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Assignment Record Form

Student Name: VEGESHA VENKATESH
University of Derby Index Number: 100275443
Learning Centre: STAMFORD RAFFLES COLLEGE
Course: MBA
Term: T1
Module Title: STRATEGIC PLANNING
Module Leader: DR. JOANNE HEE
ST
Assignment Submission Due Date: 31 MARCH, 2013
Status: Active
I confirm that I have read and understood the University regulations with regard to referencing
and plagiarism. YES NO

Note: Please read the “Instruction to Upload the Assignment on OCTAL Study Portal” before uploading your assignment.

Module Leader’s Comments:

Module Leader’s Comments on Citing & Referencing

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EXECUTIVE SUMMARY

This report provides the details of strategic management in Singapore Airlines. The paper provides
an overview of the Singapore Airlines company background and its environment and lists the
various resources and capabilities that are available in this airline industry. It focuses on the role of
various strategic tools, marketing intelligence and research, marketing segmentation, positioning
and buyer behaviour in the airline industry. The paper also identifies strategies that Singapore
Airlines utilize and how they affect the airline performance.

Key issues that threaten Singapore Airlines in the present market is been identified in this report and
it is found that it is been affected and complicated by government regulations and global laws.
Present airline industry issues and trends that is affecting SIA have been researched and a number
of recommendations have been provided as a possible solution by the author of this report.

The report also gives the actual findings and evaluates various analyses such as external analysis,
internal analysis, industry analysis and competitor analysis of Singapore airlines. External analysis
is carried out by performing PESTLE analysis tool. Internal analysis is carried out by performing
BCG matrix. Porter’s five forces’ is used to analyze the Industry analysis of SIA. Core strategies
and market segmentation gives the details on competitor analysis of Singapore Airlines.

TOWS matrix provides the information about SIA’s strengths, its competences and strategic
challenges in the airline industry. A strategic choice of SIA is evaluated by using Porter’s generic
strategies that discusses on dual strategy choice of differentiation and cost leadership. Ansoff matrix
provides the various strategies such as market penetration, product development, market
development and diversification that can be implemented in Singapore Airlines. Finally the
Hamel’s model explains how SIA’s business fit into the mode of strategic planning.

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TABLE OF CONTENTS PAGE NO.

1.0 INTRODUCTION 7
1.1 Strategic Planning 7
1.2 Strategic Position 7
1.3 Strategic Choices 7

2.0 COMPANY BACKGROUND 9

2.1 Background Information 9
2.2 Main Services & Customers 9
2.3 Current Situation 10

3.0 MARKET SUMMARY OF SINGAPORE AIRLINES 11

3.1 External Analysis of SIA 11
3.1.1 PESTLE Analysis 11
3.1.1.1 Political Factors 11
3.1.1.2 Economic Factors 12
3.1.1.3 Social Factors 13
3.1.1.4 Technological Factors 13
3.1.1.5 Legislative/Legal Factors 14
3.1.1.6 Environmental Factors 14
3.2 Internal Analysis of Singapore Airlines 14
3.2.1 BCG Matrix for SIA 14
3.2.2 TOWS Matrix for SIA 15
3.3 Industry Analysis – Porter’s Five Forces 17
3.3.1. Threat of New Entrants 18
3.3.2. Competitive Rivalry between Existing Competitors 18
3.3.2. Competitive Rivalry between Existing Competitors 18
3.3.3. Bargaining Power of Buyers and Behavior 18
3.3.4. Bargaining Power of Suppliers 19
3.3.5. Availability of Substitutes 19
3.4 Competitor Analysis 19
3.4.1 Core Competencies 20
3.4.2 Market Segmentation 20

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4.0 STRATEGIC CHOICES AND SELECTION OF BUSINESS-

LEVEL STRATEGY FOR SIA 22
4.1 Evaluation of Strategic Choices in Singapore Airlines 22
4.1.1 Porter’s Generic Competitive Strategies 22
4.1.1.1 Differentiation and Cost Leadership 22
4.1.1.2 Market Positioning 23
4.2 Selection of Business-Level Strategy 23
4.2.1 Ansoff Matrix for SIA 23
4.2.2 Hamel’s Business Model for SIA 24
4.2.2.1 Core strategy 25
4.2.2.2 Strategic resources 25
4.2.2.3 Customer Interface 25
4.2.2.4 Value Network 26

5.0 CONCLUSION 27

6.0 REFERENCES 28

7.0 APPENDICES 31
Appendix 7.1 31
Appendix 7.2 31
Appendix 7.3 31
Appendix 7.4 32
Appendix 7.5 33
Appendix 7.6 34

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Structure of this Report:

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1.0 INTRODUCTION
This report presents the strategic planning of Singapore Airlines and it critically evaluates the
organization’s present internal and external strategic position, strategic choices and its implications
in view of the airline industry’s life cycle.

1.1 Strategic Planning:

In order to make organization’s vision, mission and goals become into reality, Strategic Planning
process has to be set in motion by making a decision to pursue it. Strategic Planning should be a
flexible and responsive process, its main aim has to be to develop and maintain a satisfactory mesh
between the goals and capabilities of the organization and the opportunities and threats arising from
its internal and external environment. Strategic planning generally includes the process of data
gathering and analysis, effective strategy is essentially action oriented: gathering of information is
merely a small part of the process of creating a sustainable competitive advantage. Strategic
planning helps managers to identify potential problems before they occur and real problems before
they become acute in the organization (WEC, (2013)).

