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Alliances International Network Development

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Question:

Discuss About The Alliances International Network Development?

 

Answer:

Introduction:

Air travelling is the facility that is providing the convenience travel to the customers these days. It has grown to that extent that no big city has remain untouched. It is also the facility that has supported the activities of globalization and tourism all over the world. It is the report that provides the description about the strategic analysis of Singapore airlines. Singapore airlines are the company that has started its operation in 1947 as Malayan airlines (Heracleous and Wirtz, 2010). It was the joint venture between the Singapore and the Malaysian government. In the year 1965, Malaysia and Singapore separated and both decide to separate the operation of the airlines as well. Singapore airlines have come into the industry in the year 1972. The company struggled and today is one of the leading firms in the industry and is considered as the premium airline facilities in Singapore. The report discusses about the internal and the external analysis of the company along with some of the strategic options that can be implemented to have more business.

 

External analysis of Singapore airlines

It is the technique that has been used to conduct the external analysis of the company to provide the information about the impact of various external factors on the company’s functioning.

Political factors: political factors include the impact of the government legislation and the change in the policies by the government. It has been analysed tat Singapore airlines is backed up the Singapore government as it is promoted by the government entity Temasak Holdings thus government always take decision in favour of the company (Heracleous and Wirtz, 2012).

Economic factors:

Economic factors include the factors related to fluctuation in the interest rate and tax rate. It has been analysed that Singapore is the place with stable economic and the Singapore dollar is also strengthen in recent years (Heracleous and Wirtz, 2014). As the economy is stable thus it also helps the people to increase their purchasing power and thus customers prefer to travel by sir rather than other means.

Social factors: changes in the demands and the trend sin the society affect the choice and purchase decision of the customers. In the year of 2002, one of the flights has crashed which resulted in bad image of the company but airline has managed to balance the situation by offering compensation to the relatives and family of the people injured or dead in the case (Eiseman, 2011).

Technological factors: technology is the factors that affect each and every industry now a day. Thus, airline industry also gets affected by the change and advancement in the technology. Singapore airline is very much updated with the technological tools (Freeman,2010). The company was the first to install productivity suite for the passenger’s benefits. The company is making efforts in providing great and hi tech atmosphere to the passengers in and outside the flight (David, 2011).

Legal factors: any changes in the regulatory framework of the industry affect the functioning of the company in that industry. As discussed that Singapore airlines is backed up by the government thus many a times the legal restriction does not affect the company negatively (Hitt, Ireland and Hoskisson, 2012).

Environmental factors:

Singapore airlines are considered as the company that is very much sustainable in nature. It is the company that is certified with ISO for environmental management system of the company. The company also believes in maintaining the balance between the use of resources and the availability (Wheelen and Hunger, 2011).

 

Porter’s five forces:

It is the technique that helps in analysing the factors that are related to the industry.

Threat of substitute: MODERATE

It has been analysed that the threat of Singapore airlines is not very low and not very high. This s because it is the company that operates in the airline industry and the people who needs to travel to long distances has to travel by air (Hesterly and Barney, 2010). As far as other travelling mediums are considered, they can provide facilities for travelling in cheap prices and substitute can be done.

Threat of rival: HIGH

Although Singapore airlines is one of the leading airlines in the country but there are many other airlines that provides air flying traveling to the customers with low process such as European airline, Asian airlines etc. the company provide its services at very high price and this may sometimes against the company but the profit margin of the company is always high as compared to other competitors (Doyle, 1990).

Threat of new entrant: LOW

Threat of new entrant is very low because of the government interferences in the airline industry. This industry also requires great amount of seed capital to set up the business which is not that easy to spend (Merkert and Hensher, 2011). This is the industry that can only earn profit at large scale because economies of scale support the many to reduce its operating cost per unit.

Bargaining power of buyers: HIGH

In this case the bargaining power of the customers or the need users are high because they have many alternatives and substitutes available for them,, if the company set their one prices then customers do not thing again to switch the brad. The customers in the airline industry are not that much loyal, it is their convenience that supports their decision to choose the airline and not their loyalty for the brand (Wirtz, Heracleous and Pangarkar, 2008).

Bargaining power of suppliers: HIGH

Even the supplier power in this industry is very high. This is because the dependency of the companies on suppliers is high. If the fuel prices are increased by the suppliers then it affect the price of the air tickets as well and the companies do not have choice other than this.

Internal analysis:

It is the technology that helps in analysing the company’s internal functions it provides the detailed description about the strength and weakness of the company along with the opportunities and that available for the company.

Strengths:

Trendsetter: It is the company that has set many trends in the airline functions such as provision of drinks and meals ta the flights, audio and video services etc.

Revenue: it has been analysed that the company has consistent sales profits and revenue since years. The company is earning high profits and is one of the leading firms in the industry.

Weakness:

Shares in Tiger airways: it has been identified that Singapore airlines had 40% stake in the tiger airlines which is experiencing loss from 5 years. This acts as the weakness for the company and for its profits as well (Nair, Palacios Fernández and Ruiz Lopez, 2011).

Restricted to limited areas: The Company is trying hard to get access all over the world though their airports with other companies but still have restrictions in covering some of the areas.

Opportunities:

Low cost operations: It has been analysed that the customers wants everything at very low cost ad Singapore airlines is serving at very premium prices. Thus investing more in the Scoot ltd. will help the company to operate as low fare carrier in the industry.

