Singapore Airlines limited is one of the largest airlines present around the globe. The airline is a transportation-based company with its origins in Singapore. Incorporated in the year 1972, the Singapore airlines during its early years concentrated on becoming the leader in the airline business. It aimed to extend its operations internationally (Alagarasan et al., 2015). The airline was successful in doing so by increasing its operations and bringing in more aircrafts to its company like the Boeing 777 and the Airbus A380. Singapore Airlines is known for its reputable business and services in the market. The company has provided a brilliant service since a long period of time for which it has been appraised and awarded. The primary business focus of the airlines is to maintain its position as a leader in the airline market of Singapore and overpower its competitors by providing good quality services to its customers.
As Singapore Airlines is one of the oldest brands in the airline industry with respect to Singapore, the customer seem to trust its service. Trust by customer is an outcome of an excellent brand. The company needs to make sure that it abides by the trust that has been invested in them by the consumers. As the society of Singapore is extremely trust conscious, the only way out for the airlines to keep the trust factor high by providing optimum service.
This report aims to throw light on the business environment of Singapore airlines. The business environment of a business is complex and dynamic, which can lead to tremendous changes within the business. Although these factors lie outside the domain of the business, they tend to affect the performance of the company tremendously (Anderson et al., 2015). It is for this purpose, that external environment analysis becomes extremely crucial. The external analysis will be done using two methods, the PESTLE and the Porter`s Five Forces Model Method.
The PESTLE Analysis tool is a strategic management tool, which is used by many business enterprises to analyze their environment and identify the threats as well as the weaknesses. This analysis will be done on the Singapore airlines in order to understand the threats and opportunities for its growth.
Operations of the Airlines. Since the airline is one of the primary carriers present in Singapore, any relevant change in the government policy of the country can affect its performance. However, the political stability of the country is extremely good and that is why the Singapore airlines have been successful in becoming one of the most promising airlines in the world (Buono, 2015). The political stability of the country was considered good. The transparent and structured system of the leader tended to result in low corruption and low risk, which allowed easy investments, which encouraged the investors to invest in the company and thereby increasing its resources (Heracleous & Wirtz, 2014). Corruption seems to be an extremely big problem for any country. Bureaucracy and bribery are a part of corruption. The officials themselves keep the sanctioned amount projects, which lead to fewer amounts being sanctioned for the ones who are actually in need or for the projects that actually require those funds (Heracleous & Wirtz, 2013). Corruptions tend to indicate problems in the system of government and for this reason; the investors do not want to invest in the country (Alagöz & Ekici, 2014). The investors get a feeling that their money would be wasted and they avoid the investment.
Singapore has greatly improved in its ranking of countries, which have been deemed the least corrupt ones. In 2016, it was given the seventh rank with respect to the graft watchdog Transparency International`s (TI) Corruption Perceptions Index. It scored 84 points on this index. However, as compared to Switzerland, Norway and Denmark, the country still has still certain amount of corruption, which often tends to shoo away investors. Singapore is the only Asian country to make the cut.
Investors seem to face certain problems with respect to Singapore`s high value added investment policy which is suitable for only those companies with a high technology and larger background (Heracleous & Wirtz, 2014). Small and medium sized companies may face difficulties while adhering to these philosophies.
As seen from the given data the fuel prices in Singapore have risen steeply in the past year. It started from 1.45$ in January and ended at above 1.62$. The increased prices of the fuel have brought about huge cost increase for the airlines who fail to cover up the cost in ticket prices without increasing the passenger fare.
Use of technology to reduce operations cost:
Singapore Airlines has invested in automation, which has lead to reducing work force costs of the company. Although it received backslash from various communities for causing unemployment.
It has also adopted cloud technology, which has lead to integrated operations and omission of redundancy.
As a part of its CSR activities, the company has invested in green technology, which uses technologies in an eco-friendly manner thereby reducing harm to the environment.
This aspect of the five forces analysis concentrates on the aspects of the industry, which might encourage the new business firms to enter and operate in the particular industry. The airline industry is believed to be extremely competitive all around the globe, however, in Singapore the threat of new entrants is low. The cost of entering the industry is extremely high and requires huge investments and abiding by various legal rules. Therefore, it is not easy for the new entrants to enter the market. Jetstar, Asia Airways, Scoot and Silk air are some of the competitor of the chosen company. The airlines need to abide by various laws and regulations, which again prove to be a hindrance for the new companies.