1.2 Strategic Position:

Strategic position forms an integral part of the strategic management process. It informs the
strategic choices that need to be made and subsequently be implemented in the organization. It is
important for any organization to take consideration of the future and then to assess if the present
strategy is a suitable fit with the strategic position, if not then organization has to determine the
changes it needs to make.

The strategic position is mainly concerned with the impact on strategy of the external environment,
internal resources, competences, and the expectations and influence of stakeholders. Consideration
of the environment, strategic capability, the expectations and the purposes within the cultural and
political framework of the organization provides a basis for understanding the strategic position of
an organization. (Johnson, J., Scholes, K & Whittington, R (2008))

1.3 Strategic Choices:

Strategic Choice is built on concept of interaction in which organizations adapt to their environment
in a self-regulating, feedback manner so as to achieve their goals and objectives. Strategic choice is

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basically a systematic theory of strategic management. Strategic choice analysis is mainly at the
macro level of the company in which, the causes and effect are related to each other in linear
manner.

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2.0 COMPANY BACKGROUND

Singapore Airlines history can be traced back to 1st May 1947 and it was operating as Malaysian
Airways during 1940s and 1950s. When the federation of Malaysia was born in 1963, the Airline
name was changed to Malaysian Airways Limited (MAL). Then in 1966, following Singapore’s
separation from Malaysian Federation, the airline name was changed again to Malaysia-Singapore
Airlines (MSA). In 1972, MSA ceased its operations and split to form two separate airlines namely
Singapore Airlines and Malaysian Airline System. Thus Singapore Airlines was officially launched
in the year 1972 and rest of that decade was devoted to growth and consolidation of the newly
established Singapore Airlines (Singapore Airlines, (2013)).

2.1 Background Information:

Singapore Airline is a subsidiary of Singapore government which holds a golden share through
Ministry of Finance and holding company Temasek Holdings which holds 54.5% of voting stock.
Singapore Airlines owns all its aircrafts and maintains a modern fleet of 102 aircrafts, unlike many
other airlines who lease a substantial part of their fleet. As of 1st March 2013, the average age of the
fleet stands to be at six years and eight months - making it one of the world's youngest and most
fuel efficient flights.

The annual report ending as of 31st March 2011/12, shows that the total revenue of the company to
be SGD 14,857 million with operating profit of SGD 285.9 million. The total asset of the company
is worth around SGD 22,043 million (Singapore Airlines, (2013)).

The Singapore Airlines has more than 29,000 employees, employed in home base Singapore and in
as many as 80 diverse locations, all around the world. This large workforce comprises a diverse mix
of people who bring a range of skills, attributes and personalities to the workplace (The Times 100,
(2013)).

2.2 Main Services & Customers:

SIA’s network reaches over six continents mainly serving Asia, Europe, North America, Middle
East, South West Pacific and Africa, flying to 93 destinations in 42 countries. SIA’s regional airline
subsidiary Silk Air manages regional flights to secondary cities with smaller capacity requirements

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serving 21 destinations in 8 countries. Singapore Airlines has bought the stakes in Tiger Airways
and also owns the budget airlines Scoot in order to compete with the low-cost carrier airlines.

2.3 Current Situation:

As a part of the new strategy Singapore Airlines is increasing its focus on Australia-Asia market
and is relying less on long-haul routes to Europe and North America. SIA has traditionally been
very strong in Australia, which accounts for 18% of its current capacity (ASKs). SIA’s new strategy
features a more balanced portfolio with an increased focus on the faster-growing budget and
regional markets. SIA’s profitability is expecting a boost in late 2013 after the carrier eliminating
unprofitable non-stop flights to the US. The group is now well positioned to tap into growing
demand between Asia and Australia following its partnership with Virgin Australia, 100%
subsidiary in Scoot and investment on shares in Tiger Airways.

Competition in the Australia-Asia market is heating up as Qantas repositions its Singapore

operation to focus on Asia. But SIA at least for now is in a stronger position than Qantas in the
Australia-Asia market as Qantas lacks a sufficient number of full-service partners in Asia. Qantas is
also following more of a multi-hub strategy for its Asian connection traffic after dropping plans to
establish a premium carrier in the region, which gives SIA and Virgin an advantage as they are
offering a more uniform and in most cases more convenient Australia-Asia product (CAPA,
(2011)).

At present for SIA, it’s about to improve their strategies and focus on cost containment and to wait
patiently until all the recent major strategic changes to be fully implemented.

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3.0 MARKET SUMMARY OF SINGAPORE AIRLINES

In order to gain the competitive advantage in the market it is very much essential for any
organization to conduct internal analysis, external analysis, industry analysis and competitor
analysis. This chapter discusses in detail about these analyses conducted on Singapore Airlines and
will enable the organization to assess its strategic position and take stock of its strengths and
weaknesses.

3.1 External Analysis of SIA:

In analyzing the macro-environment of the airline industry, it is very important to identify the
factors that might in turn affect a number of vital variables that are likely to influence the SIA's
supply and demand levels and its costs. The radical and ongoing changes occurring around the
globe will certainly have an impact on the performance and operations of SIA and the PESTLE
Analysis will help identifying the opportunities and threats for SIA.

3.1.1 PESTLE Analysis:

PESTLE analysis is one of the framework and a useful strategic tool for understanding market
growth or decline, business position, market potential and direction for operations. The results of
PESTLE factors can be used to take advantage of opportunities and to make contingency plans for
threats when preparing business and strategic plans (Byars and Cooper, 2000).

