Marketing Management and Strategy: SIA Group of Airlines i.e. SIA airline, Silk Air and Tiger Airway - Essay Example

Question Given today's global marketing and economical environment, critically evaluate the product/market marketing strategy available to SIA Group of Airlines i.e. SIA airline, Silk Air and Tiger Airway. Your answer should include an analysis of each strategy group and desired positioning for each of the above airlines Answer 1 Singapore airlines: It is the national airline of Singapore. It operates a hub at Singapore Changi Airport and has a strong presence in the Southeast Asia, East Asia, South Asia, and "Kangaroo Route" markets. The company also operates trans-Pacific flights. It flies to 66 destinations across the world and has evolved into one of the most respected travel brands in the world. Segmentation and positioning: SIA targets the upper strata of the income group and is positioned as a luxury carrier. It has four variations of first class cabins, a business class and an economy class. It offers world gourmet cuisines in all classes and is known for quality customer service. It is one of the most respected travel brands around the world. Global environment - Competition: SIA faces competition from Cathay pacific and Japan airlines. In certain sectors it also faces competition from Malaysian airlines which otherwise is an associate airline. Marketing strategy: There is a gamut of initiatives that SIA has taken to strengthen its position as a global player. SIA has built the image of providing excellent quality and customer service. It has entered into alliance with other airlines like Virgin Atlantic, Malaysian airlines, Royal Brunei to provide better flying services to its customers. SIA as a group has also ventured in low cost flights with tiger airways and short haul destination with Silkair. The frequent flyer program of SIA provides world class facilities and access to lounges. It also has strategic tie-ups in different countries offering special discounts on presentation of the boarding pass. The "Singapore Girl" (way of addressing the flight stewardess dressed in traditional attire), is known worldwide and has a brand image of quality and good customer service. In an attempt to give the best cost to the customer, SIA practices strict cost control. Silkair Silkair, a wholly owned subsidiary of SIA group was formed in 1989 by the name of Tradewinds. It was targeted at the holiday traveler to SE exotic destinations. In 1992, the carrier was renamed Silkair. This marked its evolution from a leisure airline to one who also caters to the business traveler. To discuss the in flight experience, there are two classes of cabins available on all SilkAir flights - business class and economy class. The airline offers Oriental and Western menus which emphasize on flavors of the region. For in-flight entertainment SilkAir offers its passengers a handheld device called the DigEplayer. Interested passengers traveling in economy class on selected flights may rent the DigEplayer on board for a particular fee. DigEplayers are complimentary for business-class passengers flying on selected routes. Segmentation and positioning: Silkair, is not a low cost carrier, it is a wing of Singapore airlines which operates within a specific geographic area. It prefers to be addressed as a value carrier. The group identified a new segment of holiday travelers from Singapore to other SE Asian countries. The destinations are usually short haul. Thus a dedicated carrier was launched to serve this market. This is a part of SIA group's global strategy where the decision was made to service new sectors. SIA followed the global strategy of aggregate segmentation, segmenting the customers on the basis of cosmopolitanism (Kotabe, Helsen, 2004). The initial positioning, "The regional wing of Singapore airlines", took advantage of the already established credibility of SIA. Once established, it adopted a new positioning, "Where the world unwinds", directly targeting its segment of holiday travelers. Global environment - Competition: Although it is not a low cost carrier, it faces competition from most of the low cost carriers by virtue of geographical confinement. To name a few: Air Asia, Pacific Blue, etc Marketing strategy: Silk air like SIA has undertaken lot of initiatives to provide quality service to the consumer. In terms of partnerships and alliances, it is partners with Singapore airlines, octopus travels, Tradewinds, Singapore tourism board and AIG. (Singaporeair.com). Through these alliances, it offers an array of services and runs promotional activities for an enhanced customer experience. It offers loyalty program "Krisflyer" and extends benefits including access to lounge. It not only ensures a delighted customer, it also brings in frequent business. The Value added services of the program are enticing. A key strategy for the airline is to invest more in the product than to cut back to cope with rival carriers. The premise was to offer customers an enhanced product leading to a refurbishment of cabins, new cabin crew uniforms and quality catering (Natalie Chen) Promotional fares to entice the business traveler are offered. Tie-ups with hotels for the holiday traveler to help them get better deals. Updated flights and services for constant customer delight. Tiger Airways: It is Asia Pacific's true low fare airline. It offers passengers not only one of the lowest possible airfares in the market, but safe, reliable