1.Give a brief overview of the Primary External Influences to which the Organization is subject and briefly explain the particular importance of each to the Organization.
2.Discuss about the Changing Competitive Environment.
The report will discuss in detail about Singapore Airlines. Singapore airlines was founded in from Malayan Airway Ltd. where the organization was initiated the business in 1947. Since there are number of political factors, the company was actually renamed as Malaysian Airways and Malaysia Singapore Airlines however, in the end it split into Singapore Airlines along with Malaysia Airlines in the year 1972 (Beria, Niemeier & Frohlich., 2011). When there is no regional route present right after the separation, the company has been force to depend solely on global marketplace which is highly subjected competition. The bad or difficult start developed a spirit which is driving to compete and also dedicate to the branding of the company. The entire airlines have also initiated the branding strategy as per its number of services in the flight and the company was also engaged in French Haute couture and a renowned designer namely Pierre Balmain. He designed a unique and distinct version of the Malay Sarong Kebaya since the airlines Stewardess uniform. This at the later stage becomes a very popular signature for the brand (Airport Transport World, 2014).
Following is the detailed discussion: –
Political: the political environment of the Singapore has been very stable because of its dominant political party called as People’s Action Party is the government ever since independence. The government of the country has permitted freedom in number of ways like corporate governance and has also set some limitation for the industry. In addition, the company is also to make majority of the decisions. The government also impacts the company by recruiting director over the organization. the government has also permitted SIA to focus on profit when it is compared with public or social accountabilities, the government also provide support to the company for retrenchment activities especially during any kind of economic crisis (Center for Aviation, 2013). The foreign policy of the country also maintains a good association, it have also settled a diplomatic association with more than one hundred and seventy five countries and have specifically maintained cordial relationship with large scale economy and countries like Germany, UK and France. The country also managed to enter in the trade agreement which is free specifically between India, Australia, Japan, New Zealand and USA. In the recent time, it has also associated with China as well. the country has also seen working closely and diligently to build a strong connection with many Middle East countries with an intensive and high level of visit that exist between both the countries along with signing the Gulf Based Cooperation Council and Singapore Free Trade Agreement by the end of 2008. In addition, the present Asia Pacific region has raised a situation of unrest during the recent time specifically in many developing countries. Country like Thailand has also faced a lot of turmoil in the year 2008 since there was a lot of protest because of which tourism industry is impacted. There were act of terrorism as well which impact some of the country in the present region (Bloomberg, 2012).
Economic: The financial crises in last ten years have severely impacted many countries all across the world which primarily caused due to recession in many countries. The crisis remained for the whole year and the current financial institution has been very careful while loaning the money and organization that have gone through a difficult cost by cutting different measures in order to survive in long run. There are signs of recovery that have shown in 2009 and yet IMF has further predicted in many countries and it will be out of the recession by 2009. The prices of oil were also hitting at a very high level and further seen sharp drop by the end of 2008. The prices were rising at stable speed by hitting the high peak by the end 2009 (Chan, 2000). The prices of oil also came as an outcome in so many ways where some have projected that the prices of oil will drop to a specific level because most of country is were still recovering from the burns of recession and it had further speculated that it will further continue to surge. The board of Singapore Tourism Board has been putting a lot of pressure as well as efforts in promoting varied Singapore as destination of Meeting, Convention, Incentives and Exhibitions which is also called as MICE. There are two integrated projects as well as resort were costing of SGD eighteen billion and places like Marina Bay Sand along with Resort World at places like Sentosa has finished by 2010 which is further expected to drawn seventeen million and high quality tourism. The country is also involved in hosting Formula one night race and all such will also make a positive kind of impact on business based travel in country like Singapore and further boosted the tourism based sector (Cook, Tanner & Lawes, 2012).
