Strategic Management And Leadership For Strategy Evaluation: A Case Study Of Singapore Airlines

Vision, Mission and Objective Statement

Discuss about the case study Strategic Management and Leadership for Strategy Evaluation.

Singapore airline is regarded as a national symbol of Singapore and have its hub at Changi Airport of Singapore. It is the flag carrier of the country forming a group with several subsidiaries, like SIA Engineering Company which handles the maintenance and repair of aircraft and has joint ventures with 27 companies including Rolls-Royce and Boeing. The airline has grown over the last decades from a small regional airline to the world’s leading cargo and passenger carrier. The company has a fleet of modern aircraft and provides best service to Asia and other part of world.

The Singapore Airlines has its origin in the year 1947 when the demand for airlines started growing and the market has developed the potentiality with the introduction of twin-engined Airspeed Consul between Ipoh, Penang, Kuala Lumpur and Singapore by a Malayan Airways. Initially there was a joint shareholder of Malaysia –Singapore Airlines between the government of Malaysia and Singapore (Wirtz and Heracleous 2013). However, in 1972, the joint venture had ended and two new airlines called as Malaysian Airline System and Singapore Airlines had started. In the beginning, Singapore airlines had a modern fleet of 10 aircraft with 6000 staff members and a route network around 18 countries and 22 cities. Soon the airline began to create its own brand name and maintaining its standards of service. Further with continuous product innovation and investment, the airline of a small island became a large multinational company.

The paper describes the strategic plan of the Singapore airlines by discussing the several points like mission, vision and objectives of the company, environmental analysis at macro level, industry analysis, and capability analysis. The paper also states the proposed strategy and strategy evaluation method of the company.

The Vision of the Singapore Airline is to place the airline in a globalised world with continuous growth and maintain loss free record. The vision statement of the airlines indicates that the company is responsible not only for attaining excellence in the airlines industry but also to be a good citizen by improving the lives of the people. Keeping this in mind the company has made commitments towards the health and welfare of the citizens and education and arts for the societies and all the countries where they operate (Rothaermel 2015). One of the main aims to achieve its vision is to preserve the environment and believe in sustainable development.

Macro Environmental Analysis: PESTEL

The mission statement of the Singapore airlines states “Singapore Airlines is a global company dedicated to providing air transportation services of the highest quality and to maximizing returns for the benefit of its shareholders and employees.” It indicates to satisfy the shareholder by giving them good returns by providing superior service at competitive price and generating a yield that helps in expansion and modernization of the airlines (Stauss 2013). These steps will keep the employees happy and motivated and they will be satisfied.

The objective of the company is to ensure the security of the people and deliver the best of the service to the customers. The company aims to provide service that satisfy the need of the people and want to operate within their resources and deliver value for money. The other objectives are to see that the staffs are competent enough to perform their task effectively and optimize their potentiality (Mellahi and Frynas 2015). Moreover, the company aims to be a good citizen by taking care of the environment and believing in sustainable development.

The Pestle analysis helps to understand the effect of the macro environmental factors on the company’s growth and development. It explains the political, economic, social, technological, legal and environmental forces that affect the organization (Smit and Dula 2014).

Political: The political factor plays a major role in the operations of the airlines in the industry. The airline carries the country’s flag as it represents a national carrier of the country and is headquartered at the capital city of the country to represent the country. Hence given the fact that airlines represent the nation, any political changes affects its brand (Ward and Peppard 2016). The government gives full support to the airlines and if withdraws its support then the airline faces heavy disaster

Economic: As the airlines operate across the national boundaries, any change in economic conditions of national or international levels will affect the company due to the intense resources carried by them. One of the most potential threats is the price of crude oil that increases the fuel cost of the company. Any political disturbances in Arab countries lead to increase in crude oil price and affect the cost structure of the company. This rise in fuel cost could be handling by passing it to the customer but for Singapore Airlines, it is difficult as it already has a premium pricing strategy.

