Table of Contents
- Price for an Essay
- Introduction of the Organization
- Strategic Potentials for Singapore Airlines
- Strategic Business Units of Singapore Airlines
- Table 1. Comparison of costs per mile for airlines in Singapore
- Corporate Strategy and Diversification
- Table 2. Areas of Diversification for SIA
- Portfolio Matrices
- International Strategy
- Table 3. Financial Allocations for various for SIA in the year 2012
- Strategy that the Organization Should be following
- Dual Strategy of Differentiation and Cost Leadership
- Turbulence on the horizon
- Marketing and pricing Strategy
- Related Free Economics Essays
Strategic planning refers to the process of defining the objectives and end products that can be applied and evaluated (Singapore Airlines, 2006 p 54). It refers to the process by which the future activities are anticipated and picture is drawn of the future based on present situations and makes the right actions to influence forces that affect us (Binggeli, Pompeo, 2002 p 76). For instance, strategic planning can look into five years ahead and define the course on the basis of strong indicators of what the business conditions will be like in those years.
The main indicators of strategic planning for an airline industry include determination of demographic variations of the airline industry, role of government policies and advances in technology (Shaw, 2007 p 65). They indicate strong trends with regards to changes in lifestyles with respect to airline activities and political environment, which are important factors affecting planning and management of airline industries. Some of these trends may be opportunities while some may be threats whereas some may be both threats and opportunities. The process of examining the possibilities and developing strategies that ensure challenges are met is significant in making use of opportunities and minimizing threats (Chary, 2009 p 98). This paper provides an examination of how Singapore Airlines has used strategic planning to take full control of its future operations. It is significant for the industry because it ensures resources are used well while business is conducted successfully, in spite of the challenges in the environment (Costa, Harned, Lundquist, 2002 p 90).
Singapore Airlines emphasizes strategic planning due to a number of advantages that arise from its implementation such as forcing a look into the future and hence providing the prospects of the future and provides a better awareness of the requirements and facilities related issues and assists in defining the overall goal of the organization and creates a focus of its objectives as well as creating a sense of direction, continuity and efficient staffing and leadership (Roll, M. 2005 p 45).
Generally, strategic planning is significant in enabling the user collectively gain control of the future and anticipate the potential of an organization. There are certain goals that strategic planning tends to achieve. These goals include environmental issues and trends, survey of needs, mission statements and strategies (Richmond, 2010).
Strategic potential refers to opportunities that exist in form of markets that can be exploited by an industry to achieve its operation goals such as high profitability and economic competence. Strategic planning also ensures strategic potentials of the business are achieved (Doebele, 2005 p 87).
Strategic positioning refers to the process where the entire business is put into the marketplace. This has been applied in changing marketplaces to the best advantage of the business.
Introduction of the Organization
Singapore Airlines is considered as an example of an excellent airline industry in terms of provision of standard services as well as cost leaders (Reader, Ridout & Briant, 2005 p 89). This has been attributed to its dual strategy of differentiation and cost effectiveness of its activities. Indeed, it is argued that it is not possible to do so within a sustained period since dual strategies involve considerable investments and organizational modifications.
There are a number of difficulties that have plagued the airline such as overcapacity, commoditization and rivalry of brought by other low cost carriers as well as disastrous periods caused by performance below standards (Doganis, 2006 p 67). Other factors that have impacted profitability of the airline include rising oil prices, frequent concerns with regards to outbreak of bird flu as well as Asian tsunami (Porter, 1985). On the contrary, the airline has remained competent and outperformed its competitors. It has not managed to get losses on annual basis and has accomplished considerable and superior returns in comparison to other competitors within the airline industry and has received a number of airline awards for its quality service (Hax, 2010 p 54). This success has been attributed to the strategic planning process of the airline, differentiation of services and innovation in addition to simultaneous cost effectiveness in its peer group. There have been lack of certainty regarding the success of the dual strategy and the belief that cost effectiveness and differentiation must be mutually exclusive since a different kind of investment is required across the value chain (Heracleous, Wirtz, Pangarkar, 2009 p 58). This paper provides an examination of elements of dual strategy as one of the methods of strategic planning by use of vertical alignment frameworks.
Over the past four decades, the airline industry has earned itself considerable reputation in a competitive commercial airline business by enabling customers get high-quality service and dominating the business operation sectors (Plunkett, 2005 p 78). It has won a number of wards in the past few decades as a result of its exemplary performance. Furthermore, Singapore Airlines is considered one of the most cost-effective operators and costs for seats have been at least 4.58 cents between 2001 and 2009 for every kilometer traveled (International Air Transport Association, 2007 p 89). Generally, the costs of SIA are usually lower than most European and American airlines that range from 4 to 8 cents and 5 to 6 cents per kilometer travelled respectively.
