The purpose of this report is
to analyse the external environment impact of the Singapore Airline. By doing
the analysation, the report will be able to come in conclusion what
recommendation will be the best for this organisation.
Singapore Airline ltd. (SIA),
the world leading carrier, a national airline of Singapore located at Singapore
Changi Airport. SIA first started in the 1947. They had brought their first
dc-3s which fly to Ipoh, Kuala Lumpur and Penang (the cities of Malaya also
known as Malaysia now). SIA then start to expend their flight to different
countries starting from Bangkok. In 1965 Singapore achieved its independence
from Malaysia. The government of Malaysia and Singapore announced that each would
establish their own national carrier for domestic and international flight. This
resulted in the dissolution of equal distribution of assets between Malaysia
and Singapore. Singapore received all the Boeing aircraft, the facilities in
Singapore, and overseas offices in 18 countries. Today, SIA is one of the world’s
most prominent airline and a major carrier in the Pacific region with routes
to Europe and North
America. However, SIA is facing
increasingly competitive environment which see as a stiff competition from
long-standing rival like Cathy Pacific. Even though SIA is in a stiff competition,
but SIA still consistently record positive financial growth in past few years.
External environment analysis
The government in every
country play a big role in ensuring the development of every industry. The government
policy may impact in the industry profitability and competition landscape. For Singapore, it is a multi- parliament
system demonstrate democracy which mean that is ruled of majority hence is one
of the most politically stable countries. The graph below show an indicator by
the World bank providing a data from 1996 to 2015.
The economy influence airline
industry as the airline industry is tied up with the national, regional and international
economic development. The GDP of a country will have a great impact to every
industry which include airline industry. The economy of SINGAPORE grew by 4.6
per cent compared to the previous year for the third quarter of 2017. (Business
time, oct 2017). From the graph below show the GDP growth rate of Singapore
from Jan 2015- Jan 2018. As the GDP of Singapore majority remain positive. Therefore, with the positive GDP in Singapore,
can assure that that the Economic is provide a good growth opportunity for SIA.
The Singapore government
wanted to make Singapore a prosperous country. When Singapore become
prosperous, the citizen in Singapore began to become sophisticated and
demanding in their preference. This is due to an increase in their disposable
income. When there is an income in disposable income, people will tend to
travel around to work or leisure more often.
Another issue that the people
ins concerning is about the terrorism attack during the past few years. The
9/11 incident that had happened in the 2001 on 11 September. 2996 people were
killed and over 6000 people were injured in this attack. The plane was being
hijack by the Qaeda terrorist and were crushed into the World Trade Centre in
the New York City. Despite this incident had passed for 17 years, people are
still in fear as there are cases of missing airplane and airplane was being
shot down by military.
Technological advancement is
important in the 21st century. This will help to enhance the airline efficiency
, effectiveness, lower the operating cost , enhancing customer experience and
personalizing customer service. Furthermore, the technology can aid to threat
to airline which could change the way we live and interact with people. For example,
interview the applicant to join the SIA, they are using the skype to make a
video call with the employer. Video call also help lower the demand for
face-to-face meeting and hence this will reduce the demand for business demand.
Therefore, will affect the airline.
In the world of today,
Singapore must crease an environmentally conscious to the society. Therefore,
the Singapore government has encouraged Singapore Company to go green. SIA had
partner with the Civil Aviation Authority of Singapore (CAAS) to start their
first “green package “flight in the world (SIA website, 3rd may 2017)
. The flight combines the use of the biofuel, fuel-efficient aircraft and the
optimised flight operation. The optimise flight operation will help to minimize
the fuel burn and carbon emission to the surrounding. The below graph show how
least fuel efficiency among the airline, hence by adopting ” go green” package
will help to save the fuel burn and emission to the surrounding .
Portal’s Five power of customer
power with customer.
The bargaining with customer
in the airline industry is less likely to be happen. This is due to the
customer base of the airline is too diverse and each customer’s spending is too
small. Therefore, the customer does not have enough power to influence the airline
to alter it business operation to suit their personal needs. Hence, the
bargaining power with customers is low.
power with supplier.
There are many suppliers for
the airline industry. For example, the aircraft manufacturer for Boeing and
aircraft. Boeing and aircraft are the most important suppliers in the airline
industry due to these two-aircraft manufacturers have dominated the commercial
aircraft market for many years. However, due to the expending for the demand
from the supplier, there is no reason to overestimate the bargaining power of the
two suppliers. Therefore, the bargaining with supplier is low.
for new entrants
Entry to airline industry require
a high capital requirement government regulation and strong band identification.
By having the government regulation and a strong band identification will
minimize the threat that new competitor to enter the market. An example is the
airline scoot that entering the airline industry. However, “scoot” is catering
for budget airline while Singapore airline is catering to business class.