Industry Analysis: Porter’s Five Forces

Social: Changing social changes in the society affects the airline business to a large extent. Initially the travel by flights were availed by the richer section of the society but gradually with rising disposable income, even the middle income group people has started opting for air flits (Mellahi and Frynas 2015). Further, the customer now looks for a low cost carrier rather than a high cost carrier. Singapore airlines that have positioned itself as a premium airline has increased its shareholding in Tigeriar, a Southeast Asian low cost carrier to overcome the social issue.

Technological: Technological innovation always helps the company to develop competitive position in the industry. Singapore airlines do continuous research and development by innovating new products and fleets to satisfy the customers. Some of its innovations are reclining seats, seatback entertainment system and headsets (Thomas2015).

Legal: Airlines do get affected by the changes in the regulatory framework of the country. For security reasons, different countries have different regulatory requirements that need to be met by the airlines and thus affects its cost of operations.

Environmental: The airlines need to be environmental friendly due to the national carbon reduction targets that have to be achieved to control global warming in the world. The airlines need to integrate the green issues in their strategies and corporate social responsibilities. Singapore airlines are slow in it and have to fasten up its strategy for sustainable environment.

Michael Porter five forces analysis have identified the five forces of market that affects the performance of the companies. They are as follows:

The threat of new entrant (weak): The threat of new entrant in airline industry is weak The air travel industry has reached the saturation point with national carriers that gets the support from the government, especially in long haul airlines passenger sector. Hence the traffic growth in airline industry generally comes from growth of national carriers and not by entry of new entrants due to the congestions in the skies and airport (Sengupta and Sengupta 2014). Further, airline industry demands huge capital investment for the nascent firm which does not become possible for the new firms. However, in short haul sector, there are some threat of new entrant like Air Asia and Jet Star due to low capital investment.

The intensity of rivalry (high): There is intense rivalry in the airline industry but it varies according to routes. For routes where the airlines provide good service, the rivaly intensity increases, Like the route of London to Paris. Under the situation Singapore Airlines has adopted price-cutting strategies with high quality service.  Some routes are monopolized by few carriers like the Kangaroo Route that connect Australia, New Zealand and Southeast Asia has been monopolized by Singapore airlines due to weak competition among the rivals.

The Threat of Substitute Services (moderate): It refers to the extent by which the services can be replaced by another similar service. Inc case of short haul, the threat of substitute service is moderate due to increasing investment in transportation business along with Singapore Airlines (Ward and Peppard 2016). However, in case of long haul, there is less threat for substitute services and there has been increasing cons o business.

The bargaining power of the Customer (moderate): The bargaining powers of the customer are moderate in the airline industry. The switching cost between airlines is very low as the information about the flights availability is easily available in the websites (Johnson 2014). Few websites also show the comparison between the flights rates, routes and services that makes the switching cost very less. Under the situations, the airlines need to start loyalty schemes where with the increase in the number of flights with the company, makes the customers earns loyalty points and lessen their fares.

The bargaining power of Suppliers (strong):  The bargaining powers of the suppliers are generally strong in case of airline industry due to few suppliers and large buyers (Hit, Ireland and Hoskisson 2012). It requires the supply of high end technology goods that is not available with many, like,  fleets are supplied by Boeing and Airbus where duopoly exist and engines are supplied by few suppliers like, Pratt and Whitney, Rolls Royce and General Electric.

The SWOT analysis of Singapore Airlines identifies that that the strength of the airline is its brand image, size and its positioning strategy. The company has always been benefitted by applying the first mover strategy and always being ahead of its competitors in terms of quality and price. However, the company faces a weakness in the market in terms of huge competition for short haul carrier and loses the customers due to large number of low cost carrier in the South East Asian markets (Abdi et al. 2013). The company is even not able to attract more passengers in the home land because the homeland customers are already matured and there is more demand for short haul route than the long haul route, which faces huge competition. Moreover, the company also faces huge competition in North American market and unable to develop competitive advantage against the rivals.

Singapore airline has the opportunity to avail the resources of 24 members companies of the Star Alliance, which is the most successful airline strategic alliance. Though, the company is struggling in some market, in markets like India its flourishing in a joint venture with Tata Sons.

