Over the years, the airline industry has witnessed a series of alternating booms and recessions, which has significantly affected the performance of world leading airlines. In practice, in the last decade, most airlines have witnessed a discouraging environment plagued with cut-throat competitiveness following entry of low cost carriers. In addition, conducting their operations in the scare of terrorism threat, rising oil prices, frequent eruption of bird flu, hurricanes and volcanic emissions, have further impacted profitability of the service industry undesirably(Heracleous & Wirtz, 2009, p. 274).Unsurprisingly, these factors have culminated into losses condemning the industry as one of the worst performing industry as rated by Fortune Global 500. However, in the context of the unforgiving environment identified with slow growth, Singapore Airline has emerged not only to be the most admired company of Asian origin but also the world’s leading airline.
Singapore Airline Ltd
- Since the 1972 split of the Malaysia-Singapore Airlines, the Singapore Airline has positioned itself in the international market through focus and branding strategy offering airline operations, terminal services in the airports and engineering services.
- The airline management reached several international deals with other airline including the British airways marketing success of London–Singapore jet services, incorporation of Airbus 380 jets and the Virgin Atlantic code-sharing agreements(Jacobs & Dobbyn, 2012).
- In the recent, the airline has an aggressive growth pattern of increased route network productivity and low cost market segments through Silk air, and hedging against volatility in fuel prices.
- The airline strong financial muscles have identified it with the second largest market capitalization operating a fleet of 133 aircraft- 120 passenger aircrafts and 13 freighters(Thomson Reuters, 2013).
- As a premium carrier in the Asia-Pacific region, the airline as expanded its services to 36 countries and plying to 726 weekly destinations of over 65 cities in Asia, America, Europe and Africa.
- SIA senior management diversification strategies prioritize profitability over size by discontinuing, suspending temporarily and scaling back unprofitable routes (Heracleous & Wirtz, 2009, p. 275).
- The airline strategies are striking the balance through innovations in the service delivery in passengers and cargo transportation, profit consciousness, and achieving synergies and holistic development of its staff base. This has increased its earnings to S$142. 5 million ($115.10 million), up slightly from S$135. 2 million a year ago(Daga & Lim, 2013).
- SIA market power has influenced the international arrangements through its innovative expansion programs and multiple acquisitions of Ansett Stake to access the Australian market and China Eastern airline in 2007(Jones, China Eastern to Sell Stake for $930 Million, 2007, p. 12).
- Presently, SIA group is a leading icon in the service industry with 36 subsidiaries and associate companies established including 100% ownership of regional carrier Silk Air, 49% in both Budget carrier Tiger Airways and Virgin Atlantic is covering the key customer segments within the industry(Heracleous & Wirtz, 2009, p. 275).
In the recent past, SIA has aligned its activities with the mission statement seeking to provide quality by conducting incremental improvements with an objective of sustaining excellence in service deliveries. In practice, SIA has encroached the transformation of the airline industry by committing resources to diversify their services above the rest of the players. Why is the airline posing a positive annual growth in the unforgiving nature of stiff competition and multiplicity of challenges to the industry? SIA strives to gain deeper understanding of present and future customer lifestyles and their implications for the future of better series in the air(Heracleous & Wirtz, 2009, p. 276). This makes it clear why SIA is a competitive icon which has sustained the quality services as a market leader as a fast follower.
The SIA has inculcated a culture of market leadership through strategic innovations assisting in the sustenance of service deliveries. Strategic innovations have influenced the level of customer in-flight services as a direct contribution to its growth from a regional airline to a class of the world leading passenger and cargo carriers(Heracleous & Wirtz, 2009, p. 276).For instance, SIA as a pioneer in aircraft innovations has fitted the carriers with gourmet cuisines, advance system for ordering dishes through the internet and in-flight entertainment. Similarly, the SIA as a fast follower in areas of less customer’s contact relies on proven technological systems reducing risk of functionality failure and increasing cost effectiveness such as revenue management and CRM systems(Heracleous & Wirtz, 2009, p. 277).
Simultaneously, while undertaking incremental innovations to gear up its service delivery beyond instant manipulation by rival airlines, it has ingrained a culture of profit consciousness at all levels of its workforce(Singapore Airlines , 2012, p. 49). Empirically, despite the focus directed to service excellence and innovation in their operational strategies,the staffs are informed of the need to profit through cost-effectiveness. This is well aligned with its vision statement; we don’t want to be the largest airline but the most profitable(Heracleous & Wirtz, 2009, p. 277). This pursuit has borne the desired fruits of profitability rather than committing to size, ranking it behind Southwest airline. Concurrently, the airline has recorded an annual growthwith modest revenue relative to other competitors including Air France and Lufthansa Groups.
