Singapore International Airlines

Will diversification be a good strategy for Singapore International Airline?

Singapore International Airline (SIA) was founded in the year 1972 and has evolved over the years. From being a regional airline, it has become a travel brand across the globe. SIA has not only been limited to its air services, it spreads its wings on the ground as well. 

SIA has built wholly owned subsidiaries and joint ventures to provide services like catering, aircraft maintenance and terminal management. Moreover, SIA has its own school for training pilots and crew members. By diversifying into these related business activities , SIA is making itself self-reliant and will be able to provide better services than its competitors in the long run. Diversification is not just for one time survival rather helps in enhancing the ability of a firm to grow faster.

Diversification in the related activities enables SIA to achieve cost efficiencies and maintain high standard of services. It also helps in the transfer to knowledge across the verticals and provides a source of extra cash flow generation. This extra cash flow generation is very important for SIA to maintain its standards and retain the customers who are now growing price sensitive.

The Changi International Airport is an infrastructure marvel. It has extra ordinary facilities and depicts its superior quality management skills.  It is one of the best airports in the world and is maintained by the SIA .This speaks volumes about the company. SIA is strategically diversified only in related areas. It is a good idea indeed because it creates an image of SIA as a true leader in providing a variety of services in the Aviation Industry. Diversifying in unrelated business activities would lead to dilution of SIA’s Brand.

Contributed by:-

Ridhi Mundra

Section C

Strategic Management

Singapore International Airlines

What should the company do to sustain service differentiation if they plan to expand global/ regional/ local?

Singapore International Airlines (SIA) is known for it’s in flight services, flight performance and progressive performance in strategy development which nourishes a significant source of competitive advantage but their best strength is its high end services and global routes.  This strength can easily be imitated by their competitors.

SIA had low cost competitors and customers were attracted to low fares. Hence, the company is facing dramatic environmental shifts, increasing competition, and changing customer demand. Singapore has a very low unemployment rate, this lead to difficultly in supplying high quality labor at low prices.

To sustain service differentiation,  if SIA planned to expand regionally they could open an operating hub at the Asia pacific region, where labor rate per unit is lower, at better labor productivity .With improving economic condition of Asia pacific the demand for the air carrier is growing, hence SIA can increase the  frequency of flight.

SIA planned to expand globally by investing in Virgin Atlantic –a British airline which has almost 36 destinations worldwide. This allowed the SIA to operate its aircraft on Trans Atlantic sector between US and UK and also the landing slot at the Heathrow airport.

SIA should continue to maintain good flight performance, in flight services and training of cabin crews or engineer to sustain service differentiation in local. Connecting with star alliance would help in increasing its profits, improve the economies of scale and connect it to sectors which it may not access to.

Contributed by:-

Rahul Budhia

Section A

Strategic Management

Singapore International Airlines

Should the company go global/regional/local? Why?

Singapore International Airline (SIA) is one of the leading airlines in the international industry and is facing several competitive issues.

Post liberalization era, the players had to differentiate to get the market share. Singapore Airlines differentiated themselves by providing economy class meals, top-of-the-line technology, comfortable seating, effective staff, good maintenance etc. Their main point of difference was the ownership of the Changi Airport. These resources made Singapore Airlines’ operations inimitable.

There are certain region specific factors also contributing to its success -

·         The Singaporeans had high standard of living and hence higher disposable income.

·         The labor costs were also lower compared to that in US/Europe

·          People in Singapore have a higher literacy rate.

·         They have had exceptional hospitality skills and work ethics.

Thus, we can infer that most of the advantages arise as a result of its region. If Singapore Airlines goes for alliances, there is a high risk of its image getting tarnished. There could be differences between the services offered by Singapore Airlines and other airlines. The other airlines won’t have the same quality of hospitality and work ethics as shown by Singapore Airlines. This could be a cause of displeasure for the customers. Also, if the other airlines do not live up to the standards of Singapore Airlines, their image could be lost which could hit hard on its revenues. Hence, it will be profitable for them to cash their regional advantage than taking risk by going global.

Contributed by:-

Hari Krishnan

Section B

Strategic Management

Wal-mart - Case Analysis

Strategy adopted by Wal-Mart-

Low cost- Wal-Mart created a huge customer base by adopting a low cost strategy. As the main component sold was food products, it comprised of 35% of sales. They focus on opening stores which are huge and provide value for money to the customer and this cost practice makes them cost leaders.