Expanding the partnership: it is a very big opportunity for the company to enter the market by the practice of joint venture with other companies (Tugores-García, 2012). This helps the company to enter easily into the new market without focusing on developing the brand image or entering with the new name.

Threats:

Rising fuel prices: It has been analysed that the fuel prices are raising day by day and this affect the functions of the airline industry directly. This is because of the fuel price faces kind of fluctuation then the airline companies also have to make changes in their flight tickets and other services which may affect their image in the market.

Competition from low fare carriers: It has been analysed that the company like Singapore airlines is serving the customers with premium prices and with premium services. However, the customers look for the travel facilities that provide the services in low price. Thus, the company has to face competition from the low carrier’s service in the industry (Alamdari, 2002).

 

Strategic options:

Investment in Scoot: Scoot is the project of the company that is into low price services. This helps the company to fight with the low price fare carriers in the industry. Invest more in scoot project results in acquiring direct market segments by the company. The company can easily provide services to the customers who want premium services and also serves the customers who want low cost services. Although the company is using the project for facing the competition in the market but still not focusing on the services and the dual strategy of achieving cost leadership along with differentiation helps the company to have more profits along with large customers base all over.

Partnership: It is the vest and the very easy way to enter the new market. this is because when the new company in the airline industry enters the new market they have to accompany barriers such as legal barriers, government pressure, market customization, change in strategies etc. this is because they have to make alterations in their processes according to the local market which is really hectic. Partnership can helps the company enter the new market easily (O’Connell and Williams, 2005). The company need not to worry about making changes in their system and prices as well as there will be no issues of developing the brand name in the new market as the associated company is already serving the local customers of the new market.

Recommendations:

As per the discussion of the strategic framework of the company and the options available in front of the company, the need of hour for the company is to compete with the low cost airline companies; this is because they are taking the market share of the Singapore airlines by serving the customers at very low cost. As discussed that airline industry customers are not brand loyal and the switching cost for them is also not very high thus they can easily switch other brand as per their convenience, thus, it is required by Singapore airlines to be the convenient option for the customers rather than the high priced luxury option. Customers generally want to avail the services at low prices. They can compromise the services bit not on the price thus it is required by Singapore airlines to focus on its project of Scoot that is related to the low price services of the company.

 

Conclusion:

It has been concluded from the report that Singapore airline is one of the leading airline companies in the country. It is serving the customers with high   legal factors affect the company in price premium services. As per the analysis of the industry and the external factors, it has been analysed that several factors such as political, economic, social, environmental, technological factors affect the company’s functioning. The industry analysis suggests that the company has threats with rivals and substitutes but the new entrant is not a threat for the firm. The bargaining power of suppliers as well as the buyers is high in this case. The company is the leading firms and thus have effective image in the industry but the company is facing competition from the low-cost operators. Thus, it has been recommended to the company that it has to implement some strategies such as investing the in the project scoot that is already running by the company which allow the customers avail the services at low prices. It has also been recommended to the company to make partnership with other firm to enter the new market.

 

References:

Alamdari, F., 2002. Regional development in airlines and travel agents relationship. Journal of Air Transport Management, 8(5), pp.339-348.

David, F.R., 2011. Strategic management: Concepts and cases. Peaeson/Prentice Hall.

Doyle, P., 1990. Building successful brands: the strategic options. Journal of consumer Marketing, 7(2), pp.5-20.

Eiseman, F.B., 2011. Bali: Sekala & Niskala: Sekala & Niskala. Tuttle Publishing.

Freeman, R.E., 2010. Strategic management: A stakeholder approach. Cambridge university press.

Heracleous, L. and Wirtz, J., 2010. Singapore Airlines’ balancing act. Harvard Business Review, 88(7/8), pp.145-149.

Heracleous, L. and 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.

Heracleous, L. and Wirtz, J., 2014. Singapore Airlines: Achieving sustainable advantage through mastering paradox. The Journal of Applied Behavioral Science, 50(2), pp.150-170.

Hesterly, W. and Barney, J., 2010. Strategic management and competitive advantage. Pearson, ed., Pearson Prentice-Hall.

Hitt, M.A., Ireland, R.D. and Hoskisson, R.E., 2012. Strategic management cases: competitiveness and globalization. Cengage Learning.

Merkert, R. and Hensher, D.A., 2011. The impact of strategic management and fleet planning on airline efficiency–A random effects Tobit model based on DEA efficiency scores. Transportation Research Part A: Policy and Practice, 45(7), pp.686-695.

Nair, S.K.S., Palacios Fernández, M. and Ruiz Lopez, F., 2011. The analysis of airline business models in the development of possible future business options. World Journal of Management, 3(1), pp.48-59.

O’Connell, J.F. and Williams, G., 2005. Passengers’ perceptions of low cost airlines and full service carriers: A case study involving Ryanair, Aer Lingus, Air Asia and Malaysia Airlines. Journal of Air Transport Management, 11(4), pp.259-272.

Tugores-García, A., 2012. Analysis of global airline alliances as a strategy for international network development (Doctoral dissertation, Massachusetts Institute of Technology).

Wheelen, T.L. and Hunger, J.D., 2011. Concepts in strategic management and business policy. Pearson Education India.

Wirtz, J., Heracleous, L. and Pangarkar, N., 2008. Managing human resources for service excellence and cost effectiveness at Singapore Airlines. Managing Service Quality: An International Journal, 18(1), pp.4-1

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