3.1.1.1 Political Factors:

Political factors that have influenced Singapore Airlines are as follows:
1. One of the major political factors that have influenced Singapore Airlines is in the operating
restrictions influenced by other countries where SIA have to work within. Many countries
adopt regulatory measures in order to safeguard their home city airline industry so that they
limit the extent of cross border cooperation between SIA.

2. Other political factor for SIA is the bilateral route agreements, where all members of an
alliance can utilize. So far SIA has taken advantage of liberal bilateral aviation agreements
between Singapore and Thailand, and with the United Arab Emirates, to offer more onward
connections from Bangkok and Dubai respectively.

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3. The unstable political environments in oil producing countries and regions such as Iraq, Iran
and Venezuela have already resulted in oil prices being driven upwards to record prices. The
uncertain future of these political contexts also means that future economic impacts on the
airline industry remain unclear (American Essays, (2007)).

4. Instability arising out of the terrorist attacks in US on September 9/11, terrorist attack in
Bali, Indonesia has created more security related pressures for airline operators. Also natural
disasters such as the tsunami in Japan and its impact on holiday passengers in the region
may also potentially have a long term impact on SIA.

3.1.1.2 Economic Factors:

Economic conditions help evaluate how easy or how difficult it is to be successful and profitable at
any time because they affect both capital availability and cost, and demand (Thompson, (2001)).

From economic point of view limitations to Singapore Airline industry can result from several
sources, such as, regulatory constraints imposed by overseeing agencies, changes in technology,
trends in the demand level, supply side factors, such as scale, scope and network economies, and
market organization determinants such as nature of competition.

Economically, Singapore airlines lead to a greater control on capacity, therefore reducing

competition and increasing yields. By code sharing airlines are able to not only split costs but to
offer services and enter new markets. This leads to less aircraft at airports, therefore less space
being required, and is another way in gaining access to prime airports, which can expand no further.
(IATA, (2011)).

Demand and Supply side of Airline Economy:

Please Refer Appendix 7.1 for more details

Economy of Rising Oil Prices:

Please Refer Appendix 7.2 for more details

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3.1.1.3 Social Factors:

The socio-cultural environment encapsulates demand and tastes, which vary with fashion and
disposable income, and general changes, can again provide both opportunities and threats for
particular companies (Thompson, (2001)).

The products and services changes from being a novelty to market saturation depending upon the
situation, when this happens then SIA has to change its pricing and promotion strategies according
to the social conditions.

Singapore Airlines should be aware of demographics changes as the structure of the population by
ages, wealth, regions, and numbers of working and so on which can have an important bearing on
demand as a whole and on demand for particular products and services. There can be threats for the
existing products and same time there can be opportunities for differentiation and market
segmentation that might emerge in the future, SIA should be quick to react to those changes and
implement the suitable strategies to stay ahead in its competition.

3.1.1.4 Technological Factors:

SIA is one of the airlines that strongly believes in the use of IT and at present SIA has to examine
various new IT developments such as electronic ticketing, selling tickets through online, use of
smart cards for self-check in, automated check in and more sophisticated management software.
This technological development will make air travel easier, faster, comfortable and more fun for
SIA travelers and IT applications will have the primary aim of providing the best possible services
to SIA’s customers.

Technological factors are changing the nature of the airline business and increasingly becoming
fundamental to every aspect of Singapore Airlines operations. In order to take full advantage of all
the potential benefits available through the adoption of e-commerce, SIA will need to replace their
unrelated and often ill matched legacy IT systems used in different parts of their operation in
different countries by a unified architecture. This will enable SIA to implement a more effective
electronic based distribution system.

Please Refer Appendix 7.3 for more details

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3.1.1.5 Legislative/Legal Factors:

In the airline industry there are many legal restrictions such as flying over a country or in some
other country’s flying zone. Being an International carrier it is very much essential for Singapore
Airlines to have all the licenses in order to fly to different destinations across different nations.

Singapore Airlines have the flying rights to over major countries in the continent. However it is
finding hard to establish itself in the Australian and American continent which is currently
dominated by several large players. The company since the day it started has been doing well to
acquire licenses and adhere by the legal framework which it operates in.

3.1.1.6 Environmental Factors:

Singapore Airlines is committed to continual improvement in environmental performance and has
taken appropriate measures to address key areas of environmental concern. The environmental
factors usually relate to those operational effects that the company has over the environment.

SIA communicates the environmental policies to all its staff and continuously monitors changes in
environmental legislation, audit their compliance and co-operate fully with environmental
regulatory authorities; establish an environmental action program to manage environmental issues
relating to the use of energy and resources, emissions to the atmosphere, effluent discharges, waste
management, noise and relations with key suppliers (Singapore Airlines, (2013)).

3.2 Internal Analysis of Singapore Airlines:

The Singapore Airlines Group has over 20 subsidiaries, covering a range of airline-related services
from cargo to engine overhaul. SIA’s main subsidiaries include SIA Cargo, SIA Engineering
Company, Silk Air and Tradewinds tours and Travel. SIA seek to invest more in related business of
aviation industry, rather than to invest in diversifying outside airline industry (Singapore Airlines,
(2013)).

3.2.1 BCG Matrix for SIA:

BCG Matrix is tool used to determine the priorities that needs to be given in the product portfolio of
SIA’s business unit. BCG Matrix is a two dimension matrix and it plots SIA’s business unit against:
 Rate of market growth in the airline market and

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 SIA’s relative market share with its competitors

BCG Matrix helps SIA to understand and prioritize its strategic decisions in allocating resources to
its portfolio of business units such as airlines, cargo and terminal services. Till date SIA’s major
contribution of profits comes from airline industry which is followed by its terminal services, cargo
and engineering.

