? Problem Identification ?
Singapore Airlines (hereafter known as SIA) has built a storied reputation for excellence in customer service, attention to detail and a progressive stance in designing strategy. It has established a well-orchestrated system that nurtures significant sources of competitive advantage that are used to support a strategy of differentiation. Currently, the single biggest challenge facing SIA is that of continuing to differentiate itself amongst its competitors. This translates into the question of how to maintain its place as the world's best airline as well as the most profitable? Having garnered a host of accolades for its outstanding level of service, whether or not SIA can hold on to its enviable position remains to be seen. While SIA has one of the most modern fleets in the industry, its service levels are likely to be imitated by other airlines. With the arrival of copycat competitors, the intensifying pressures of cost competition, and the increasing frequency of alliances in the aviation industry, SIA needs to set its focus towards how to rebuild its competitive advantages in order to differentiate itself and satisfy its customers in the three main areas of technology, customer service and brand image.
? Company Analysis ?
With its innovative in-flight services, fine cuisine, and sarong-clad flight attendants, the "Singapore Girl," Singapore Airlines (SIA) has always tried to cultivate a certain image. The airline currently operates in 63 cities in 37 countries, and the carrier has the youngest fleet of any big airline - the average age of its 46 aircraft is under five years (see Exhibit 1 in the Appendix). The Singapore government owns 57% of SIA, and the airline belongs to the Star Alliance airline marketing network.
Despite the Singapore government's 54% ownership, SIA has developed into a world-class airline since its emergence as...
- Length: 988 words (2.8 double-spaced pages)
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Physical resources and capabilities
1. Changi Airport
Government and SIA had invested in the Changi Airport together. It includes facilities such as hangar, maintenance center, and catering center, those facilities can be used by SIA, but also the customers of other airline company. So those services in Changi airport are not unique for SIA. Airport service is valuable and important for SIA or other airlines company. Low unique and high valuable, then it is not SCAs.
2. Planes: SIA have 22% 747-400 aircrafts of total production in the world. These planes are greater flying range, better fuel efficiency and quieter cabin than other airline. High unique and valuable that SIA has strong competitive power for attract consumers, and lower cost than other airline. Also if other airlines want to purchase more 747-400 that will use huge money, which is difficult.
There are two sources for SAI finance: revenue and shareholders funds. Both are valuable because they are key factors to support the operation of SIA. Two factors that allocate to the SAI revenue are overall load and passenger seat, and they are not unique because every airline companies must contain these sales. While, SAI’s group shareholders funds even were enough to pay for most of its purchases of aircraft in future and recent past the shareholders funds had grown at a rate exceeding S$500 million every year, as well as no debt for group, so this strong financial position is unique to comparing with others. However, shareholders funds is not sustainable competitive advantage, because the process of collecting funds are not complexity, any airline companies have this kind funds, and it is easy to tacit.
SIA has a comprehensive human resource management system which involves training and motivates its employee. We can find the SCA of human resource from two aspects: labor cost, training.
SIA’s labor cost is the lowest among all major airlines, that not only valuable but also unique at that time. The gap between SIA and other airlines companies are not easy to cover in short time. But if other airlines make great efforts on cut down their human resource cost, they will catch up with SIA eventually since it is not too complexity, specificity and can be learn from the cumulate experience.
SIA is only one company who consecutive win the National Training Award for three years. SIA spent a lot of money in employee training program, since it believes that human is the essential factor for company successful.
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It also launched some program (eg. Outstanding Service on the Ground) to motivate the frontline staff. Maybe the competitors can copy the model but they can’t imitate the SIA’s culture easily. Whole training system is inseparable with SIA’s culture which is valuable and unique, also hard to imitate.
In the customer service aspect, they are the first airline to offer Dolby Headphone and in-flight entertainment system for customers, SIA also was the first airline company to provide global satellite in flight telephone service and fax service.
For the pre flying service, such as introducing internet check in service and Centralized Baggage Tracing unit system, which enabled more effective management of mishandled baggage
All of the above are distinctive competencies of SIA at that time. But most of them are not strong sustainable, the only advantage for the SIA is just they are the first one to introduce these kind of service, but all other airline companies can provide the same kind of service in the future after they realize that customers want these kind of service.
We think that only the Centralized information system, as Centralized Baggage Tracing unit is sustainable distinctive competency of SIA, because it is more complex and mostly suitable for airline industry.
During the 1999-2000 year, SIA received over sixty awards worldwide in a range of categories. It was named Asia’s Best Managed Company of the Decade by the Asiamoney magazine and Asia’s Most Admired Company by the Asian Business magazine. In a survey, readers of the Conde Nast Traveler magazine declared SIA as the best airline in the world, for the 11th time in twelve years. From above evidences, we can easy to see that SIA’s reputation have a high valuable and high unique. SIA is also high specificity and tacitness, so reputation of Sustainable Competitive Advantages is high.
U V L C S T SCA
Physical Changi Airport Low High - - - - -
747-400 plane High High Low High High High Yes(Strong)
Financial Revenue High Low - - - - -
Shareholder Funds High High Low Low Low Low No
Human Labor cost High High Low Low Low Low No
Training High High Low High High High Yes (Strong)
Technology In-flight entertainment High High Low High Low High Yes (Weak)
Internet check-in High High Low High Low Low No
Centralized Baggage Tracing unit High High Low High High High Yes (Strong)
Reputation Brand name High High High Low High High Yes (Strong)
In the future, SIA should focus the following aspects:
Develop its own strategy that is not copied by competitors easily, for example, installing complex software programs for reservation system, ticketing, check-in facilities, etc.
Create new routes and be careful when designing the new routes. For example, SIA may consider its own routine route that is operated for many years and join new routes according to the reasonable arrangement.
Since fuel price, which is denominated in US dollars, is one of the major cost for airline company. So SIA may consider using its financial strategies, such as sign forward contract, hedging in the money market in order to eliminate the risk of changing in currency value.
Persuade government to develop Singapore’s travel business so that brings potential customers for the airline’s business as well.
Adopt Virgin’s internal culture and share two companies’ resources efficiently, for example, human resources, technologic resources, etc.