<\/p>\n
Singapore Airlines is the national carrier of Singapore, which has an international presence, but a focus on the Asian and Australasian markets. Founded in<\/p>\n
1972, the Airline has grown and consolidated its position over the last forty years to become one of the world\u2019s largest and most successful<\/p>\n
airlines, with an expansive and relatively young fleet of planes (Singapore Airlines, 2014). According to its published mission statement, \u201cSingapore<\/p>\n
Airlines is a global company dedicated to providing air transportation services of the highest quality and to maximising returns for the benefit of its<\/p>\n
shareholders and employees.\u201d (Singapore airlines, 2014). But just how well placed is the company to achieving its objectives? The purpose of this paper is<\/p>\n
to evaluate the business environment, the resources held by the company and the threats and opportunities facing it in the globalised marketplace. The\u00a0tools used to undertake these analyses are a SWOT analysis, PESTLE analysis and Porter\u2019s Five Forces analysis.<\/p>\n
A SWOT framework is used to evaluate the internal and external forces affecting the company.<\/p>\n
Association (ITA) as the second largest in the world in terms of market value (Heracleous and Wirtz, 2012). Famously, and in an achievement<\/p>\n
unmatched by any other sector counterpart, Singapore Airlines has reported a profit for every year since it was established in 1972 (Heracleous and<\/p>\n
Wirtz, 2014). In 2013, the company reported an annual profit of 378.9 million Singaporean dollars (equivalent to just over \u00a3186 million GBP)<\/p>\n
(Singapore Airlines, 2013).<\/li>\n
best-known brand in the airline industry, and as a standard for other airlines seeking to develop their product and their brand (Heracleous and<\/p>\n
Wirtz, 2012). The company has managed to secure its position as the industry\u2019s leading brand through the utilisation of a \u2018first<\/p>\n
mover\u2019 business model (Markides and Sosa, 2013). By, for example, being the first airline to offer free refreshments and a choice of meals to<\/p>\n
economy class passengers in the 1970s, through to being the first airline to take delivery of the new A380 passenger plane in the 2000s, Singapore<\/p>\n
Airlines has always ensured that it is one step ahead of its competitors (Singapore Airlines, 2014).<\/li>\n<\/ul>\n
noted that the company\u2019s investment in low cost, short-haul carrier Tigerair is dragging the company down in terms of profitability (Air<\/p>\n
Transport World, 2014). In 2014, Singapore Airlines boosted its stake in the company by 7.3 per cent to 40 per cent, but the company has been<\/p>\n
consistently unprofitable since 2012. In an effort to boost its performance, that company has attempted to establish a presence in markets other<\/p>\n
than Singapore (particularly in Thailand and the Philippines) but these efforts at market penetration have, to date been unsuccessful. This is a<\/p>\n
considerable weakness for Singapore Airlines, for low cost carriers in the South East Asian markets have recently been experiencing a boom (Pearson<\/p>\n
and Merkert, 2014).<\/li>\n
growing, since 2000, Singapore Airlines has only managed to grow passenger numbers on the mainland (Singapore and Malaysia) by 2 per cent annually<\/p>\n
(Heracleous, Wirtz and Pangarkar, 2006; Heracleous and Wirtz, 2012). This is because the home market is already mature, and, given increased levels<\/p>\n
of movement between Singapore and other nations near the peninsula, short-haul routes have experienced the greatest levels of growth.<\/li>\n
A weakness therefore is that rather than seeking opportunities to expand into this market, Singapore Airlines instead seems to be shrinking from<\/p>\n
it. Previously, the company served such important North American hubs as Vancouver, Las Vegas and Chicago (Chan, 2000), but today, it serves only<\/p>\n
four US cities: San Francisco, Los Angeles, Houston and New York (Pearson and Merkert, 2014). In 2013 alone, the airline\u2019s seat capacity in<\/p>\n
the North American market dropped by some 16 per cent (Centre for Aviation, 2013). As a result, while the airline is still the largest in Europe,<\/p>\n
in North America it now lags behind eight other competitors.<\/li>\n<\/ul>\n
and most successful airline strategic alliance, which gives it access to the resources of 24 partners (Heracleous et al, 2006). Since only 11 of<\/p>\n
these partners thus far fly to Singapore, there are opportunities for further and deeper partnerships. To some extent, the company is already<\/p>\n
