Singapore Airlines: PESTLE and Five Forces Analysis Report

This report provides an in-depth analysis of Singapore Airlines (SIA), focusing on its strategic management within the airline industry. It begins with an introduction to SIA, highlighting its reputation for superior customer service and its strategic approach. The report then conducts a PESTLE analysis, examining the political, economic, social, technological, legal, and environmental factors affecting SIA. This includes an assessment of political instability, economic threats such as fuel costs, social challenges related to cultural differences, technological advancements, and legal regulations. Following this, a Five Forces analysis is presented to evaluate the competitive landscape, considering the threats of new entrants, substitute products, the bargaining power of suppliers and customers, and industry rivalry. The report concludes with recommendations for SIA's management, emphasizing the importance of global expansion, strategic acquisitions in manufacturing, and customer-centric financial services. The report aims to provide insights into SIA's competitive position and offer strategic recommendations for continued success.

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SINGAPORE AIRLINES
STUDENT NAME

INTRODUCTION TO MANAGEMENT: SINGAPORE AIRLINES
INTRODUCTION
Singapore based reputed company who has built great reputation for superiority in consumer service is
Singapore Airlines, also known as SIA, has gained much attention for its detailed and improved stand
in designing strategic management. By giving consideration to all available sources of competitive
advantage and establishing a well nurtured management system, the company has been able to survive
the airline industry with gaining significance. SIA was commenced on 12 October 1937 with the
incorporation of Malayan Airlines by the Ocean Steamship Company of Liverpool, Imperial Airways,
and Straits Steamship Company situated at Singapore. (Singapore Airlines: Sustainability Report
FY2016/17, 2017) The company was successful in expanding its business with technical assistance of
British Commonwealth Airlines and IATA. The company started to schedule regular flights from
Singapore to Kuala Lumpur and Ipoh to Penang. In 1957 the company became public after the fleet
included Douglas DC-3s in large numbers and was named as Malayan Airlines. Again in 1963, with
the formation of federation of Singapore, Sabah, Malaya, and Sarawak the company was renamed as
Malaysian Airlines. Finally in the year 1966, when Singapore got separated from the federation, it
renamed the company under Singapore Airlines and made its company high rise headquarters based in
Singapore. (Singapore Airlines: Sustainability Report FY2016/17, 2017) Since its formation, the
mission of the company is to provide with high quality transportation service and return utmost revenue
to its stakeholders. (AYOB)
PESTLE ANALYSIS OF SINGEPORE AIRLINES
With the help of PESTLE analysis; factors relating political, technological, legal, economic, social and
environmental forces that affects the company externally but is relevant to the firm will be considered.
(Frue, 2017) Politically, any airline industry is prone to government instability in the areas where it
conducts its operation. For example, incidents of revolution in Arabian countries have led to curtailing
of flight takeoffs in this region which had affected the cost operation of SIA. On the other hand
opportunity that lies are most of the airlines carries National Flag of the country as its main carrier sign
and represents the country itself and thus the government are likely to support them in all ways. Airline
industry cannot limit its economic boundaries to its homeland and has to depend on various
international economic conditions and are economic threat for the company. Other economic threat to
SIA is growth in fuel rates as it composes main element in aircrafts and is used on regular basis in large
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quantity. Any rise in it can bring instability in the company operation directly or indirectly as if the
overall economies of countries destabilizes it can affect the GDP of countries and hence people may
become more concentrated in their expenditure for extensive travelling. (Jurevicius, 2013) Although
SIA utilises best pricing strategy, it is possible that to some extent strategy also might not prove fair.
Socially, the company has to face many challenges as operations of SIA are not limited in few
countries only. For example, tourists travelling to far country with altogether different culture and
language, it might become difficult for them to understand and take assistance from flight attendants
during their long journey. Thus SIA requires appointing attendants who are well conversant in different
language and culture which requires a huge expenditure to spend significant amount in staffing and for
the management who are able to take initiatives. (Pestel and Five Forces analysis of Singapore Airline,
2015)
Climatic threat has also been prominent in airline industry as any weather disruption like earthquakes,
flood, or any other uncertainty in climate can lead to cancellations in flights relating those countries.
On the other hand increased concern for environmental friendly services among passengers is
increasing in a significant way which makes it a priority concern topic for the management part.
