January 10th, 2018
Marketing Plan for Singapore Airline – industry analysis
Tools such as Porter’s five forces, help in assessing the external environment of a company. Such tools help in the understanding of the industry in which the entity is operating
Porter’s Five Forces Analysis
Porter’s five forces help to evaluate the competitiveness of the market. It assesses the threats posed by new entrants, bargaining power of suppliers, bargaining power of buyers, threats posed by substitutes and competitive rivalry existing in the market. The threat of new entrants for SIA is minimal since the airline industry requires substantial capital investment (Dagmar Recklies, 2001). The threat of substitutes for SIA is also minimal since the entity concentrates on foreign flights hence avoiding a high threat of substitutes such as automobile and trains (Dagmar Recklies, 2001). The bargaining power of customers is also low since the customers of the airline are individuals who are not organized into associations that would, for instance, push for a review of the entity’s charges in its flights to various destinations (Dagmar Recklies, 2001).
Suppliers bargaining power is considerable with respects such as procurement of fuel, aeroplanes and labour. For supply of fuel, the bargaining power is heightened by existence of oil cartels such as OPEC, which influence the global prices of petroleum. Labour unions for instance present a considerable bargaining power for union-affiliated employees of SIA (U.S. Bureau of East Asian and Pacific Affairs, 2011). Competitive rivalry is also high for SIA with competitors such as Malaysian Airlines and emirates presenting alternatives for individuals travelling to most of the locations where SIA operates.
External Environment Analysis
The external environment analysis helps determine the opportunities and threats posed by the external environment. In this respect, SWOT and PESTEL tools are critical to assessing an entity’s external environment.
SWOT Analysis of External Environment of SIA
In its external-environment assessment, SWOT (i.e. strengths, weaknesses, opportunities and threats), deals with the opportunities and threats that an organization faces. In respect to opportunities, the Asia pacific region provides opportunities for the airline to expand its operations with its increasing importance in commercial air travel (Kamath & Tornquist 2004; Findlay & Goldstein 2004). The domestic market also presents an opportunity for the entity to diversify its services thus reduce the risk in the event of a fall in international flights.
Various threats affect SIA in realizing the opportunities provided by the external environment. Like many other industries, the airline industry has been adversely affected by various factors including commoditization of offerings, overcapacity and business rivalry which is brought about by entry of cheaper carriers and periods of underperformance. Additionally, macro-level socio economic factors including increased oil prices due to global inflation, concerns of contagious pandemics including bird flu, the increasing terrorism and the Tsunami of Asia (Heracleous & Wirtz 2009), affect the SIA’s business. Since the company has highly trained staff, it faces many problems associated with staff poaching by other airline companies which tend to offer a higher pay. The world financial instability and decreasing yields may also have adverse effects on the company.
PESTEL Analysis of SIA External environment
PESTEL factors refer to the political, economic, socio-cultural, environmental and legal aspects that affect business operations. In respect to political factors, SIA is prone to political instability in areas it conducts business. For instance, the revolutions witnessed in the Arab world curtail the extent to which the entity can make flights to these regions. Economic factors also affect SIA’s business notable among them being fluctuations in global oil prices that challenge effective planning and adverse economic conditions e.g. financial crisis that limit customer’s incomes thus reducing their expenditure on extensive travel (Heracleous & Wirtz 2009).
Socio-cultural factors also affect SIA’s business. With its operations traversing multiple countries, SIA, for instance, requires attendants who are conversant with multiple cultures. Such a requirement means that the entity has to spend a substantial amount in staffing and talent management initiatives. Environmental factors also affect SIA’s business an example being the volcanic eruptions that led to flight cancellations in many parts of Europe in May 2011 (Quinn, Milmo & Wainwright 2011). The influence of technological factors on SIA’s business is evident on its reliance on aspects such as online booking as evident in its website. Accordingly, in countries with poor internet connectivity, the entity may lose customers due to inaccessibility of its online services. Legal aspects affecting SIA’s business include acquiring permissions to operate in new routes with differences in legislation in countries the entity operates in presenting challenges related to entering into contracts and enforcing its contractual rights and obligations. Go to the conclusion here.