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Singapore Airlines, Case Study Essay

This case exam for the module ‘Principles of Marketing’ accounts for 70% of the final grade for this module (IBMMK108R1). The two multiple choice tests during the module account for 30% (15% per test).

A CASE STUDY OF SINGAPORE AIRLINES

EXECUTIVE SUMMARY

As a former British Colony that gained full independence in 1965, Singapore was essentially forced to make do with its limited resources. This developed into a national obsession with achieving excellence without compromise and has been responsible for its many successes. This attitude of control and determination was critical in the creation of the culture within Singapore Airlines (SIA). From the first unveiling of its official colours in 1972, SIA’s primary objective was that of creating a world Class airline, able to compete against the best in the world, without government subsidy or interference. This international focus, along with its goal of being distinctive, resulted in the creation of a company-wide commitment to the success of the airline.

INTRODUCTION

The single biggest challenge facing Singapore Airlines is that of maintaining its place as the world’s best airline as well as the most profitable. Having been recognised and rewarded for its outstanding level of service, whether or not it can hold on to its top position remains to be seen.

PRODUCT CATEGORIES

SIA’s product offering is divided into three main lines. The First Class seat represents the ultimate in air-borne luxury with corresponding prices. SIA allocates no more than 5% of its seats to this Class due to its limited market. The next category is the Business Class seat. Passengers in this category enjoy fully reclining and seats, plenty of space and excellent food served on custom designed china. The allocation for this Class makes up approximately 10% of the average load. The most substantial category in the product mix is the Economy (or “Tourist”) Class, which accounts for close to 85% of the seat allocation. Even though SIA has one of the most modern fleets in the industry, and has service levels that other airlines can hardly match, the emergence of other regional airlines who aim to displace SIA from its prized leadership position poses some threat to the company.

GOALS

Based on comparisons of SIA’s performance with other international airlines, SIA performs well. SIA finished up the year in the sixth position in terms of passenger numbers, tenth in passenger kilometres, and first in absolute profit (See Table 1). This is in line with the unequivocal goal that has driven the company since its inception.

However, with the growing competition in the industry, SIA needs to consider ways to not only protect its penetrated market from competitive erosion, but also to increase it’s market share. Due to the premiums paid by the Business Class passenger, the company has directed its thoughts towards this market to reach it’s goal of staying ahead of competition and increase market share. One important requirement has been set: that there should be “no compromise of commitment to quality . . . .if a trade off is necessary, it should be in favour of the customer.” Another additional tool in the arsenal is the fact that SIA is an industry leader in the use of technology as a competitive tool. It is the view of the management that this will have an increased role as a differentiator.

BUSINESS CLASS PASSENGER PREFERENCES

To increase market share and competitive posture in the Business Class customer segment SIA did an extensive market research including a survey. From the results of the surveys conducted, it appears that there are some wants of Business Class travellers that are not currently catered to by the excellent in-flight service already provided by SIA. These are summarised as follows: The introduction of satellite telephone facilities on-board brings
is one of the needs of these passengers. Printers, chargers and computer workstations are a logical extension.

With the exception of secretarial services, it is entirely possible that the use of technology will enable business travellers access to full office facilities in the air. In addition, whilst other customer wants (such as showers) may not be logistically or economically efficient, it is not beyond the scope of the imagination to provide minor personal conveniences such as facilities for ironing or changing. This would be especially beneficial to travellers with time constraints.

Nutrition and Meal Frequencies

The fact that all meals originating from Singapore are prepared by ISO certified SATS Catering Private Limited, SIA’s catering affiliate, are planned by nutritionists, and rigorously tested for suitability to the unique requirements of air travel is not known by the general public. These issues could be better communicated to the passengers simply through including the nutritional content of the meals. The services of SATS catering could also be applied towards addressing passengers’ expressed preference to have smaller meals at greater intervals.

Time

Results of the Business Class passenger survey also pointed to waiting time and entertainment as factors affecting passenger satisfaction. Whilst a large number of delays associated with air travel are beyond the control of the airline, such as delays due to inclement weather, some of the customer dissatisfaction is due to the lack of information. Technology could be used to address this. Reports could be inserted into the entertainment system accessed by Business Class passengers. This, along with options for interactive video entertainment in the form of computer games, on-line shopping (as opposed to catalogue shopping for duty free items), even mechanisms for ordering meals and beverages are not beyond the reach of present technology.

Customer Satisfaction and complaints

Another area for concern is that primary data suggests that passenger dissatisfaction has tended to originate from passengers of certain nationalities. This suggests a tendency shown by certain cultures for external expression. This is an important consideration as studies have indicated that complaints received are only the tip of the iceberg; a company could stand to lose up to 96% of its unhappy customers.

Consistency of in-flight service quality with ground service quality Another issue of some importance is the lack of direct control over the quality of ground services offered by SIA’s suppliers in countries, and specifically at airports, around the world. The real issue is the communication, despite cultural differences, of the need for and the maintenance of a consistent level of service quality.

SEGMENTATION

Apart from the use of technology to improve the Business Class services, it would also be useful for the airline to consider further segmenting it’s largest target market – the Economy Class Traveller. Sub-Segmentation or Niching will enable the airline to manage, and maximise the returns from its customers by meeting customers’ needs, and will allow the airline to charge a premium in the process.

Sub-segmentation

SIA could, through the re- examination of the preferences of its largest customer segment, actually create an additional sub-segment or niche. The growing wealth of Singaporeans (over a third of whom choose to fly SIA) and the region, plus the recognition of the growing need for comfortable, yet economical travel especially on long-haul flights may well generate a need for an additional class of travel. The likelihood of this plan could be ascertained by also conducting passenger surveys of the Economy Class travellers on long flights. This interim class could be positioned between the Business and Economy Classes, with some key differentiators. Priced at a slight premium over the Economy fare, it could be introduced on Long Haul flights before eventual adoption on shorter routes.

CONCLUSIONS AND RECOMMENDATIONS
Addressing Business Class Passenger preferences

A good number of the passenger preferences, as revealed in the survey, can be addressed through the use of technology. Here, Singapore Airlines is already a leader, and already has the necessary expertise in the sourcing and application of technology. It should be noted however, that the competitive advantages brought about by such technological innovations are inherently temporal as they quickly erode as a result of competitive emulation. Nevertheless, constant and continuous innovation is critical in maintaining a competitive advantage. Hence, SIA should continue to apply technology towards enhancing its on-board service.

Segmentation

It is recommended that SIA creates an additional sub-segment or niche; the “Interim” Class. Due to the capacity-constraints inherent in the airline business, and the positioning of the proposed “Interim” Class, it is natural that cannibalisation of existing segments should be a concern. The price and the differentiators should be carefully selected so as not to come too close to the exclusivity and luxury of the Business Class, whilst maintaining sufficient tangible benefits above and beyond those available in Economy. In conclusion, SIA needs to act to maintain its competitive edge and grow market share by using technology to better cater for Business Class needs and SIA should carefully introduce an “Interim” Class.


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