The main areas of focus of the airline are management of people and planes to ensure service is better in comparison to its rivals. The main areas of investment of the airline are businesses that touch the customer and enhance its strategic positioning (Lee, 1977 p 97). Every activity that is done within the airline is under rigorous control by ensuring cost effective operations.
Strategic Potentials for Singapore Airlines
The main internal aspects that are covered in this study are strengths and weaknesses in areas such as marketing, financial, and organizational. The main strengths of SIA are that there are high quality customers services and its brand image of ‘Singapore Girl’ that makes it highly recognized by global customers (Beaton-Wells, 2003 p 234). The main concern is to ensure quality is maintained at high profits and minimizing threats.
The main concern of SIA is to maintain a brand image and the ‘Singapore Girl’ is a major component of this image. The Singapore Girl s creates a friendly environment for customers and assists in delivery of quality services to staffs (Chary, 2009 p 413). This has brought competitive capacity for SIA.T he process of training staffs and development have been useful in ensuring retention of customers through measures such as provision of language courses and other programs that provides professional service to clients. In general, the main strengths include strong, experienced marketing personnel, high brand name and competitive consumer testing panel.
Opportunities include areas where buyer needs are supposed to be accomplished such as areas where the company needs to operate at a profit (Doebele, 2005 p 513). Opportunities include investment in information technology and development of e-ticket systems to assist in selling tickets at reduced prices. These developments have been enhanced by high skill management and governance that has enabled SIA enjoys an efficient financial network that is beneficial for the operations of the company. The Singapore Girl as an icon is important in enhancing consumer behavior and helped the strategies of the company particularly with respect to racist attacks (Hax, 2010 p 64). The general opportunities for the company include the growth of internet that has resulted into an increase in the number of consumers capable of buying tickets online and delivery of products and services at a fast rate. The main weakness of SIA is that prices are perceived to be considerably high that results into the possibility of customers opting for cheaper airlines (Heracleous, Wirtz, Pangarkar, 2009 p 523).
Strategic Business Units of Singapore Airlines
The main strategic business units for the SIA are generic strategies and interactive strategies. Generic strategies include the strategies of ensuring costs of operation and leadership are reduced, differentiation of operations is implemented and more focus is placed on provision of quality services to customers (International Air Transport Association, 2008 p 53). Interactive strategies include strategies such as cooperation among employees, high competition against its competitors and applications of the game theory. Strategic business units have been created at SIA to enable every business unit within the business specialize in its operations and maximize its output, varying business operations to meet the needs of customers and enhancing accountability where each business unit is accountable for its contribution of related losses (Lindstrom, 2005 p 97).
SIA intends to achieve its generic strategies by being a leading cost effective airline in Singapore for all types of trips and focusing its operation in reducing costs of operations. It also intends to ensure differentiation of it s products and activities (Marquardt, & Berger, 2000 p 89).
In order to be a leading cost-leader in provision of airline services, SIA intends to reduce input costs and enhance the design of products and services as well as increasing the use of pervious experiences to minimize costs. The table below shows a comparison of Singapore Airline with other airlines in Singapore.
|Airline||Commenced operation||Rates of travel per mile ($)|
|Singapore Airlines Cargo||2007||37|
Table 1. Comparison of costs per mile for airlines in Singapore
In cooperation with rivals, the main activities will involve cooperation with buyers, suppliers and entrants (Morrell, 2007 p 76). Cooperation with buyers will be enhanced by increasing supplier power and standardization of benefits. In enhancing supplier power, cooperation will be enhanced through increasing purchasing power and provision o equal benefits to all customers.
Corporate Strategy and Diversification
Corporate strategies will be focused on enhancing market penetration and provision of products and services. Diversification will be enhanced by increasing the range of products and services offered by the company to the market such as provision of a range of products and services and their diversification into existing business (Outlook November, 2004 p 245).
Market penetration will be achieved at the SIA will be achieved by building on strategic potentials of the business such as ensuring unchanged scopes and increasing leads to greater markets and enhancing economies of scale (Lee, 1977 p 57). Consolidation of services will be enhanced by focusing on current markets with current products and such as focusing its operations on routes where there are more customers who are likely to board the planes. This ensures all planes are boarded to make use of the capacities (Plunkett, 2005 p 86).
Retrenchment is also a method that has been used to withdraw from marginal activities in order to ensure the company concentrates on the most important segments of products and services within the airline.
