Singapore Airlines: Business Environment Analysis and Recommendations

This report provides an in-depth analysis of Singapore Airlines' external business environment. It begins with an executive summary outlining the airline's establishment and global presence. The report then conducts an external environmental analysis using PESTLE and Porter's Five Forces models to identify opportunities and threats. The PESTLE analysis examines the political, economic, socio-cultural, technological, legal, and environmental factors impacting the airline. Porter's Five Forces analysis assesses the threat of new entrants, industry rivalry, the bargaining power of suppliers and buyers, and the threat of substitutes. The analysis highlights key issues faced by the airline and concludes with recommendations. Supporting data, including graphs and tables, is included to illustrate key points and support the findings.

Running head: SINGAPORE AIRLINES
SINGAPORE AIRLINES
Name of the Student
Name of the University
Author Note

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Executive Summary
Singapore Airlines was established in the year 1972 and is one of the largest and the most
popular carriers around the globe. This report aims to throw light on the external business
environment of the business domain of Singapore Airlines. For this purpose, an external
environmental analysis has been conducted. The analysis has been conducted by using
two strategic management tools named PESTLE Analysis and Porter’s Five Forces
Analysis. After the analysis, the situation and the issue for the business has been
identified and followed by recommendations and conclusion. Some graphs and tables
have been provided to support the content.

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Table of Contents
Introduction..................................................................................................................3
External Environmental Analysis................................................................................4
PESTLE Analysis........................................................................................................4
Porter`s 5 forces Analysis............................................................................................8
Issue Analysis............................................................................................................10
Recommendations and Conclusion............................................................................10
References..................................................................................................................12

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Introduction
Singapore Airlines limited is one of the largest airlines present around the globe.
The airline is a transportation-based company with its origins in Singapore. Incorporated
in the year 1972, the Singapore airlines during its early years concentrated on becoming
the leader in the airline business. It aimed to extend its operations internationally
(Alagarasan et al., 2015). The airline was successful in doing so by increasing its
operations and bringing in more aircrafts to its company like the Boeing 777 and the
Airbus A380. Singapore Airlines is known for its reputable business and services in the
market. The company has provided a brilliant service since a long period of time for
which it has been appraised and awarded. The primary business focus of the airlines is to
maintain its position as a leader in the airline market of Singapore and overpower its
competitors by providing good quality services to its customers.
As Singapore Airlines is one of the oldest brands in the airline industry with
respect to Singapore, the customer seem to trust its service. Trust by customer is an
outcome of an excellent brand. The company needs to make sure that it abides by the trust
that has been invested in them by the consumers. As the society of Singapore is extremely
trust conscious, the only way out for the airlines to keep the trust factor high by providing
optimum service.
This report aims to throw light on the business environment of Singapore
airlines. The business environment of a business is complex and dynamic, which can lead
to tremendous changes within the business. Although these factors lie outside the domain
of the business, they tend to affect the performance of the company tremendously
(Anderson et al., 2015). It is for this purpose, that external environment analysis becomes

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extremely crucial. The external analysis will be done using two methods, the PESTLE
and the Porter`s Five Forces Model Method.
Figure 1: Highlights of the Group’s Performance
Source: (Singstat.gov.sg, 2018)
External Environmental Analysis
PESTLE Analysis
Figure 2: Pollution causes by transportation
Source: (Singstat.gov.sg, 2018)

