Individual Report - Marketing Audit PDF

Preview

Summary

Individual assignment weighing 60% to complete an audit/report on one of your chosen companies - Strategic marketing module (Year 3)...

Description

Singapore Airlines

1

MARKETING AUDIT : SINGAPORE AIRLINES

Executive Summary This report is a detailed study regarding Singapore Airlines, one of the very few global aviation companies to have outperformed the industry consistently. The marketing audit for this company includes a macro-environmental analysis wherein the system of discriminatory taxes levied by developed nations has been highlighted as an important problem to international operations. The unrest surrounding oil prices happens to be yet another reason that plagues the industry. However, the shift in consumer mentality wherein travel is prioritized over many other things has increased overall demand. Looking into the micro-environment, it is found that the suppliers and

Singapore Airlines

2

the customers have a dictatorial role to play as far as pricing is concerned especially because the industry has fierce competition (barring the exception of few non-serviced routes). Singapore Airlines has been a robust service provider concentrating both on providing quality service as well as reducing costs. It has managed to attain service differentiation as well as cost leadership in an otherwise crippled industry. The industry should expand into developing countries whilst maintaining its operations in the saturated markets in the developed countries

Contents Executive Summary.........................................................................................................................2 1.0 Introduction................................................................................................................................3 1.1 Company Background............................................................................................................3 1.2 Purpose of Study....................................................................................................................4 1.3 Structure of Report.................................................................................................................4 2.0 Marketing Audit.........................................................................................................................5 2.1 Macro-Environment Analysis................................................................................................5 2.2 Micro-Environmental Analysis..............................................................................................7 2.3 Internal Analysis....................................................................................................................9 2.4 Marketing Strategy for Singapore Airlines..........................................................................10 3.0 Conclusion...............................................................................................................................11 4.0 Bibliography............................................................................................................................12

Singapore Airlines

3

5.0 Appendices...............................................................................................................................14 Strengths.................................................................................................................................17 Weaknesses.............................................................................................................................17 Opportunities..........................................................................................................................17 Threats....................................................................................................................................17

1.0 Introduction 1.1 Company Background The airline industry has been a volatile industry field for companies mostly due to the intense competition, volatility in demand and commoditization of services [ CITATION PCo02 \l 16393 ]. The macro-environment factors such as the rise in oil prices, natural disasters and concerns over plane hijack have furthermore plagued the industry. In the years 2006 and 2007, the global airline industry went from suffering a 0.1% net loss to just 2% net profits (in terms of revenue) [ CITATION Int07 \l 16393 ]. The flagship air carrier of Singapore, Singapore Airlines defies the way business is done in the aviation industry. Owned by the Singapore Government in association with Temasek Holdings, what started off as Malayan Airlines in 1972 [ CITATION Hitnd \l 16393 ]has transformed into a few of the game-changers that has consistently performed better than the aviation industry on the whole has. One of the very few companies to be a global cost leader as well as one that boasts of

Singapore Airlines

4

having received numerous international accolades and awards for its immaculate service, SIA has been one airline company that has never reported an annual loss. 1.2 Purpose of Study This study aims at critically analyzing the marketing strategies for Singapore Airlines thereby evaluating the external as well as internal factors that affect the organization. It seeks to understand the approach towards promotions that has transcended into the huge success of this organization. Apart from evaluating the underlying reasons behind the way in which the company has achieved service differentiation as well as cost leadership, this report also tries to examine the ways in which the low-cost carrier can be improved and positioned in a stronger way in front of the target audience. This report is a detailed analysis of the marketing plans and actions of Singapore Airlines. 1.3 Structure of Report This report analyzes the macro-environmental factors by using the PESTEL framework and also magnifies further to conduct a micro-environmental analysis using the Porter’ Five Forces framework. Before understanding the way in which SIA operates, the STP analysis of Singapore Airlines aims at understanding the target market for the company and the way in which it has been successful in penetrating and positioning itself as a sought-after service providers for flyers all around the world. The final part of this chapter points out a few recommendations that could be useful for the company to operate in the competitive and globalized landscape.

2.0 Marketing Audit The marketing audit shall consist of a macro-environment analysis that shall make use of the PESTLE framework and analyze the external factors that have shaped the marketing strategies of

