Singapore Airlines (SIA) has developed into one of the most respected travel brands around the world. Its mission statement: “Singapore Airlines is a global company dedicated to providing air transportation services of the highest quality and to maximizing returns for the benefit of its shareholders and employees”. Singapore Airlines has grown from a regional airline into one of the world’s leading carriers. They have a young, efficient fleet, an educated staff attuned to quality, and a top-ranked travel gateway, Singapore’s Changi Airport, at the centre of the extensive route network. The macro-environment is where SIA has the least influence and control over, but the forces arising from the macro environment can have influences on both SIA and the micro-environment. Rising fuel, new entrants, economic stability and international politics is the example of major trends having a major impact on SIA in the market.
Scanning internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths(S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred as a SWOT analysis. SWOT analysis provides information that is helpful in matching the firm’s resources and capabilities to the competitive environment in which it operates. Strengths are the resources and capabilities that can be used as a source for developing a competitive advantage. Examples of such strengths include:
• strong brand names
• good reputation among customers
• cost advantages from proprietary know-how
• exclusive access to high grade natural resources
• favorable access to distribution networks
Weaknesses are the absence of certain strengths. For example, each of the following may be considered weaknesses:
• lack of patent protection
• a weak brand name
• poor reputation among customers
• high cost structure
• lack of access to the best natural resources
• lack of access to key distribution channels
Opportunities in the external environmental analysis may reveal for profit and growth. Some examples of such opportunities include:
• an unfulfilled customer need
• arrival of new technologies
• loosening of regulations
• removal of international trade barriers
Threats to the firm may exist when changes in the external environmental. Some examples of such threats include: shifts in consumer tastes away from the firm’s products • emergence of substitute products
• new regulations
• increased trade barriers
These five competitive forces will shape industry and market, these forces determine the intensity of competition and hence the profitability and attractiveness of an industry. The objective of corporate strategy should be to modify these competitive forces in a way that improves the position of the organization. Porters’ model supports analysis of the driving forces in an industry. Based on the information derived from the five forces Analysis, management can decide how to influence or to exploit particular characteristics of their industry.
First, bargaining power of supplier bargaining power is likely to be high when the market is affected by a few large suppliers rather than a fragmented source of supply. In such situations, the buying industry often faces a high pressure on margins from their suppliers. The relationship to powerful suppliers can potentially reduce strategic options for the organization.
• Second, the bargaining power of customers determines how much customers can impose pressure on margins and volumes.
Third , threat of new entrants in the competition in an industry will be the higher, the easier it is for other companies to enter this industry. In such a situation, new entrants could change major determinants of the market environment (e.g. market shares, prices, customer loyalty) at any time. There is always a latent pressure for reaction and adjustment for existing players in this industry.
• Fourth, threat of substitutes exists if there are alternative products with lower prices of better performance parameters for the same purpose. They could potentially attract a significant proportion of market volume and hence reduce the potential sales volume for existing players. This category also relates to complementary products. Similarly to the threat of new entrants, the threat of substitutes is determined by few factors. • Fifth, Competitive Rivalry between Existing Players, this force describes the intensity of competition between companies in an industry. High competitive pressure will results in pressure on prices, margins, and hence, on profitability for every single company in the industry.
Singapore Airlines Limited (SIA) is the national airline of Singapore operating major routes internationally. SIA strength is having young and well trained staff, their service is excellence and a top ranked hub in Singapore to serve their extensive international network. The airline has built a sustainable competitive advantage using strategies that differentiated it from other airlines based on superior customer service.
SIA weakness is the high pricing of their travel fare; therefore it manages its regional flights with subsidiary, Silk Air which has lower cost airline market. As for opportunities, SIA has built up a strong reputation in the aviation industry, safety and consistent profitability despite rising and volatile fuel prices, stress in global financial markets, heightened security issues, and increased market competition. SIA has a dedicated freighter fleet, SIA Cargo, and has also expanded into airline related businesses. SIA will have to scan for threats like terrorism and stiff competition.
This Porter’s 5 forces analysis deals with factors outside of airline industry that influence the nature of competition within it, the forces inside influence that how SIA compete. • Threat affecting SIA will be rising aviation fuel prices, increasing competition from low cost airlines and the instability internationally. • Supplier bargaining power is very high in airline industry. Singapore airline also concern about this factors. For example if the jet fuel price increase, SIA will have to increase its fuel surcharge for tickets issued. • Buyer bargaining power for individual customer is too high in airline industry. There are hundreds of Airline Company operate internationally, in this fact individual buyers has so many option to choose from. • Current competitive rivalry & new entry: SIA has to concern about the competitors because airline industry is so competitive. • Opportunities are the growing market, increase in trans-pacific cargo and Global airline market.
In a SWOT analysis identifying strengths, weaknesses, market opportunities for your company, and threats to your business. One way to use the analysis it to then develop marketing strategies that will minimize the affect of weaknesses on your business while maximizing your strengths. Ideally, you will match your strengths against market opportunities that result from your competitors’ weaknesses or voids. The five forces combine to make up the business environment. Using these definitions for the five forces, a clearer picture of the business environment can be obtained.
Heracleous, 2005, Flying High in a Competitive Industry: Cost-Effective Service Excellence at Singapore Airline, McGraw. Hill Company
Venture Republic research report 2002-2008, Singapore Airlines – An Excellent Asian Brand
Johnson, G, Scholes, K, 2005, Exploring Corporate Strategy, London: Prentice Hall
Jamie, W, 1999, The Business Environment, Second Edition, England
http://www.singaporeair.com/saa/en_UK/content/company_info/siastory/index.jsp, 07 Oct 2010