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The PESTLE Analysis tool is a strategic management tool, which is used by
many business enterprises to analyze their environment and identify the threats as well as
the weaknesses. This analysis will be done on the Singapore airlines in order to
understand the threats and opportunities for its growth.
Political- The political scenario of the country tends to have a huge impact on the
Operations of the Airlines. Since the airline is one of the primary carriers present
in Singapore, any relevant change in the government policy of the country can affect its
performance. However, the political stability of the country is extremely good and that is
why the Singapore airlines have been successful in becoming one of the most promising
airlines in the world (Buono, 2015). The political stability of the country was considered
good. The transparent and structured system of the leader tended to result in low
corruption and low risk, which allowed easy investments, which encouraged the investors
to invest in the company and thereby increasing its resources (Heracleous & Wirtz, 2014).
Corruption seems to be an extremely big problem for any country. Bureaucracy and
bribery are a part of corruption. The officials themselves keep the sanctioned amount
projects, which lead to fewer amounts being sanctioned for the ones who are actually in
need or for the projects that actually require those funds (Heracleous & Wirtz, 2013).
Corruptions tend to indicate problems in the system of government and for this reason;
the investors do not want to invest in the country (Alagöz & Ekici, 2014). The investors
get a feeling that their money would be wasted and they avoid the investment.
Singapore has greatly improved in its ranking of countries, which have been
deemed the least corrupt ones. In 2016, it was given the seventh rank with respect to the
graft watchdog Transparency International`s (TI) Corruption Perceptions Index. It scored

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84 points on this index. However, as compared to Switzerland, Norway and Denmark, the
country still has still certain amount of corruption, which often tends to shoo away
investors. Singapore is the only Asian country to make the cut.
Investors seem to face certain problems with respect to Singapore`s high value
added investment policy which is suitable for only those companies with a high
technology and larger background (Heracleous & Wirtz, 2014). Small and medium sized
companies may face difficulties while adhering to these philosophies.
Economical- According to Heracleous (2014), an international airline is subject to a
variety of economies. Not only are they affected by the national economy but are also
affected by the global economy as well. A particular change in the fiscal policy of a
country, which may result in the change of the prices of fuel, may affect the costs of
the airlines and then they will need to re-invent their whole model. High costs
associated with fuel tend to have an impact on the profitability of the airline company.
Fuel prices have increased considerably which then tend to increase the prices of the
tickets. When the price of the ticket increases, the customers are very often tend to go
to another airlines and this reduces the profitability of the company. As the economy
has been performing well, the standard of living has also increased; this has led the
people to travel more often to international places thereby increasing the sales of the
company.

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Singapore Fuel prices in the year 2017. (Source: Whyte & Lohmann, 2015).
As seen from the given data the fuel prices in Singapore have risen steeply in
the past year. It started from 1.45$ in January and ended at above 1.62$. The
increased prices of the fuel have brought about huge cost increase for the airlines who
fail to cover up the cost in ticket prices without increasing the passenger fare.
Figure 3: The GDP growth by sector
Source: (Singstat.gov.sg, 2018)

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Figure 4: International Visitors Arrival
Source: (Singstat.gov.sg, 2018)
Socio Cultural-The socio- cultural environment of a country tends to have an impact
on the working of the airline. The preference of consumers, increasing income and
other important factors tends to influence the performance of the airlines and affect
their profitability. As the airlines has been in the country since a long period of time,
people trust the company and tend to believe that it will perform better than its online
competitors. The trust of the people has helped the airlines to achieve new heights.
The residents of the country tend not to trust the other competitors therefore leading to
increased revenue.
Technological- In this decade, there have been various changes in the technological
dimension. With the use of new technology, which comprises of automation and
advanced machines any new updates need to be taken up by the airlines to compete
with the global standards. Various airline service providers tend to spend high funds
on the research part to make their work at par with the other airlines. Singapore
Airlines can utilize the new technology to reduce the cost of fuels used by its aircrafts.

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This shall help the business in increasing the profit in its operations. Some
technologies have the power to reduce fuel usage, which can be useful for the airlines.
Use of technology to reduce operations cost:
o Using automation
Singapore Airlines has invested in automation, which has lead to reducing work force
costs of the company. Although it received backslash from various communities for
causing unemployment.
o Transferring IT infrastructure to Cloud
It has also adopted cloud technology, which has lead to integrated operations and
omission of redundancy.
o Investing in green technology
As a part of its CSR activities, the company has invested in green technology, which
uses technologies in an eco-friendly manner thereby reducing harm to the
environment.
Legal- The legal environment comprises of various legal and regulatory policies that a
business needs to abide by when they are operating in the airline industry. The airline
industry is particularly strict in this domain and it tends to operate with various rules
and regulations (Hillier, 2015). Since the development of the airline industry is
extremely important for the growth of a nation, the rules are generally relaxed for the
industry. However, there are certain restrictions related to the emission of carbon
dioxide, which need to be followed by the airline industry. Related to the
environmental policy, the Singapore airlines have a certain limit up to which the
organization can emit pollutants into the air.

