answer clients’ needs and wants. As the corporate world are in the competitive market of introducing innovation, the challenge to stabilize while exceeding customer expectation can bring about effective strategies at the management level. Porter (1998) believes that even if the industry is not performing well, any company can have higher returns just by applying the right competitive strategy. Competitive advantage mainly has two kinds: “low cost or differentiation” (Porter, 1998). For him, if “cost leadership” applies, differentiation is not anymore applicable. However, both can be applicable at the same time to Singapore Airlines (SIA). The airline offers an exceptional customer service and establishes a strong customer satisfaction while minimizing their costs incurred. In fact, SIA has been constantly leading the industry, leaving behind its competitors for the past thirty years (Heracleous, Wirtz & Johnston, 2004). Moreover, it has constantly making higher profits despite the fact that air travel is on the verge of declining. SIA on Industry Challenges The airline industry confronts the challenges on “globalization, maintaining high standards of ethics and social responsibility, responding rapidly to environmental changes and customer needs, managing the digital workplace and supporting diversity” (Daft, Murphy & Willmott, 2010). Consequently, to offer the best service would mean providing the customers the latest trend in technology. Singapore Airlines was the first airline company to offer telephone service onboard for their business and first class customers. Also, SIA is exerting efforts in constant innovation such as “full-size space bed and onboard email and internet services” (Heracleous, Wirtz & Johnston, 2004). Known for its service orientation, the company ensures customer satisfaction as they deliver quality service, as opposed to their competitors. According to Kaufman (n.d.), SIA is continuously training their employees, especially those who are always interacting with customers. It centers on “career development,” organizational communications among employees, “consistent external communications,” strong attachments to customers, constant innovations, “professionalism and profits” (Kaufman, n.d.). Singapore Airlines constantly does these things to establish an exceptionally strong customer satisfaction by exceeding the customer expectations. This paper is a study of how Singapore Airlines outperformed other competitors and what are the things SIA did in providing excellent customer service cost-effectively. This is also an analysis of how organizational changes affect the firm and their customers. Analysis The Issues and the People Involved For firms to cope with current challenges, companies need to undergo organizational changes thoroughly. According to Kotter (2007), the steps to organizational transformation are: establishment of “sense of urgency,” formation of strong leading coalition, creation and communication of vision, encouraging others to participate, “planning and creating short-term wins,” improvement consolidation, and “institutionalizing new approaches.” This process arises when a firm recognizes the need for total innovation to provide better customer service. In most cases, organizational changes provoke environmental or external forces (Beerel, 2009). In the case of Singapore Airlines, doing the above-mentioned phases is not enough. Organizational change is particularly beneficial, but this requires an extremely high cost. Change is always a risk for firms do not know what the results will be. For SIA, competitive advantage is the key to their success. SIA tends to focus more on satisfying their customers, while catering their needs beforehand (Wirtz & Johnston, 2003). Buying a service is remarkably different from buying a product because services depend on people while producing a product depends mainly on machine (Wirtz & Johnston, 2003). Obviously, the executives and managers are responsible for leading these innovations. However, they cannot do it by themselves for they needed people to carry out their command overseeing the results. Drivers of Change and Actions taken to address the Issues Porter’s five forces are the following: “threats of new entrants to the industry, threat of substitute products, bargaining power of customers, suppliers, as well as the rivalry among current competitors” (Stonehouse, Campbell, Hamill & Purdie, 2004). External forces are those that are beyond the control of the company which could lead to change. For example, new entrants to the industry would mean additional competitors. On the other hand, internal forces are those that happen within the organization such as conflicts between employees. Since internal forces are within the control of the organization, these should be prioritized. Building a strong relationship within the company is tremendously valuable since it is where everything starts. Organizations must take into account how these factors affect them to address the issues utilizing the approaches to innovation. For external forces like the one mentioned, the company should make necessary changes in the services offered to exceed customer expectations and earn more profits. Looking on the SIA perspective, career development of the employees are of equal importance to the assurance of customer satisfaction. To SIA, the customers are buying the totality of the service but do not mean to be costly. They have to find ways to serve the customers with the best of everything without increasing the price too much to make a small profit. These would require them to look for possible ways on key innovations regularly. Arguments and Suggestions SIA on Changes Singapore Airlines delivers the best service to “demanding customers” (differentiation) without being too costly (Heracleous & Wirtz, 2009). However, by offering premium quality services, substantial innovations, development of staff and building strong branding to attain differentiation may require higher cost than the usual. SIA promotes centralized and decentralized