Singapore Airlines

5

SIA. Also, a micro-environment analysis making use of the Porter’s Five Forces framework shall help in understanding the specific nuances of the business and the organization. A SWOT analysis shall evaluate the internal resources of the firm in comparison to the external opportunities and threats thereby elucidating the way in which SIA has been successful in optimally using its core competencies whilst trying to work on its weaknesses. 2.1 Macro-Environment Analysis In order to understand the various external factors that affect the marketing strategy of Singapore Airlines, a detailed PESTEL analysis [ CITATION Abh13 \l 16393 ] has been performed (Appendix 1). The PESTEL analysis of Singapore Airlines is indicative of the fact that each of the external factors plays a very crucial role in shaping the marketing strategies for the organization. Being a state-owned organization (partially), Singapore Airlines leverages the brand identity in Singapore thereby establishing itself as the flagship carrier in the country. The strategic ties of the country with its Asian neighbors and other countries in the world prevent use of discriminatory taxes and CRS intrusions [ CITATION Eug91 \l 16393 ]. As such, Singapore Airlines identifies such countries as potential markets for international business. The marketing strategies of the company keep in mind the interests of its allies. Also, the case where some countries impose flying restrictions and others make use of discriminatory tax systems ensures that SIA does not target those countries as its potential markets. Singapore Airlines functions as a cost leader in its industry and the same can be identified from its recent hike in investment in a low-cost carrier named Tigerair. The organization has followed an affordable pricing policy and the same is challenged by the rise in oil prices and the

Singapore Airlines

6

uncertainty surrounding its future price. The political unrest in the Gulf countries has ensured that oil prices are subject to uncertainty [ CITATION HHa11 \l 16393 ] and in cases where it does rise, the cost leadership strategy of Singapore Airlines is challenged as it cannot reduce its margins in order to contribute to the fixed cost expenditure. On the other hand, it faces the challenge of providing the customers the low-cost flying services that it is globally renowned to offer. The enhancement of the marketing strategies and a profound marketing plan is executed by tying up with online travel portals, flagship hotels, etc. mainly because of the growing tourism industry. The 21st century generation attaches greater value to travel as a means for recreation and the same benefits the business of the aviation companies whilst providing them a wider customer group to cater to [ CITATION ASc97 \l 16393 ]. Especially in developed countries, families make use of low-cost carriers such as Singapore Airlines in order to commute for vacations and getaways. Closely associated with the sociocultural factors affection aviation business is the increased awareness due to environmental impacts of different business sectors. Singapore Airlines has joined IATA and strives to improve fuel efficiency by 1.5% annually between 2009 and 2020 [ CITATION Sin17 \l 16393 ]. It also aims at reducing carbon emissions by almost half by 2050. It has also partnered with CAAS to reduce carbon emissions from the host of 200 flights that take off daily. These practices position Singapore Airlines as a responsible and aware company doing sustainable business and acts as additional promotions wherein consumers are inclined to avail services that do not contribute to environmental hazards.

Singapore Airlines

7

The legal factors are mostly associated with the political factors as regulatory norms are imposed by the Governments especially in the case of state-owned companies such as SIA [ CITATION LHe12 \l 16393 ]. The technological factors affect the marketing strategy of the company immensely. Singapore Airlines has made use of new fleets of Airbus 380 and this makes flyers identify the company as one that makes use of the latest technologies in terms of safety and entertainment.

2.2 Micro-Environmental Analysis In order to understand the intricate nuances that affect the aviation industry in general and Singapore Airlines in particular, the Five Forces model of Michael E. Porter [ CITATION Mic85 \l 16393 ] has been used as a theoretical concept (Appendix 2). The barriers to entry and exit determine the nature of competition in the industry. Contrary to the usual scenario, the industry competition is very saturated despite huge entry and exit barriers. The fixed costs in the aviation industry happen to be one of the most important reasons behind the positive net operating profits that amount to overall losses once capital expenditure is added. The huge capital outlay required in the aviation business makes it very difficult for organizations to enter the market. Government-owned airline companies such as Singapore Airlines have significant advantage due to the financial support that they can leverage during difficult times and also the significant ease of doing business in their home country. The threat of substitutes, at the present moment, is moderate. Since air travel is considered the most convenient and quickest form of travel, substitutes such as road and rail transport are not substitutable options for customers. However, Bullet trains, development in communication

Singapore Airlines

8

technologies and rapid technological advancements do ensure that the industry is not completely eclipsed by this threat. The concept of space travel that is presently being researched upon, could be one of the biggest threats to the aviation business lest a method to implement the same is actually discovered. Customers have a high bargaining power in some cases whereas they are left with few or no options in other cases. For flexible itineraries attributed to vacationers mostly, the Internet has provided for web portals that make it very easy to compare prices and flight schedules and choose the one that best suits the need. Also, the dynamic pricing mechanism coupled with very low switching costs does ensure that customers have different options with different prices on different dates. However, airline companies such as SIA have been extremely proactive in initiating miles programs and loyalty rewards that provide their frequent flyers/ loyal customers with added benefits such as free upgrades, priority access to lounges, etc. The biggest threat to Singapore Airlines happens to be the duopoly between Airbus and Boeing in the aircraft manufacturing market. Also, the market for manufacturing aircraft engines has very few competitors and can be characterized as an oligopoly. As such, the high potential threat due to the scarcity of suppliers ensures that the aviation companies accept rather than dictate the prices and terms for delivery [ CITATION JOl11 \l 16393 ]. The aviation industry is characterized by intense competition. However, the competition in this industry can be segregated based on how well the routes are serviced. For heavily commuted routes such as those between London, New York, Tokyo, etc. the rivalry is intense and differentiators such as punctuality, service, price and frequency of flights determine the profitability of an airline. In other routes such as those hovering to and from Australia and New