Intensity of Industry rivalry- VERY HIGH
Any business needs to be well aware of its competitors, hence even for the Singapore airlines, it is extremely important for the business to make sure that the competitors do not race ahead and capture their market (Heracleous & Wirtz, 2014). The completion present in the industry tends to have a huge impact on productivity in the market. Globally also mega carriers have been increasing tremendously which further leads to a pressure on the Singapore Airlines. Various airlines present in the Middle East and Asia provide fierce competition to the industry in terms of both quality and price. The primary competitors of SIA are Air Asia, Cebu Pacific and others. These airlines tend to garb the larger share of market because of their low cost. As the demand has been rising in the particular industry, the demand for airlines has also risen. Research reflects that the sales of the Singapore Airlines have fallen by 12 per cent since 2008. In 2017, the Air Transport World declared Air Serbi as the major world leader. As stated earlier, the competitors of the brand in Singapore are Jetstar Asia Airways, Scoot and Silk Air is some of the competitors of the company. However, the market leader in the given industry is Singapore Airlines itself. Other airlines have come up with a plan whereby they have reduced the price of the tickets and have tried to steal the customer base from the company. Singapore has not been making as much money as before with respect to regional routes because of other low cost airlines like Changi-Jet star, Tiger, FireFly and Cebu Pacific. The number of domestic flights has increased considerably for example from Singapore and Kuala Lumpur, which was earlier only in the hands of Singapore Airlines and Malaysian Airlines (Jeng, 2016). Various low cost airlines have also come between Jakarta and Bali from Singapore.
Threat of substitutes- MODERATE
Substitutes refer to similar products or services with slightly different features. Michael Porter considered it important to analyze the substitutes present in the market. The substitutes make it possible for the customers to move away from a particular company and take the services of another company. The threat of substitutes in the business environment of Singapore Airlines is comparatively moderate (Wu, He & Cao, 2013). There have been recent trends whereby the cruise travel has become increasingly famous thereby stealing the market from the airline business. Cruise travel tends to provide the customers with leisure and comfort along with a better experience. There has been a high-speed railway between Malaysia and Singapore, which is a cheaper option for domestic travelling option. However, this railway is not yet in operation. This seems to be a future threat for the airline.
Bargaining power of Buyers- MODERATE
Buyers tend to refer to the customers who will be the potential passengers of the particular airline. As newer options are coming up in the given the travel industry, buyers have a variety of options as to which transport to use. In the airline industry, the bargaining power of the buyers is relatively moderate. This is because, for international travels, there are various other companies present in the market, which can then offer better services to the consumers. These better services may mainly refer to a larger leg space or better hand luggage options. Companies like Air Asia, Cebu Pacific and other companies have a greater experience and therefore they can serve the companies better.
Bargaining power of Suppliers- HIGH
Suppliers refer to the providers of the raw materials that are required in the particular industry. Suppliers tend to have a huge impact on the working of a firm and this leads to make their position extremely crucial. In the airline industry, the suppliers of the airplanes are fuel suppliers, parts suppliers and others (Hill, Jones & Schilling, 2014). Their bargaining power is usually extremely high especially in case of Singapore. There are a huge number of suppliers available for the firm. Hence, the airlines enjoy greater power. However, quality plays a key role and these suppliers tend to enjoy greater power. The suppliers presently have other airlines to whom they can provide their services to and hence, if Singapore airlines stop taking their services, they might just render their services to the competition (Lin, 2015).
Since its incorporation, Singapore airlines have been doing extremely well. It has successfully tried to maintain its position has the main airline company. After the external environmental analysis, it can be seen that the problem that the firm is currently facing is the presence of competition and the various environmental rules that are present around the globe. Since various international airlines have established themselves in the business domain, Singapore Airlines has observed that its sales have dropped considerably (Lee & Worthington, 2014). Due to the maintenance of the environmental standards, it has become extremely important for the firm to maintain the carbon emission. Hence, it is suggested that the firm takes some action in the domain.
Although the airline company has tried to implement various strategies in the business domain, it has not been able to do so. A regular analysis of the external environment may help the firm in gaining back their sustainable advantages.
Due to the variability of the external environment, the company faces threats regularly but it needs to be well prepared in advance in order to mitigate any risks that are present in the environment (Limited, 2018). This analysis will help the company to maintain its leadership position.
As e-cigarettes have been banned on flights recently, this still causes many problems. Certain customers tend not to follow the restrictions placed and still carry these e-cigarettes, which then increase the chances of minor accidents on airlines (Joo & Fowler, 2014). Recharging or carrying batteries of the smoking devices on the airlines is not permitted however, some customer create hassles and this causes barriers to the airlines by providing better services.
Conclusion
From the given analysis, the following areas of concern can be identified:
For the above, the company can reflect upon the ideas and techniques of the global competitors so that it can see their problem solving technique. It needs to adapt to latest environmental friendly technology in order to avoid suggestions. By taking these steps, the airline will be able to perform well and overcome its barriers. (Whyte & Lohmann, 2015).
It needs to make sure that it has enough strategies in order to overcome the barriers that come in the way of its operations. The airline can even consider the method like disposing old crafts and reducing the fleet size. If this is done appropriately then it can overcome the high cost problem it has been facing recently.
The airline industry is a crucial industry of any economy. Its success greatly affects the success of the country. The Singapore Airlines has been a major contributor to the welfare of the economy of Singapore. For this purpose the airline company needs to make sure that it uses the Pestle model and Porter`s Five forces Model continuously in order to see to it that it mains its strategic position in the dynamic business environment.
References
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