and convenient point-to-point air travel as well. Tiger Airways took to the skies from Singapore in September 2004. Within three years of operation, Tiger Airways now flies to more than 25 destinations across 9 countries in Asia-Pacific on a fleet of brand new Airbus A320 aircraft. Segmentation and positioning: It serves the cost conscious customer and is positioned as a low cost carrier. Competition: Air Asia, Jet star, Qantas, Pacific Blue Marketing strategy: Tiger airways has a very customer centric approach and operates on customer -focused core strategies: Market stimulation - creating opportunities for new travelers and empowering budget-conscious people to fly more often by making travel affordable with its consistent low fares. Stringent cost controls through its operations so that it can keep its fares consistently low for travelers. Capacity utilization - maximizing the number of sectors served by the aircraft per day with efficient air traffic planning. Online Internet sales to help keep sales and distribution costs low. 85% of flights are booked direct at www.tigerairways.com. Ticket-less travel to save on print and distribution of paper tickets. Removing frills so passengers only pay for what they want. Excess luggage, meals and entertainment onboard flights are all available at affordable prices should passengers want them. New aircraft provides new technology with greater fuel efficiency and less maintenance, plus passengers enjoy a more comfortable ride. Operating at budget terminals and secondary airports to reduce operating costs. Short aircraft turn-around to keep ground time low and flying time high. This means more seats can be sold on more flights for passengers to enjoy more cheap fares, and Outsourcing aircraft maintenance to reputable companies such as Singapore Airlines Engineering Company to ensure high safety standards are achieved at competitive rates. In addition, Tiger Airways has teamed up with various partners to provide great hotel deals and budget accommodation, car rentals, and even travel insurance to passengers - all available online at www.tigerairways.com. (tigerairways.com) Conclusion and recommendations: SIA group of airlines has well positioned its three products so that they do not cannibalize each other. Targeting different segments and sticking to the goal of quality service has given the group an edge over the others. It offers the mix required for a successful brand. Reference: 1. Kotabe,M. Helsen,K.(2004) Global marketing management . 3rd edition.India. WSE Wiley 2. Natalie chen (2006). Silkair yields dividends from 'simple but well executed' strategy.travelweekly.[Internet] retrieved on 22 Nov.Available. 3. Wikipedia contributors, 'Singapore Airlines', Wikipedia, The Free Encyclopedia, [internet] retrieved on 23 Nov 2008 4. Wikipedia contributors, 'SilkAir', Wikipedia, The Free Encyclopedia,[internet] retrieved on 23 Nov 2008 5. www.singaporeair.com. [internet] retrieved on 22 Nov 2008. Available. 6. www.tigerairways.com [internet] retrieved on 22 Nov 2008. Available 7. www.silkair.com [internet] retrieved on 22 nov 2008. Available www.silkair.com Question 2 Critically evaluate and discuss Porter's Generic Competitive Strategies with reference to an example of a firm / brand for each strategy. Answer 2 In 1980 classic, Competitive Strategy: Techniques for Analyzing Industries and Competitors, Porter simplifies the scheme by reducing it down to the three best strategies. They are cost leadership, differentiation, and market segmentation (or focus). These are considered a good start point for strategic thinking. (Kotler, 2005 p.106-107) Cost Leadership Strategy: This strategy emphasizes upon efficiency. (Wikipedia) The firms aim to gain cost competitiveness by means of sound manufacturing facilities to be able to control production costs, maximum capacity utilization, controlling product distribution, vertical integration and low marketing and R & D costs. The product offered is a standardized, no frill product and caters to a large consumer base. This strategy usually provides competitive advantage that is sustainable. Low costs not only aid a firm to gain substantial market share, it also helps create entry barriers since any new entrant will have to make huge capital investments and compete in a price triggered market. An example of this strategy is South west airlines. (Thompson,A. Strickland,A.J 2003). In 2001, it was the only major short hop, low fare, point to point carrier in the U.S. carriers. This accounted for 90% of low fare competition in the U.S. it pursued a low cost/ low price/ no frill strategy that featured offering passengers a single class of service at the lowest possible fares, making air travel affordable to a wide segment of the U. S. population. SW Airlines believed that the reduced costs will be compensated by the increased revenues by virtue of volume. As a rule, it did not initiate flights to any airport unless it envisioned the potential for at least 8 flights. To achieve a low cost, they took the following measures: The fleet was Boeing 737 (uniformity) to cut down on maintenance, training, inventory cost. It encouraged online booking thereby by passing agents and thus their margins. It tried to steer clear of all congested airports thereby producing better than average on time performance and saving fuel cost. It used point to point system of scheduling flights which proved to be better than hub and spoke system of other airlines. It was a no frill airline with no first class, no meals, and no fancy clubs at the airports and no baggage transfer service. It implemented new software that produced crew schedules in less time and helped improve on time performance. Like all strategies, this also faces certain risks. Firstly the competition eventually follows. Any technological, logistical advantage eventually becomes immaterial as the competition usually adopts the same tacts. The low cost products are not perceived as good quality products. Thus an image and a quality conscious consumer might not be a customer for such products. The segment lacks customer loyalty.