Singapore Airlines
Singapore Airlines
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Introduction
The Singapore Airline is an international business entity, which serves citizens from different countries. Being an international business organization, requires the business to come up with a strategy to provide services to people from different cultures and backgrounds. The business is in a situation where they are required to identify their strengths and create ways of perfecting their strengths for financial gains and good customer relations (Layton and Pang, 10). The company must at the same time consider its weaknesses, and formulate a strategy on how to improve on the areas of weakness.
Since the company serves international customers and domestic customers, it must provide top notch services. To ensure that it provides better services than its competitors, the company must engage in market research. Market research will enable the company to know what clients really want in the airline industry, and the new trends in the industry. The transport industry is quite a challenging industry with high levels of competition and since people must travel from one place to another for business purposes, then companies must aim to be on the top.
This paper will present an analysis of the Singapore Airline from a close perspective. The paper looks into the threats that the business entity faces and will present solutions to this threats(Layton and Pang 10). The paper will also present the strengths of Singapore Airline over other airlines and bring forth suggestions of how these strengths can be maintained. Finally, the paper will present modern trends and styles in the airline industry and transport in general. With a keen concern on the macro environment and internal factors that affect provision of airline services. Sources include reports from Singapore Airline released annually for shareholders to compare business performance.
Indigenous Singapore cultures and how they affect the airline industry
Singapore culture is a combination of many Asian cultures, from China to Malaysia with some British culture blended in it. It is one of the most diverse cultures in the world. However, in this diverseness, there is a uniqueness that identifies the Singapore people (Layton and Pang 33). They always work hard to uphold, maintain and practice their culture. They could be referred to as people who are proud of their diversity and cultures.
The main language used in official conversations in Singapore is English. However, other languages are used in other levels of communication; Chinese is one of the languages that substitutes English in communication. Language is an imperative tool in conducting business with members of a particular community. Once you are able to speak their language, you will be able to sell your services and products to them. All local business transactions are conducted using the local official language (Layton and Pang, 16). Understanding the local official language is important to open communication links. If by any chance, officials at Singapore Airline fail to learn the local languages, it may culminate into miscommunication, hence important details, which may translate to loss of important clients.
In understanding the cultures of a particular community, it is also important to understand their custom practices both religious activities and economic activities. The business must adhere to the beliefs of the locals or must not have services that tempt the citizens to practice things that are against their faith. There are many different approaches in faith and beliefs in Singapore, some of which are not practiced in other communities.
Meritocracy – this is from the word merit. Where people are respected and regarded to according to what they merit, either intellectually or in monetary value. This means that those who are considered as intelligent are regarded more highly than those who are not. This mode of classification cuts across all religions and social classes. Here, education is used as a major criterion for classifying members of the society. This affects how Singapore Airline conducts business since those who occupy top ranks in the business are expected to be those with great academic qualifications or academic excellence. Failure to do this, the business will be considered as not to have followed the cultures in Singapore. Due to the use of this policy in classifying people, education in Singapore if accessible for everybody (Layton and Pang 20).
Religious practices –Singaporeans are diverse in terms of religion. They practice three main religions Islam, Buddhism and Christianity. However, the law fully respects all these religions and believers of each of these religions have a right to practice their religion anywhere they desire. Religious harmony is highly advocated for by the government. In Singapore Airline, all staff and managers should practice on all of these religions. It is imperative for all people to have something, which they believe in. It is faith that keeps people going and expecting better days each day. Practicing a religion is important since it provides a forum for social interaction. Religion also guides us on how to conduct ourselves. It helps us to uphold our morals at all times since it gives us something to stand for (Layton and Pang, 20).
Political and social practices – the government and citizens of Singapore highly advocate for democracy. Democracy presents an opportunity for all political and social processes to be clear and transparent in such a way that corruption and nepotism do not blemish good processes like national elections. Singapore Airline is expected to uphold the same principles in all its dealings, in the recruitment of new workers and promotion of current workers. By performing all its operations openly, the company is able to earn trust from its clients since they know that all complains will be addressed. Also in issues of development and bringing in corporate social responsibility, the example that is set by Singapore Airlines is followed by all other institutions. Simply, Singapore Airline is a role model to other local companies. The company also has a role to play in raising awareness on the need to have all public and private processes to be conducted in a clear and open manner (Layton and Pang 5).
From this point SIA will be used to refer to Singapore International Airlines.