Below figure shows the BCG Matrix that helps illustrate which business units are worth allocating
resources towards (Stars), and which to divest from (Dogs).

Figure: BCG Matrix of SIA

Source: (ACU, (2013))

3.2.2 TOWS Matrix for SIA:

TWOS matrix 'forces' practicing managers to analyze the situation of their company and helps to
develop strategies, tactics, and actions for the effective and efficient attainment of its organizational
objectives and its mission.

TOWS Matrix is an important matching tool that will help SIA’s strategic planners to develop four
types of strategies namely SO Strategy, WO Strategy, ST Strategy and WT Strategy. SIA need to

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implement this framework to analyze the external factors and internal factors of the airline industry
for their future research. Strategies need to be implemented based on the findings of these variables.

TOWS Matrix for SINGAPORE INTERNATIONAL AIRLINES (SIA)

STRENGTHS WEAKNESS

1. Strong and experienced 1. Expensive ticketing prices.

marketing team supported by 2. Customers preferring to pay
skilled management. for Budget airlines.
2. Brand image of Singapore Girl 3. Flying right access to
highly recognized by global important countries and
customers. airports and bilateral
3. High quality customer service. agreements.
4. High quality staff training and 4. Negotiations with the
development programs. Australian government over
5. Well established consumer open skies.
testing panel.
6. Youngest aircraft fleets in the
world with average age of 6
yrs and 8 months.
7. 36 direct subsidiaries and
associated companies.

SO STRATEGIES WO STRATEGIES
1. Investment in technology
1. Establish new hubs in
such as e-ticketing, cost 1. Use code sharing with other
Australia, Dubai, Europe and
effective sales and billing airlines in order to split
OPPORTUNITIES

North America.
system. costs.
2. Provide special packages to
2. Increasing consumers to
2. Offer services to other
customers for tourism
buy tickets online.
locations.
airlines from different
3. Effective marketing
3. Increase market share in the countries and enter markets.
strategy and value added
Middle East, China and India.
targeted marketing
4. More user friendly website.
segmentation.
4. New emerging market.

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5. Invest and trial the

growing Low-Cost Airline
market.

ST STRATEGIES WT STRATEGIES
1. Rising and volatile fuel
costs impact on operational 1. Invest in buying shares of 1. Stop long hour’s journey flight

costs. budget airlines. to destinations such as New

2. Terrorist attacks and 2. Establish a better relationship York etc.

Natural disasters like with other countries by signing 2. Buy more fuel efficient

tsunami and floods. MoU’s for better services and aircrafts.

THREATS

3. International Politics are offers.

complex in global markets. 3. Increase more passenger seats

4. Price sensitive customers. in economy class.

5. To maintain quality of
services at profitable
levels.
6. Potential of new entrants
within the airline market
segment.

Figure: TOWS Matrix of Singapore Airlines

Source: Created by Author

Please refer Appendix 7.4 for more details on SO Strategy, WO Strategy, ST Strategy and WT
Strategy with examples.

3.3 Industry Analysis – Porter’s Five Forces:

This report uses Porters 5 forces in analyzing the industry structure of Singapore Airlines and is as
follows:

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Figure: Porter’s Five Forces

Source: WEC, 2013

3.3.1. Threat of New Entrants:

The cost involved in setting up a new airline industry is considered to be the biggest barrier for new
entrants in airline industry. Another major barrier for new entrants is to obtain flight access to
foreign countries and obtaining airport space is also a major hurdle. SIA has to constantly work on
maximizing the cost efficiency and performance in order to discourage any new entrants.

3.3.2. Competitive Rivalry between Existing Competitors:

SIA don’t have the domestic airline market since Singapore being a very small country with
population of only 6 million, despite of that the airline has done extremely well in maintaining their
profit income. The price wars are very common occurrence in the airline industry and hence SIA
has to compete with its competitor in providing better customer services and products for its
customer at relatively competitive market prices.

3.3.3. Bargaining Power of Buyers and Behaviour:

The factors that influence buyers bargaining powers include a mix of social, cultural, personal,

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lifestyle, psychological, environmental, education, occupation, motivation and beliefs and attitudes
of people. SIA’s understanding of this could enable them to develop more successful marketing mix
strategies. It is very important to ask and understand customer satisfaction in experiencing SIA’s
services or products offered to them. This provides invaluable inputs on how the services and
product provided value for the customer as well as how they chose it.

Henry Asael in Kotler (2003:201) summarized the four different buyer behaviors that require
different responses from marketers:

Please Refer Appendix 7.5 for more details

3.3.4. Bargaining Power of Suppliers:

Bargaining power in the airline industry mainly depends on fuel, aircraft and labor. Airlines have
little control over rising fuel prices; SIA must often use techniques such as hedging to mitigate the
impact of price fluctuations.

Supplier power in the airline industry is boosted by the presence of a duopoly upstream. SIA have
formed partnerships or alliances with airline manufactures such as Airbus and Boeing in order to
buy fuel or purchase aircraft as a bloc, thereby achieving higher bargaining power and reducing
supplier power. SIA’s aircrafts are purchased from manufacturers such as Airbus and Boeing by
negotiating a separate contract for each order.

