University Report: External Environment Analysis of Singapore Airlines

This report provides a comprehensive external environment analysis of Singapore Airlines (SIA). It begins with a background of the company and its business operations, highlighting its history, mission, and fleet. The core of the report focuses on the external environment analysis, utilizing PESTLE and Porter's Five Forces frameworks to assess the political, economic, social, technological, legal, and environmental factors impacting SIA. The PESTLE analysis examines government policies, economic growth, social trends, and technological advancements, while Porter's Five Forces evaluates the competitive landscape, including the threat of new entrants, substitute products, supplier and buyer power, and market rivalry. Finally, the report concludes with strategic recommendations aimed at helping SIA maintain its competitive edge in the dynamic airline industry, emphasizing the importance of adapting to the external environment, leveraging alliances, enhancing customer service, and improving branding and marketing efforts. The report stresses the need for continuous improvement and awareness of external factors to ensure SIA's continued success.

Running head: EXTERNAL ENVIRONMENT ANALYSIS OF SINGAPORE AIRLINES
External Environment Analysis of Singapore Airlines
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1EXTERNAL ENVIRONMENT ANALYSIS OF SINGAPORE AIRLINES
Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
1. Background of the company and nature of its business.....................................................2
2. External environment analysis...........................................................................................3
2.1 PESTLE Analysis.........................................................................................................3
2.2 Porter’s Five Forces.....................................................................................................5
3. Strategic recommendations................................................................................................7
Conclusions................................................................................................................................7
References..................................................................................................................................8

2EXTERNAL ENVIRONMENT ANALYSIS OF SINGAPORE AIRLINES
1. Background of the company and nature of its business
The Singapore Airlines Limited (SIA) is a well-established national airline of
Singapore. It has always been a famous airline in the world. It represents the hallmark of the
long history of accomplishment and advancement of Singapore ("Corporate info", 2018).
This airline company operates at the Singapore Changi Airport. It has its main focus on the
Australian and Asian market. It was founded in the year 1947 by Liverpool, the Ocean
Steamship Company. The company was expanded overnight after its split from the Malaysia-
Singapore Airlines (MSA) in the year 1972 and within the last forty years, it has grown to a
position that is unknown to none. In current days, it is one of the biggest and the most
successful and notable airlines in the world. Its mission statement states that the Singapore
airlines is dedicated towards providing the highest quality air transportation services to its
customers as well as maximizing the returns in order to benefit its employees and
stakeholders. It consists of a fleet of about 103 aircraft. Some of its reputable fleets include
Boeing 777, Boeing 747, and A380 ("Our Heritage", 2018). The main motto of the company
is to attain the position of world’s excellent citizen, which holds the responsibility in
everything that they do in sustaining and building its excellence in services with strong and
powerful commitments towards the environment. The company has received various awards
and recognitions for its high level of services. The in-flight services include first class, second
class, and the economy class.
2. External environment analysis
2.1 PESTLE Analysis
The PESTLE analysis records the different vital factors in
Political, Economic, Social, Technological, Legal, and Environmental aspects that may have
an influence on the business of a company (Kolios and Read 2013). They help the business
heads in strategizing and planning their next steps by providing them the view of the present

3EXTERNAL ENVIRONMENT ANALYSIS OF SINGAPORE AIRLINES
and upcoming external factors, which may have an impact on the company (Zvirblis and
Zinkeviciute 2012).
Political factors: The political factors refers to all the government policies like, the
intervention degree in the economy and what are the various goods, products and services
that the government wants to provide (Contributor, 2018). The government has major
influence on the various operations and services of the airline industries. It is more or less
because of the fact that near about every country has a ‘national carrier’, that is, airline,
which carries the flag of the country, representing the country and has its headquarter in the
country’s capital city. The terrorist attack in US in September 11 had a great ramification of
profitability in the global airline industry. There are many companies that are still
experiencing major losses and threat to their closure. It has not only reduced the domestic
travelling of the planes but has also declined the experience of international travelling. At this
stage, there were loads of factors that were disappointing the services of almost all the airline
companies but still, the performance of the Singapore Airlines was better than its rival
companies after the attack. Hence, higher profit margins and better revenues was reported by
the Singapore Airlines.
Economic factors: The economic factors comprises of taxation changes, interest rates,
economic growth, exchange rates and inflation ("SIA has lost market share and needs new
strategy", 2018). The demands for the air travel is generally characterized by the income
elasticity, which must be always high (Belobaba, Odoni & Barnhart, 2015). Hence, as the
economy of the world is growing, the demand for the air travel too is increasing with the
same speed. Singapore Airlines offered to purchase stakes of about 24 percent in the China
Eastern Airlines for about 7.2 billion dollars, appeared in vexation since after the major
shareholders criticized their deal as unethical. With the same, the Singapore Airlines has also
been plagued by various other economic factors or macro level, such as, the rise in the oil