The national festivals to look forward to in Singapore include Diwali, which is a Hindu festival, Idd ul Fitr, which is an Islam festival, and Christmas and Easter, which are Christian festivals. During these festivals, there is a national holiday on the dates when the celebrations are held. This is one of the strategies used by the government to ensure that citizens who are from different religions tolerate each other (Rau, 27). By enjoying each other’s holidays and being part of the festivity gives one the feeling of belonging and appreciation. This is what makes Singapore a united republic amidst its diversity; the people participate in activities that bring them together. The management and staff of SIA should ensure that they observe these festive periods. The best way to observe these festive periods is to have flight offers since it is during these periods of time that people travel to be with family and friends. Giving cost cuts to all those who are traveling during these festive periods are the best way to join the Singapore community in celebrating these important days. The management should also consider rewarding their customers during these festive periods with gift tickets to dream destinations.
Environmental conservation is of major importance to the citizens of Singapore. In most cities and towns in Singapore, there are well maintained gardens where plants and flowers are growing. This shows that Singaporeans value environmental conservation and protecting Mother Nature. SIA should also take part in environmental conservation, not only in the air ports where it serves, but it should also as an organization, initiate environmental conservation forums. A company in the frontline in environmental conservation presents the organization in a good light (Rau, 27).
The cultures of any community directly affect how an organization conducts its business. A business should conduct all its activities in such a way that they uphold the cultural and moral principles of members of the community they serve (Rau, 27). A business should handle all cultures so that it can blend in with the people. When a business is aware of all cultures of the native people, it stands a better chance to emerge as the top organization where it serves.
MACRO ENVIRONMENTAL FORCES THAT AFFECT BUSINESS FOR SINGAPORE AIRLINES
Macro environmental forces that affect a business include factors in the industry which the business has no control over. There are other factors that affect a business and they are known as micro environmental factors. Micro environmental factors are factors that affect the business and the business has control over them. This part will look into the macro environment forces that affect the airline industry and provide some suggestions on how a business may conduct itself to cushion against such forces (Heracleous, Wirtz and Pangarkar, 6). Macro environmental factors mainly affect the marketing process and market penetration by a company. These are conditions that have been dictated by the economy and a single company cannot change them.
Macro environment can be grouped in many different ways, from the political perspective, to the social, economic and technological factors that affect Singapore Airlines.
Political factors that affect Singapore Airlines
Taxation- this is a policy which is set by the Singapore government, on how much tax a company should pay. The more the company earns as revenue, the more it gets charged as tax. Singapore International Airline has no control over the regulations and laws that have been put in place to handle the taxation process. The body that collects tax is an independent government body which collects tax from all companies after harmonization of accounts. The tax policy directly affects the airline company; in the period March- June 2013 the company recorded an increase in profits this means that tax for the period was higher (Rau, 35).
Government policy- these are the general laws and regulations that are set by the government that govern how business should be conducted in the country. SIA cannot manipulate how laws and regulations for conducting business are made. The business has an obligation to follow the set rules for conducting business in Singapore and other countries where it operates. If the policies made by the government do not favor the airline business directly or indirectly, then this will result to business losses. Government policy may directly or indirectly affect a business by addressing issues that directly or indirectly affect the business. In this case, the government of Singapore may make a policy that indicates citizens from which country can fly in and restrictions to citizens from other countries. This affects the operations of the airline company which should operate its functions without any bias (Rau, 36).
Political and government stability- these dictates directly how investors react and are willing to spend their money. When there is political instability in Singapore or any other country where Singapore Airline operates, the company cannot change this. This translates to business losses since the company is unable to make the projected profits. It is always imperative for a business to study the political scene and be prepared in case of any political unrest. At such times, when a country is experiencing political instability, there is destruction of property due to the riots. SIA may lose property worth millions during the riots (Rau, 37). Currently there is political stability in Singapore; the future also looks stable according to political analysts. Political instability in countries where the company flies to may however result to losses for the company, for example during the political unrest in Egypt the company had to suspend its flights until the country was stable.
Economic factors
These are factors in the economy that a Singapore Airline has no control over.
Economic recession or economic boom- a recession is a time when the world or nations economy seems to be crashing. Prices of goods and services seem to be inflated and there is minimal or no business activity taking place. It may be referred to as an economic go slow. While an economic boom is a time when there is much activity in the worlds and nations economy. There is high and increased trade activity. Singapore Airline has no control over the world’s economy and is affected by such occurrences.