(Together We Grow: Environmental Report, 2011) Global warming issues have affected and have been
taken into consideration by many industries due to which airline industries have also started
undertaking carbon reduction processes to assimilate their part of corporate social responsibility (CSR).
SIA lacks some reputation here as it has been slow in responding in this case and hence is been
demanded to rise in global prospective from customers. (Singapore Airlines Social Responsibility -
Singapore Airlines Results, 2017) In gigantic market of airline industry where people prefers air
travelling, mainly in top marketplace, the main arena in which competition is played relates to
technological innovations. For this, airline industries spends considerable amount in research and
programming division not only to provide technological assistance and comfort to passengers but also
to evoke a sense of security among them. Technological factors is far superior in case of SIA as it holds
youngest fleets of aircrafts and is a self-righteous holder in adopting new and innovated reclining seats,
entertainment systems, headsets, etc. and is still improving on this ground by adopting new and
advanced ways. For booking tickets online, the technological factor has great influence and SIA holds
good position as it provides great support to its customers by providing easy and correct way of
choosing their preference regarding price and class. (Singapore Airlines, 2017) Although countries with
poor internet connectivity might not be able to utilise this service and can get astray from SIA which
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might led in losing customers for the company in those areas. Changes in governmental rules and
regulations can impact the business politically. The organisation has to take permissions from the
government to enter into new routes and to operate in countries where legislations are different which
is another challenge the company has to face constantly. (Singapore Airlines: Sustainability Report
FY2016/17, 2017) Therefore it can be said that airline industry is much depended on legal factors like
government support to sustain in the market.
FIVE FORCES ANALYSIS OF SINGAPORE AIRLINES
To identify major external forces with which a company is affected, Michael Porter has created a tool,
Five Force Analysis with the help of which company’s performance within market boundary is
identified and can be evaluated accordingly. (Martin, 2017) Threats of new entrants, threat of substitute
product, bargaining power of suppliers, bargaining power of consumers, and competitors of industry
are few areas that are been identified in this analysis. With the help of this tool the management can
predict future threats and opportunities that come in the way of attaining goal of the company. The
force relating threat of new entrant refers to the scope in which new competitors can accommodate
itself within the industry. In airline industry, this force seems weaker for SIA as the airline industry is
highly dominated by it. The government support and national carrier attached to it representing the
country itself makes other competitors tough to penetrate in Singapore airline industry and passengers
prefer to travel more in nation supported company. (Singapore Airlines: Sustainability Report
FY2016/17, 2017)Also, the clogging of the atmosphere and airports enables increase in congestion
level and is considered negative from government and passengers view point. Although there are few
entrants possessing weak threat who are constantly trying to enter in the long-haul airline sector, while
strong threats witnessed recently are the one dealing in short-haul airline passenger sector. The
bargaining power of suppliers seems strong in airline industry as it depends highly on other resources
like oil and manufacturing parts. (BUSINESS REPORT ON SINGAPORE AIRLINES PRINCIPLES
OF STRATEGIC MANAGEMENT, 2015) Porter has described in its theory that if the bargaining
power of suppliers is high then it weakens the relative position of business. In the year 2010, SIA
declared that out of its total costs, 33% was due to oil purchase and constant increase in the prices of oil
have made suppliers power strong enough to make contracts under their conditions. (GALLEZO-
ESTAURA, 2016) Boeing and Airbus are the prime suppliers of aircraft and possess bargaining power
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and monopoly in supply of engines sector. With limited suppliers in manufacturing area, SIA has to
constantly face difficulties in its supply and also for their maintenance. (Sustainability Report
FY2015/16, 2016)
Another weak force which airline industry faces is high bargaining power of customers. Over hundreds
of Asian airline companies operate in the Asian region which enables customers to make choices
among them according to rates and services provided by them. Increase in access to internet and
websites showing comparisons between different flight operators makes it difficult for the company to
maintain price. Normally a customer will prefer Airline Company with lower fare which makes their
bargaining power strong. Switching costs are also fairly low and lack of customer loyalty can easily
make customers switch to other company. SIA has managed to some extent in reducing this force by
offering loyalty points and discounts to its regular customers which has saved the company’s
sustainability. According to Porter, intense rivalry can affect the business and demands change to
respond accordingly. (Martin, 2017) There are several routes in which other airline companies provide
sufficient amount of takeoffs with providing enhanced on board services. In order to sustain in the