3.3.5. Availability of Substitutes:

There are no potential substitutes for Singapore Airlines at present since the airline industry is
involved in flying passengers to international destinations around the globe. But still SIA may get
substitution threat from neighboring markets such as destinations to Malaysia, Indonesia, and
Philippines, customers may still prefer to travel in cars, boats and fast trains to these destinations.
Singapore government is presently planning to establish a fast train operation between Singapore
and Kuala Lumpur and this can be potential threat to SIA.

3.4 Competitor Analysis:

SIA don’t have the home market since Singapore being a very small country with population of 6

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million, despite of that the airline has done extremely well in maintaining their profit income. This
also implies that size is not the key factor for airline industry to compete. SIA’s competitive success
over its competitors lies in its service quality and innovation, investment in latest technology and
most modern fleet, continual training and development of its staff, and strong management and
work ethics.

In order to compete with budget airlines companies like Air Asia, Cathay Pacific, Qantas etc., SIA
has marketed itself as a value adding airline operator and also has sought to focus on cost control in
order to improve competitive capabilities.

3.4.1 Core Competencies:

SIA's core competencies include the skills of is top management at planning marketing strategies
and the interpersonal skills of its flights attendants. Making flights as comfortable as possible is
what they do best.

SIA top management has been able to communicate in other ways to its employees about the
company's mission, and that a written mission is necessary. There is no doubt that SIA's implicit
mission is to meet the needs of customers beyond their dreams. This is evident from the accolades
and awards that SIA has received from aviation bodies. By 1979, SIA became the ninth largest
airline in the world, up from the 57th position prior to its strategy achieved due to a continuous
average annual growth rate of 46% over its initial seven year period (Chan, 2000).

3.4.2 Market Segmentation:

The main objective of market segmentation is to determine the marketing strategies of SIA by
understanding the customer trends and their behaviors. Once the market segmentation is done then
SIA can pursue all or a number of segments with a different offer for each differentiated and niche
markets that creates and maintains value for the targeted segments. After SIA has identified and
selected its target market, the next stage is to decide how it wants to position itself within the
chosen segment.

SIA should use four types of market segmentation depending on Geography, Demographics,
psychographic and behavioral and this type of segmentation are provided for each of the general
bases and is summarized below:

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Please Refer Appendix 7.6 for more details.

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4.0 STRATEGIC CHOICES AND SELECTION OF BUSINESS-LEVEL STRATEGY FOR

SIA

SIA’s strategic choice is to give priority to profitability over its size and hence it has positioned
itself as a premium carrier with high levels of innovation in terms of technology and aircrafts and
excellent levels of services to its customers. SIA management has always strived towards
continuous people development and rigorous service designs which has been the key aspects of its
operations and sustaining its positioning and strategic choices.

4.1 Evaluation of Strategic Choices in Singapore Airlines:

Information technology has played a crucial role in reducing the costs, enhancing customer services
and has increased the efficiency as well as quality. This has enabled SIA’s website to be one of the
most advanced and user friendly in the industry, where customers can check schedules, buy tickets,
check into a flight, manage their frequent flyer. Hence it implies that IT to be one of the essential
features to be a part of SIA’s strategic choices.

In terms of business level strategy, SIA has performed well in order to deliver premium services to
demanding price sensitive customers by achieving differentiation at certain level of cost that
approach those of budget carriers and other airlines.

4.1.1 Porter’s Generic Competitive Strategies:

In order to evaluate the strategic choices of Singapore Airlines Porter’s generic competitive
strategies is used.

4.1.1.1 Differentiation and Cost Leadership:

Differentiation and Cost Leadership strategy was deemed by Michael Porter who held that
differentiation and cost leadership must be mutually exclusive since they require different kinds of
investments across the value chain.

SIA has successfully achieved outstanding performance by implementing the dual strategy. The
differentiation was done under cost effective service excellence and innovation, enshrined in a
unique, self reinforcing system of organizational processes and activities together with simultaneous

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cost leadership in its peer group.

Because of the dual strategy, SIA has consistently outperformed its competitors and has never
posted a loss on an annual basis; it has achieved substantial and superior return compared to other
airline industry like British Airways. It has received hundreds of industry awards for its service
quality (American Essays (2007)).

4.1.1.2 Market Positioning:

Market positioning strategy of SIA should depend on how its competitors position themselves so
that consumers can make a direct comparison when they buying the air tickets in Singapore
Airlines. Market positioning is about how SIA wants consumers to perceive their products and
services in relation to their competitors. Understanding of market positioning enables SIA to create
positioning strategies that result in an offer being seen by consumers as attractive, filling a gap in
the market, and providing the organization with some competitive advantage.

SIA’s market positioning strategy uses “Singapore Girl” as a central ingredient in marketing its
image. Singapore Girl broke that branding image of traditional marketing communications focusing
on cabin design, food, comfort and pricing. Personified through the girls, customers got a
sensory/emotional experience of air travel with SIA’s commitment to service and quality
excellence.

4.2 Selection of Business-Level Strategy:

At the business unit level, author of this report believes in Ansoff Matrix that needs to be
implemented in marketing strategy of SIA for its future expansion and diversification. Also at same
time believes in Hamel’s business model to be implemented.

Ansoff Matrix and Hamel’s model are justified by author for marketing strategy and business
model respectively for SIA and the details are mentioned as follows:

4.2.1 Ansoff Matrix for SIA:

Ansoff’s matrix suggests four alternative marketing strategies which hinge on whether products and
services are new or existing in the airline industry. SIA will have to mainly focus on risk involved
depending on whether a market is new or existing. Within each strategy there is a differing level of

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risk that the company could take and count on for its future growth in the market. This tool
developed by Ansoff allows SIA to scope out its strategic business options.