(e-learning) While focusing on efficiency it is very easy to ignore customer demands and supply only what is most efficient. While this can work when demand is very high, e.g. Henry Ford's famous dictum about "any color you want as long as it's black," it can lead to a firm's downfall if competitors have nearly matched a cost advantage and can offer more product diversity. (Gallagher 2004) Cost leadership is a powerful and frequently announced business level strategy. However, it is undermined by technological change, loss of focus on customers, and imitation of a cost advantage some other way. (Gallagher 2004). Differentiation strategy: This strategy emphasizes uniqueness in product offering. The attributes of such products should be valued by the customer and at the same time should be distinctly different from the competition. Uniqueness could be in terms of design, brand image, technology or customer service. These products are usually perceived as high quality products. The firm or business unit thus charges a premium for its product. Advantage is gained from the fact that customers for such products are not price sensitive and are brand loyal. This serves as the biggest entry barrier apart from product uniqueness in this segment of products. There are numerous examples of this, Rolex vs. Casio watches, t-shirts from Wal-Mart versus Abercrombie and Fitch A good example of this is Amazon.com. It differentiates on the premise of wide selection and one stop shopping. The risks associated with this strategy are: - There might be a change in customer preference, thereby leading to fall in demand. Perhaps the most common is that over time consumers cease to value the difference they were willing to pay a premium for earlier (Gallagher 2004). Competitors may imitate the product offering. Certain firms may offer even more differentiated products for particular segments of market. Focus: In this strategy the business focuses on one or more narrow market segments. The firm gets to know these segments intimately and pursues cost leadership or differentiation in the target market. (Kotler, 2005 p.106-107) Examples of focused strategy in two segments are motel 6 and Ritz Carlton. They compete at opposite ends of the lodging industry. Motel 6 employs a focused strategy keyed to low cost. Ritz Carlton employs a focused strategy based on differentiation. Motel 6 caters to price conscious traveler who wants clean, no frill place to spend the night. To achieve this motel 6 has undertaken efforts in the following areas: It selects relatively inexpensive sites for its units. It builds only basic facilities. It relies on standard architectural designs. It has simple rooms, furnishings and dcor. Ritz Carlton on the other hand caters to discriminating travelers and vacationers willing to pay for top of the line accommodation and world class personal service. For this it features: Prime locations and scenic views from the rooms Custom architectural designs Fine restaurants with gourmet menus prepared by accomplished chefs Elegantly appointed lobbies and bars Swimming pools, gyms. Health centers, spa, recreation facilities Well trained staff (Thompson,A. Strickland,A.J 2003) Some risks of focus strategies include: Imitation and changes in the target segments. It may be fairly easy for a broad-market cost leader to adapt its product in order to compete directly. Other focusers may be able to carve out sub-segments that they can serve even better. (e-learning) Conclusion and recommendations: Porter suggested use of one strategy for any business unit. According to him a company practicing cost leadership cannot differentiate and vice-versa. If a firm tries to do so it will have no advantage at all and will result in projecting a confused identity to the consumer. This is called "Stuck in the middle" scenario. Recent development however promotes hybrid strategy where a firm has to adopt multiple business strategies to survive in ever changing market scenario. Thus it is recommended that a firm understands the market and the customer extremely well before adopting any particular strategy because what wins in the end is a customer centric strategy. The strategy should aim to exploit opportunities and avoid threats created by market conditions and that will be a pragmatic approach for a firm. Reference: 1. Gallagher. (2004) Business level Strategies [Internet]Available from [Accessed 20 Nov 2008] 2. Kotler,P. (2005) Marketing management. 11th Edition. Singapore. Pearson Education 3. Thompson, A.A. Strickland, A.J (2003) Strategic Management: concept and cases. Thirteenth edition, India, Tata McGraw Hill 4. Wikipedia contributors. (2008) Porter generic strategies [internet] Wikipedia, the free encyclopedia available from [accessed 20 Nov 2008] 5. 1985, Porter's generic strategies, Quick MBA, Accessed on 20 Nov 2008 Read More