Singapore Airlines

9

Zealand, the exclusivity granted to few airline companies by the governments ensures less competition [ CITATION DCh00 \l 16393 ]. In high-competition markets, businesses should be extremely responsive and try to gain competitive advantage either by providing a differentiated service or by providing a low price. Singapore Airlines is one of the very few companies that have managed to succeed on both fronts. 2.3 Internal Analysis In order to undertake an effective analysis of the core competencies and weaknesses of Singapore Airlines and compare it with the industry prospects, the SWOT analysis (Appendix 3) has been used herein. One of the most important strengths of Singapore Airlines is the brand value that the company has carved for itself in the last few decades. Coupled with quality service, SIA is a brand worth reckoning in the global aviation industry. The multi-brand model of making an early move into the low-cost carriers sector has ensured that its subsidiaries such as SilkAir and Scoot have been performing consistently well. SIA has positioned itself as a premium service provider in Europe and Australia which happen to be the most lucrative markets for the same. As the largest Asian airline operating across these venues, a significant part of its revenues are attached to its market share in the developed countries of the world. The most significant drawback for SIA happens to be its missed chance in fully acquiring Tiger Airways. With a minority stake of 40% in the short-haul airline, this company has continuously eaten into the company’s profits. One of the most significant disadvantages is the mature market condition wherein there is very little scope to expand operations (the ones in which SIA has been operating). The geographic position of the central hub of SIA distances itself from the North

Singapore Airlines

10

American countries and it has not been able to tap the market potential for travel between Asia and North America. 2.4 Marketing Strategy for Singapore Airlines Porter (1985) professed that differentiation and cost leadership strategies could not be implemented on the same business model. This is because each of these required a different approach and a different channel. The service differentiation category is associated with high costs mostly attributed to innovation, development, high quality offerings and premium investments. It is almost improbable that an organization that pursues this strategy would be able to do economically. However, Singapore Airlines does managed to provide a differentiated service to its customers (that is uniquely identified globally) and does not incur costs relative to that. Singapore Airlines ensures that it optimally uses human resource assets and physical assets in providing better service than the industry and that too at lower prices. It ensures that it has a fleet of ypoung aircrafts and there are fewer cases of operational delays whilst enhancing the public image of the brand as a carrier that makes use of updated technology and latest systems. It’s turnaround time between flights is extremely short and the aircrafts do not spend too much time in the hangars, thereby optimizing the returns obtained from the fixed costs incurred on a periodic basis. Training programs for its employees ensures a consistent standard that SIA adheres to globally. Its employees are trained to deal with cultural issues mostly because the international airline has frequent visitors from different parts of the world. A hospitable service to its customers ensures loyalty and reduces switching between airlines. The training to the employees is not just

Singapore Airlines

11

concentrated on provision of quality service but also reducing costs during the same. Cost considerations form a part of the core policies at SIA and the employees are encouraged to look into grassroots solutions to cost efficiency and rewarded for the same based on a bonus-incentive scheme that is linked to the company’s profitability. The company follows the robust path of providing quality service by premium positioning in the forefront whereas the back-end operations are subject to cost control. SIA has tried to reduce its costs by spending less on its headquarters establishment costs, hiring employees for back-end operations, providing for budget stays for cabin attendants and not spending lavishly in any regard. These are the ways in which Singapore Airlines has managed to provide quality service to its employees at rates lower than its competitors thereby achieving cost leadership and service differentiation.

3.0 Conclusion Singapore Airlines is one of the most formidable companies in the world and has managed to position itself as a premium service provider thereby earning abnormal profits out of the same whilst functioning in an otherwise volatile and unattractive business industry. This paper tries to evaluate the marketing strategy by considering the large and small aspects of the business (external and internal). The saturation of demand in the existing areas under operation are a clear indication of the need for SIA to expand its operations into developing countries such as India, optimize its operations in China and forge strategic alliances to look into the underdeveloped nations in Africa. Since Africa is one of those regions of the world that is growing at a very fast rate, this market has huge untapped potential that can be tapped by gaining first mover advantage. Also, the company

Singapore Airlines

12

should not try to further its operations in Europe or North America mainly due to the fierce competition in these regions especially from the Gulf carriers. This paper is a detailed analysis concerning the way in which the marketing methods of SIA are affected by the external factors and the core competencies and the way it should move forward while dealing with the numerous problems that the a...