PESTLE Analysis
Discuss about the Introduction to Efficiency and Competitive.
Singapore Airlines Limited is a flag carrier airline company in Singapore and its centre is at Singapore Changi Airport. Singapore Girl is the central figure for the company in terms of corporate branding. The company is present at international level but their primary focus is over Asian and Australian markets. The company was founded in 1972 and since last 40 years, it has made their unique image in the international airline industry along with expansive and young fleet of planes. Their mission statement is providing qualitative air transportation services in relation to maximise their revenues through which they could offer highest returns to its shareholders and employees. The primary objective of this report is to evaluate the business environment, business’ opportunities and threats through which their business performance may get affected. In relevance to analyse the business environment, macro environmental factors and the Porter’s analysis will be conducted. Further, report will conclude the strategic recommendations through which Singapore Airlines could enhance their market share in the global market.
Operations of the airline industry are majorly affected by the National Political Frameworks. The major reason behind this is that almost every country has their national carrier which carries country’s flag, headquartered in the capital of the country and represents the nation in the international airline industry. In this scenario, Singapore Airline Company needs to perform their functionalities on the basis of governmental policies, rules and regulations while private companies are free to set up their own rules and regulations, they only require to follow the standards related to quality, safety and security whereas Singapore Airline Company needs to set up their fares also on the basis of government’s policies (Wirtz & Heracleous, 2016). Government’s support is essential also as it helps the company to gain unique respect at the international level and withdrawal of government’s support lead to various disastrous situations and shut down of the business is one of those.
The major economic threat faced by Singapore Airline’s process is the rise in the fuel costs. And as the airlines are allowed to operate across the national economic boundaries, thus the resources intensity is huge. In the scenario where fuel costs are rising rapidly, airline companies have limited options such as transferring their burden over the customers through increasing the fare rates while Singapore Airline is already using a premium pricing strategy and airline companies can utilise the pricing strategy method to a limited extent, thus, appropriate pricing strategy needs to be adopted through which the fuel cost and the profits could be evaluated easily (Heracleous & Wirtz, 2012).
Political
Airline businesses and their operations are heavily influenced by social trends. People generally adopt travelling through airlines with the motive of saving the travelling time, travelling to far locations, etc. Apart from this, airline services are not affordable by all segments of the society due to fare prices. Thus, the target audience is limited for the airline companies. In terms of increasing the market value of the organization in the target market, they should adopt certain effective pricing strategies which could attract the other public segments. With regards to the social trends and their impacts, Singapore Airline Company needs to execute the competitive analysis in relation to adopt more effective and efficient strategies through which competitive advantage could easily be attained (Heracleous & Wirtz, 2014).
Airlie industry needs to be updated in relevance with the technological updates as this is a crucial aspect for the organization in terms of increasing the efficiency of the organization. Technological innovations are required for airline companies as this is an important factor for uplifting the organizational performance through delivering high quality and valuable services to its consumers. This also develops positive image for the organization in consumers’ mind-sets. Technological developments have huge impact over the Singapore Airlines. The company has the latest and young fleet in the whole industry which is a positive factor through which competitive advantage could easily be attained in the global market. Singapore Airlines is also engaged in adaptation of the latest innovations such as reclining seats, headsets, entertaining systems at the back of the seats, etc. (Clarke, 2014).
Legal and regulatory frameworks also have huge impact over the organizational performance and especially over the airline companies and amongst them, national carriers are highly affected by these regulatory frameworks. With change in every government, political policies and the strategies get changed and these have significance impact over the airline industry (Smith & Rees, 2017). Mainly legal changes are made in the airline companies with reviewing the past incidents along with assuming the future considerations.
Airline passengers are much concerned regarding the environmental friendly services. This demand is high due to increase in the awareness amongst the users regarding the environmental conditions. The demand for the environmental friendly services will also increase in the future due to national carbon reduction objectives as well as due to increase in the prices of energy resources. Many of the airline companies have already included the ‘green issue’ in their CSR (Corporate Social Responsibilities) in relation to match up with the marketing conditions. Singapore Airlines have not adopted these types of strategies as they are bit slowly in terms of matching up with consumers’ demand (Mhlanga & Steyn, 2017).