The threat to the airlines is the rapid growth of several airlines of Middle East, like, Etihad and Emirates which are adopting similar positioning strategies as the Singapore airlines (Heracleous and Wirtz 2012). Initially the airline was the leader in business class products but now similar products are introduced by airlines like British Airways.

Singapore Airlines have been able to succeed and achieve a strong competitive position in the industry due to its efficient usage of resources. The major resources are discussed here under threshold capabilities and distinctive capabilities are discussed through value chain analysis.

Physical resource: The physical resources that are available maintenance centre, hangar and catering centre. Both Singapore Airlines and Government have together invested in developing the infrastructure and physical resources in Changi Airport.

Planes: Singapore airlines have 22% 747-400 aircrafts of the total world production. The planes have better fuel efficiency and greater flying range and quieter cabin than any other airlines (Hitt, Ireland and Hoskisson 2012). The airlines have strong competitive power to attract customer with low cost and high quality service.

Finance: The sources of finance are revenue and shareholders’ funds. The source of revenue is the sales which is not unique and depends on its marketing strategies. But the shareholders fund is able to establish a strong financial position for the company as it has grown at a rate of S$500 million every year (Sexton 2014). Te another strong point is the company has no debt. Such a financially strong position is unique in the airline industry.

Human Resource: The Singapore Airlines have a comprehensive human resource management system that training and motivation programs for its employees. The company’s labour cost is lowest as compared to other airlines (Hill, Jones and Schilling 2014). The company has got consecutive awards for its employee training programs and has spent enough in training the employees. It believes that the essential factor for success of any organization is human resource. To motivate the frontline staff, the company has started programs like, outstanding service on the ground floor which is unique and valuable in nature and is difficult for other company to imitate its culture.

Technology: In terms of technology, Singapore Airlines is the first to launch several innovative products like, in-flight entertainment system for customers and global satellite in flight fax and telephone service (Hill and Jones 2013). Further, in regard to pre-flying service, the internet check-in service and centralized baggage tracing unit system was introduced by Singapore airlines which had made the management of handling baggage effective.

Reputation: The Company has established a unique reputation and goodwill by winning about sixty awards in various categories at the national and international levels.

VRIO Analysis

VRIO analysis does a resource based study to understand the resources and its capabilities minutely and apply them for gaining competitive advantage.

Value: indicates that only a company should concentrate mainly on value added resources as this will only bring competitive advantage. A Singapore airline has taken care of it and has gained competitive advantage in the market on its basis. The company has been able to create a value in the minds of customer that in-flight crews of the airline provide the best hospitality as compared to other airlines. This has been achieved by strategic brand positioning and advertising the products through the image of a “Singapore Girl” (Heracleous and Wirtz 2014). The after sales service by the airline is different and unique to retain the customer. Hence the company’s employees are the most valuable resource for the company.

Rarity: It refers to the consideration of those resources that are valuable and are capable of providing temporary competitive advantage. The company strategy of entering into membership with Star Alliance to share the lounges and terminals and expand the route network has given frequent benefits to the regular fliers and helped the company to spread the service globally and given it the chance to develop a rare resource which other competitors could not develop. Further, the company is able to provide best of the customer service by training its employees through rigorous training programs which had made them efficient and helped them to provide flawless service to the customer

Imitability: The company should adopt develop such strategies which become difficult for the competitors to imitate. It then becomes the source of competitive advantage. Singapore Airlines is known for its differentiated customer service by providing innovative and premium quality service. Further, Singapore Airlines is able to maintain a fleet of latest aircraft with low maintenance cost and safety assurance from any kind of flight accidents. Thus has created the competitive advantage for the company in the industry.

Organizational: The firm should be well organized to develop and leverage full potentiality of its resources and capabilities. Singapore Airlines infrastructure and technology application is highly advanced and has given the company the opportunity to utilize its resources aptly.

The TOWS analysis can be drawn from the SWOT analysis which helps to identify the proposed strategy. The company can diversify their market by using their strength and opportunities. To overcome the threat, the company can adopt the strategy of merger and acquisition with some airline companies in South East Asian countries and North American region (Heracleous and Wirtz 2012). To avoid the weakness of low cost competition in short haul sector, it can apply the cost leadership strategy. Further, internal factors can be developed to overcome the threat and weakness of the company.