innovation and regarded as the industry’s leading innovator (Heracleous & Wirtz, 2009). Although conflicts may arise between the central and local innovation, Singapore Airlines promotes both. Its Product Innovation Department adheres to an exceedingly complex yet structured method of identifying an opportunity, evaluating the concept, designing, developing, and launching (Heracleous & Wirtz, 2009). Because of PID, SIA was able to provide non-stop business-class service flights from Singapore to the business-centered city of New York. Furthermore, the company believes that if SIA wanted to stay ahead of the others, the employees must innovate. SIA believes that services depend on their people so they generate financial resources in providing adequate preparation to their employees. They train their staff on quality services that result to customers’ satisfaction and cost reduction “by minimizing turnover” (Heracleous & Wirtz, 2009). Initiative and common sense are the principal requirements that crews must have especially in serving food, while on board. SIA is earning higher returns because they have successfully minimized turnovers and losses. Thus, the causes of changes in relation to the theory may create more customer value, satisfaction, and loyalty as this can be gauged to measure potential market in a service-oriented firm like the SIA. The approach of product innovation, alongside with employee motivation, does not only suggest cost-effectiveness, but the whole process guarantees that innovations addressed the real-time issues. Change Theories, Outcomes and Necessary Improvement Acknowledging the necessity to revolutionize is the main driver of organizational changes. Without it, most organization would remain as is for its entire existence and might only exist for a limited period. Change is obviously the ultimate antagonist of all businesses, but companies should learn to adapt to change quickly as possible. Lewin developed three stages before a change takes part in the organizational system: “unfreezing, movement and freezing” (as cited in Kritsonis, 2005). First is to unfreeze the equilibrium condition to overcome resistance and conformity by motivating the employees to change. SIA was able to address employees and customers’ feedback to allow the flow of new ideas and suggestions. Through this, the company solicits positive and negative comments regarding their services that will facilitate necessary changes. Second step is to change the desired system to a whole new equilibrium level. Singapore Airlines provides educational programs to their employees to accommodate external changes, thus driving them to participate in the organizational change. Final stage is to refreeze the newly established status quo so that employees need not retract from the former. This process helps a lot in managing change within the organization. However, change management also differs from one industry to another. If constant innovation is what businesses have to do, change theories have also evolved. What may be true to one company now may not be true to other company in the future. Organizations, aside from developing strategies to outperform competitors, should also design new possible ways in carrying out the desired results. Conclusion Differentiation and cost leadership, as proven by SIA, can be applied at the same time with the right timing and approach. Constant innovation, carrying out differentiation, strengthens productivity in the industry. As the customer needs and demands are insatiable, so as the challenge to address these necessities are of paramount consideration that must be strictly enforced within the organization. Constant improvement in the totality is the secret of Singapore Airlines to be on the top of the airline industry. The company focuses more on the long-term results than the short-term wins. Environmental forces often cause the organization to adopt changes, where organizations conform to some procedures in achieving the needed change. Both Lewin’s change model and Kotter’s eight-step organizational transformation are particularly helpful to organizations in their change management since all of them undergo changes. However, to adopt any of the existing change theories or to develop one of their own that can address their concerns primarily depends on the firm’s decision-making strategy. References Beerel, A. (2009). Leadership and change management. London: SAGE Publications Ltd. Daft, R., Murphy, J., & Willmott, H. (2010). Organization theory and design. Mason, OH: South-Western Cengage Learning. Heracleous, L., & Wirtz, J. (2009). Strategy and organization at Singapore Airlines: Achieving sustainable advantage through dual strategy. Journal of Air Transport Management, 15, 275-279. Heracleous, L., Wirtz, J., & Johnston, R. (2004). Cost effective service excellence: Lessons from Singapore Airlines. Business Strategy Review, 15 (1), 33-38. IATA forecasts industry net profit to fall from USD7.9 billion to USD3 billion in 2012 (2012, June 12). Retrieved from http://www.centreforaviation.com/news/iata-forecasts-industry- net-profit-to-fall-from-usd79-billion-to-usd3-billion-in-2012-159346 Kaufman, R. (n.d.). How does Singapore Airlines fly so high? Customer Service Professionals. Retrieved from http://customerservicemanager.com/how-does-singapore- airlines-fly-so-high.htm Kritsonis, A. (2005). Comparison of change theories. International Journal of Scholarly Academic Intellectual Diversity, 8 (1), 1-7. Kotter, J. (2007). Leading change: Why transformation efforts fail. Harvard Business Review, 83 (1), 96-102. Porter, M. E. (1998). Competitive advantage: Creating and sustaining superior performance. New York, NY: The Free Press. Stonehouse, G., Campbell, D., Hamill, J., & Purdie, T. (2004). Global and transnational business: Strategy and management (2nd ed.). West Sussex: John Wiley & Sons Ltd. Wirtz, J., & Johnston, R. (2003). Singapore Airlines: What it takes to sustain service excellence - a senior management perspective. Managing Service Quality, 13 (1), 10-19. Read More