Social: Singapore is basically an immigrant nation and have a diversified culture which is almost close to thirty five percent of the present population where non citizen living in the nation with twenty five percent of foreigners and just ten percent of local residents. However, there was a lot of protest in recent time related to this issue. Instead of high level of non-citizen of citizen related ratio, this nation is still promoting the international talent and also believing that the nation will have short of labor many the immigrant policy was there to finish. The complete population contains almost more than seventy five percent of Chinese people which is followed by Indian as well as Malay (Hakiman, 2011). The main religion followed by resident of the country was Islam, Buddhism, Taoism, Christian and Hindu. The country was specifically known for its rich Asian culture, this country is also one of the most western inclined countries in Asia. The recent development in Chinese economy along with many open door policy have landed in this country with major international labor which arrives from China and this have also developed some kind of cultural conflict among many people living in Singapore. The country is also famous for the hard work as well as competitive culture which was operating of Kaisu which holds traditional values from Chinese tradition and have strong impact on the working culture. This further converted to a culture of high values along with power distance and the low level of employees have accepted the subordinate level which sometime questions the decision of management. The management also stressed on the current team work and maintenance of group harmony was also encouraged from time to time (Fu & Oum, 2014).
Technology: the basic invention like computer along with internet has resulted in so many kind of expansion of telecommunication and electronic innovation during the past ten year. Growth in the recent time where the value of HD is important and provide a crisper kind of image in addition with high speed of processing system in order to compress as well as decompress different images and rapid data transfer rate and main solution in high quality with no gap in time as well as clear image and sound. With advancement in technology, the basis definition of entertainment has been constantly evolved and electronic devices are getting portable with rise in performance. Such kind of gadgets is constantly getting cheaper and more people are treating as it is becoming a necessity (Heracleous & Wirtz, 2014). Every house in the country will have a portable processing system along with hand phone and cameras that are completely loaded with personalized game, photos, music as well as videos. Such items will normally carried at time of travelling.
Legal: transformation in present regulatory foundation can have major influence on airlines industry specifically for those that are associated national level carriers. Different types of governments are brining different set of outlook from political perspective and there are strategies, there are many steps which are constantly impacting the present aviation industry. For example, there were some kind of terrorist events in 2001 and there were some important regulatory transformations that influence the way in which travelers must be scrutinized for all air travelers (Heracleous & Wirtz, 2014).
Environmental: there is rise in issues and concerns about the airlines travelers for many environment friendly based services and functions. The main preference is likely to develop in the time to come because of the national level of carbon reductions aims and rise in prices of energy. Some kinds of airlines have already initiated to deal with green concerns and integrating it with other CSR based policies and plans of marketing. However, Singapore Airlines has therefore been very slow in speed in order to respond to demand from customers (Lim & Lee, 2012).
Following is the detailed discussion of the Porter’s Five Forces: –
Threat of new entrants: the present airline sector need a huge capital level investment with at least millions of money needed right before the business processes and it is based on estimates that the company need about one dollar in order to generate one dollar revenue. It will also need a lot of work in logistic department with highly skilled personals like technicians, pilots as well as specialized managerial personnel that are often restricted by resources in the present industry. There is also some kind of restricted access to routes and airport with another difficulty post any new entrant. Since the region of Asia Pacific is moving towards free deregulation and trade related to airspace and more options are developed (Heracleous & Wirtz, 2006). From the time of introduction, by companies like America Southwest Airlines in the year 1973, there is Low Cost Carrier as well that have gained a lot of popularity and proven to be highly profitable. Number of different organization have formed to give the services which revolve around the Asian region as well as around 1990s and presently Asia region have almost over sixty of varied kind of LCC primarily because of offer with short distance flight within similar country. Some of the airlines have also initiated to provide long haul budget airlines for instance; Air Asia has also introduced the services called Air Asia X in the year 2007. This service offer flight from London to Malaysia and also covers Australia and India. At the same time, the LCC were never considered as a direct competition to SIA and as the main market for such airlines where the travelers were most cost conscious. It is also possible that in near future, these LCC will also venture into the premium market sector especially when the company is able to reach specific level of business based expertise. Such trends must not be completely overlooked by SIA in long run and it is also safe to base an assumption that the current treatment of number of new entrants will remain low at the present time (Markides &Sosa, 2013).