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Environmental- Being the primary airlines, Singapore airline believes that it has
certain responsibility towards the environment and has the duty of preserving the
environment. Hence, the aim to provide the highest quality service to the customers.
Since, the various environmentalists and other activists have started taking the
conservation of the environment extremely seriously; Singapore Airlines believe that
it is their duty to conduct business and operations in an eco- friendly manner. The SIA
firm believes that if it is efficient in improving its fuel consumption, it will be able to
reduce the negative impact of its operations on the environment. It also needs to keep
the carbon emission control in check so that it does not come under any legislation
(Pearson, Pitfield & Ryley, 2015). For this purpose, the airlines had previously
adopted a four-pillar strategy, which will then enable the firm to achieve success in its
mission to reduce carbon emission.
Figure 5: The fuel consumption data

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Source: (Singstat.gov.sg, 2018)
Porter`s 5 forces Analysis
Threat of new entrants- VERY LOW
This aspect of the five forces analysis concentrates on the aspects of the industry,
which might encourage the new business firms to enter and operate in the particular
industry. The airline industry is believed to be extremely competitive all around the
globe, however, in Singapore the threat of new entrants is low. The cost of entering the
industry is extremely high and requires huge investments and abiding by various legal
rules. Therefore, it is not easy for the new entrants to enter the market. Jetstar, Asia
Airways, Scoot and Silk air are some of the competitor of the chosen company. The
airlines need to abide by various laws and regulations, which again prove to be a
hindrance for the new companies.
Intensity of Industry rivalry- VERY HIGH
Any business needs to be well aware of its competitors, hence even for the
Singapore airlines, it is extremely important for the business to make sure that the
competitors do not race ahead and capture their market (Heracleous & Wirtz, 2014). The
completion present in the industry tends to have a huge impact on productivity in the
market. Globally also mega carriers have been increasing tremendously which further
leads to a pressure on the Singapore Airlines. Various airlines present in the Middle East
and Asia provide fierce competition to the industry in terms of both quality and price. The
primary competitors of SIA are Air Asia, Cebu Pacific and others. These airlines tend to
garb the larger share of market because of their low cost. As the demand has been rising
in the particular industry, the demand for airlines has also risen. Research reflects that the

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sales of the Singapore Airlines have fallen by 12 per cent since 2008. In 2017, the Air
Transport World declared Air Serbi as the major world leader. As stated earlier, the
competitors of the brand in Singapore are Jetstar Asia Airways, Scoot and Silk Air is
some of the competitors of the company. However, the market leader in the given
industry is Singapore Airlines itself. Other airlines have come up with a plan whereby
they have reduced the price of the tickets and have tried to steal the customer base from
the company. Singapore has not been making as much money as before with respect to
regional routes because of other low cost airlines like Changi-Jet star, Tiger, FireFly and
Cebu Pacific. The number of domestic flights has increased considerably for example
from Singapore and Kuala Lumpur, which was earlier only in the hands of Singapore
Airlines and Malaysian Airlines (Jeng, 2016). Various low cost airlines have also come
between Jakarta and Bali from Singapore.
Threat of substitutes- MODERATE
Substitutes refer to similar products or services with slightly different features.
Michael Porter considered it important to analyze the substitutes present in the market.
The substitutes make it possible for the customers to move away from a particular
company and take the services of another company. The threat of substitutes in the
business environment of Singapore Airlines is comparatively moderate (Wu, He & Cao,
2013). There have been recent trends whereby the cruise travel has become increasingly
famous thereby stealing the market from the airline business. Cruise travel tends to
provide the customers with leisure and comfort along with a better experience. There has
been a high-speed railway between Malaysia and Singapore, which is a cheaper option for