4EXTERNAL ENVIRONMENT ANALYSIS OF SINGAPORE AIRLINES
prices, the Asian tsunami, outbreak of bird flu and the rising terrorism in the country.
However, the major economic risk or threat is the process of Singapore Airlines in its fuel
costs. These factors have affected its profitability adversely. In addition to that, in the year
2006, the international airlines industry has undergone a total loss of 500 million dollars or
0.1 % of the revenues by assembling a total loss of 42 billion dollars in the years 2001 and
2006.
Socio-cultural factors: The changes in the social trends have a great impact on the
demands of the products of the company and also on the willingness and availability of the
individuals to work for the same. It has a heavy impact on the overall operations of the airline
business. In 2002, one of the flights of the Singapore Airlines namely the SQ006 at the
Taipei’s Chiang Kai-Shek International Airport, has experienced a massive and fatal crash
(National Library Board, 2018). The airline authorities have blamed the pilot for that
accident. However, the Singapore Airlines took the complete responsibility of the crash by
saying that it was because of “pilot error”. It has offered a sum of 400,000 dollars as a
compensation to each of the individual’s relatives, who were died in the crash and with the
same, it has also met the medical expenses of every injured individual as well. The company
has changed all the engine motors of each of their aircraft A380 in order to retain its
customers after the fatal accident of 2010. However, still the accident has an impact on the
mind of the people and it makes a societal affect on the Singapore airlines as well (Baum,
2015). In addition, the Flu and SARS epidemic of 2009 has resulted in decrease of the stock
of Singapore Airlines by 4%, which in turn has raised the traveler’s worries. Apart from this,
the Singapore Airlines is a globally recognized company it is considered as a brand that
emphasizes professional as well as customer-oriented services.

5EXTERNAL ENVIRONMENT ANALYSIS OF SINGAPORE AIRLINES
2.2 Porter’s Five Forces
In the year 1985, Michael Porter has identified the five factors that is said to have
impact on the performance of the companies within the market boundaries (Yunna &
Yisheng, 2014). They are- the threat of new entrants, the threat of services or substitute
products, the bargaining power of the suppliers, that of the buyers and the intensity of market
rivalries. They help the company to identify and predict its possible success. The stronger
each of these forces are, the higher will be the competitive industry as well as the lower will
be the return rate, which can be earned.
The threat of new entrants: The Singapore airline is concerned about its competitors
in its business industry, as the industry is very competitive. However, as compared to the
other sectors, the threat of new entrants in the airline sector is comparatively weak. Already it
has started with the two national carriers- Garuda if Indonesia and Air Canada, pursuing to
restrain the Singapore Airline’s entry to the home markets. With the same, the rise of global
megacarriers such as the European and the U.S airlines merge and form alliances in order to
cut costs ("SIA has lost market share and needs new strategy", 2018). This will intensify the
competition for the company to a great extent.
The threat of services and substitute products: With the globalization, there is an
increasing investment in the links of transportation in between the major geographical hubs,
which includes those that are served by the Singapore Airlines ("External Industrial
Environment Analysis for Singapore airline - Business & Economics - The Best Way to
Share & Discover Documents - DocGo.Net", 2018). There is also the possibility of high-
speed connections railway connections that is prevailing in between major cities of the
country Eurasia in near future.

6EXTERNAL ENVIRONMENT ANALYSIS OF SINGAPORE AIRLINES
The bargaining power of the suppliers: Bargaining power of the suppliers is very high in the
airline industry. The Singapore airline is concerned about this factor. If the fuel or oil price of
the jet gets increased, it will affect the whole airline industry. The company will get no option
to choose in that case. For example, in the year 4 December 2007, the increase in fuel price
has resulted in increase in fuel surcharge for the jet tickets on that day (“Singapore Airlines
2017 outlook:”, 2018). Porter has argued that since the supplier has powerful bargaining
power, therefore, relative position of the airline business is very weak.
The bargaining power of the buyers: The bargaining or the buying power of the
customers are very high in the industry. Thousands of airline companies are operating in
Asian region and therefore, the buyers have various options regarding which airline he wants
to fly. However, Porter has argues that since the supplier has powerful bargaining power,
therefore, the relative position of the airline business is very weak.
The intensity of market rivalries: There are some rivalries in the vast airline industry.
However, it takes place on the basis of route-to-route. The rivalries could be intensive if the
routes are well serviced by various airlines such as the Paris to Frankfurt or the London to
New York. Apart from this, there are few routes that are monopolized by only few carriers,
for example, the Kangaroo Route, which involves connections inn between the Southeast
Asia, New Zealand and Australia. As there are less carriers functioning in this route, the
competition inclined to be less fierce.
3. Strategic recommendations
Singapore airlines is doing well in the market as compared to its other competitors but
change are necessary in every organization in order to sustain in its top position. Continuous
and more efficient improvements are needed in the Singapore airlines so that it could