Economic
This is the aspect of the Porter’s five forces analysis and it includes that the existing business organizations gets affected with the new business ventures in the same industry. In terms of Singapore Airline’s scenario, relatively threat of new entrant is quite weak as they have effective goodwill in the airline industry (Dombrowski, 2014). Long-haul passenger airline market (it is currently dominating the Singapore Airline’s market functionalities) to the entry of new ventures is weak. Long-haul air travel business is saturated business industry with one or two nationwide carriers representing the economy and most of them are receiving appropriate support from their nation’s government. Traffic in the airline industry comes from the rise of the national carriers rather than the new entrants. Setting up the new venture in the airline industry is bit difficult financially as well as physically because it requires huge capital investment along with large man-power resources (Nesset & Helgesen, 2014). Despite the less threat of new entrants, long-haul airline passenger sector, the short-haul sector has witnessed the entry of several new entrants in recently. For instance, in the Southeast Asian markets in which Singapore Airlines operate are Air Asia and Jet Star (Camilleri, 2018).
When rivalry is intense, business organizations present in the market needs to perform evaluation techniques in terms of analysing the market trends, consumers’ demands and competitors’ strategies in terms of adaptation of most effective and adequate strategy through which organization could attain its desired goals and the objectives (Heshmati & Kim, 2016). In airline industry, intense rivalry exists and it operates from route to route basis. Such routes where, large number of airline companies exists, chances of intense rivalry are high. In such situations, airline companies performs various functionalities such as offering discounts and other attractive offers to gain the market share on the particular route. Apart from this, airline companies also concentrate over the timings and the punctuality in relation to develop a positive image amongst the target audience (Razal, 2016). This also helps the companies to gain competitive advantage in the busiest routes. There are many routes which are still managed by limited airline companies and the famous route is ‘Kangaroo Route’ and it connects Southeast Asia, New Zealand, and Australia. Reviewing the past performance of the Singapore Airlines, their primary motive is to acquire the Kangaroo Route in terms of setting up their brand image in the rest parts of the globe (Fan & Lingblad, 2016).
Social
Substitutes for airline industry are railways, road transportation and water transportation services. All these have unique impact and significance over the society. The threat of substitutes is weak because all these sources are bit time consuming in comparison with air transportation services. Along with this, there is another source i.e. high speed rail transportation services invented by Japan in the form of Bullet train (Shah, et. al., 2015). This transportation service also consumes less time in comparison to the air transportation services. With the effect of globalisation, various countries have adopted this innovation made by Japan in order to match up with the latest technological developments. High speed rail network may take over the business of airline industry and in the future, major cities of Eurasia may get connected with this network (Pearson, Pitfield & Ryley, 2015). This may also lead to great substitute for the airline industry.
Bargaining power in the airline industry is high in comparison with the supply of the products and the services by the airline companies. Airline companies needs to aware about the demands and the requirements of their target consumers for attaining their desired goals and the objectives. This will also help them to develop sustainable growth objectives for the organization. In airline industry, bargaining power of consumers is moderate because costs of all airline companies are quite similar as well as the fare prices are also quite similar (Luo, Olechowski & Magee, 2014). Whereas, this trend has been changed, airline companies are offering huge discounts in the fare prices in relation to attract the consumers. Apart from this, airline companies are offering various products and value added services to its consumers in flight timings in relation to enhance their performance as well as to gain the competitive advantage in the airline industry. From the perception of consumers, airline travelling is bit more expensive in comparison with other modes of transport. Thus, it is necessary for the Singapore Airlines to uplift their market presence in terms of accomplishing their set targets (Min & Joo, 2016).
This factor plays a crucial role in terms of increasing the efficiency as the presence of airline companies in the global market is bit high. All those companies are performing their functionalities in relation to gain the adequate competitive advantage as well as to acquire the target market. Abnormally for a transportation industry, bargaining power of suppliers in airline industry is quite strong. Fleets are supplied to airline companies which is effectively a duopoly – Boeing and Airbus –, whereas an oligopoly exists in the supply of engines (Joo & Fowler, 2014).