SIA has earned a reputation of a trend-setter by conducting their services differently than other competitors in the same industry line. In particular, while development executed in the service industries over the last decades were perceived as trial and error, SIA views the product design and development as a strategic and structured effort(Heracleous & Wirtz, 2009, p. 277).This made the airline snub the membership of IATA, to the perception that its rules were highly constraint service developments. Service development in the airlines takes a center stage alongside quality delivery through a full operating departed responsible with honing and thoroughly testing any changes before they are fully implemented(Jannarone, 2007, p. 4). Here, research, trials and mock ups are performed to assess the customers’ reactions to ensure the introduction of change is well supported by receptive procedures to avoid any conflict that may arise.
Underpinning service development and implementation of innovation is the receptive environment inculcated through corporate culture accepting change as co-joined to quality operations.In line with the national culture suggested by the Singapore government, the airline sustains a similar approach that failure in a new innovation during the trial stage may be withdrawn without damaging the corporate reputation(Enz, 2009, p. 272). However, in the contemporary operations each airline is conducting a similar approach to service development and therefore a potential threat to the SIA market share. This is where differentiation strategy pays for the SIA by maintaining a continuous incremental development strategy. In practice, SIA continuously improves and discards of programs and approaches that no longer afford competitive distinction(Morgan, 2011, p. 3). In response, SIA prefers locating a new mountain to climb by scrutinizing present and future customer preferences and tastes alongside the competitors’ strategic management.
Over the years, SIA has locked the market by utilizing the power obtained from the customer feedback mechanism. For example, since SIA is identified with distinctive products and services, this has raised the customers’expectations; to always push the senior management engage the professional teams offering above average innovations. Consequently, the SIA treat the customers’ feedback mechanisms as a fundamental resource for innovative ideas. This demands the service and development to amplify every compliment and complaint through SIA spy flights engaging with every detail of competitive intelligence and future competitive strategies(Aaker & Mcloughlin, 2010, p. 134).Rather than over-relying much on ideas generated only in the staff, the strategic management team appreciates that competition originate from outside the realms of the airline industry. Correspondingly, SIA has engaged a broad benchmarking against both the rival airlines and the best-in-class service companies(Ross, 2012).
Globalization effects cannot be alienated from the airline industries as new advancements have spilled over to influence everyday activities of organizations, particularly in the service providers. Bearing that in mind, SIA has embraced total innovation at every level and operation under its brand name. Through strategic management SIA aims at conducting total incremental innovation strategically to save on the cost of conducting radical innovations. Additionally, conducting radical changes in its operations may generate mismatch from within its workforce and the customers who resist adapting to abrupt changes(Ross, 2012). On the other hand, conducting services in some international routes may fail to generate substantial returns relative to the resources committed in the investment. Compatibly, SIA aims to outdo their competitors in everything they pursue to profit from their innovation strategy without pricing themselves beyond the market.
Naturally, human beings embrace new products that perfectly tracks and matches their present and future needs. However, for any organization to meet and maintain their products at such levels, active scrutiny must be conducted to predictably locate the consumer styles in future. Concurrently, the product innovation development conducts pre-feasibility surveys to understand passengers’behaviour and reasons for their preferences(Nankervis, 2005, p. 134). This has enhanced the product innovations of the SIA to perfectly interact such as Krisworld on-demand entertainment systems for all classes, internet and phone check-ins, space-beds and simulators which mimics air pressure and humidity to taste foods(Heracleous & Wirtz, 2009, p. 278). Congruently, the staff must carefully analyse the innovations adapted to strike the balance between the cost incurred and expected service benefits. Harmoniously, the cost-effective strategies are executed at all levels including elimination of grand decorations and furnishings at headquarters and subsidiary offices. In contrast to other airlines with large fleets, they maintain simple designs epitomizing the augmentation of internal efficiency(Ahmed, Lim, & Loh, 2012, p. 104).
Human resource efficiency and satisfaction are key determinants in the performance of a service industry. In view of that, SIA maintains a reward system paying bonuses relative to the periodic profitability throughout the entire group(Inderwildi & King, 2012, p. 485). This generates a sizeable peer pressure influence to challenge wastage of an organization’s resources emerging from new decisions implemented in the SIA Group. Similarly, this bonus-profit sharing formula has since placed more weight to performance accomplished by individual companies to motivate and improve the workforce efficiency(Plunkett, 2009, p. 23). Likewise, the airline has committed to building team spirit concept with small teams of 13 crew members flying together for a period of two years. Emerging from such arrangements is social bonds reinforcing corporate culture of cost-effectiveness and service excellence to deliver the SIA’s promise to customers(Heracleous & Wirtz, 2009, p. 278). Recently, the airline has refined the team concept to include team performance evaluation and schedule efficiency. Such a mindset coupled with organizational practices has reinforced productivity of the human resources to the highest attainable figure of 1028 thousand available tonne-kms per employee(Heracleous & Wirtz, 2009, p. 278).
