SIA started off with a humble beginning as part of Malayan Airways. In 1947, Malayan Airways operated services between Singapore, Kuala Lumpur, Ipoh and Penang. During 1972, where Malaysia -Singapore Airline (MSA) split in two entities, name Malaysian Airline System and Singapore Airlines. Since then, SIA has emerged as one of the top international airlines in the industry (SingaporeAirlines, 2012). SIA was ranked 17th in Fortune magazine’s list of most admired companies in 2007, the only airline to make it in the top 50. The company also consistently receives prestigious industry awards. SIA has never posted a loss on an annual basis, and has achieved substantial and superior returns in an industry plagued by intermittent periods of disastrous under-performance.
From the very first days of SIA, several things were clear in the mind of the brand owner: the airline was determined to be a highly profitable brand, and the best airline brand in the aviation industry. SIA has managed to integrate elements of differentiation and cost leadership strategies. It is positioned as a premium carrier with high levels of innovation and excellent levels of service, and has made a clear strategic choice of giving priority to profitability over size. For ‘full service’ airlines and service organizations in general, delivering excellent service always come at a cost. SIA on the other hand has managed to deliver premium service to some of the most demanding airline customers, who have sky-high expectations, at cost that are within the range of those of budget carriers.
With such an outstanding performance achieved in the airline industry; consistently delivering premium service to the customer and create a strong brand reputation over the decades. We would examine and analyze the competitive advantage which include the strategies adopt, the organization activity (design), organization structure as well as the challenges towards organizational changes to compete with the competitors. In the last portion, we will make recommendation to improve the whole system.
2.0 Competitive Advantages
As we have mentioned early, SIA have successfully gained the competitive advantage with adopted differentiation and cost leadership strategies together and sustained over the long term. The three main components (strategies, design, and structure) are interrelated and contribute the success of the overall in the organization. Any of the component that is poorly execute, will affect the progress in the future. Hence, in this chapter, I would like to start with a brief summary of the competitive advantage achieved in Singapore Airlines. Source: L. Heracleous, J. Wirtz / Journal of Air Transport Management xxx (2009) 1-6
Next I would like take a step further of zooming the elements that constitute to the success of leading Singapore Airlines of achieving the dual strategy. Above we have identify the elements of differentiation and cost leadership strategies, now we will identify the element of the five pillars of SIA’s cost-effective service excellence at Fig.1 which is the vital portion that support to gained the competitive advantage. The purple colour circle highlight the five pillars of the activity system (organisational design) are rigorous service design and development; total innovation (integrating continuous incremental improvements with discontinuous innovations), profit and cost consciousness ingrained in all employees, holistic staff development, and reaping of strategic synergies through related diversification and world-class infrastructure (Heracleous, 2009).
The five pillars of cost-effective service excellence are interconnected into an organizational activity system characterized by self-reinforcing virtuous circles and high levels of fit. It is this level of fit and mutual reinforcement among the elements that supports the sustainability of competitive advantage at SIA. Fig. 1 illustrates organizational activity system of SIA, where the pillars support the core competencies of cost-effective service excellence.
3.0 Organisational Changes
In the competitive industry, every organisation would likely to face organisational changes mainly is to improve the efficiency and effectiveness of the operation. Nevertheless, acquisition by new firm and force to change by the external environment in order to stay competing with the business niche.
Singapore Airline have achieved an impeccable flying record since the birth in 1972, they put emphasis on safety as we can see All in-flight staff are comprehensively drilled in first aid and emergency procedures at the state-of-the-art SIA Training Centre.; an example will be the national icon Singapore Girl; setting safety and service standards that other airlines aspire to. SIA have the youngest fleet of aircraft in the world with the aircraft average age at 6.5years. This means the maintenance and fuel costs will be lower and is seen by passenger as a sign of safety, punctuality, and comfort. Recently, the A380 was discovered damages on the structural, SIA take immediate inspection on the aircraft and keep it updated of the result. Nonetheless, the public did not lost faith on SIA due to the prompt react to the incident (Xinmsn, 2012).