capitalising on these opportunities. Since the firm\u2019s Chief Executive Officer (CEO), Goh Choon Phong took the helm of the airline in 2010,<\/p>\n
the company has forged 8 new codeshare partnerships with competitor airlines (Riwo-Abudho, Njanja, and Ochieng, 2013).<\/li>\n
for growth exist in the Indian market. Singapore Airlines has entered into a joint venture with Indian transportation giant Tata Sons, which will<\/p>\n
culminate in a new full-service airline Vistara, that is expected to be fully operational by October 2014 (the Times of India, 2014).<\/li>\n<\/ul>\n
of these is perhaps the rapid growth of several Middle Eastern airlines, such as Etihad and Emirates, many of which have adopted similar business<\/p>\n
models and market positioning strategies as Singapore Airlines (Bloomberg BusinessWeek, 2012).<\/li>\n
the start of the century, Singapore Airlines was the clear market leader in business class products (Chan, 2000), but in recent years similar cabin<\/p>\n
products have been introduced by European carriers like British Airways (Bloomberg BusinessWeek, 2012). This means that the offerings of Singapore<\/p>\n
Airlines, which once would have been considered innovative or avant-garde, are increasingly in danger of appearing outmoded.<\/li>\n<\/ul>\n
The PESTLE framework is used to understand the political, economic, social, technological, legal and environmental forces affecting an industry and its<\/p>\n
incumbent organisations.<\/p>\n
National political frameworks have a major impact on the operations of the airline industry. This is because almost all countries have a \u2018national<\/p>\n
carrier\u2019 \u2013 an airline that carries the country\u2019s flag, is headquartered in the capital city, and represents that country (Riwo-Abudho et<\/p>\n
al, 2013). Given that these carriers are seen as representing the nation, they tend to receive a great deal of support from government, and globally, many<\/p>\n
remain government-owned. Withdrawal of such support, for whatever reason, can be disastrous for national carriers, as Italy\u2019s national carrier<\/p>\n
Alitalia found in the 2000s (Beria, Niemeier, and Fr\u00f6hlich, 2011).<\/p>\n
Since airlines operate across national economic boundaries, and given their level of resource intensity, they are subject to the vagaries of national, and<\/p>\n
the international economy. One major economic threat to Singapore Airlines\u2019 process is the growth in fuel costs<\/a>. Political unrest in the Middle East,<\/p>\n exemplified by the so-called \u2018Arab Spring\u2019 of 2011 has helped to bring oil prices to unprecedented levels (Hakimian 2011), which is directly,<\/p>\n and negatively impacting airlines\u2019 fuel costs. Some airlines have opted to pass these increased costs on to customers, but given that Singapore<\/p>\n Airlines already utilises a premium pricing strategy, there may be limits to the extent to which it can adopt such a strategy.<\/p>\n Social trends are also impacting heavily on the operations of airline businesses. Travel, particularly to faraway destinations and to tropical locations,<\/p>\n has long been the provision of the more wealthy in society (Schafer and Victor, 1997). An increase in disposable income since the 1980s has enabled the<\/p>\n types of travel that was previously out of reach of the less wealthy individuals in society to become affordable. At the same time, there seems to have<\/p>\n been a shift in consumer preferences away from premium types of travel to the low cost travel formats, as evidenced by the huge increase in the number of<\/p>\n low cost carriers. Even airlines with premium positioning strategies like Singapore Airlines have found that they have little choice but to enter this<\/p>\n market. This might explain the company\u2019s recent decision to increase its share holdings of Southeast Asian low cost carrier Tigerair, in spite of its<\/p>\n recent lack of profitability (Air Transport World, 2014).<\/p>\n In a saturated market like long haul passenger air travel, and particularly in the premium market position, technological innovations are often the arena<\/p>\n in which competition is played out (Chan, 2000). Airline suppliers expend considerable levels of research and development (R & D) in creating new<\/p>\n fleets and cabin products in order to boost sales, and customers enjoy using new technology on airlines not only for reasons of comfort, but because new<\/p>\n fleets evoke in passengers a sense of security (Heracleous et al, 2006). Technological developments have had a huge impact on Singapore Airlines. The<\/p>\n carrier has one of the youngest fleets in the industry, and prides itself on being the first to adopt new innovations, such as headsets, reclining seats<\/p>\n and seatback entertainment systems (Singapore airlines, 2014).