Internal capabilities and core competencies

5 May 2016

The importance of efficiency particularly in running a business provides a major opportunity for Singapore Airlines (SIA) to successfully deliver optimum value to its customers. According to Lacar(2009),SIA introduced ground-breaking in-flight services with relation to the latest technological advancements. For example,the innovative Raffles Class Space-Bed which provides passengers the ultimate luxury and comfort in their travelling experience (Anon, 2005).

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In addition, SIA provides services such as in-flight movies and superior food. SIA flight attendant, Singapore Girl is personification of Asian values and hospitality described as an icon that links SIA’s commitment to service excellence (Hasan, 2009). These activities correspond with the highly skilled management team in terms of formulating effective marketing strategies. 1.2 Aircraft fleets

Continuous introductions of aircrafts are conducted by Singapore Airlines, with the assistance of rapid technological advancements, SIA managed to introduce new aircrafts with a larger passenger capacity and also implement fuel-efficient technology (Lacar, 2009).

In fact, SIA was the largest operators of the Boeing 777 in the year 2005 which implies that the internal capabilities of SIA on being able to introduce the most updated models of aircraft is a major factor for the success of SIA despite being overtaken by Emirates Airlines in 2009. This is an indication that SIA are capable of being one of the leaders in the airline industry due to continuous improvements. 1.3 Information technology

Information technology and effective communications lead to the enhancement of customer services, particularly in terms of improving the efficiency especially due to the fact that the airline industry is a service industry. According to Singapore Airlines (2012), the introduction of the In-Flight connectivity allowed SIA to take advantage of the IT industry to bring internet and mobile data services.

Doganis (2006) states that the use of IT can reduce operating costs such as the introduction of online booking and check-in services reduces the need for customers to book via a travel agent which would be more costly as SIA’s website is regarded as one of the most user-friendly and advanced websites in the airline industry. 1.4 Market Potential

Singapore Airlines has managed to grow into one of the leading airline carriers in the world (Lacar, 2009). SIA’s reputation has been greatly enhanced due to its continuous innovations and numerous core competencies despite facing the challenges. SIA possesses a strong position particularly in Asia and ‘Kangaroo Routes’ (Singapore Business Review, 2013).

There is a strong market potential particularly in emerging countries such as India and China. The CEO of Singapore Airlines has mentioned that the firm open to investment opportunities especially in India due to the numerous world class airports that are evident in India which could prove to be a second hub for flights to European countries (Phillip, 2013).

Despite failing twice in the Indian market in 1970 and 2001, India is seen as one of the most potentially lucrative markets in the world. In terms of the US market, due to the dropping of non-stop flights, SIA’s total capacity in the US market are estimated to drop by 16% to about 22,000 weekly seats (CAPA, 2013). 1.5 Market Opportunities

Due to the strong market potential in the emerging countries particularly India and China, there are major opportunities for SIA to increase its flight destinations. Phillip (2013) states that the market in India is relatively more open to foreign investment in recent years and may prove to be an instrumental factor for SIA to seize this opportunity to undergo expansion. Besides opportunities to implement new technology advancements to increase customer experience, there is a largely untapped ‘secret weapon’ in terms of investing in the low-cost airline market (Lacar, 2009). 1.6 Competitive Situation

In 2006, SIA became the airline with the highest stock market value in the world. However, due to rapid competition particularly from Middle Eastern airline companies such as Emirates and Etihad, SIA experienced a major 12% fall in passenger count since 2008 (Fickling, 2012). SIA faces more challenges as Emirates Airlines and Qatar Airways expand their central hubs and are able to win premium passengers with improved front-cabin service (Tsang, 2013a). Intense competition can be observed nowadays particularly due to the increase of low cost airlines obtains an ever increasing market share in the aviation industry. 2.0 Identification of Problems and Issues

2.1 Problems and Issues
2.1.1 Brand Identity
Singapore Airlines has well known with its identity of premium brand.According to IATA,premium traffic grew by 2.9% for the first 5 months of 2013, against a 4.3% growth in overall passenger traffic (Tsang, 2013b). The figure shows company lose considerable market position and recognised could not continue to Asia budget airline market over the past four years (Tsang, 2013a). 2.1.2 Operating Loss

Singapore Airlines faces a challenging and unpredictable operating environment with instability in economic climate in the Eurozone and sluggish recover in United States. Furthermore, fuel prices remain persistently high. Singapore Airline’s operating loss widened to a $214.2 million after-tax loss represent 375% deterioration over the $121.8 million net profit (Tsang, 2013b).Passenger yieldfell to 11.1 Singapore cents per RPK in FY13/14 first-quarter.The cargo business faces an issue of overcapacity in the marketwhich will add pressure onloads and yields (CAPA, 2013). 2.1.3 Intense Competition