Market development is being done at SIA by creation of new styles and products that are satisfying to the needs of customers and involves extension of the use of more designed seats for aircrafts and service processes that are distinct from other airlines (Porter, 1985 p 356).
Diversification and integration will be achieved at SAI by implementing various diversification options such as participation in related activities such as manufacture of aircrafts and repairs, provision of transport services to and from the airport and manufacture of components for construction of aircrafts.
Table 2. Areas of Diversification for SIA
The matrices for managing operations at the airport include growth/share (BCG) Matrix, Directional Policies matrix and parenting matrix. The growth share matrices that enable the company to perform better in the competitive airline industry include the analysis of stars, cash cows, dogs and question markets.
The stars will be business units that are likely to contribute to high market share in the growing market. SIA intends to make proper use of these business units by investing more resources in their expansion to get an edge over its competitors in the airline industry. Question marks refer to business units that can be used by SIA to ensure high growth in areas of high competition. The airline also needs to identify cash cows within its business operations. These are business units that have high market share in mature markets. It will also need to determine dogs. These are business units within the airline that have low market share in a declining market. The process of identifying these components of a BCG matrix are important in ensuring areas of weaknesses are important in ensuring areas of high potential are utilized while areas of difficulties are corrected to arrive at the intended goals of attaining high profitability.
This involves processes of internationalization of potentials of different markets by identifying competitive capacities in the international strategies through both global sourcing and distinction of types of international strategies. During internationalization of its operations, the main areas of focus include international drivers, selection of markets and mode of entry into the market. It also involves identification of geographical advantages that makes the airline better placed to serve its functions in the existing markets. Internalization strategy involves the processes that the company can use to operate in the neighboring countries.
In order to identify its international drivers, the airline will determine government drivers such as trade policies, technical standards and government policies. Cost drivers for internationalization of strategies will involve economies of scale, the right logistics and favorable logistics and country-specific logistics. Market needs will involve identification of customer needs and identification of global customers. The chart below shows the percentages of financial allocations for SIA in the year 2012.
Table 3. Financial Allocations for various for SIA in the year 2012
Strategy that the Organization Should be following
There is the need for Singapore Airlines to pursue more partnerships. This is because SIA still does not venture into other joint ventures that have been forged recently in North America, Europe or Asia (Roll, 2005 p 315). In the new generation of partnership, mental neutrality and anti-immunity have been incorporated but these partnerships do not serve Singapore. Mental neutrality has not been pursued by Singapore Airlines since Airlines such as Virgin Australia do not operate in Singapore.
Generally, SIA has avoided strong partnerships, specifically with airlines that operate within Singapore as well as full participation in the Star Alliance (Richmond, 2010 p 217). As the airline industry enters a new era of partnerships, it will be inevitable for Singapore Airlines to pursue more partnerships, engage in close partnerships and possibly joint venture metal neutral tie-ups with carriers that operate in Singapore. This is a section of the groups’ strategy that still needs to be refined.
The airlines management committees need to determine the possibilities of involvement in the partnerships by measuring the benefits that can result from them as well as the sense in engaging in such partnerships (Beaton-Wells, 2003 p 316). Management of Singapore Airlines have reported that the airlines industry if continuously becoming volatile and there is the need to include flexibility in its management in these volatile periods. Thus there is the need for SIA to avoid conservative nature in comparison to its peer groups and create other strategies such as preparing the group for challenges that come ahead (Binggeli, Pompeo, 2002 p 324).
Dual Strategy of Differentiation and Cost Leadership
The strategies of cost leadership and differentiation require considerable investments and organizational models for achieving these goals (Chary, 2009 p 512). The role of differentiation, for example ensures high quality services are offered and investments are made in innovation, development of staffs and branding which leads to high costs in comparison to the average costs. Differentiation strategy can be achieved by SIA at low costs while operating at high efficiency in comparison to its peers (Costa, Harned, Lundquist, 2002 p 413).
There are four key elements that represent strategic alignment. They include environmental conditions and strategy of the company that is appropriate for environmental conditions as well as major competencies that are important in the strategy and an organizational level elements and processes, culture and functions that result into attainment of the required core competencies (Doebele, 2005 p 56).
In order to apply the pillars of strategy of differentiation and cost leadership, there is the need to make use of its organizational functions where the key levels of strategic management are located and core competencies of the organization are delivered. This will ensure the core competence of accomplishing a differentiated offering with high level of efficiency. This capability
Turbulence on the horizon
There are more difficulties experienced in creating competitive conditions in the airline industry (Reader, Ridout & Briant, 2005). The airline also needs to ensure it does not undergo the risk of bypassing its hubs on flights from one region to another. This can be achieved by seeking rights to fly to these destinations and ensure planes are able to carry passengers from these hubs (Doganis, 2006 p 512).