Rates of inflation- at times there is inflation in the market when the prices of goods and products escalate. Inflation affects Singapore Airline by reducing the number of people flying in and out or using the airline services in general. During times of inflation, the company also has a hard time purchasing jet fuel and other necessities to run the airplanes. At this time, prices are high and to recover the high prices charged to purchase jet fuel and other equipment, the flight prices augment. This creates a cycle of events since customers will try and use other means of transport to move from one point to another so that they can save on cost. To cushion itself from the effects of inflation, the company should have a huge supply of the goods that are highly affected by inflation. The company may consider purchasing fuel in bulk when prices are low and storing it so that they can charge a constant price for air tickets and retain their customers (Heracleous, Wirtz and Pangarkar 10).
Spending power growth- spending power refers to how much a person is willing and able to spend at a given time, given the current economy. This affects Singapore Airlines by the number of people willing to spend on local air travel of on Singapore Airline tickets. This brings about price comparison, when the spending power is low, people will prefer to use the airline company with cheaper tickets. When there is growth in spending power, passengers will not mind spending their money on expensive tickets. Singapore Airlines must keenly study the economy and understand the spending level in the economy, how people are willing to spend for transport. The services provided must also match the money paid for them. It would be inopportune for passengers to book an expensive flight from Singapore Airline and receive similar services to others who booked a cheaper flight.
Singapore Airline has no control over the economy. However, through close study of the client reaction during different times, then it can come up with a strategy on how to cushion itself (Heracleous, Wirtz and Pangarkar 9).
Technological factors
These are factors dealing with the use of technology in the airline company. Since Singapore Airline is a travel company that serves clients from different countries, it must be in a position to use technology for service provision.
Use of internet- this presents clients with a chance to learn more about Singapore Airlines. The internet is an avenue for the company to market itself and give details on the services that it provides. In this era, a client should be able to book flights online through the internet and also check their flight details. Technology makes life simpler and Singapore Airline should use it to improve on its service provision. The internet is not only a place to market the airlines` services, but also a place to research and take surveys from clients and potential clients. Singapore Airlines can use the internet to research what other airline companies are doing in provision of air transport services. SIA should use the internet to improve on customer relations, where a customer care center can be based online and airline staff and clients can communicate directly. All this can be achieved by creating a company website and blog (Heracleous, Wirtz and Pangarkar, 12). In addition, the company has introduced a mobile boarding pass that has attracted a lucrative number of passengers due to the flexibility and convenience offered by the service (Singapore Airlines, 23)
Electronic and social media- this is still a factor under the internet but mainly can be used for marketing. Social media is a forum that has already been created by other companies but it presents an arena for marketing. So many people use social media to communicate with friends and family. SIA should use this to reach out to the target clients and provide details on how they can be contacted.
The internet is a great tool for communication and advertising. These tools can be free while others are bought, but once the company acquires them, they can be used for the greater benefit. Use of information systems to communicate internally within the business is also a strategy that can help SIA in its business functions. Singapore Airline has no control over the internet and direction that technology takes. However, the company can enjoy the benefits that surface from the use of technology in business processes.
PORTER’S ANALYSIS ON SINGAPORE AIRLINE COMPANY
The porter’s analysis is a model used for business comparison, to show the forces that affect the operations of a particular business. The model focuses on five aspects that affect any business. These include the buyers, suppliers, the business and close competitors to a business. All these factors lie in the businesses environment. This part of the paper evaluates all these factors keenly to help create an understanding of the competitive advantage that a business has in the industry. All these factors are compared with other entities in the industry to obtain a clear picture of the actual business situation. After going through this list, SIA managers are at a better position to formulate their competition strategy (Bensoussan and Fleisher, 30).
Supplier power
This is a situation where a company is supplying the raw materials for the industry. In this case, the raw materials for Singapore Airline Company are jet fuel and airplane repair parts. There exists a relationship between Singapore Airline and the fuel suppliers, which is a seller-buyer relationship and the airline company must aim to maintain it at that. None of the parties should be more powerful than the other because that could lead to unfair competitive advantage.
Another factor that leads to the supplier being powerful, in comparison to the buyer, is being the only supplier of a basic commodity/raw material. This presents the scenario of a monopolistic market, where there is only one supplier of a major product and the supplier will take most of the profits earned by Singapore Airline Company (Bensoussan and Fleisher, 30).
The solution to such a scenario is where there are multiple suppliers competing to be the fuel suppliers for the airline company. The competition will lead them to lowering their prices and this will be in favor of Singapore Airline. The company will then chose to buy fuel from the supplier that has the best rates (Bensoussan and Fleisher, 30).
