CHOSEN in the world with 24,350 employees

CHOSEN
COMPANY: SINGAPORE AIRLINES LTD

Introduction

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The purpose of this report is
to analyse the external environment of Singapore Airlines Ltd through different
models as well as to gain in depth knowledge on the successful management
practice of a huge company. In addition, to come up with strategic management
solutions for sustainable success in future based on the issues addressed.

Scope:

Singapore Airlines Ltd (SIA)
was officially formed in 1972 which was originally formed with Malaysian
carriers in the name of Malaysian Airways Limited (MAL). Singapore Airlines is
the national flight carrier of Singapore with 54 percent of shares are owned by
the Singapore government and other companies such as Delta Airlines as well as
Swissair with minor shares (Referenceforbusiness.com, n.d.). Today, Singapore
Airlines is also providing engineering, cargo and other services apart from
airline service. It is regarded as one of the biggest companies in the world
with 24,350 employees and revenue averages around 10 billion dollars a year (Forbes.com,
2017). Singapore Airlines is ranked as the second-best airline in the world by
Skytrax, the leading consumer aviation website (Zhang, 2017). The focus of the
company is indeed to get back to the top spot which was held for consecutive
five years.

External
environment analysis:

PESTEL
ANALYSIS:

Political:

Singapore Airlines is
considered as the national carrier of the country just as other countries have
their own national carriers. Singapore Airlines has the backing of the
government as it is the image of the country in global arena. Majority of the
shares are also owned by the government too (UKEssays, 2015). Moreover,
Singapore is known for its political stability and strict laws. There is every
opportunity in this country for businesses to thrive. However, government will
not hesitate to take severe action against any businesses regardless of their
background if they try to evade the law.

Economic:

Singapore’s economy has been
growing steadily with average GDP growth of 6.77 percent since 1975. It has one
of the highest GDP per capita in the world (Tradingeconomics.com, 2018).
Therefore, the domestic economic condition has been favourable for the growth
of Singapore Airlines together with the support of government. However, the
unpredictable economic condition of certain regions is the real cause of
concern. This is because the aviation sector is closely related to the regional
and global economic development. For example, a drastic increase in the price
of crude oil may be a reason for increase in the ticket fare.

Social:

Sociocultural conditions
including demographic trends such as population size, age distribution and
ethnic mix can have a direct impact on business. For instance, this is the
period where the millennials are stepping into their prime income stage
(ValueEssay, 2017). Therefore, it is imperative to study and analyse the
travelling habits and preferences of the current generation and coming up with business
strategies to cater their needs.

Technological:

Technological improvements can
act as a double edged-sword (ZHENG, n.d.). It can improve efficiency of a
business by saving time and cost. In addition, investing in new technologies is
essential in keeping the aviation industry safe through better tracking and
monitoring of airlines. Recently researchers at TU deft came up with new
techniques to control damaged aircraft in the air for longer period through new
flight simulation technology (ScienceDaily, 2007). Such technologies may be
greatly helpful in reducing the risk of air crashes. On the other hand, there
are also disadvantages due to technological advancements. For instance, business
dealings and meetings can be done virtually through video conferencing
technology eliminating the need to physically present in a place. This in turn
greatly reduced the need for business travelling.

 

Environmental:

Singapore Airlines is doing
their best efforts to better contribute to the environment. Singapore Airlines
has an ISO certified Environment Management System (EMS) in their engineering
and flight operations. The company encourages their employees to maximise their
usage of resources such as recycling papers and using energy saving equipment
such as auto-off light management systems etc. It also supports the IATA’s four
pillars strategy to reduce aviation carbon emissions (SWOT & PESTLE.com,
2017). This is because the aviation industry has realised the importance of environmental
changes and its impact on their business operation. The unpredictable weather
changes make it beyond human control to avoid some unfortunate aviation
incidents. As we all aware, with all the technological advancements and
resources spent, the MH370 airline which disappeared three years ago is yet to
be found.

Legal:

The regulatory frameworks of
aviation industry greatly differ across different countries. As a result,
failure to keep up with the regional and global aviation regulation will
greatly dampen the business (SWOT & PESTLE.com, 2017). Countries tend to
change their regulations to help improve their own domestic airlines business.
Countries within a certain region such as ASEAN work closely together to help
their national carriers gain better access to the neighbour’s markets. This
results in increase in competition. In addition, Singapore Airlines also gives
significant importance to its service standards and pricings. There have been
recent incidents where airlines were involved in lawsuits due to service
deficiencies. A recent incident of forcing a boarded passenger out of an
airline went viral and. Such incidents will land the company into heavy lawsuit
and will damage the company’s reputation to the rock bottom.

Porter’s
Five Forces Analysis:

Competitive
rivalry within an industry: High

Aviation industry is highly
competitive as countries tend to restrict access to markets to back their
national carriers. Moreover, the competition has intensified more than ever due
to the emergence of budget airlines. The arrival of budget airlines has tapped
the huge market of middle and low- income people with their highly affordable
ticket fares. Premium airline companies like Singapore Airlines are finding it
hard to match the pricing of budget airline fares.