The airline has been criticised for an alleged lack of strategic vision and intensifying competition in the market. The new trend of changing landscape marked by the growth of low-budget carrier and premium long-haul market,primarily from Middle Eastern carriers underminedpremium yield of Singapore Airlines. 2.2 Strategic Alternatives

Singapore Airline should implement campaign activity to re-branding their strategyto launch premium economy class in growing emerging economies.The proposed strategy will minimise the risk of low demand of first-class seats and maximise revenue of the lower end market. As the wealthy population increases in emerging market. Another approach of SIAopportunities in forging close partnership with India. It would avoid the high fuel costs and intensifies of low fares competition.While the overall Asia market is growing, SIA must exploit the full potential of the market and equity stakes in airlines. 3.0 Strategic Gap

The competition continues to intensify and the product gapSIA enjoyed for several years over competitors has narrowed significantly and unprofitable. SIA has perceived as leader in stylish innovation in the past few years, usurped as the world’s best premium airline. However, there is a deterioration of product challenged by image issue and customer’s expectations that frequently copied by competitors.Numerous core competencies like in-flight service, aircraft fleets, and efficient information techonology has provided convenient to the current passengers, however customer has higher expectation each day.

It increased along with the expansion of Emirates and Qatar as centrally located hubs and switched passengers attracted to its improved front-cabin service (Tsang, 2013a). To bridging the gap, SIA should respond to demand of renewal the current facilities, new service ideas or partnership within the next 5 years. Company can successfully close the competitive gap with the renewal of business demands to stay ahead of competitors. 4.0 Customer or Buyer Targets

Based on the proposed strategies, Singapore Airlines can target customers such as professionals, white collared and businessman who are travel frequently to other countries for their business meetings or visits.

They are more conscious on service quality and price. Other than that, it can focus on few markets such as countries in Asia Pacific region such as India and China as these are emerging countries with high purchasing power parity since their level of middle income class is increasing day by day due to their fast growing economy. These emerging counties has a large population which enable Singapore Airlines to gain market share by entering these markets and become market leader in these regions by joint venture or alliance with local airlines company. 5.0 Competitive Situation and Competitior Profile

5.1 Competitor Profile
Although Singapore Airlines has a few significant competitors that provide similar service and cheaper air fares around the world (Morningstar, 2005). The key rivals of Singapore Airlines can be categorized into Middle East carriers and Asian low-cost carriers. Middle East carriers

Singapore Air faces challenging competition from Emirates Airline and Qatar Airways on Europe-Asia routes which are known as “Kangaroo Route” between Europe and Oceania as both competitors expand their more centrally located hubs and win premium passengers with improved front-cabin service (Fickling, 2012).

Middle East carriers are more focus on the quality such as Emirates and Qataras they invest millions in upgrading lounges and enhancing services (CNBC, 2013). Also, Qantas Airways and Emirates are forming an alliance that opens up the Australian firm’s domestic network of more than 50 destinations to the Dubai-based airline. Asian low-cost carriers

Low-fare airlines accounted 30 percent of seat capacity at Singapore low-cost carriers that are focus on price sensitivity competition such as Air Asia and Jetstar targeted regional and economy travelers as their customers by offering fares that are cheaper up to four times than SIA’s fares (Park,2013). Air Asia’s cut-rate pricing on Southeast Asian routes and the emergence of new rivals such as the Lion Air group from Indonesia increase the intensity of competition among airlines industry. 5.2 Competitive Situation

As now population of emerging countries’ income level is moving to middle class, the demand for premium economy class will increase compare to economy class. The weak global economic performance boosted the emerging markets with the strongest growth in Africa, Latin America, and Middle East (Onyango, 2013). For instance, Cathay Pacific and Qantas offer customers premium economy tickets to satisfy the needs and demand of customers who are willing to pay more for better services and comfort but not willing to pay for business class fares.

This will lead to a price war lastly as airlines company start reduce their fares of premium seat in order to gain market share and stay competitive. Moreover, Qantas and Cathay Pacific upgraded premium products as well. Besides, Singapore Airlines can carry out joint venture or alliance with other airplane industry as their strategy. The Indian government permitted foreign carriers to invest up to 49%(Bahre, 2013).

By adopting this strategy, it is easier for Singapore Airlines to penetrate into Indian market as the restriction and barriers of government become relatively low. There will occur the restructuring and re-consolidation of company in the airlines industry as other airlines company will go for similar strategy in order to stay competitive and increase their market share. 6.0 Segmentation, Targeting, and Positioning

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