Another way to overcome supplier power is to have an association as buyers; in this case Singapore Airline Company and other airline companies can come together and form a consumers association.
The biggest cost of operations for Singapore airlines is jet fuel, since 2010 the price of jet fuel has been on the increase with a percentage of 31%. Jet fuel makes up to 41% of the company’s expenditure.
Practicality: This has already taken place in its formation; Singapore Airline Company was only a single entity. However, it merged with other Malaysian airline companies to perform air travel services and reduce the supplier’s power. As a merged airline company, Singapore airline limited is able to have some control in the prices at which they buy their products. Currently Singapore Airline Company has partnered with smaller companies to provide airline services and cushion them from supplier power in the market. These smaller companies include SilkAir, TigerAir and Scoot. The purchasing of fuel is done in large scale and the companies are able to enjoy the economies of scale.
Threat of new entries
This refers to new companies that are making a first time entry into the industry. The new entries pose a threat to the company since they bring competition for clients in the industry. There are many reasons why new firms may want to join the airline industry, the main reason is to enjoy the high profit margin enjoyed by other firms in the industry. However, there are factors that hinder the entry of new firms in such an industry (Bensoussan and Fleisher, 40). The main hindrance is the high capital required to set up an airline company and market it to a point where it can operate at a profit making level and make more than it will be spending. For this reason, any firm that makes it and breaks into the industry is well prepared to compete with Singapore Airline Company, which is an already existing company.
The threat of new entries does not only affect Singapore Airline by the competition brought in by the entries but also affects the company directly. When Singapore Airline Company wants to expand its market and have flights to another destination in Egypt, it faces challenges of breaking into the market as a new entry where other companies dominate (Bensoussan and Fleisher, 40). However, expansion is necessary for Singapore airlines to increase the profit margin. In this case, SIA will have to spend a little bit more in advertising and setting up a base in the new destination. Occupying a specific market share is quite a task in the airline industry, where competition is high.
Another challenge faced is government policy in the new destination. There may be are requirements for a company to operate in Egypt and this may frustrate or delay the process of opening up and expansion of the company. The regulations in different countries to do business vary. This is not viable for an airline company that serves international clients. For example, if there are unaccommodating policies for travelers making connecting flights when there air crafts experience breakdowns, then the travelers may get stranded for some time. If the country is not accommodative due to the laws and regulations set, then the clients will be stranded until their connecting flights are offered (Bensoussan and Fleisher, 41).
Threat of new entries affects both completely new firms trying to make an entry in the industry, and companies that have been in existence but are trying to make an entry into a new market (Bensoussan and Fleisher, 41). Overcoming these threats and being in a position to begin operating immediately gives the firm competitive advantage over others.
Threat of substitutes
For Singapore Airlines, the threat of substitutes is posed by companies that offer other means of transport. The airline industry falls under the larger transport industry. There exists other forms of transport like water transport, road transport and rail transport and companies in all these industries pose the threat of substitutes to Singapore Airline Company.
Practicality: Azamara cruise ship offer poses the threat of substitutes to Singapore Airline Company. The cruise ship company offers luxury cruises to Singapore and other destinations from Singapore. For travelers who wish to take their time and enjoy their travel they may opt for the cruise ship rather than air travel. Water travel is a substitute to air travel.
There are many reasons why travelers may opt to choose to use other means of transport other than air travel (Bensoussan and Fleisher, 44). These other forms of transport may be cheaper than air travel, which prompts Singapore Airline to fix travel costs at an affordable price. This at times may be unfeasible because of the expenses that the company goes through in order to offer the services. The cost of jet fuel is more costly than any of these other means of transport. The competitive advantage in this situation is the fact that air transport is much faster and convenient. Hardly do flights get canceled, they are always scheduled on a strict timetable and this is why travelers prefer traveling by air rather than using rail or water.
Singapore Airline Company also enjoys competitive advantage over Azamara Cruise ship by being able to make good connections. At times, a traveler may want to get to one destination through another point first (Bensoussan and Fleisher 44). Connecting flights give travelers the opportunity to such places and get to their final destinations. In cases of a substitute like road travel, it is also easy to connect but it takes a long time and a traveler may have to use different bus companies so that they can make the needed connections.
The quality of services offered by Singapore Airline Company is also a factor that gives the firm competitive advantage. Substitutes may not be able to provide quality services and this may drive away travelers and make them prefer traveling by Singapore Airline Company, where they receive the value for their money.