Accomplishing comparative advantages through innovation and total exposures to withstand the substitute threat in the international market requires detailed policy attained through differentiation and infrastructure. This has hyped the need for SIA utilizing related diversification in the international destinations to realize cost synergies and correspondingly monitor quality controls. This has been served with the letter in subsidiaries and associate companies as development grounds for corporate management skills through transfer learning and job rotation(Eigenhuis & Dijk, 2007, p. 117). This is vital as other services such as catering, selling of spares and maintenance of aircrafts have emerged as co-operations providing better profit margins.
SIA terminal services are distinct and excellent providing a source of costliness enticement to passengers while selecting their preferred carriers to their destinations.For instance, the nature of ground services and infrastructure executed at Changi airport distinguishes it among the most cost-effective airports in the international airline industry. The same management philosophy is continuously implemented in all subsidiaries to create a uniform delivery of quality services to customers engaging the services of SIA.
Historically, SIA has positioned its training programs to holistic levels not even leaving out issues perceived as valueless during the development program for its staff. In all its training and induction programs, the airline has become an icon concentrating onfunctional skills and soft personal skills regarding the interaction, composure, deportment and dealing with demanding passengers.For example, the Singapore girls are undertaken in a longer transformation program coupled with extra activities for their crew to develop camaraderie such as a Wine Appreciation Group and Gourmet Circle. SIA has developed its brand image through its corporate social responsibility aimed at accomplishing close-up engagements with the less fortunate members in the society.Further holistic development is enhanced through a shift from management-directed further learning to self-directed systems where staffs are responsible for their self-development programs.
The airline has an active recruitment policy that ensures the right individuals are hired by the company. For instance, the recruitment involves a three-stage process involving uniform testing, water confidence testing and psychometric testing. Here, academic qualifications and physical attributes are monitored in the process. Successful applicants are involved in a detailed training after which they are placed in an extended probation. Here, the in-flight supervisors maintain professionalism and excellence in its operations.
While the airline has to maintain internal efficiency and innovations to cut an identity in the airline industry, it must be vigilant to the turbulence in the horizon. For instance, competitors in the industry are closing the gap with the emergence of improved jets with the ability to by-pass hubs such as Singapore airports. This poses a great risk for SIA. To withstand such risks, SIA is seeking freight rights to operate across all continents to mitigate such risks. For instance, Singapore airline has intensified its lobbying approach for access Sydney-Los Angeles route dominated by Qantas Airways Ltd (Jones, Singapore Airlines Ltd., 2010). Additionally, through code-sharing with other leading airlines such as Virgin Atlantic, this will limit the competitive threat from innovative rivals.
Similarly, the airline must deal with increasing demands from the labour force and multiple protests from the travel agents. Consequently, lay-offs are inevitable in suspended or discontinued operations in the unprofitable routes and outsource the services to other suppliers (Jones, Three Rounds of Job Cutbacks Are Disclosed in Rapid Order, 2004). This may disintegrate the reputation earned to the advantage of the competitors. Similarly, channel relationship challenges such as travel agents contracts, generate power conflicts which the airline can overcome through web based, virtual and direct marketing alongside their physical channels (Saxena, 2009, p. 446). This will require maintaining management information systems with the ability to maintain hawk-eyed views to enhance organizational performance and withstand competitive pressures (Rahim & Rahim, 2010, p. 110). The SIA has continuously kept the potential competition at bay through its top management team support for the technical team to reinforce the scope of international market analysis.
The achievement embracing the Singapore airline places little doubt of their efficiency, cost effectiveness and excellent service delivery to investors. All along their growth path, the airline has identified with holistic strategic management and holistic development to survive the unforgiving environment. However, the success of the SIA is attributable with able management and their corporate culture embedded in its operational strategies. In particular, the product innovation and service development departments emphasize the need to strike the balance through performance productivity and benefits, cost incurred and the expected benefits to the customers.
Current globalization and technological advancements pose the greatest challenge for Singapore Airline, as competitors will close-up the rift existing in their service delivery. This might erode and eat into its market share and thus affect the productivity of its operations. This will put pressure for the company to maintain its incremental innovations to gain competitive differentiation over its rivals. Sustenance of high levels of differentiated excellent services will remain a gold mine investment to commit one’s resources as competitors are continually kept at bay.
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