Expand route network
SIA have expand its route network spans over 70 cities in more than 40 countries. During 1999, SIA bought 49% of the Virgin Atlantic Airways. The reason behind this acquisition is the reputation of SIA and Virgin as string players in innovation and high standard service. SIA also expand to promising and new markets (e.g U.S) and strategic alliances (e.g. Swissair and Delta).
The advancement of technology brings the organisation to a great height if they successfully engaged it to improve the overall function or create a new services or product. SIA is a global leader in innovation. SIA launched the newest cabin products designed to improve the in-flight experience in all cabin classes. It maintain the youngest fleet of aircraft amongst all major carriers, and they are always been first in line to take delivery of new aircraft types like Boeing 747 jumbo jets, Boeing 777, and they become the first airline to fly the spacious Airbus Super jumbo A-380 in 2006. Additionally, they have pioneered many in-flight experiential and entertainment innovations, and strived to be best-in-class. SIA was the first to introduce hot meals, free alcoholic and non-alcoholic beverages, hot towels with a unique and patented scent, personal entertainment systems, and video-on-demand in all cabins. (BrandScape, 2009)
4.0 Organisational Design
We have identify the activity system (organisational design) which is the essence element that explain why SIA’s competitive advantage has been sustained for decades. While it is easy to copy single elements, it is much harder to reproduce an entire self-reinforcing activity system. Imitating one or two elements will not achieve the same result since the whole system would need to be imitated. Now we will take a look deeper to the design of the activity system.
Rigorous Service Design and Development
SIA has a Service Development department, before introduced any changes it will need to undergo a thoroughly test. This department undertakes research, trials, time and motion studies, mockups, assessing customer reaction; to ensure that a service innovation is supported by the appropriate procedures. It combined with its extensive customer feedback mechanisms, SIA treats its customers’ high expectations as a fundamental resource for innovation ideas. They also have a program called ‘‘SIA’’, for ‘‘staff ideas in action’’, where staff can propose any ideas they have that would improve service or cut costs.
Total Innovation: Integrating Incremental Development with Unanticipated, Discontinuous Innovations SIA adopt a total innovation approach captured in their ’40-30-30’ rule, ensuring a holistic approach to service improvement. SIA focuses 40% of its resources on training and invigorating its people, 30% on the review of processes and procedures, and 30% on creating new product and service ideas. The aim is about cost-effective service excellence based on the whole rather than just one aspect of customer experience. They have a product innovation department that continuously looks at trend and why people behave in a certain manner, why they do certain things.
Profit Consciousness Ingrained in All Employees
Managers and staff are simultaneously aware of the need for profit and cost-effectiveness. Station managers and frontline staff know that they should balance passenger satisfaction versus cost-effectiveness in their decisions. In daily operations, SIA’s staff keeps the importance of reducing wastage in mind without compromising customer service. Lastly, SIA has a reward system that pays bonuses according to the profitability of the company (Heracleous, 2009).
Developing Staff Holistically
The famous ‘‘Singapore Girl’’ undergoes a sturdy training for 15 weeks, longer than any other airline and almost twice as long as the industry average of 2 months. This training includes not only functional skills such as food and beverage serving and safety training, but also soft skills of personal interaction, personal poise, grooming and deportment, etc. During their initial training and subsequent career, crew employees spend time at welfare homes, to get a close-up engagement with the less fortunate, who have to depend on others for their survival. This is aimed to help them develop empathy for others and put themselves in the shoes of the passengers. The recruitment process is extensive, involving 3 rounds of interviews, a ‘‘uniform test’’, a ‘‘water confidence’’ test, psychometric tests, and a tea-party.
Achieving Strategic Synergies through Related Diversification and World-Class Infrastructure SIA uses related diversification to reap cost synergies and at the same time control quality and enable transfer of learning. Subsidiaries serve not only as the development ground for well rounded management skills, and a corporate rather than a divisional outlook through job rotation, but also as sources of learning. SIA’s Singapore Airport Terminal Service (SATS) Group subsidiary manages Changi Airport, which is frequently voted as the best airport in the world. The excellent airport management and infrastructure entice passengers en route to Australia, New Zealand or other countries in the region, to pass through Changi Airport and to select SIA as their carrier.
