Jeffrey Chang

1

• Jeffrey Chang
• Ryan Lucina
• Christina Morales

2
Agenda

• History
• Service Differentiation
• SWOT Analysis
• Porters 5 forces 1
• Key Problems
• Solutions
• Implementation
• Questions

3
History

• 1947 began operations as Malayan Airways with 3
  flights a week up and down Malay Peninsula to
  Kuala Lumpor, Ipoh, and Penang
  
• 1963 Renamed to Malaysian Airways
• 1966 Governments of Malaysia and Singapore
  acquired majority control and renamed it to
  Malaysia-Singapore Airlines, Ltd.

4
History cont.

• 1971 Governments of Malaysia and Singapore
  developed 2 different objectives
  
• Malaysia wanted to maintain domestic operations
  and service remote areas of the country
  
• Singapore wanted worldwide international flights
• October 1, 1972 The two airlines split into two
  airlines Malaysian Airline System and Singapore
  Airlines

5
Service Differentiation

• Focus on In-Flight Service
• Singapore Girls
• Book the Cook for Raffles (Business) and First
  Class
  
• High passenger to Crew member ratio
• In-flight alcohol and movies at no charge
• Spacious seats in all class levels
• Once you pay for a ticket service and amenities
  are
  
• free
• Kris Flyer Programs

6
SWOT Analysis - Strengths

• The worlds most modern fleet of aircraft and
  the charm of the Singapore girl
  
• 1 of 81 people in Singapore works for Singapore
  Airlines
  
• Set up committee to meet challenges for the
  1980s
  
• 70 of ticket sales outside of Singapore
• Carried a consistent 70 load of passengers
• BE point was 65.8

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Strengths Cont.

• Employee productivity ranked 1 in world
• Singapore Airs ratings were regarded as industry
  standard
  
• In 1983 Singapore Airlines ranked 2 for service
• Offered lower fares than other western airlines
  and still made a profit
  
• Expansion rate of 25-30 annually
• Subsidized by the Singapore Government

8
Strengths Cont.

• J.Y.M. Pillay and staff as a major force in
  managing success of Singapore Air
  
• Initiative in grassroots effort for more
  participative management
  
• Excellent credit rating
• Had anti-trust immunity in US
• Pricing strategy aimed at stimulating new
  markets
  
• Strong Advertising program
• Looks at itself internally and externally

9
Weakness

• Break-even load-factor at 65.8 which was higher
  than most international airlines
  
• Poor management-employee relations
• Management focused on task issues and not
  employee/personnel issues
  
• Grassroots effort for participative management
  rather than an organizational wide program
  
• Lack of a executive or business class in the
  late 70s

10
Opportunities

• Buying aircraft when no other airlines were
• In 1982 US airlines operated at a 500 mil loss
  and had not made a profit since 1979
  
• Undertook aggressive growth strategy after
  reorganization in 1972
  
• Newer aircraft that offered more profitable
  seating
  
• New aircraft that reduced fuel consumption by 5

11
Opportunity Cont.

• Europe biggest target market with 1/3 of
  revenues
  
• US had the fastest growing market segment with
  20 of revenues
  
• In 1983 added 4 more routes after 2 years of
  consolidation
  
• Excellent credit rating allowed Singapore Air to
  pursue its expansion strategy
  
• Take a 40 control of Cambodian Air seeing the
  tourist and business potential there
  
• Partnership between Cathay Pacific and Malaysian
  Airline System

12
Threats

• 1970s Oil crisis
• Todays fuel prices
• Competitive Threats
• Top 4 in Revenues for Passenger/kilometer Japan
  Airlines, Pam Am, TWA, British Air
  
• German market Lufthansa, KLM, Swiss Air, Air
  France, Sahara
  
• Asia/Pacific Cathay Pacific, Japan Air, Qantas,
  Thai Airways Intl

13
Threats Cont.

• Critics of SIA
• Poor public relations with bad remarks
• SIA accused of interlining or using the 6th
  freedom in Australia
  
• Complaint by Pan Am for unfair pricing practices
  due to government subsidies
  
• Subject to US airline retaliation
• With agreement into US limited amounts of flights
  to Tokyo, Taipei and HK

14
Threats Cont.

• Lufthansas complaint about competitive pricing
  under officially approved prices
  
• Strong Singapore exchange rates

15
Porters Five Forces 1Threat of New
EntrantsBased on International Flights

• Economies of Scale High
• Product Differentiation Low
• Switching Costs Medium
• Capital Requirements High
• Access to Distribution Channels Medium/High
• Absolute Cost Advantages Medium
• Government Policy Low (Internationally)
• Expected Retaliation High
• Overall Medium/High

16
Threat of Substitutes

• Value Based -Low
• Switching Costs Medium
• Propensity for Switching for Buyers High
• Overall Medium

17
Power of Buyer

• Unequal Size
• Travel Agents High
• Individual Low
• Switching Costs High
• Undifferentiated Product or Service Medium
• Backward Integration Medium
• Full Access to Information High
• Overall Medium/High

18
Power of Suppliers

• Fragmented Low
• Substitute Low
• Forward Integration Low
• Buyers Importance Medium
• Overall -Low

19
Rivalry Among Firms

• Slow Industry Growth High
• Intermittent Overcapacity High
• Lack of Differentiation High
• Storage Costs High
• Balance Firm Size Medium
• Diverse Competitors High
• Exit Barriers High
• Overall -High

20
Power of Other Stakeholders

• Government Medium/High
• Shareholders High
• Public Opinion Medium
• Overall -Medium

21
Key Problems

• Poor management-employee relations
• High risk of new competitors
• Service can be easily duplicated
• Many high performance airlines in the same
  region
  
• Board members are political
• Accusations of unfair competitive practices
• Singapore girl may not be viewed as politically
  correct from western culture

22
Key Problems cont.

• New fleets of planes are costly too maintain
• Maverick image within the airline industry
• Marketing problems for new classes within the
  aircraft
  
• Unavailability to secure new routes due to
  competitive retaliation
  

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Solutions

• Have a stronger organizational program to look
  after employee needs on all levels
  
• Continue to differentiate themselves
• Expand to areas to create a higher customer base
• Appoint members who are not affiliated with the
  Singaporean government
  
• Adopt competitive practices that are equivalent
  to industry standards

24
Solutions cont.

• Selective advertising that targets specific
  regions
  
• Keep aircraft longer to reduce training costs
• Improve public image
• Add even higher levels of service to the
  different class levels
  
• Maintain relations with other nations to allow
  them to land aircraft at their airports
  partnerships with their domestic airlines

25
Implementation

• Add mandatory programs for all managerial
  positions and higher to attend employee
  sensitivity classes and make sure it is
  implemented
• Have service differentiation both from hotel room
  to arrival destination to add to the flying
  experience
  
• Negotiate contracts with other area to extend
  their service to unexplored regions

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Implementation Cont.

• Appoint board members who is not highly
  affiliated with the Singaporean Government to add
  different perspectives
  
• Instead of being completely adversarial with
  competitors just slightly below the industry
  standard but not totally undercutting
  competitors
• Research the areas that they are targeting and
  adjust marketing strategy accordingly
  
• Train the trainers program to keep aircraft in
  service longer and not having to continually
  teaching new technicians on new equipment

27
Implementation Cont.

• Have public relations team ready to combat any
  negative publicity that may result from critics
  
• Add service levels in different classes even
  higher than current levels
  
• Extend partnership opportunities to domestic
  airlines that Singapore Air may want to move into
  to reduce resistance to access of airports

28
Questions?

• Thank You