- Introduction
Singapore Airlines (SIA) is an airline service provider based in Singapore. It serves the south east and south Asia regions. It is based in Changi airport. This airline was the initiator of the manufacture of Airbus A380.this is the current world largest passenger aircraft. SIA has been in operation for quite a period to master most of the industry norms, operational pitfalls as well best ways to maximize revenues out the prevailing market conditions. This is the second largest airline service provider with an estimated net worth of $14B (Albrecht, Stic and Sltice, 2010) .It has many subsidiaries in the world including Scoop, silkAir and Singapore Airlines Cargo.
- Environmental analysis of the entry mode
- Singapore’s use of joint venture with India’s Jet airways
Joint venture entry mode is the best for Singapore Airlines with India’s Jet airways because of easy market entry, risk sharing, technological sharing, joint product development and compliance to government regulations. Additionally, political connections are easy in a joint venture. There is also accessibility to agency services in an airline joint venture deal. In this regard, the major goals of Singapore airline and Jet Airways are common. This makes synchronization of operation easy. The other factor, which makes this joint venture appropriate, is that the two airline’s market power and resources are relatively small compared to the Airline industry market leaders. According to Clayton (2011), it is easy for the two airlines to share their operational skills in order to achieve excellence in service delivery. The other factors, which will make the two Airlines’ joint venture successful is the mutual agreement on pricing, contractual period and technological transfer. The harmonization of the two airline’s cultural practices is critical in order to attain efficiency and co-ordination in the joint venture operation.
- Singapore’s Use of Wholly owned subsidiaries in entering Japan Aviation sector (SilkAir)
The adoption of wholly owned subsidiaries in foreign market is a viable mode of entry into the foreign markets by Singapore airline. This technique involves Greenfield investments and acquisitions. The Greenfield investment strategy refers to creation of a fully dependent subsidiary in the foreign country (Albrecht et al, 2010). This strategy guarantees fully control of the parent firm on the subsidiary. It also leads to earning of great returns. This method is appropriate for the Singapore airlines given that there is need for highly professional service delivery. Moreover, there is close contact with the beneficiary of the airline’s services. According Michell (2011), customization is also another factor, which makes this method appropriate in this part of the world. Expatriate staff work in this subsidiary in order to maintain high levels of service delivery and to gauge the political temperatures of eh foreign country (Clayton, 2011). Although this strategy takes a longer time to establish, it is the best for Singapore Airlines. This time is reduced through the employment of expatriate staff, who applies their professional skills. This eliminates the need for foreign staff, which saves time for hiring new staff into Aviation services.
- Cost consciousness
Cost consciousness has been highlighted as one of the key operational ideals of the joint venture is keeping costs as low as possible. The following has been the key areas of cost reduction. Using internet ticket booking instead of the traditional agents located in the company’s operational strongholds (Alberth, 2010).Internet ticketing has been touted as one of the cost drivers in most of the service industry. It is ineffective to use agencies in the current market trends due to various reasons, as highlighted in market dynamics .The involvement of agencies means that between joint venture and their clients there has been a third party. It will thus call for reduction of their profits in order to sustain the agents in the supply chain. It is thus advisable to deal directly with customers through internet ticket booking. This will commence with security concerns as cybercrime has been synonymous with all sorts of online transactions being initiated by people who need to hijack people’s business trails. But in the long term, this is the sustainable business model for the joint venture (Alberth, 2010).Comparison of the industry wages with those of the joint venture should a big gap. This is has been as a result of the initiative to hire fewer workers in their teams.
Consequently, the joint venture has managed to offer competitive remuneration to employees, at the same time saving on the resulting efficiency. The above policy has been highlighted by the company’s initiative to do away with some luxurious expenses that are actually adding no value to the company long term expansion goals. The decision to do away with facilities like provision of meals to the travelers has been the best in the business with regard to keeping costs low. In the policy direction, it has been highlighted that the joint venture airline has been serving the long distance niche (Charles, 2010).Hence, provision of such expensive dishes to the travelers will amount to a luxury, adding unnecessary cost to the service provision, making the company eat in to the profits, at the same time transferring some portion of the meal’s value to passengers. The final results will be making travel tickets high forcing the passengers seek less expensive options. This is a symbol of prudence since flamboyancy has never been a competitive policy, but only serves to sink the business in the sea of unnecessary costs (Charles, 2010).