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domestic travelling option. However, this railway is not yet in operation. This seems to be
a future threat for the airline.
Bargaining power of Buyers- MODERATE
Buyers tend to refer to the customers who will be the potential passengers of the
particular airline. As newer options are coming up in the given the travel industry, buyers
have a variety of options as to which transport to use. In the airline industry, the
bargaining power of the buyers is relatively moderate. This is because, for international
travels, there are various other companies present in the market, which can then offer
better services to the consumers. These better services may mainly refer to a larger leg
space or better hand luggage options. Companies like Air Asia, Cebu Pacific and other
companies have a greater experience and therefore they can serve the companies better.
Bargaining power of Suppliers- HIGH
Suppliers refer to the providers of the raw materials that are required in the
particular industry. Suppliers tend to have a huge impact on the working of a firm and this
leads to make their position extremely crucial. In the airline industry, the suppliers of the
airplanes are fuel suppliers, parts suppliers and others (Hill, Jones & Schilling, 2014).
Their bargaining power is usually extremely high especially in case of Singapore. There
are a huge number of suppliers available for the firm. Hence, the airlines enjoy greater
power. However, quality plays a key role and these suppliers tend to enjoy greater power.
The suppliers presently have other airlines to whom they can provide their services to and
hence, if Singapore airlines stop taking their services, they might just render their services
to the competition (Lin, 2015).

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Issue Analysis
Since its incorporation, Singapore airlines have been doing extremely well. It has
successfully tried to maintain its position has the main airline company. After the external
environmental analysis, it can be seen that the problem that the firm is currently facing is
the presence of competition and the various environmental rules that are present around
the globe. Since various international airlines have established themselves in the business
domain, Singapore Airlines has observed that its sales have dropped considerably (Lee &
Worthington, 2014). Due to the maintenance of the environmental standards, it has
become extremely important for the firm to maintain the carbon emission. Hence, it is
suggested that the firm takes some action in the domain.
Although the airline company has tried to implement various strategies in the
business domain, it has not been able to do so. A regular analysis of the external
environment may help the firm in gaining back their sustainable advantages.
Due to the variability of the external environment, the company faces threats
regularly but it needs to be well prepared in advance in order to mitigate any risks that are
present in the environment (Limited, 2018). This analysis will help the company to
maintain its leadership position.
As e-cigarettes have been banned on flights recently, this still causes many
problems. Certain customers tend not to follow the restrictions placed and still carry these
e-cigarettes, which then increase the chances of minor accidents on airlines (Joo &
Fowler, 2014). Recharging or carrying batteries of the smoking devices on the airlines is
not permitted however, some customer create hassles and this causes barriers to the
airlines by providing better services.

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Recommendations and Conclusion
From the given analysis, the following areas of concern can be identified:
 The rising fuel prices
 The increasing competition from other transportation systems
 Increasing environmental regulations
For the above, the company can reflect upon the ideas and techniques of the global
competitors so that it can see their problem solving technique. It needs to adapt to latest
environmental friendly technology in order to avoid suggestions. By taking these steps,
the airline will be able to perform well and overcome its barriers. (Whyte & Lohmann,
2015).
It needs to make sure that it has enough strategies in order to overcome the barriers
that come in the way of its operations. The airline can even consider the method like
disposing old crafts and reducing the fleet size. If this is done appropriately then it can
overcome the high cost problem it has been facing recently.
The airline industry is a crucial industry of any economy. Its success greatly
affects the success of the country. The Singapore Airlines has been a major contributor to
the welfare of the economy of Singapore. For this purpose the airline company needs to
make sure that it uses the Pestle model and Porter`s Five forces Model continuously in
order to see to it that it mains its strategic position in the dynamic business environment.

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