The four strategies are summarized below:

Low-cost airlines, aircraft fleet investment, and destination expansion are areas that SIA could
further investigate and develop strategies for to expand market share.

Established Product Market New Product Market

Market Penetration Product Development
 Promote its low cost Airlines such as Tiger  Promoting the superjumbo A380 as a better
Airways, Fly Scoot to increase sales and alternative/experience in the hope to gain
Established Market

penetrate into new budget market. more market share.

 Promote its growth in markets such as  Continuous innovations in technology in
China, India, Australia and Middle East. terms of e-ticketing, baggage handling etc.,
and provide excellent staff training and
development.
Market Development Diversification
 Develop SIA's destinations to new routes  Consider extending their reputation for
such as Kangaroo Route & Transatlantic service by affiliating their brand with
Routes. hotels/accommodation.
New Market

 Establish a hub in Australia to make  Tie up with tours and travels agents in
travelling easy and efficient to American tourist destinations to provide holiday
markets. packages for its frequent flyers.
 Develop Scoot airways to acquire market
share in budget airlines in Australia.

Figure: Ansoff’s matrix offers strategic choices to achieve the objectives.

Source: Created by Author

4.2.2 Hamel’s Business Model for SIA:

Hamel’s model has to be used in order to explain how SIA’s business fit into the mode. There are
four strategies that SIA need to implement in order to maintain a healthy competition in the airline
industry. The four components of a business strategy are mentioned below which include core

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strategy, strategic resources, customer interface strategy and value network done by Hamel. The
four strategies are in turn linked by three bridges namely customer benefits, configuration and
company boundaries (Hamel, G, (2002)).

Figure: Hamel Business Model

Source: Hamel, G, (2002)

4.2.2.1 Core strategy:

The three elements that make up the core strategy are the business mission, product/market scope
and basis for differentiation. It is very important for any company to communicate its employees
about their vision, mission and objectives. SIA’s top management is been communicating well
about its mission to meet the needs of its customers beyond their dreams. This is very much evident
from the awards and accolades that SIA has received from aviation industries.

4.2.2.2 Strategic resources:

 Top class management is involved in planning the marketing strategies of SIA.
 In flight service includes serving customers with food and drink, providing them with
information on anything asked, providing customers with blankets, assisting them with
luggage’s, and a host of other assistance. Ground services include ticket sale, seat
reservation, checking in, baggage handling (Singapore Airlines, (2013)).
 All staff members are provided with very good interpersonal skills.
 Singapore Airlines was subject to heavy competition from the onset and this tough start
created a driving spirit to compete and also a dedication to branding.

4.2.2.3 Customer Interface:

Customer interface mainly includes SIA’s service to its customers in fields such as, fulfillment and
support, information and insight, relationship and dynamics and pricing structure.

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 To support its service excellence strategy, SIA adopts a rigorous quality control system and
process for staff recruitment and selection, and a rigorous training and service policy (Chan,
D, (2000)).
 SIA has one flight attendant for every 22 seats, which is the best in the world. In 1997 SIA
introduced electronic Ticketing for flights from Singapore to Kuala Lumpur and Penang. In
the same year, it launched innovative inflight entertainment offering passengers viewing and
listening options (Chan, D, (2000)).
 SIA collects information from its passengers. SIA conducted a survey on 4,000 passengers
from all classes to determine their needs and preferences. The survey found that people
wanted comfort, privacy and the experience that SIA offered (Chan, D, (2000)).
 SIA’s pricing structure is available on its website and it displays the usual pricing structure
very expensive for first class and business class and affordable rates for economy class.

4.2.2.4 Value Network:

The fourth strategy of Hamel concept is the value network. SIA’s strategic role in relation with
value chain mainly complements and amplifies the SIA’s own resources that include its suppliers
and partners.
 The main suppliers of aircrafts for SIA are Airbus and Boeing. SIA is having total of 102
aircrafts with average fleet age being at 6 years.
 SIA is having 36 direct subsidiaries and associated companies. Some of the SIA partners
include top hotels around the world, car rental services, credit card and telecommunication
companies. Passengers can stay miles away and can call or make purchases from any of its
partners worldwide.

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5.0 CONCLUSION

Singapore Airlines is the company that has proved itself over years that it delivers great service in
terms of flight experience, ground staff and quality services to its customers and it has earned
frequent international awards for its services. There are several good reasons for SIA’s success and
it most directly relates to the strong brand management that is primarily driven by dedicated,
professional brand strategy throughout a diversified global organization. Singapore Airlines brand is
unique where the boardroom itself takes dedicated leadership of the brand strategy unlike many
other airline companies.

The prime objective of SIA has been their commitment towards their mission statement of
providing quality world class service to their customers where other airline companies are lagging.
Ultimately for SIA is all about to attract their customers towards their products and services and
implement the suitable strategies in order to reach its vision, mission and goals.

SIA must continue to seek ways and be quick in implementing new strategies towards changing
market trends, changing socio-cultural factors, changing economic factors and global aviation
regulations in order to maintain their continuous profit status every year and to maintain their track
record even as retaining the loyalty of their customers and attracting new ones.