<\/p>\n Changes to the regulatory framework can have major impacts on airlines, particularly those that are national carriers. Different governments bring with<\/p>\n them different political outlooks and strategies, many of which will significantly impact the aviation industry. For instance, following the terrorist<\/p>\n events of September 11, 2001, there were major regulatory changes impacting the way in which passengers must be screened for air travel (Heracleous, and<\/p>\n Wirtz, 2014).<\/p>\n There is increased concern among airline passengers for environmentally friendly services. This preference is likely to grow in the future due to national<\/p>\n carbon reduction targets and increasing energy prices (Heracleous, and Wirtz, 2014). Some airlines have already begun to tackle the \u2018green<\/p>\n issue\u2019; integrating it into their corporate social responsibility (CSR) policies and marketing plans, but Singapore Airlines has thus far been slow<\/p>\n to respond to this demand from consumers.<\/p>\n Michael Porter (1985) identified five factors, which he argued impacted the performance of companies within market boundaries: the threat of new entrants<\/p>\n to the market; the threat of substitute products or services; the bargaining power of suppliers; the bargaining power of buyers and the intensity of the<\/p>\n rivalry in the market. It is common for strategists to analyze these factors in order to predict the likely success of a company in a market. Below, these<\/p>\n factors are applied to the airline industry.<\/p>\n This aspect of the Five Forces refers to the extent to which new competition can be accommodated within the industry. In relation to the long-haul<\/p>\n passenger airline business (which currently dominates Singapore Airline\u2019s market activity), the threat of new entrants is weak. Long haul air travel<\/p>\n is a fairly saturated industry with just one or two national carriers representing each economy, most of which receive some backing (pecuniary or<\/p>\n otherwise) from the nation\u2019s government (Fu and Oum, 2014). This means that traffic growth generally comes from the growth of a national carrier,<\/p>\n rather than the entry to the market of new rivals. Evidence of the saturation of the long haul airline passenger industry can be seen in the congestion of<\/p>\n the skies and airports, particularly large regional hubs (Wirtz and Johnston, 2003; Heracleous et al, 2006), and there is impetus from regulatory and<\/p>\n governing bodies as well as passengers to reduce current congestion levels. In any case, there are huge capital outlays and long lead times to recoup<\/p>\n investment in the airline industry, which explains the high failure rates of many nascent airlines. Despite the weak threat of new entrants to the full,<\/p>\n long-haul airline passenger sector, the short-haul sector has witnessed the entry of several new entrants in recent years. Good examples in the Southeast<\/p>\n Asian markets in which Singapore Airlines operate are Air Asia and Jet Star (Stockport, 2012).<\/p>\n Porter (1985) conceptualised rivalry within an industry as existing on a continuum from low to high. He argued that where rivalry is intense, businesses<\/p>\n must continually scan the market for changes in the needs and demands of customers and respond accordingly. There is some intense rivalry within the<\/p>\n airline industry, but it occurs on a route-by-route basis (Heracleous et al, 2006). Where routes are well serviced by several different airlines (good<\/p>\n examples are London to New York or Paris to Frankfurt), rivalry can be very intense. In order to capture market share on such routes, airlines must adopt<\/p>\n price-cutting strategies or ensure that the quality of their service is very high. For instance, Cook et al (2012) have noted that on well-serviced routes,<\/p>\n lack of punctuality can have deleterious effects on carriers. On the other hand, there still remain many routes that are monopolised by just a few<\/p>\n carriers. The so-called \u2018Kangaroo Route\u2019, involving connections between Southeast Asia, Australia and New Zealand is an excellent example<\/p>\n (Heracleous et al, 2006). Since there are just a few carriers operating this route, competition tends not to be as fierce. The exceptional performance of<\/p>\n Singapore Airlines in recent years has been attributable to the capture of the Kangaroo Route (Chan, 2000).