- Competitive niche
The Singapore-Jet airline joint venture has been having a funny mode of running business. This is because in the current trading environment, it is will be difficult for any airline business to compete with low cost options like road and railway is not easy. It remains a fact that the distinguishing and the only competitive advantage will the unparalleled speed. It will be left at the mercy of travelers to determine whether they are in hurry to be left with the option of travelling by plane. Viewing it on another perspective, other traveling means like road transport will have lower expenses, hence offering competitive prices to the passengers. This will keep the management of the joint venture at its toes but of importance will be scrambling with other airlines for the market niche being held by the other airlines at the same time trying its hand in gaining part of the low end transport modes (Charles, 2010).
- Employee sustainability & long term sustainability
It is an impressing trend for Singapore-Jet airline joint venture; it has been portrayed as an airline that has simplified its task to the level of not considering experience and skills but rather the qualities and attitude of the people being hired. This has the implication that the human resource infrastructure has been well maintained that any employee will acquire the required skills within the minimum time after recruitment. This will cushion the company against any human resource crisis in case a many employees leave at one point (Mitchell, 2010).Keeping tabs with the industry average in terms of remuneration of employees has been a two sided sword for the joint venture in reducing costs, which has resulted in consistent hiring during times of high employee turn out. At the same time, it will keep costs at check preventing unnecessary maintenance of unproductive employees to the Singapore-Jet airline joint venture.
- Unique brand in the market and Enviable reputation
It will be fair to term the joint venture as market leader in the services it provides to the market. This is because of its competitive reach with airlines and other transport means featuring regularly in its niche. Hence in this particular operation, the joint venture has a competitive edge over its competitors in both sides. On another perspective, this will act as a cushion for the business during times of low businesses for the company has some bit of surety ingenerating sustainable revenues. Anomalous demands will be catered for smoothly for a business of this nature (Mitchell, 2010).Over the company’s operation, it has cultivated enviable reputation by winning several service provision awards, making the brand be associated with positive values. This will forever remain an asset for the company as long as this is not damaged along succession lines (Alberth and Sltice, 2010).All these strategies enhance maximization of competitive edge through the joint venture.
- Strategic analysis
- Product differentiation
Product differentiation, design campaign and strategic operation management are vital in the operation of SilkAir subsidiary. A two-fold campaign ensures that the travellers get the right product image in their mind, and the subsidiary is able to meet the expectation of the clients. The subsidiary pricing strategy is a major consideration in the marketing of services. Much of it is usually determined by market standards. The subsidiary ensures maintenance of high margins on each sale. Thomas and Paul (2008) assert that the subsidiary make every effort to maintain a competitive pricing policy. However, as other entities build their reputation as it expects to earn the ability to charge a premium for its airline services.
- Innovation
Strategic operation management is an essential requirement to the subsidiary executives. With globalization, airline industry competition in the world market has become intense because of the opening up of many aviation airlines. The subsidiary enjoys the foreign market and overcomes the challenge of competing with international companies given its vast experience and innovative means of service delivery. In the Japanese aviation sector, only airlines that have implemented superior strategic operation management emerge above the competition. This is what sets apart the average performing companies and the world class companies. According to Charles and Meek (2011), the subsidiary uses strategic operation management to create value in their services. The subsidiary has the simple way of creating a competitive advantage using pricing techniques and product differentiation.