5.0 Singapore Airlines’s Organisational Structure
Above depicts a functional structure of Singapore Airlines organisation chart, where the entire functional department are controlled and coordinated from the top level management. It evolved from the concept of high specialization; high control framework of manufacture organisation tuned towards higher efficiency.
It is more technical oriented, and they are skilled in making decisions in the functional areas. The infrastructure, skills, and knowledge needed for a particular functional activity are consolidated in a one sub-organisation, this help sharing valuable expertise by superior with their subordinates. Normally, functional units are managed by leader who equip with in-depth knowledge and experience and hence able to control the unit more effectively. Lastly it harvest the potential of the unit with duplication of scarce resources, thus maximize their utilization.
According to the theory of James D. Thompson; task interdependence is the manner in which different organisational tasks are related to one another affects an organisation’s technology and structure. To ensure the strategies align with the design and structure, SIA adopt mediating technology as well as organic structure. From the above we can see clearly, to achieve the differentiation and cost leadership; each functional unit have to fully coordinated (i.e involve HR and Acting Crew dept) to train the SIA girls, and to achieve the young fleet; fuel effiency and lower maintenance cost, (i.e involve R&D and finance dept) in order to effectively achieved the plans. Decision-making in the organisation are almost decentralized; promote flexibility within and encourage innovator behaviour. An example will be the reward system, where employee are award with monetary when provide any ideas to improve the work process (Jones, 2010)
1. Ever since SIA decide to enter the budget airline name Scoot. They would likely challenges against some of their management or department. Functional structure limits the capabilities of the managers to occupy management positions, therefore, organisation may be effective initially, being controlled by several founding members; long term efficiency is in doubt. It draws on the full potential of the HR resource. It slices through unwieldy lines of control within the matrix. It frees up leadership in everyone concerned. Matrix structures are also exciting, dynamic and innovative which require people to be able and willing to serve more than one master; (which fit in the characteristics of SIA employees ie frontline crew) to derive any potential benefits and this may have more to do with behaviour and culture than any intrinsic organisational design. This will allow opening up of communications between different function groups, which will be more productive. Since SIA is in the business environment, we believe that matrix structure would be more effective.
2. If the matrix structure does not successfully work as plan, we would like to recommend a switch from functional to divisional. The divisional structure is where by employees are group into division of different products, such as A380, Cargo flight, Budget airplanes, if they were divided into such groups, it will boost productivity and efficiency because if they were to split into groups that handle diff kinds of services, they would be more specialise in that aspect.
The entire project gives us a considerable insight of Singapore Airlines organisational changes, design and structure; all this major components are well coordinated and the strategies which they adopt clearly defined SIA as a airlines industry leader. According to Michael Porter is impossible to achieved both the differentiation and cost leadership at the same time, however, SIA managed both strategies successfully, create the five pillar activity system as their solid foundation and execute wonderfully.
Now it has become their competitive advantage, continuously lead against their competitors. Certainly, SIA promote flexibility, dynamic, creative, work attitude towards the employee; ensure all the employees clearly understood their roles and responsibility; the vision and mission of the company and the culture. Managers also require to assess the performance with the objective to ensure is in the right track, on the other hand, top management constantly revise on the design and structure to improve the process flow and the operation efficiency. Lastly, changes are inevitable, SIA managed to respond and react to the changes; due to their strong management team and strategies; the determination to thrive in the airline industry.
BrandScape. (2009). Singapore Airlines – An Excellence Asian Brand. Accessed 19 January 2012 http://brandscapeafrica.org/index.php/articles/corporate-branding/215-singapore-airlines-an-excellent-asian-brand.html
Heracleous. L. and Wirtz.J. (2009). Journal of Air Transport Management: Strategy and organisation at Singapore Airlines: Achieving sustainable advantage through dual strategy. Accessed 20 January 2012 <http://bschool.nus.edu/departments/Marketing/Jochen%20papers/jatmstrategyorganizationsia-2009.pdf>
Jones.G. (2010). Organisational Theory, Design & Change 6th ed. Prentice Hall International
SingaporeAirlines.(2012). Singapore Airlines – About us. Accessed 31th January 2012 <http://www.singaporeair.com/en_UK/about-us/sia-history/>
Xinmsn.(2012). SIA checks Airbus A380 aircraft after fresh cracks reported.
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