Singapore Airlines
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September 18 2006
Contents
Introduction
Most important trends in the airline industry
The position of Singapore Airlines and reasons for prior success
Current strategy according to Rust, Norman and Dickson
The major issues Singapore Airlines is facing
Is Singapore Airlines current strategy sustainable for the future?
SWOT analysis
Future strategy for Singapore Airlines
References
Introduction
The purpose of this paper is to advice the management of Singapore Airline (SIA) which strategy they should follow. By doing so we start with discussing what the most important trends in the airline industry are. Subsequently we look at the current position of SIA and explain there prior success. After discussing the major issues that SIA is facing we give a SWOT-analysis to recommend a strategy for SIA.
Most important trends in the airline industry
In our assignment we differentiate different trends that are mentioned in the case study. We use these trends to develop a strategy for Singapore Airlines (SIA). There are trends mentioned in the case that we think are not relevant trends anymore at the moment. This can be for example because all airline companies have already jumped in this trend or because they happened a long time ago. Some trends are more difficult to decipher. We will give argument if we think one of these difficult trends is not a relevant trend at the moment.
The first trend that can be observed is the improving level of service offered by some airlines. Airlines that want to provide a superior customer service compete fiercely for premium passengers by introducing more and more sophisticated and consequently extremely expensive products, like the seatbeds for example. They always try to get the newest gadgetry and to offer the state-of-the-art endowment.
Besides these airlines that focus on customer satisfaction by offering cutting-edge quality service, there are airlines that are seeking for market share by offering premium class service for much lower prices than their competitors. They also aim to offer premium class service, but by asking much lower prices they cannot provide this raised standard of their “highest class competitors”.
These two trends can be explained by an intensive competition in this industry in the 1990s because every airline is fighting for its market segment. But one can also argue the other way around by saying the competition entail the need to offer such superior customer service or lower prices to stand out from the crowd.
Another trend in the airline industry is a global tendency toward deregulation and consolidation, which are leading to the privatization of some airlines and an increasing competition. The progressive privatization entails disadvantages but also advantages for those airlines that can stand the competition. They are not dependent on the state anymore but instead they have to care for themselves.
A further trend are loyalty programs that offer the customer the opportunity to earn miles that can be redeem for tickets or flight upgrades. These mileage accrual programs aim to link the customer to one specific airline company. But beside this, the airline can benefit by selecting the data of their clients. SIA introduced its program KrisFlyer in 1999 as one of the latest in the industry. Because almost every airline company already has a loyalty program we dont think this is a trend thats very important at the time.
Yet another trend is to join an alliance, like the Star Alliance. These are global networks of several airlines that work together. They offer the customer the possibility to book flights seamlessly. The airline can construct reasonable airfares to a final destination where it doesnt fly and it can check baggage straight through. The airlines can also share airport lounges or service. Alliances are still a trend because more companies are joining an alliance like the Star Alliance or Skyteam.
There has been a shift over time in the general attitude of premium customers. In the early 1990s top-tier customers wanted to be treated consistently on every flight. Now these customers desire individual pampering.
As consequence of September 11, 2001 one can observe several trends like a decline of passenger traffic as well as higher demand of safety arrangements. It is not certain whether this will be temporarily or if it will last longer. At this moment it is uncertain how the aviation industry will develop in years to come.
The position of Singapore Airlines and reasons for prior success
If one looks at numerous lists like the Zagat International Airline Survey of February 2001 you could say Singapore Airlines (SIA) is the best Airline Company in the world. In the segments overall, comfort, service and food they are not only the best in the premium class but also in the economy class. These high qualifications are a result of a life long philosophy that started since the beginning of SIA in 1972. SIA has always pursued a position of product leader corresponding to Treacy and Wiersema (1993). The product of airline companies can be described as the service of taking the customer from one place to another true air. SIA has always tried to do this in the best way possible. With the newest airplanes and a high level of service they have gained product leadership. This section explains the prior success of SIA.
In the beginning of SIA it was hard for airline companies to differentiate itself. All airline companies had the same high fixed costs. A disadvantage for SIA was that the government of Singapore did not support them like many other countries