	Strength ·         Brand image ·         Size ·         First Mover strategy ·         Quality	Weakness ·         High cost for short haul carriers ·         Huge competition in North American market
Opportunities ·         Strategic Alliance with Star ·         Joint Venture with Tata Sons	·         SO Strategies ·         Use the alliances with Star to increase its size and improve its quality. ·         Be the first mover in many developing countries by making similar joint venture as that with Tata sons	·         WO Strategies ·         Develop cost leadership strategy for short haul carriers ·         Enter into joint venture in North American Market
Threats ·         Rapid growth of several low cost airlines in Middle East ·         Imitation of its strategy by the competitors	ST Strategies ·         Adopt the strategy of merger and acquisition with airline companies in South East Asian countries. ·         Use its first mover strategy to overcome the threat of imitators	WT Strategies ·         Develop internal factors to overcome the threat ·         Adoption of modern technology to reduce cost

Figure1: TOWS Matrix

Source: Author

The evaluation of the strategies can be done by using SAF (suitability, acceptability, feasibility) model. The suitability evaluation of the strategies can be done by understanding the external environment analysis. It examines whether the strategic options are suitable under the given external environment (Fan and Lingblad 2016). The threat and opportunities can be most suitably dealt by availing the opportunities and encounter the threat by making alliances with the local companies. The company merger and acquisition strategy is most suitable to combat the threat from competitors.         The company can also avail the resources of other member companies of Star alliance which is the most suitable strategy and can aim at obtaining cost leadership.

Suitable Strategies	Rank
Merger and Acquisition	1
Utilization of resources from other members of Star Alliance	2
Development of alliances with local companies	3
Understanding the external environment analysis	4

Figure 2: Ranks of Suitable Strategies

Source: Author

Feasibility focuses on whether the company has the requisite resources to continue with the strategic choices. The feasibility analysis helps to evaluate the internal capacities of the organization. The strength and weakness of Singapore airlines helps to do the feasibility analysis. The most feasible strategy will be to adopt the policy of diversification and enter the market in alliance with domestic companies given the suitable external environment and internal resource capacity (David and David 2016). The Singapore Airlines has 88 destinations in 38 countries that create a suitable external environment to emphasize on diversifying their route to get the competitive advantage. Further the company’s strength is its internal efficient resource and low cost operation which makes it feasible to diversify the products and expand its market. The company should however strengthen its asset turnover ratio to make diversification of product effective.

Acceptability focuses on financial and shareholders aspects of the strategy. It examines the risk and return of the strategies and the reactions of the stakeholders towards the strategy (Eden and Ackermann 2013). The risk and return can be examined by capital budgeting techniques and then if it satisfies the conditions of the techniques then it can be evaluated. The reaction of the stakeholders is reflected through the share prices and if it is favourable then the strategies should be accepted. The financial tool that can be applied is Net Present value method, Internal Rate of Return Method, Payback method and others.

Conclusion

The paper describes the strategic plan of the Singapore airlines by discussing the several points like mission, vision and objectives of the company, environmental analysis at macro level, industry analysis, and capability analysis. The paper also states the proposed strategy and strategy evaluation method of the company.

The vision statement of the airlines indicates that the company is responsible not only for attaining excellence in the airlines industry but also to be a good citizen by improving the lives of the people The mission statement means to satisfy the shareholder by giving them good returns by providing superior service at competitive price and generating a yield that helps in expansion and modernization of the airlines. Further, the objective of the company is to ensure the security of the people and deliver the best of the service to the customers.

The environmental analysis is done through Pestle which explains the affect on the organization due to the changes in the external factors. The industry analysis is done through Porter’s Five Forces which identifies that the most strong and the most weak forces of the market that affects the growth and development of the company. The threshold capabilities and the distinctive capabilities of the organization s studied in terms of basic resource analysis and value chain analysis. Based on the SWOT and TOWS analysis, the paper proposed the strategies that need to be adopted by the company and later the evaluation of the strategies are done through Suitability, Acceptability and feasibility analysis.

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