Technological
With the help of above evaluation, it has been concluded that organization needs to adopt certain effective strategies through which organization could enhance their efficiency in terms of attaining their goals and the objectives. Following are certain recommendations which are necessary in terms of increasing the organizational performance in the target market:
- Singapore Airlines is required to perform their operations in such as way so that they could make up their superiority in the airline industry as well as it is also essential in terms of developing and maintaining the leading position in the international market. This requires appropriate market research and the competitive analysis as this will help the organization to adopt more effective strategies in relevance to their competitors’.
- Another recommendation to the Singapore Airlines is to adopt the strategies through which they could be able to provide enhanced services and leisured experience to its consumers in terms of gaining the growth and expansion objectives. This will help the organization to be on the leading position in the competitive business environment. Installation and adaptation of comfort services is also required in relation to improve the customer experience and their satisfaction. Along with this, it is also essential in terms of developing and maintaining the customer relationship.
- Adaptation of product and service differentiation strategy could also be applied in the business in relation with improving the effectiveness in comparison to the other companies of the industry. It has been recommended to the Singapore Airline Company to adopt the overall communication plan in relation to provide improve their services along with this, it will also lead to development of the employer-employee relationship. Apart from this, this business strategy is also effective for increasing the communication services and channels to its customers. Organization could also adopt the internet based services which will help the travellers to access their crucial mails and it will also help the travellers to make their travel easy and entertained. These facilities will cost bit high but it will improve the travellers’ experience and it will also lead to increase in the customer satisfaction objectives.
- Singapore government’s connection could be utilised and along with this, SIA brands and their goodwill could be utilized in relation to expand their network in the rest parts of the globe. Along with this, with the slow growth rate, the company can maintain its goodwill even in fierce competition avoiding fare price war as it does not needs to quickly expand its market share.
Conclusion
From the aforesaid information, it can be concluded that external business environment for Singapore Airlines is full of opportunities. With the help of these opportunities, organization could easily expand its business in further parts of the globe. They have effective and valuable resources which could be utilised for attaining the desired goals and the objectives in the international airline industry. This report concluded the macro environmental factors of the organization and along with this; competitive analysis has also been concluded in this report. The last part of the report concluded regarding the strategic recommendations which will help the organization to improve their performance in the target market.
References
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Clarke, A. P. (2014). Strategic analysis, valuation and market mechanisms: the 2012 Initial Public O ering and subsequent trading of Japan Airlines.
Dombrowski, J. (2014). Business Model Changes of an Incumbent Player in the European Airline Industry: A Case of the Lufthansa Group (Bachelor’s thesis, University of Twente).
Fan, T. P. C., & Lingblad, M. (2016). Thinking through the meteoric rise of Middle-East carriers from Singapore Airlines’ vantage point. Journal of Air Transport Management, 54, 111-122.
Heracleous, L., & Wirtz, J. (2012). Strategy and organisation at Singapore Airlines: achieving sustainable advantage through dual strategy. In Energy, Transport, & the Environment(pp. 479-493). Springer London.
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Heshmati, A., & Kim, J. (2016). Introduction to Efficiency and Competitiveness of International Airlines. In Efficiency and Competitiveness of International Airlines (pp. 1-14). Springer Singapore.
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Luo, J., Olechowski, A. L., & Magee, C. L. (2014). Technology-based design and sustainable economic growth. Technovation, 34(11), 663-677.
Mhlanga, O., & Steyn, J. N. (2017). Impacts of the macro environment on airline operations in southern Africa.
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Pearson, J., Pitfield, D., & Ryley, T. (2015). Intangible resources of competitive advantage: Analysis of 49 Asian airlines across three business models. Journal of Air Transport Management, 47, 179-189.
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Shah, S. T. H., Jamil, R. A., Shah, T. A., & Kazmi, A. (2015). Critical Exploration of Prescriptive and Emergent approaches to Strategic management: A review paper. International Journal of Information, Business and Management, 7(3), 91.
Smith, P. E., & Rees, G. (2017). AN INTRODUCTION TO THE ORGANIZATION, ITS ENVIRONMENT AND HUMAN RESOURCE MANAGEMENT. Strategic Human Resource Management: An International Perspective, 3.
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