The main factor that causes the threat of substitutes to arise is the pricing of services. Clients will definitely prefer the service provided with affordable prices. Pricing of transport services is influenced by the cost of fuel, which is the main raw material in the industry (Bensoussan and Fleisher, 44). Competitive advantage arises from the pricing and quality of services. There must be a close relation between the quality of services offered and the price charged for these services.
The airline company must formulate strategies to ensure that the cost of raw materials does not majorly affect their pricing for flights. At the same time, this will cost the company its profit margin but the company will be able to retain its clients.
Buyer Power
This refers to the power that buyers in this case travelers enjoy for being a united front. All the clients who use services from Singapore Airline either personally or for their cargo and delivery services are buyers of the airline service (Bensoussan and Fleisher, 43). Their strength and unity to work as a united front can create a situation where the airline company has less competitive advantage over the buyers. For such a situation to occur, there must exist more sellers in this case airline companies, than the buyers; travelers. The buyers will have a variety of suppliers to choose from and they can set their own prices. When one party has a competitive advantage over the other, then it enjoys some benefits like price setting in the industry.
This situation will only occur when there are a few buyers in a given market. For example when Singapore Airline Company is trying to penetrate into a new market where other airline companies already exists the number of suppliers will increase (Bensoussan and Fleisher, 43). At the same time, the number of clients’ remains at the same margin, which creates a scene where there are many sellers and few buyers, the opposite of a monopolistic competition.
At other times, travelers can protest any price changes by Singapore Airlines by purchasing the services of a different airline company. The competition by the suppliers in the industry brings about price wars, which significantly reduces the profit margin for all companies involved. The best way for Singapore Airline Company to overcome the effects of such a situation is by having a strong relationship with other suppliers. This will ensure that price wars do not occur and that there is a similar price range for similar services offered by the different airline companies. This will rule out unfair competition (Bensoussan and Fleisher, 43).
The level of rivalry
Rivalry is defined as the level of competition among firms that operate in the same industry. This takes many different forms in different industries. There are many aspects that give different companies competitive advantage over their rivals. Mainly the use of technology and the level of resources at the disposal of the company are the factors that bring about rivalry in the industry (Bensoussan and Fleisher, 46). In the airline industry, every company wants a share of the market. Each company wants to be best known for a particular service or product and would do anything to be associated with high quality services.
Competitor Analysis
The main competitors for Singapore airlines are Air China, Cathay Pacific Airlines and Qantas Airlines. These are not only competitors in terms of destinations served but also in terms of stock value and company value in general. The greatest competitors China Air which has a slightly larger stock value than Singapore airline. Singapore airline was the largest airline company in terms of stock value, however due to a period of losses China Air its greatest competitor toke over as the largest company.
In rivalry, a company can only enjoy competitive advantage by closely monitoring the industry to find out what other companies are doing. Once the firm identifies what other companies are doing, then it is much easier to come up with creative and unique products and services. Also companies operating in the airline industry should form an organization that restricts price wars in the industry. This will ensure that competition does not come from the price set by individual firms.
Financial Analysis for Singapore Airline Company
Singapore Current Ratio = Current Asset
Current Liabilities
= 1.39 times
Singapore D/E = Total Debt
Total Equity
= 0.07 times
Singapore Market Cap = Shares Outstanding X Share Price
= 12.35 B
Singapore Return on Equity = Net Income
Total Equity X 100
= 3.64 %
Singapore Total Asset = Tangible Assets + Intangible Assets
= 22.04 B
Competitor Financial Analysis
China Air Financial Analysis
Debt to Equity
7.74
Current Ratio
7.18
Quick ratio
4.51
Return on Equity
7.18
Net Profit Margin
6.66
Qantas Airways Financial Analysis
Debt to Equity
0.65
Current Ratio
0.02
Quick Ratio
10.05
Return on Equity 0.68
Net Profit Margin 5.26
SWOT ANALYSIS ON SINGAPORE AIRLINE COMPANY
A SWOT analysis is a management concept that helps a firm to formulate the way forward by identifying its strengths, weaknesses, opportunities and threats. A company that is able to identify its strengths stands at a better position and is able to work on its strengths and get competitive advantage over other firms in the industry. At the same time, a company should be in a position to identify its weaknesses and this could be considered as the main faults of a company, why it is not able to achieve its strategic plan. Identifying both strengths and weaknesses is the best way for a company to plan. The points noted on each will enable a company to use the available resources to improve on its weaknesses and polish up on its strengths (Bensoussan and Fleisher, 44).
Using the same analysis a company is able to identify