SIA also experiences high competition from competitors who try to be similarly competitive in excellence and service delivery. This has not been possible since high quality service does not imply efficiency. Competitors are embarking on aggressive growth while competing on service quality (Doganis, 2006 p 195). With respect to internal conditions at Singapore Airlines, the necessity to reduce employee numbers and result into a reduction in wage variable to wage packages on the basis of profitability of the company after the 2003 crisis has resulted into high stresses to the airline’s industrial environment (Hax, 2010 p 231). Thus the Minister for Transport in Singapore needs to intervene to ensure these issues are resolved and consider the importance of Singapore Airlines in the aviation sector for economic well-being of the country. In addition, there is the need to fasten the delivery of the A380 during the coming years to ensure launching costs are reduced and ensure capacity plans are realized (Heracleous, Wirtz, Pangarkar, 2009 p 213). Furthermore, employees need to be fairly rewarded so that they do not get lured to higher paying jobs in other service organizations to ensure they are familiar with the challenges experienced at the airline.
Furthermore, service issues at the airline need to be addressed in order to improve the ranking of the airline in the aviation industry (International Air Transport Association, 2007 p 313). This will ensure wonders regarding the effectiveness of the efficiency and quality of the services are determined and corrected. This will ensure Singapore Airlines retains its position in the airline industry.
Marketing and pricing Strategy
The airline can ensure it cuts into new territories and ensure it markets itself. This will ensure it serves other areas of Asia and Middle East (Kossmann, 2006 p 314). There is also the need to improve marketing strategy by utilizing a combination of methods that ensures the desires and needs are accomplished. There is the need to include a large advertising budget to buy the space and time required to include its name in the largest possible areas for customers as well as utilizing public relations to the advantage of the airlines (Lindstrom, 2005 p 254). The airline also needs to open new markets and transcend the technological barriers.
In a similar manner to other strategies, the pricing strategy should set an airline apart from its peers and is considered an aspect of the overall marketing strategy. The airline should charge the right amount of tariffs and fares at a rtes that are favorable to customers and business will be made more predictable and user-friendly to passengers as well as helping filling that planes and making financial directions easy to predict and create a clear management systems for the airline (Marquardt & Berger, 2000 p 185).
This can be possible through provision of quality services that are required by customers at the right place and at places where they need to go at the most fair prices. Competition has been experienced through varying prices between airlines but it is not the only factor that drives the market place (Morrell, 2007 p 243). The airline needs to work from two sets of fares: weekday’s fares and stay-over weekend fares. In weekdays fares, charges will be made so that business travelers are charged a price that they can afford while going about their businesses while stay-over weekend fares should be charged to leisure travelers where pricing is most important thing compared to weekdays (Lee,1977 p 324). The main variations that should be allowed in these fares include setting aside publicized discounts and allowing travelers to buy tickets online. In addition, seasonal and peak-period adjustments need to be done to fares or adjustments to spikes in fuels and other factors.
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There are certain approaches that have to be used in order to achieve a successful implementation of strategic planning. These include commitment, reliability and communication.
In order to be successful in the airline industry, Singapore Airline leaders need to be committed towards adherence to the thorough process of strategic planning. They must also be focused on implementing the strategic planning recommendations suggested by this paper. Programs should be implemented and allocation of resources should be focused on meeting the objectives of the strategic plan at a level that is possible to accomplish for the organization and the level of activity. Members of the airline industry also need to implement the recommendations of the planning committee and credibility should be involved in following the guiding principles. Participation should be representative and there is the need for complete adherence to the process and creation of clear documentation of activities and evaluation of those activities. The strategic planning process should not be exclusive, on the other hand it should be open to all members of the industry and allow review and input.
It should also be remembered that strategic planning is a process that requires cooperation and participation. Everyone should be allowed to input and everyone should have a sense of ownership over the final direction to be taken by the organization. When there is personal commitment, implementation process is facilitated.
In addition, it is recommended that principles and goals of strategic planning are explained to everyone within the organization by assuring everyone that their recommendations will be implemented. The strategic planning committee should ensure they make the general recommendations of what they think should be done while staffs and leaders should determine how it should be done. The implementation process should then be done by considering these methods.
In order to implement a strategic plan successfully, there is also the need to create an integrated system through which the strategic plan becomes the benchmark for progress in the organization. An integrated system can be set up by accepting the strategic plan and making the mission statement a section of the directives.