Rivalry among the present firms: the goods in the current industry have a short shelf in fair manner and the service is also based on loss when airplane takes off and every kind of cost incurred cannot be recovered properly. The seats are normally around seventy five percent with full on capacity and airlines that is also dominating in the same region by considering the direct competition with SIA are small and they are associated with Malaysian Airlines Ltd., Cathy Pacific, Japan Airlines and many more. There are some airlines which are able to compete completely against SIA and the complete airlines are same in structure as well as market shares (Pearson & Merkert., 2011). At the same time, there is a lot of potential for development in the airlines sectors in the Asian region with recent crisis in finances that have forced companies around the world in order to engage in the process of cost cutting factors and it also consist of hitting the airlines industry in a hard manner with almost eleven billion of loss in the year 2009. The Asian region has positive development of almost two percent as compare worldwide. Such kind of carriers are utilizing differentiation based strategy principles which focus mainly on varied booking service as well as in-flight offers. There is frequent flyer based programs and were also provided by airlines to retain consumer and create a positive loyalty for brand. According to the marketing perspective, most of the airlines are member based on strategic alliance are associated with Star alliance and Sky-trex and have right code of share system with other partner’s alliances to increase the flight association and also extend connection with flight. At the same time, SIA has strived with the offering and with reputable excellence in association with in-flight service and innovation based entertainment systems.
Threat of substitute product: Singapore Airlines had also aimed that passengers that focus on the comfort as well as on time while travelling and are less price sensitive which have made other mode of transport a bad substitute for the company, specifically on different medium along with long haul flights (Porter, 1985). At the same time, advancement in technology have also evolves with new kind of treats. The concept of video conferencing also means of getting a lot relinquish the need for business travelers and this is why, there are number of post serious treat which make it as substitute to complete airline industry. With the help of advancement in technology with HD video conferencing are able to finish at low capital investment as well as low maintenance fees. New characteristics has come with introduction like sharing files, recording with video, computer screen that have made the concept of video conferencing to be near direct meeting (Richards, 2012).
Bargaining power of buyers: the current airlines industry has been active part of products for so many years with an aim of getting from one destination to another and it never makes a lot of difference on which the present airlines company they select and this is also true specifically for long to medium haul travel. By the time, air space completely deregulates for instance, the recent deregulation of Malaysia-Singapore air travel has also prompted a kind of an influx of other kind of carrier like Air Asia and Firefly to diverse market like MAS and SIA. The travelers in the present airline industry contain business passenger along with discretion based passengers (Olienyk & Carbaugh, 2011). Discretion based passengers are very flexible by nature on the flight and time connection along with cost is main problem for them. Business passengers are not very sensitive by nature and also about price despite short traveler’s time and also with comfortable travel with right priority for people. People will also hesitate to move to airlines when timing and price is matched with certain kind of interest. There are number of traveler principle travel agents for buying the tickets and there are some business travelers even recruit a designated travel based agent. The travel agents also form huge amount of sales of tickets and this further give specific power to other travel agents and airlines will normally provide some percentage of commission to them for sales of tickets. The concept of zero commission based policy by Singapore Airlines has also caused protest in the form of boycott of sales of Singapore Airlines tickets by many travel agents who consist of almost eighty percent of total sales which further forced the company to decrease flight and also down sized in places like India. The bargaining power of the buyer is indeed quite high for the company (Schafer & Victor, 1997).
Bargaining power of suppliers: the company have number subsidiary Singapore Airport services for handling the ground based service like handling baggage and it also consist of in-flight beverages and food supply. (The Times of India, 2014). The company also has other subsidiaries like SIA engineering that also engaged in maintaining the aircraft as well as services. The company has also been very strong and financially stable and this is why it never relies heavily on many other financial situations for different business process. This further leaves the main suppliers of the present SIA just on producers of air craft. The jet fuel also forms up to forty percent of all the expenditure of airlines and is also used as a commodity that has the power to change or move the crude oil prices. The airlines sector usually buys the plane from Airbus to Boeing (Riwo et al., 2013). At the same time, there were no fix substitute with high amount retraining along with right cost for logistics that will help in incurring for moving the suppliers and the overall demand is relatively slow or weak for different kind of suppliers in recent time with around ten percent of the world’s place in storage. The company is constantly involved in renewing the present fleet that at the time of peak of any crisis gives sales order that assist aircraft producers that pull through the difficulty in financial crisis.