7EXTERNAL ENVIRONMENT ANALYSIS OF SINGAPORE AIRLINES
survive in this fast changing and challenging world. Below are few recommendations
suggested for the SIA.
 Singapore airlines must always be conscious about its external environment to
identify the existing opportunities and threats in its business and to remain
competitive. One of the major concerns for the Singapore airlines is the fear of
customers because of terrorism, air accidents (crash) and prestige. Singapore Airlines
could make use of maximum number of benefits by the current existing alliances and
with the same, by equally contributing to its partners by the services and other
benefits.
 In current days, the Singapore airlines is operating in many routes including the South
East Asian route, East Asian route, South Asian route, and the Australian route. It
could also prefer to have less number of partnership in the airline industry and add
more destination and more aircrafts. This will help it to develop its customer service,
which in turn will sustain its current position as well.
 The Singapore airlines is not working much on its branding and marketing. As a result
the customer satisfactory level of its is not so high. Hence, it should continue to work
more on its branding and remain competitive by providing excellent services to its
customers and continuing to have a strong workforce. This will increase the customer
satisfactory level and as well.
 It must differentiate itself more by improving the media and channels of
communication, which in turn will improve its net communication plan. The
executive officer must dismiss the motiveless and the ineffective mangers or
employees from the company and hire employees only to look after the tasks such as
scanning the articles, journals, newspapers, magazines, reviews, bulletins, forums and
so on in order to become aware of the unseen information and to take appropriate

8EXTERNAL ENVIRONMENT ANALYSIS OF SINGAPORE AIRLINES
decisions for its future operation and functioning. With the same, it must also select
quality managers into its departments to help it deal with various forces in its business
environment.
Conclusions
From the above analysis, it can be concluded that though it has an excellent reputation
in the financial health, the external environment has enormous influence on the Singapore
airlines. However, there is a little danger for the company in terms of competition. The
company may succumb to the competition at any time. The PESTLE and Porter’s Five Forces
analysis of the company has helped in identifying some of the major barriers in the
international, economical and political sectors. Furthermore, the analysis of the external
factors has helped in identifying some of the major barriers in the international, economical
and political sectors. It has been observed that the oil price is the major and sensitive issue
globally and with the passage of time, it is getting in receipt of more instability. For this
reason, the power of the supplier is very high. The company needs to develop more new
markets and develop the low cost arm to meet the changing demands of the consumers and in
order to maintain its current position, the company must concern its external surroundings.

9EXTERNAL ENVIRONMENT ANALYSIS OF SINGAPORE AIRLINES
References
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reprise. Tourism Management, 50, 204-212.
Belobaba, P., Odoni, A., & Barnhart, C. (Eds.). (2015). The global airline industry. John
Wiley & Sons.
Corporate info. (2018). Singaporeair.com. Retrieved 10 January 2018, from
https://www.singaporeair.com/en_UK/us/about-us/
External Industrial Environment Analysis for Singapore airline - Business & Economics -
The Best Way to Share & Discover Documents - DocGo.Net. (2018). DocGo.Net.
Retrieved 10 January 2018, from https://docgo.net/external-industrial-environment-
analysis-for-singapore-airline
Kolios, A. & Read, G., (2013). A political, economic, social, technology, legal and
environmental (PESTLE) approach for risk identification of the tidal industry in the
United Kingdom. Energies, 6(10), pp.5023-5045.
National Library Board, S. (2018). Crash of Singapore Airlines Flight SQ006 |
Infopedia. Eresources.nlb.gov.sg. Retrieved 13 January 2018, from
http://eresources.nlb.gov.sg/infopedia/articles/SIP_1813_2011-07-13.html
Our Heritage. (2018). Singaporeair.com. Retrieved 10 January 2018, from
https://www.singaporeair.com/en_UK/us/flying-withus/our-story/our-heritage/
SIA has lost market share and needs new strategy. (2018). The Straits Times. Retrieved 12
January 2018, from http://www.straitstimes.com/singapore/sia-has-lost-market-share-
and-needs-new-strategy

10EXTERNAL ENVIRONMENT ANALYSIS OF SINGAPORE AIRLINES
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