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6.0 REFERENCES

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1. American Essays (2007), Strategic Analysis of Singapore Airlines [Online], IATA 2007,
Viewed on 15th March 2013, < http://www.americanessays.com/study-aids/free-
essays/business/strategic-analysis-of-singapore-airline.php#ixzz2NWmVYpJs>
2. ACU, (2013), Singapore Airlines: Factors Accounting for Marketplace Success [Online],
Australian Catholic University, Viewed on 27th March 2013,
<http://dlibrary.acu.edu.au/research/carpediem/pages/volume4/vol4no1_businessanalysis.ht
m>
B.
3. Bryson, J.M (2011), Strategic Planning for Public and Nonprofit Organizations: A Guide to
Strengthening and Sustaining Organizational Achievement, 4th edition, John Wiley & Sons:
United States of America.
4. Bourgeois III, L.J., Duhaime, I.M & Stimpert, J.L (1999), Strategic Management: A
Managerial Perspective, 2nd edition, Dryden Press: United States of America.
C.
5. Calingo, L.M.R (1997), Strategic Management in the Asian Context: A Casebook in
Business Policy and Strategy, JOHN WILEY & SONS: Singapore.
6. Chan, D, (2000), The Story of Singapore Airlines and the Singapore Girl, Journal of
Management Development, Singapore.
7. CAPA, (2011), Centre for Aviation: Singapore Airlines [Online], CAPA, Viewed On 14th
March 2013, <http://centreforaviation.com/analysis/singapore-airlines-struggles-to-defend-
yields-as-fuel-costs-blow-out-and-protracted-downturn-looms-62204>
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8. David, F.R (2003), Strategic Management: Concepts & Cases, 9th edition, Prentice Hall:
Upper Saddle River, New Jersey.
H.
9. Haberberg, A & Rieple, A (2008), Strategic Management: Theory and Application, Oxford
University Press: Spain.
10. Hamel, G, (2002), Leading the Revolution, 1st Edition, Plume, USA.
I.
11. IATA, (2011), Press Releases [Online], IATA, Viewed on 15th March 2013,

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<http://www.iata.org/pressroom/pr/Pages/2011-09-20-01.aspx >

J.
12. Johnson, G., Scholes, K & Whittington, R (2009), Fundamentals of Strategy, FT:
Pearson/Prentice Hall, Spain.
13. Johnson, J., Scholes, K & Whittington, R (2008), Exploring Corporate Strategy: Text &
Cases, 8th edition, FT: Pearson/Prentice Hall, Italy.
L.
14. Lynch, R (2009) Strategic Management, 5th edition, FT: Pearson/Prentice Hall, Italy.
15. Lynch, R (2006) Strategic Management, 4th edition, FT: Pearson/Prentice Hall, Italy.
16. Lewis, G (1999), Australian and New Zealand Strategic Management: Concepts, Context
and Cases, Prentice Hall: United States of America
P.
17. Pearce II, J.A & Robinson, R.B (2009), Formulation, Implementation & Control of
Competitive Strategy, 11th edition, McGraw- Hill/Irwin: United States of America.
S.
18. Singapore Airlines, (2013), Singapore Airlines History [Online], SIA, Viewed 5th February
2013, <http://www.singaporeair.com/en_UK/about-us/sia-history/>
T.
19. Thurbin, P (2001), Playing the Strategy Game: Strategy is a Skill not a Formula, Make it
one of yours, FT: Pearson/Prentice Hall, Great Britain.
20. Thompson Jr., A.A., Strickland III, A.J & Gamble, J.E (2005), Crafting and Executing
Strategy: The Quest for Competitive Advantages, Concepts and Cases, 14th edition,
McGraw- Hill/Irwin, United States of America.
21. Thompson, J.L (2001), Understanding Corporate Strategy, Thomson Learning: Great
Britain.
22. Thompson, J & Martin, F (2005), Strategic Management: Awarene3ss and Change, 5th
edition, Thomson Learning: London.
23. The Times 100, (2013), A Singapore Airlines Case Study [Online], The Times 100, Viewed
on 25th February 2013, <http://businesscasestudies.co.uk/singapore-airlines/people-in-
organisations/introduction.html#ixzz2NPQLoCPt>
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24. Warren, K (2008), Strategic Management Dynamics, JOHN WILEY & SONS: Great

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Britain.
25. Walker, G (2009), Modern Competitive Strategy, 3rd edition, McGraw-Hill/Irwin: United
States of America.
26. WEC, (2013), Introduction to the Concept of Strategy [Online], WEC, Viewed 25th Jan,
2013, <http://dl.wecouncil.com/Octal/SubData_Home.aspx?SubjectID=SUB20090000042>

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7.0 APPENDICES

Appendix 7.1:
Demand and Supply side of Airline Economy:
 Demand in airline industry is generally affected by air fares and travel time, as for the airline
industry the reduction in air fare will depend on the relationship between deregulation,
network structure and competition. But for any airlines the major result is in the significant
increase in frequency, which greatly reduces waiting times for departing passengers.

 Integration between two individual airlines is one of the main factors for supply side of
airline economics. This depends upon how well the two airlines share a common factor of
production, operation from the same airport, sharing facilities and labor.

Appendix 7.2:
Rising Oil Prices:
Rising oil prices will always have adverse impact on the profitability. The political situation
in Iraq in 2007 has driven the oil prices to all time record high and for SIA this oil price rise
has added more than £100 million to their costs. The cost of fuel charges is always at risk
for SIA (IATA, (2011)).

High oil price remains a challenge, but SIA could still ease this situation given the rising
fuel charges by fuel hedging and introduction of new products with higher fares. The current
strong air travel demand and network rationalization by the industry will also help SIA. SIA
has to phase out less fuel efficient aircraft and has to cut down on long routes due to high oil
prices.