<\/p>\n This aspect of the Five Forces refers to the extent to which the product or service offered by an industry incumbent can be replaced by another similar<\/p>\n service. Porter (1985) argued that businesses providing substitutable products and services were at risk of market losses. Once again, distinctions must be<\/p>\n made between the short-haul and the long-haul arms of Singapore Airline\u2019s business operations. The threat of substitute services to the short-haul<\/p>\n element of the business is relatively moderate. With globalisation, there are increasing investments in transportation links between major geographical<\/p>\n hubs, including those served by Singapore Airlines. It is possible, for example, that high-speed rail connections will exist between the major cities of<\/p>\n Eurasia in the future (Richards, 2012). More immediately, a threat to Singapore Airline\u2019s market for long-haul business class passengers is posed by<\/p>\n the growing recalcitrance of workers in internationalised organisations to travel for work. Due to increased concern with the environmental impact of air<\/p>\n travel, improved real-time telecommunications technologies and the growing number of virtual enterprises, individuals that would previously have made<\/p>\n considerable use of long-term business travel are finding that they can do their work from home.<\/p>\n According to Porter (1985), where buyers have strong bargaining power, the relative position of suppliers of goods and services is relatively weak. In such<\/p>\n industries, product and service providers must be particularly cognizant of the needs and demands of their customer base if they are to develop \u2013 and<\/p>\n maintain \u2013 their market share. The bargaining power of customers in the airline industry is moderate. Switching costs between airlines are<\/p>\n very low (Cook, Tanner and Lawes, 2012). Switching costs refer to the burden perceived by customers in selecting one supplier over another, and are<\/p>\n comprised of time, emotions, opportunity and financial costs. Observers have argued that switching costs for passenger flights have considerably lessened<\/p>\n in recent years, driven by the decline in high street airline offices and travel agents and the proliferation of the Internet (Lim and Lee, 2012). Although<\/p>\n virtually all airlines have their own websites through which passengers can search, book and pay for flights, it is more common for passengers to search<\/p>\n for flights using one or more of a multitude of \u2018comparison sites\u2019 such as Lastminute.com and Traveljungle.com. These websites enable<\/p>\n passengers to compare the airfares of like-for-like routes and services, which in turn facilitates easy switching (Lim and Lee, 2012). Airlines, have<\/p>\n however, been attempting to increase switching costs through the provision to passengers of loyalty schemes, either alone, or in conjunction with partners<\/p>\n in strategic alliances. Passengers are encouraged to remain loyal with one airline or one alliance as frequency of purchase enables them to accrue<\/p>\n \u2018points\u2019 or \u2018air miles\u2019 that can be exchanged for free or discounted flights, or other rewards. The extent to which these<\/p>\n initiatives drive purchasing decisions, is, however, under debate (Wang, 2014).<\/p>\n This aspect of the Five Forces refers to the extent to which suppliers can negotiate with businesses over materials and equipment. Porter (1985) argued<\/p>\n that where suppliers have strong bargaining power, the relative position of businesses is relatively weak. Unusually for a transportation industry,<\/p>\n suppliers to the airline industry are in a relatively strong bargaining position. Fleets to the industry are supplied by what is effectively a duopoly<\/p>\n \u2013 Boeing and Airbus \u2013, while an oligopoly exists in the supply of engines (General Electric, Pratt and Whitney, and Rolls Royce). With so few<\/p>\n suppliers in operation, manufacturers are able to unilaterally establish prices and set delivery times (Olienyk, and Carbaugh, 2011).