Power of the stakeholder- relative: – there are other kinds of stakeholders that plays an important role consist of Airline Pilot cooperation or association, Singapore Airlines Staff Union and other regulation based authority at country. the government of Singapore also plays an important role while regulating the air space of eth country and also handling the landing based rights to many international flights and also setting new kind of landing rights with other country. This also influences the routes that company is able offer and competition that can be faced here. The major shareholders of the company with the help of Singapore Airlines with the help of Temasek Holding and the government of the country have the complete power to interfere in policy as well as businesses procedure it requires to (Schafer et al., 1997). There are other regulatory based authority as well that may influence the business process of the company. For instance, the recent allegation by the ACCC which is also known as Australian Competition and Consumer Commission which the company can cargo and also enter into price based fixing cartel. All such international regulatory group have the limited barriers on Singapore Airlines and challenging to impact the business process of the company and also has the power which is low. (Wang, 2014).
There is no second thought that the present airlines sector is facing a lot competition which is also intense by nature and it is done with many airlines companies that are struggling to survive. However, Singapore Airlines must also survive the fierce competition and in addition it also thrives for its peer. Singapore Airlines constantly make a profit in this risky and competitive business environment and it also makes the company stand out primarily because of stiff competition. Therefore, to answer such doubts it is important to recognize the options where Singapore Airlines that can exploit and the threats that company needs to deal which in some cases may not be sufficient (Singapore Airlines, 2013). In order to gain success in this current ever-changing market, Singapore Airlines should have strategic capacity to make sure that people can outperform the competitors. A resource related opinion also suggests that the current strategic capability comes from the present competitive advantages that mainly stems from the resources of the company and the usage of such resources along with capabilities and competencies. There are many resources which mainly can be separated into many intangible as well as tangible sections. The tangible resources are normally part of the physical or financial assets of company and are easier to recognize and test the intangible resources that are invisible assets. (Wirtz & Johnston, 2003). For Singapore Airlines, the tangible resources consist of the different airplane fleet with advanced level of maintenances and facilities based on state of art maintenance group with cash reserve which is strong by nature as well as well trained employees. The Singapore Airlines also consist of many intangible resources that are based on brand name, reputation of brand, culture of company along with organization capacities with employee’s skills and knowledge (Singapore Airlines 2012).
There are four pillars where technology has best prospective to reduce emission in aviation. The present industry is also making great amount of advances in technology like revolutionary designs of new planes along with new composite ad light weight raw materials, with radical and new kind of engine advances and the growth of bio-fuels. The airlines industry also needs to spend over one trillion of dollars on new aircraft by the year 2020 (Stockport, 2012). There are some five thousand aircrafts that are aiming to get replace by 2020 or raise by twenty seven percent of the current fleet those results in twenty one percent of reduction. Sustainable bio-fuels in aviation sector can decrease the CO2 emission almost by 80% along with complete carbon on the basis of life cycle.
It is important to understand here that Singapore Airlines can make most utilization of most number of advantages by the present alliances and the contribution is done equally to the partners that are impacted by services or other advantages. The company also prefers to have some kind of partnership in the industry and also add more to the current destination, with more aircrafts as well as customer services that will make them to stay for the position of becoming the best. The company must continue to work on the current branding and also providing the best services which is actually meant to maintain satisfactory level of customer and also continue to have strong staff because of all the expenses of costs. One must also maintain the branding name along with quality of present services and it is also important to move to diverse market which can provide risks based solution when the strategy fails entirely. This further proves that any fatal for the companies as there are other organizations as well those have also settled the brand name in the market. There are things which are similar to technology that can be obtained easily by any other kind of organization.
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