business the company must adopt price cutting strategies and ensure high service so that threat
regarding competition in minimised. Competitive rivalry of SIA seems moderate with its exceptional
performance in Singapore Airline industry and presence of few routes like Kangaroo Route in which
the company plays control, gives its competitor’s tough competition. (The way how Singapore airline
managing the business)
Threat of substitute service according to Potter refers to the extent to which product or service can be
replaced by other company with similar range. Due to requirements of government permissions and
regulations in international connections, airline industry faces threat of substitutes highly in regional
sector. Increase in availability of substitutes has also been a matter of concern for SIA. Although in
international service, the company gains prominence. There are other issues also like increase in
possibility of introducing high speed rail connections very soon. The scope of telex- communication
and technology has also increased which had made people get connected and work from abode rather
than making long travelling which was done by them earlier. (BUSINESS REPORT ON SINGAPORE
AIRLINES PRINCIPLES OF STRATEGIC MANAGEMENT, 2015)
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RECOMMENDATIONS TO MANAGEMENT
After making external analysis of Singapore Airlines there are few issues which require to be
recommended to the management which can assist the company in keeping supreme position and
continue to be the top airline industry. Global economy and international strategy is the area in which
the company requires to give stress on. (KALPIČ, 2002) Other airline companies like British
Airways, Virgin Atlantic, and Cathay Pacific have superior and highly comfortable on board service
along with quality maintenance of staff. SIA needs to examine its weakness and threats of rivalries in
order to make a distinction from others in superior way. By giving more effort on expanding its
regions globally, it can also provide scope of investments by investors and get higher returns of
profits. Thus by enhancing its expansion policy and pricing SIA can get benefited to large extent.
Next recommendation which is essential for the company to incorporate is to make provision in the
company for acquisitions of industries that specialises manufacturing aircraft parts. Since the
company faces constant threat of suppliers in manufacturing units, it sometimes even leads for delay
in its flight schedules also. (Airline Suppliers: Tags Singapore Airlines, 2017) If the management can
make further expansion in its business to manufacturing industry, the issue can be sorted. Also with
utilisation of available resources, the cost of manufacturing and servicing can be reduced which is
presently very high for the company. Thirdly the management in the company relating service sector
can incorporate few ideas in which customers can get loans and credits where the pricing in tickets is
high and unaffordable for customers. Airline travelling can sometimes become urgent and at the same
time not affordable to many customers and by introducing credit giving policy in marketing can
attract customers and also prove SIA as a service oriented company for them. As discussed in
PESTLE analysis that the company lacks CSR and is not taken by the customers in positive way, it
can turn this threat to opportunity by making amendment in its strategic approach and induce
framework that shows its concern regarding CSR. (Singapore Airlines: Sustainability Report
FY2016/17, 2017) SIA can include special techniques which can help in providing with sufficient
amount of oxygen rotation on board along with utilizing proper disinfecting machines.
(Understanding corporate responsibility, 2016) If all the mentioned recommendations are adopted by
the company it can become successful in future along with gaining high sustainability.
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CONCLUSION
Singapore Airlines has been one of the most reputed airline service worldwide and is been recognized
as best service provider in meeting its customer demands. Its partnerships with other reputed airlines,
top hotels, rental car services, credit card companies and cruises have provided customers with
overall solution for travelling and tourism. With the flow of joining new customers, the company also
identifies high profits and fair returns to its investors. (Singapore Airlines Social Responsibility -
Singapore Airlines Results, 2017) Advancements in technologies have always made customers prefer
travelling in SIA while ensuring their loyalty towards the company. SIA has got strong and efficient
management who constantly improves the company in growth path by innovating and adopting latest
methods and policies. The management has always taken customer’s response with consideration and
had made separate discussions regarding customer complaints during meetings and team discussions.
(The way how Singapore airline managing the business) Therefore has maintained the trust of
customers, which has always been its top priority. On the concluding note it can be said that after
identifying its core strategies SIA is an airline industry which possess numerous qualities and
admirable efficiency which deserves to be the top in airline sector and taken as an example of
strategic management.
REFERENCES
Airline Suppliers: Tags Singapore Airlines. (2017). Retrieved from
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https://www.airline-suppliers.com/tag/singapore-airlines/
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singapore-airlines-declining-revenues
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Relations/Annual-Report/sustainabilityreport1516.pdf
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