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Content Page
Introduction to Essay
Vision Statement of SIA
Mission Statement of SIA
Core Competencies Analysis
Strength Analysis
Weakness Analysis
Opportunity Analysis
Threat Analysis
SWOT Chart
Evaluation of SIAs response
Conclusion
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Introduction
What thought to be a localized currency and financial crisis that started in Thailand during July
1997 spiraled out of control, affecting neighboring countries like Korea, Indonesia and
subsequently the whole of East Asia. Thailand unpegged the Thai Baht from the US dollar when
the dollar appreciated to protect their export. Thailand had an imbalanced loan structure, holding
majority of debts to be repaid in the short term while having minority in the long term. This
caused repayment issues and essentially the bankruptcy of the country.
The airline industry during the economic crisis was suffering from the sharp decline in air travel.
Namely Cathay Pacific, Thai Airways, Korean Air, Qantas and ANA were all seeing a drastic
drop in passenger flow and revenues. All companies were looking into cost cutting measures
such as returning of leased aircrafts, head count reduction, wage freeze, cutting back on
expenditures etc.
It was during this dark period that certain companies made strategic decisions to turn their
companies fate around. These decisions would have had a serious impact (positive or negative)
on their future in years to come.
Singapore Airlines went on the opposite of all their competitors. Instead of cutting back, SIA
performed a product and services launch that cost almost S$500 million including a promotional
Hello Kitty dressed in the SIA stewardess costume to travelers.
SIA diversified their traditional flight routes within Asia and took on more long haul based
flights to Europe and USA.
Simultaneously, top management staff took a wage freeze for the fiscal year to contribute to the
belt tightening measures put in place to cut cost. Deliveries of planned aircrafts were also
deferred at the same time.
This essays aim is to explore the strategic decisions that SIA undertook during this time and
finally to evaluate if these decision were sound.
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SIAs investors and stakeholders interests have been addressed. Profitability is the common
denominator with all investors and SIA has, with this statement directed the entire companys
strategy on focus to generate maximum returns to all stakeholders.
While this could be hard pill to swallow when SIA announced her earnings would drop
significantly in March 1997, the consensus was that all decisions made were not targeted for
mid-term relief but as a long term strategic decision for the business.
Employees have been given a clear message with the statement that should the company reap
profits, they will also be rewarded for their dedication in fulfilling SIAs mission and vision.
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This was not evident on any new airlines trying to vie for the market share, unless a
merger or acquisition happens between competition firms to form a new entity
Full service airlines offering lower cost and budget airlines could possibly disrupt
staple routes
Those consumers whom still have ability to spend would have a much wider choice
given that the supply outweighs the demand
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Suppliers at this stage would have little or no leverage to increase sales. They would
be faced with the same situation and pressure to increase their revenues
Internal Perspective:
a. Financial:
Ability to be debt free and ability to finance CAPEX purchases such as aircrafts
internally. The company remained profitable and without debt, making her a highly
sort after investment choice by many investors.
b. Physical:
Hosting the youngest fleet among all major carriers (average 3 5 year old). This
physical asset equates to reliability where the fleet needed lesser maintenance (lower
OPEX)
Better fuel efficiency in the times where oil prices are high provides the company
significant savings. SIA Engineering provided a cost effective way to maintain their
fleet without incurring high cost from engaging principles
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Hosting the latest inflight entertainment & technology, superb services such as wide
choice of beverages and meal would attract new customers while frequent flyers
would feel rewarded
c. Human:
Constant upgrading improves the knowledge and skill sets of the employees, while
the top-down engagement retains the competencies within the organization. The
rigorous and arduous training provided by SIA bore fruit to the attentive and
charming Singapore Girl whose image embodied the word service made SIA a
world renowned choice for consumers
d. Intangible:
Branding such as the Singapore Girl well known for excellent service
Airline safety records and young fleet gave passengers a sense of safety
e. Cultural:
During the crisis when top-management voluntarily took a freeze on their annual
increment gives a very good insight into talents that SIA hired to manage the
company. The decision made would have had a top-down impact down the chain on
Dynamic View:
While the investment in the products and services was implemented as long term initiative for
the company, SIA was still swimming in the midst of the crisis. Strategies had to be changed and
quick to implement. The organization had to be nimble. SIA changed their strategy to turn to
longer haul flights to USA and Europe. Promotional materials such as the Hello Kitty used to
boost sales. Open orders for aircrafts deliveries were delayed to scale down expenses.
Singapore Airlines Strength Analysis (Internal View)
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New and latest aircrafts within the fleet (average age of 5 years)
Fuel efficiency with latest technology in aircrafts
Lowered operational and maintenance cost
Singapore Girl branding for excellent service
Latest and updated in-flight entertainment system
Self-sufficient aircraft service center (SIA Engineering) (lower cost to maintain fleet)
First movers advantage (pioneer in services and products launch)
Diversifying from the Asian flight routes to other global markets (long haul flights)
Acquiring competition airlines at a lower price
Enter re-negotiations for capital purchases to leverage on the environment of poor
on one market
Re-possess shares at a lowered price
Unknown time span of crisis where the strategic investments decisions might be obsolete
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When the crisis struck, the first instinctive reaction for most was to squirrel away as much
money as possible and cut cost so as to tide through the rainy day.
But opportunities are always present hence resources and strategies are re-evaluated to capitalize
on the situation.
The above tool, SWOT, has correctly (of course not fully) identified that the underlying
fundamentals of SIA is solid. The financial position and backing from a government related
investment vehicle has given SIA the ability to invest more than any of their competitors. The
ability to be able to get the buy-in from stakeholders that their unconventional decisions made
at that time would be a strategic move for the long term itself is concrete enough to show the
trust and faith they put in their top-managements of the company.
Even upon announcement that SIAs earnings would drop and share prices took a beating, the
core investors stayed firm and pull through with the strategic decisions put in place.
The commercial negotiation leverage in such a crisis would have been enormous where
competition amongst key vendors would be akin to cutthroat. SIA was the only company with
money to spend and everyone would want a piece of the pie.
The cost of innovation would also be reduced where newer cutting edge technology could be
purchased at a lower cost with better payment terms. (Aircraft, inflight entertainment systems
etc.)
Conclusion
Threat of a downtrend is ever-present. Stakeholders are always concern about loss of profits.
This is where we need to utilize the tools in place to accurately paint us the most current
environment we are operating in and where we should best allocate our resources.
The ability to be decisive and standing firm through the implementation whilst being flexible to
adapt to the ever-changing landscape is the difference between success and failure.
The results of SIA as of today tells it all, they manage to not only to survive the crisis (and a few
more after), but emerged stronger from each adversity they faced.
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Reference
http://www.pbs.org/wgbh/pages/frontline/shows/crash/etc/cron.html
http://usatoday30.usatoday.com/travel/news/2004-04-07-singapore-hub_x.htm
http://sias.org.sg/index9.php?handler=ir&action=ir_content&ir_content_title_id=36
http://sias.org.sg/index9.php?handler=ir&action=ir_content&ir_content_title_id=35
Business Strategy In Asia: A Casebook By Kulwant Singh, Nitin Pangarkar, Loizos Heracleous
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