<\/p>\n This paper has examined the business environment, the resources held by the company and the threats and opportunities facing Singapore Airlines. Emerging<\/p>\n from this analysis is a picture of a company with an excellent reputation in fine financial health. While there is little danger of the company succumbing<\/p>\n to the competition any time soon, there are, however, a number of environmental threats, of which it must remain cognizant, if it is to remain the leader<\/p>\n of what can be an intensely competitive industry. Importantly, the company will need to develop new markets, particularly in India and North America, and<\/p>\n develop its low cost arm in order to meet changing consumer demands.<\/p>\n Air Transport World (2014). Singapore Airlines boosts Tigerair stake. Online at<\/p>\n http:\/\/atwonline.com\/finance-amp-data\/singapore-airlines-boosts-tigerair-stake<\/a><\/p>\n . Accessed on 12 October 2014<\/p>\n Beria, P., Niemeier, H. M., & Fr\u00f6hlich, K. (2011). Alitalia\u2013the failure of a national carrier. Journal of Air Transport Management, 17(4), 215-220.<\/p>\n Bloomberg Businessweek (2012). Singapore airlines completion rise. Online at http:\/\/<\/p>\n www.businessweek.com%2Farticles%2F2012-05-17%2Fsingapore-airlines-competition-rises. Accessed on 12 October 2014<\/p>\n Centre for Aviation (2013). Singapore Airlines reduces focus on US market as non-stop flights are dropped. Online at<\/p>\n http:\/\/centreforaviation.com\/analysis\/singapore-airlines-reduces-focus-on-us-market-as-non-stop-flights-are-dropped-131665<\/a><\/p>\n . Accessed on 12 October 2014<\/p>\n Chan, D. (2000). The story of Singapore airlines and the Singapore girl. Journal of Management Development, 19(6), 456-472.<\/p>\n Cook, A., Tanner, G., & Lawes, A. (2012). The hidden cost of airline unpunctuality. Journal of Transport Economics and Policy 462), 157-173.<\/p>\n Fu, X., & Oum, T. H. (2014). Air transport liberalization and its effects on airline competition and traffic Growth: An overview. The Economics of International Airline Transport (Advances in Airline Economics, Volume 4) Emerald Group Publishing Limited, 11-44.<\/p>\n Hakimian, H. (2011). The economic prospects of the \u2018Arab Spring\u2019: A bumpy road ahead. CDPR Development ViewPoint 63 (1), 1-2<\/p>\n Heracleous, L., Wirtz, J., & Pangarkar, N. (2006). Flying High in a Competitive Industry. Singapore: McGraw Hill<\/p>\n Heracleous, L., & Wirtz, J. (2012). Strategy and Organisation at Singapore Airlines: Achieving Sustainable Advantage Through Dual Strategy. In<\/p>\n Inderwildi, O. and King, D. (eds.) Energy, Transport, & the Environment (pp. 479-493). London: Springer<\/p>\n Heracleous, L., & Wirtz, J. (2014). Singapore Airlines: Achieving sustainable advantage through mastering paradox. The Journal of Applied Behavioral Science, DOI: 0021886314522323.<\/p>\n Lim, S., & Lee, B. (2012). Online loyalty programs viewed from a searchability perspective. In Proceedings of the 14th Annual International Conference on Electronic Commerce (pp. 255-262). ACM.<\/p>\n Markides, C., & Sosa, L. (2013). Pioneering and first mover advantages: the importance of business models. Long Range Planning, 46<\/p>\n (4), 325-334.<\/p>\n Olienyk, J., & Carbaugh, R. J. (2011). Boeing and Airbus: Duopoly in jeopardy?. Global Economy Journal, 11(1), 4.<\/p>\n Pearson, J., & Merkert, R. (2014). Airlines-within-airlines: A business model moving east. Journal of Air Transport Management, 38,<\/p>\n 21-26.<\/p>\n Porter, ME. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. New York: The Free Press<\/p>\n Richards, B. (2012). Future transport in cities. London: Taylor & Francis.<\/p>\n Riwo-Abudho, M., Njanja, L. W., & Ochieng, I. (2013). Key success factors in airlines: Overcoming the challenges. European Journal of Business and Management, 5(30), 84-88.<\/p>\n Schafer, A., & Victor, D. (1997). The past and future of global mobility. Scientific American, 277(4), 58-61<\/p>\n Singapore Airlines (2013). Annual report 2013. Online at<\/p>\n http:\/\/www.singaporeair.com\/pdf\/Investor-Relations\/Annual-Report\/annualreport1314.pdf<\/a><\/p>\n Accessed on 12 October 2014<\/p>\n Singapore Airlines (2014). About us. Online at http:\/\/www.singaporeair.com\/en_UK\/about-us<\/a>.<\/p>\n Accessed on 12 October 2014<\/p>\n Stockport, G. J. (2012). AirAsia-flying high. International Journal of Globalisation and Small Business, 4(3), 324-333.<\/p>\n The Times of India (2014). Tata Sons-Singapore Airlines \u2018Vistara\u2019 set for October launch online at<\/p>\nSocial<\/h3>\n
Technological<\/h3>\n
Legal<\/h3>\n
Environmental<\/h3>\n
Porter\u2019s Five Forces analysis<\/h2>\n
The threat of new entrants<\/h3>\n
The intensity of rivalry<\/h3>\n
The threat of substitute services<\/h3>\n
The bargaining power of customers<\/h3>\n
The bargaining power of suppliers<\/h3>\n
Conclusion<\/h2>\n
References<\/h2>\n