Hence, this is not a big affecting the Singapore airline. So, due to the highly
capital involve, this mean that the entry barriers are very high and hence overall
the threat of new entrants is low.
of substitute product or service
A substitution of
transportation may be driving, taking train and by boat. However, these are
only efficient for those people who travel in short distance. However, it seems
very unlikely for long- haul traveller to switch to other alternative traffic
mode modes as airplane is so far, the fastest and safest transportation for
long travel for now. Hence, the threat of substitute is remaining low.
Today, the airline industry is
still facing a highly competitive and intensity rivalry at a very high level. Even
with many airline companies required to registered and had relatively improve
their financial result due to the fuel price slump in the recent year. However,
to the fact that many airlines are still struggling to strive. The common
problem face in the airline industry is the overcapacity and price wars. There
is constant fighting for territory and expansion. Most competitor in the
industry focus in lowing their cost and improve their service to deter with new
entrants. Another noticeable thing is the ostentatious gulf airlines who have
been aggressively disrupting the airline industry and Emirates’ newly launched
(2013.March) non-stop Dubai-Auckland flight has taken the mantle of world’s
longest flight, which was once SIA’s bragging right.
As the above analyzation had
shown that SIA doesn’t have any big issue SIA had been a strong company with a
strong image reputation Singapore. However, there is no doubt that the airline
industry is in intense competition with many airline that is struggling to
survive. But can SIA survive in the stiff competition and thrive among the
other competitor? How can SIA continue to make a profit in such a competitive environment?
Having identify with the
external factors and the threat, the next is to find out what are the strategies
to defend SIA against the threats.
SIA should pay unwavering
attention on Asia market especially China market and adopt the expanding their
network into mainland China as China leading the 5 fastest-increasing markets
in terms of additional passengers per year. Even though SIA group has increased
its marketing presence in mainland China by its subsidiary carriers SilkAir,
Scoot and Tiger, SIA itself has not boosted its footprint in China since
May-2011. It is very much worth noting that SIA’s two direct competitors, QATAR
and Emirate have been aggressively exploring mainland China market. Emirates’
recent move to launch new direct flights to two China mainland cities
(Zhengzhou, Yinchuan), expands its network to five mainland China cities, one
short of QATAR’s six mainland China cities in its network. SIA needs take
prompt actions to expand its network in mainland China to spur its growth
before lagging far behind its bitter rivals.
Based on the above analysis,
to keep SIA remain in the top rank, SIA could adopt the strategy of product
development. This strategy need SIA to come out with new product and service to
serve the existing market. By having new product and service, it can deter SIA
from other airline and had its own specialties. The potential strategy could be
developed a new concept of “luxury service” to further boost SIA’s already
well-recognized quality service. Since the customer disposable income had
increase due to the increase in disposable income and prosperous of the globe,
the expectation for quality service always keep changing and more demanding.
Hence, by utilizing SIA’s precious human resource and outstanding service to
launch a “luxury service” concept, SIA could further enhance its brand image
and distinguish itself from its close competitors.
SIA had uses the SAF criteria
to evaluate whether the two-potential strategy that had mentioned above are
workable. For expanding SIA’s network in mainland China, it meets the
suitability criterion because it seizes the opportunity of fast-growing China
market and there are no constraints could hinder the implementation of this
strategy. It also meets the acceptability criterion because it meets the
expectations of stakeholders to grow in emerging market and, considering
China’s huge market of growing middle-class the risk level is low and potential
return is very attractive. Regarding the feasibility criterion, the proposed
strategy could work in practice because it’s based on SIA’s already available
resources of affluent cash reserve and highly skilled employees. In short,
expanding SIA’s network in mainland China could be a workable strategy.
In additional, strategy links
with SIA’s existing strategy of “delivering quality service to its customers”
and “maximizing returns to its shareholders and employees”. The objective can
be set as “expanding SIA’s network in mainland China by one city per year”.
For the second proposed
strategy which is the develop a “luxury service” concept, it doesn’t meet the
suitability criterion since the demand for luxury service is not currently the
key opportunity for SIA. It also fails the other two criteria because the risk
level may not be acceptable and it’s questionable whether it really works in
Based on the above analysis,
expanding SIA’s network in mainland China is more recommendation since it’s
based on SIA ‘s strengths of strong branding, valuable human resource and
quality service with the aim of exploiting the opportunity. Entering a fast-growing
market like China may oppose the threat from bitter rivals like the Emirate and
In a nutshell, after the
discussion and analysation of the external environment of SIA, I recommend the
SIA could expand its network into mainland china as the SIA potential growth
strategy. Even though this strategy is coercive with full consideration of SIA
‘s strength, opportunities and threat, there are still some likelihood barrier
that SIA might need to overcome. The barrier is customer maybe tepid response
to the marketing campaign in the beginning and the competitor’s fierce
counterattack toward SIA. Hence to overcome all this barrier, SIA need to constantly
monitor the flicker external environment and review its strategies to enable itself
to stay ahead of the fast-growing competition.