- Value chain analysis
However, with increased customer enlightenment, the subsidiary is seeking to go beyond the product and include a value chain analysis (VCA).According to Leonard and Robin (2013), VCA helps the subsidiary to strategize its operation in terms of the primary activities of service delivery. In the modern world market, clients are not only after cheaper airline services but also quality and efficiency. Consumers are seeking services that they can depend on in terms of quality and being available when they need it and at a convenient place. This is achievable by the subsidiary through strategic operation management and aggressive brand building campaign like the Singapore Airline Girl brand. The two fold campaign ensures that the clients get the right brand image in their mind, and the subsidiary is able to meet the expectation of the clients.
- Strategic operation management
Most importantly, strategic operation management helps the subsidiary maximize on their profits and thereby increase their financial strength. According to Clayton (2011), strategic operation management helps the subsidiary identify the most cost effective means of production by use of technology, cheaper personnel in Japan. When these factors are combined with the large economies of scale of the international airlines, the result is increased profit margins (Leonard & Robin, 2013). The more profit the subsidiary get, the more it is able to invest in efficient means of service delivery, expand to more lucrative markets.
- Continuous improvement
The business strategy of continuous improvement of the quality of the services of SilkAir, are correlated. This is because these strategies affect the operation of the subsidiary. Strategic operation management is directly related to the operation of the business. This owes to the fact that the technique focuses on zero losses. Airline services are offered according to the client requests. According to Albrecht and Sltice (2010), these strategies enable the achievement of the SilkAir’s goals of maximization of revenue and improvement in quality of services. This subsidiary has been able to employ strategic operations management in its worldwide operations to achieve the leading spot in the aviation sector. They have managed to attain this leading spot in the world because of their effective service delivery strategies, product innovation, differentiation and strategic management. SilkAir traces its root in the parent Singapore airlines. The company underwent tough times in its attempt to establish itself in the aviation industry, which was dominated by European and American airlines.
- Expansion strategy
SilkAir came up with an ambitious expansion strategy that relied on lean pricing. The implementation of the strategic plan in the last decade of the 20th century ensured this Singapore subsidiary expand into big and lucrative markets in the Japan. However, after scanning the business environment, it reviewed the previous strategy. Leonard & Robin (2013) asserts that SilkAir has come up with a new strategy whereby it first identifies the needs of the market and offers services that serve the purpose for the clients at affordable prices. This has enabled the subsidiary to build value in its clients who trust in SilkAir and the customers who get innovative ideas from SilkAir. This subsidiary has skillfully been able to customize services for each of the regions in Japan whereby it operates. For instance in Japan, the company offers quality services to its clients who usually identify with its unique brands like Singapore Airline Girl brand. This strategy has found favor in clients who get the services they need from this Singapore subsidiary.
3.7 Conclusion
Singapore airline has made great strides in the aviation industry especially in the south Eastern Asia region. This Airline has explored many ways of accessing the economies of scale in its operations. In this regard, it has taken part in joint ventures with many other airlines, which have a common goals and objectives these joint ventures have enabled the airline to access foreign markets, where it has found new market niches and opportunities to expand its operations. This has also enabled the airline to increase its profit margins and develop its professional skills through technological exchange with the joint venture partners like Jet Airways of India. The competitiveness of Singapore airlines has also been boost because of the joint venture because of the combined effort in marketing of the airline services like the Singapore airline girl branding. The airline has also created subsidiaries in many countries in orders to expand its airline service operations. This includes the SilkAir subsidiary, which has increased the client base of Singapore airlines. This has led to an increase of revenue and profits for the Singapore airline.
References list
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Clayton,T. (2011).The most efficient ways to fly. Journal of Air Transport Management, 39(4), 949–969.
Charles F. & Meek, G. (2010). Asean aviation pact on the radar. Journal of Airline and Airport Management, 15, 91–102.
Leonard C. &Robin J. (2013). Flight management. Airlines – Wall Street Journal, 125(3), 1297-1348.
Michell, T. (2010). Global trends in Airline industry. Air finance Journal, 93(2), 416-435.
Thomas R. &Paul M. (2008). Singapore Airshow: Smaller jets, propeller-driven aircrafts next big thing in Asia aviation. Flight Journal, 23(2), 235-291.
