Discuss about the Five Forces Analysis of Singapore Airlines.
The aim of this report is to analyze the five forces of the Singapore Airline compared to another low cost carrier. The development and innovations in the airline industries is the contributor to the economic development. So, innovation in the Singapore airline industry is becoming the important part to overcome from the economic recession and global terrorism. The objective of this report is to examine the competitive forces affecting the operations of Singapore Airlines. The five forces analysis of Singapore Airlines is given below:
Porter’s Five Forces Analysis
According to the Michael Porter, there are five factors i.e. threats of new entrants, threats of substitute products or services, bargaining power of suppliers, bargaining power of buyer, and the rivalry in the market. The analysis of Singapore Airlines is as follows:
The threats of new entrants: Weak
There is deregulation in the airline industry and the result is lower fares, and higher load factors. The flight service of Singapore Airlines has increased. Along with this, there are various new airlines which are improving their services continuously. They are trying hard because the older airlines have left strong impact on the customers with their services.
The bargaining power of suppliers: strong
The major supplier of the airline is Malaysian Airlines which deal with other manufactures of various products such as Airbus, Fokker Boeing and supply the aircrafts and electrical parts to the airline industry. Because of being major suppliers, the supplier companies hold power more than the airlines. Singapore Airlines has two major suppliers of aircrafts i.e. Boeing and Air bus and by which the airline is able to maintain its position. The suppliers companies are supplying the airline products continuously. So, the supplier companies have great supplier power because they are the largest suppliers which are helping to improve the performance of Singapore airlines.
The fuel cost is expected to increase due to increment in the prices of oil to $100 per barrel. The demand of fuel and cost of operation is increasing because the supply of fuel has 15 to 20% in the operation costs. The Tiger Airways flew into different timings in 2004 and because of raising the oil prices; it had created the great competition for the other airlines. The Airways had minimized the supplier power by held off the fuel costs (Ministry of Foreign Affairs Singapore, 2016).
Rivalry in the industry: High
Having diverse plane services, the Singapore Airlines has left the strong impact on the customers. The Airlines has allowed the customers to differentiate the flights in terms of price and quality. The customers compare the airline companies in terms of provided services and the prices and are able to have great experience in the Airline industry. The Singapore Airlines is able to gain competitive advantage by providing great-in-flight services to the customers. There are so many competitors in the airline industry which are budget airlines but they are not able to compete with the ability of Singapore Airlines in terms of gaining competitive advantage (KAUR, 2015).
Bargaining power of buyers: High
There is the strong bargaining power of consumers because there are lots of options for them and they can switch easily on the other options. There is low cost switching airline that can be adopted by the customers. Along with this, now customers are more smart and educated. They are aware of all the things such as price and quality in the market. They are price sensitive, and using online booking system rather than going physically for booking the tickets. As per the research, it can be said that more than 50% of the bookings will be made through mobile devices and apps. Through internet, mobiles apps and technology, customers are able to compare the prices of two airlines. Customers have more options in the airline industry. So, the buyer power is increased continuously.
Availability of substitutes: Moderate
There are many options for the customers in the transport system rather than flights such as bus, trains, cruise and cars etc. due to advancement in the technology, consumers are no longer dependent on one option of transportation. Teleconferencing is the best medium to talk with each other at long distance and it is the best medium to take decision. Along with this, technology has saved the cost and time so, consumers do not need to spend much on the travelling. The information can be communicated among the people through the technology rather than meeting physically. There is email that has also strong impact on the consumers as this the fast and inexpensive method of communication for the business. This method enables the people to talk around the world and prevent delays.
From the above discussion, it has been analyzed that the SINGAPORE AIRLINES has the strong competitive advantage by providing good services. But the airline is affected by the increased oil prices and the demand of the flights is decreasing among the consumers.
KAUR, K., (2015), Airfares set to rise next year despite lower oil prices, Accessed on 21st December 2016 from https://www.straitstimes.com/singapore/airfares-set-to-rise-next-yeardespite-lower-oil-prices
Ministry of Foreign Affairs Singapore, (2016), airline industry innovation report, Accessed on 21st December 2016 from https://www.mfa.gov.sg/content/mfa/index.html