Appendix 7.3:
Technological Factors:
Improving supply chain management and procurement will also be an important objective for SIA.
Given the high costs of software development and of operating the necessary hardware, Singapore
airlines will also have to decide whether they should do all this in house by themselves, or whether

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some or most of those IT development and application can be outsourced.

The strategy behind the technology program of SIA is very clear: It enhances cost efficiency to use
the latest aircrafts and at the same time, Singapore Airlines uses these events for marketing
purposes. An example of this was the non-stop services to Los Angeles and New York launched in
2004, which attracted huge publicity in global media and kept the innovation promise of the brand
alive (American Essays (2007)).

Appendix 7.4:
SO Strategy, WO Strategy, ST Strategy and WT Strategy with examples:
7.3.1. SO Strategy:
SO Strategies use a firm's internal strengths to take advantage of external opportunities. SIA need to
take advantage of its strengths in order to position itself by using the external trends and
opportunities.

For Example, with latest technology, quality of service and recognized brand around the globe, SIA
can attract more customers to fly in Singapore airlines.

7.4.2. WO Strategy:
The main aim of WO Strategy is to minimize internal weaknesses by taking advantage of external
opportunities. Sometimes key external opportunities exist, but a firm’s internal weaknesses may
prevent it from exploiting those opportunities.

For example, an auto accessory company with a great demand for electronic devices (opportunity)
to control the amount and timing of fuel injection in automobile engine, may lack the technology
required for producing these devices (weakness). One possible strategy would be to acquire this
technology through cooperation with a firm having competency in this field.

7.4.3. ST Strategy:
The main aim of ST Strategy is to use firm's strengths to avoid or reduce the impact of external
threats in the environment.

For example, amazon.com an online market place for individuals and businesses across the world is

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trying to use their strong customer service (strength) to handle customer complaints and concerns
on the confidentiality of the customer's transactions on the site in order to reduce negative publicity
(threat), about problems the company is having with its systems.

7.4.4. WT Strategy:
The main aim of WT strategy is to minimize both weaknesses and threats. A company faced with
external threats and internal weaknesses may indeed be in an insecure position. In fact, such a firm
may have to fight for its survival or may even have to choose liquidation. But there are other
choices too where company need to make for its good.

For example, such a firm may prefer a merger, or may cut back its operations, with the intent of
either overcoming the weaknesses or hoping that the threat will diminish over time (too often
wishful thinking). Whatever strategy is selected, the WT position is one that any firm will try to
avoid.

Appendix 7.5:
Henry Asael in Kotler (2003:201) summarized the four different buyer behaviors that require
different responses from marketers:

1. Complex buyer behavior – requires marketer to provide more information and reassurance
to a customer. This is probably more prevalent in B2B transactions with SIA.
2. Dissonance-reducing buyer behavior – requires marketer not to provide any reason not to
buy the product and maintain consumer satisfaction. SIA maintains this through their
consistent delivery of quality service in all cabin classes leaving consumers with high
satisfaction levels. The frequent flyer program and lounge services further add value to their
level of satisfaction.
3. Variety-seeking buyer behavior – requires marketers to provide a lot of options within
their range so it reduces the likelihood of the customer switching to another provider. For
example, SIA provides a variety of options in cabin classes, catering, in-flight entertainment,
flight destinations and even for budget-conscious customers, an option with their Low-Cost
Airline, Tiger Airways. These days, access to service providers via the internet enables
buying decisions that involve low risk to be compared more directly with competitors.

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4. Habitual buying behavior – requires the marketer to encourage as many people as possible
to trial their products so as to be included in their habitual choice sets. SIA along with Silk
Air has established a strong presence in the Asian market, managing regional flights to
secondary cities with smaller capacity requirements. The corporate sector, as part of their
business needs, is perhaps the most consistent and habitual with flight bookings (ACU,
(2013)).

Appendix 7.6:
Market Segmentation:
 Geographic – SIA’s customers are located globally with varying wants and needs or
behaviors and the organization attempts to exploit this by providing airline services to major
cities/ routes evidenced by SIA flying to 65 destinations in 35 countries on five continents.
SIA’s strong presence in the Southeast Asian region, with its subsidiary Silk Air, connects
Singapore to many international destinations in the region. The airline has also established
and captured major markets in its Kangaroo Route, flying international traffic into and out
of Australia and since 2005, frequent flights between Bangkok and Tokyo. SIA can segment
geographically in an attempt to gain extended market share on transpacific routes from
Australia to the United States, as evidenced by its proposed hub in North America through
Vancouver.
 Demographics – segmenting on the basis of customer factual characteristics such as age,
gender, income etc. SIA could build on from this by looking at them in terms of the other
major segmentation variables using multiple approaches to achieve a more complete
consumer profile.
 Psychographic – attempts to capture what is driving the customer’s behavior, such as
values, personalities, attitudes and lifestyle aspirations of each segment. For example, SIA
provides variations of cabin classes (First, Business and Executive Economy) to meet the
product needs and wants of people. SIA employs tiered membership to provide status
preferences to consumers. In addition, the Low-Cost Airlines have attracted a market that
have a simple need to reach their destination without the “extras”. SIA have positioned to be
part of this target market with their stake in the carrier, Tiger Airways.
 Behavioral – is segmenting the market based on observable issues on consumer behavior
when consuming the products. Characteristics include frequency of consumption, buyer
readiness and commitment. The corporate market tends to be a frequent flyer that could gain

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benefits from SIA’s Frequent Flyer program (KrisFlyer and PPS Club), in return for
consumer loyalty to the airline (ACU, (2013)).

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