Threat
of new entrants: Medium/Low

Although the competition in
the aviation industry has increased and the arrival of new airlines has raised,
Singapore Airlines is still the second-best airline in the world as mentioned
earlier. The ability to maintain its premium status through its unparalleled
customer service and offering of the luxurious feeling to the customers are
hardly matched. The strong backing of Singapore government is also a
significant factor to reduce the threat of new entrants into the industry.

Power
of Suppliers: High

The price of oil has been on
the constant rise. Singapore Airlines reported that 33% of its cost was due to
fuel consumption (DATAMONITOR 2010). Majority of the crude oil production and
supply is controlled by the union of few countries called OPEC. Estimated 60%
of oil exports worldwide are controlled by the OPEC countries (Eia.gov, 2018). These
facts show that the control over oil supply and pricings are high. In addition,
the supply of airlines’ body parts and engines are dominated by companies such
as Boeing and Airbus. Therefore, the high power of suppliers in the Aviation
industry is unavoidable.

Threat
of Substitute Products or Services: High

The threat of substitutes products
is a cause for concern. The rapid advancement in technology such as video
conferencing and applications like skype has reduced the need for frequent
travelling for business purposes. These technologies enable companies to do
business meetings virtually. In addition, the emergence of high speed trains
reduced the need to fly in domestic airlines. For example, the upcoming rail
project from Singapore to Kuala Lumpur in 2020 will greatly decrease the number
of people taking flight from Singapore to Kuala Lumpur.

 

 

 

Bargaining
Power of Customers: High

The bargaining power of
customers is high due to various reasons. Although no major shareholdings in
Singapore Airlines are owned by any individual or company, the possibility of
having an absolute control by is being eliminated. However, the availability of
close substitutes and the rise of purchasing power of customers have broadened
their options to choose their preferred airlines for travelling.

Issue
Analysis and Recommendations:

Singapore Airlines should hire
quality staffs at the management level to deal with the various forces in the
business environment (Jennifer M.George 2000). I cannot agree more on the
statement as threats from external environment can impact a business severely.
Therefore, hiring staffs who are experts in analysing the external
environmental forces and coming up with strategic solutions to deal with it
would go long way in staying ahead in the competition. Staffs who are
professionals in that field would be better equipped with knowledge and
experience to deal with the task.

Singapore Airlines is well
renowned for its outstanding customer service. Management should continue to
give special focus on maintaining or improving the customer service. Employees
who are in the front line should be trained to serve the needs of the new
generation customers whose preferences are vastly different from the older
generation people. As Singapore Airlines is a national carrier of Singapore,
any news on bad service may severely affect the reputation of the country as
well as the company in global scale.

The market growth of Singapore
Airlines has decreased due to heavy competition (MBA Skool-Study.Learn.Share.,
n.d.)  To combat this issue, Singapore
Airlines should tap into the potential markets of developing countries. Middle
eastern countries are one such example where Singapore Airlines has very little
access to compared to Europe and other countries. The company should also
consider sending direct flights to more destinations in India and China, who
are the two biggest markets in Asia with huge potential markets with
astonishing number of middle and high-income people.

 

Singapore Airline should
continue to add new technologies and find ways to enhance the safety of
airlines. Aviation industry has become prone to crashes and accidents. The
recent mystery of missing Malaysian Airlines added more salt to the wound.
Although there is strict regulations and safety measurements in place governed
by the International Air Transport Association. Some experts believe that lack
of trainings to the pilots and engineers plays a significant role in these
unfortunate incidents. Training is one of the various issues that needs major
improvements across the region (Desmond Ross,2015). There is no point of having
high-tech equipment if staffs are not properly trained to use it. Therefore,
training the staffs is imperative and should not be overlooked.

Singapore Airlines may
consider opening a separate budget airlines operation with smaller sized fleet
of carriers with budget fares to serve the middle and low-income people in
developing countries. This solution may seem not go down well with the top
management as Singapore Airlines has been well established as a premium luxury
flight. However, this can also be the starting point to explore the potential
markets in developing countries and improve the business opportunity.

Conclusion:

Singapore Airlines is in good
hands, operating in a country where the political and economic conditions are
stable. The main source of Singapore’s income is coming from tourism. As a
national carrier, Singapore Airlines plays an essential role in contributing to
the country’s economy as well as upholding the company’s image globally. Their
traffic records are cleaner than most of their competitors. The service and
hospitality offered to their customers are incomparable. Despite people are
leaning towards budget airlines for lower fares, Singapore Airlines continue to
sustain its status as a premium airline. It is ranked as the 18th
most admired companies by Fortune magazine (National Library Board, n.d.).
Through intensive research for this report, there are lot of learning points on
how a big company can be run successfully by overcoming all the obstacles.

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