Location-Wal-Mart acquired volume through a careful consideration of locations away from the city; moreover this was adopted by them as they wanted to open huge spacious stores which would have been costlier in the city. Thus it was easier for them to go for internationalization and increase their market reach in different countries.

Competitive advantage of Wal-Mart-

Responsive supply chain/distribution network-The network was centralized and automated.Efficient distribution with cross docking and concentrating on Hub and Spoke model. The center position (hub) was occupied by the 84 distribution centres/warehouse which served other 150 stores within a 150 mile radius.

Hub &spoke Model:

Bargaining power over the suppliers- Wal-Mart had a higher bargaining power over its suppliers as the system was centralized and there was no decentralization of authority. The suppliers had no decision making power and this was difficult to be replicated by the competitors.

EDLP (Every Day Low Price) - They maintained everyday low prices which provided convenience to the customers. Consumers had access to a variety of products under the same roof and hence this confirmed customer loyalty.  Wal-Mart was able to sustain its EDLP model with fewer expenses on advertising and matching volume driven strategy.

Recommendation-

Wal-Mart had a competitive advantage because of its responsive supply chain. The sustainability of the supply chain was outcome of the good relationship with suppliers since they treated them more than just partners.  As Wal-Mart has already shown its commitment and seriousness in its operations so the relationship will prosper more over a period of time. Also, they have the benefit of exclusivity and no imitability because replication of the models and strategies require huge capital investment.

Therefore, building upon the existing distribution network would help them sustain their existing competitive advantage; moreover, internationalization could increase their market penetration and assist them in sustaining as the market leader.

Contributed by:-

Tanvi Lal

Section A

Strategic Management

Class of 2013-15

VRIO ANALYSIS

 VRIO is an internal analysis technique, used as a framework in evaluating all resources and capabilities of a firm, regardless of what phase of the strategic model it falls under. VRIO is an acronym for the four question framework you ask about a resource or capability to determine its competitive potential: the question of Value, the question of Rarity, the question of Imitability (Ease/Difficulty to Imitate), and the question of Organization (ability to exploit the resource or capability).

·         The Question of  Value: "Is the firm able to exploit an opportunity or neutralize an external threat with the resource/capability?"

·         The Question of Rarity: "Is control of the resource/capability in the hands of a relative few?"

·         The Question of Imitability: "Is it difficult to imitate, and will there be significant cost disadvantage to a firm trying to obtain, develop, or duplicate the resource/capability?"

·         The Question of Organization: "Is the firm organized, ready, and able to exploit the resource/capability?

VRIO analysis of HDFC Bank

VALUE

·         High quality Retail Assets.

(Product Leadership)

->HDFC’s retail asset market share in India is very large.

As in the case of the corporate book, the bank is sensitive to compromising on quality of assets   through disciplined credit risk management.

·         Vast branch network

-> HDFC has more than 3251 branches and 11,000 ATMs

·         Customer profitability system and advanced technology

-> The bank has an excellent customer profitability system which helps it judge the potential for cross selling.

->The bank has won 7 awards till now for innovative use of technology.   

·         Selective lending

-> HDFC bank has built its consistent growth through selective lending, diversified exposure and focus on low- cost savings deposits. Unlike other banks, HDFC has also shunned risky, exotic products and is very picky about its borrowers

·          Wholesale Banking

-> The Bank's target market is primarily large; blue-chip manufacturing companies in the Indian corporate sector, top rated corporate and small & mid-sized enterprises.

-> HDFC Bank provides loans to SMEs at a high rate of return. Lending procedure includes careful monitoring and appraisal as SME segment is quite risky.

RARE

·         Innovative use of Technology

-> HDFC bank uses information technology in innovative ways to deliver business value, create competitive advantage, optimize business processes, enable growth or improve relationships with customers.

-> In 2011, it won 7 awards in the IBA Banking Technology Awards

·         Mobile banking in Hindi

->It is the only bank in India till now to have introduced mobile banking in Hindi.

IMITABILITY

·         Vast branch network

-> The vast branch network, though prone to imitation, creates competitive advantage due to high cost involved in setting up of branches and ATMs.

ORGANIZATION

·         Strong culture

-> Designed to deliver increasing value to Stakeholders. The firm is extremely organized to exploit the capabilities of its resources

In good times and bad, HDFC Bank sticks to its 30 per cent profit growth. Delivering such growth, quarter after quarter, is a carefully crafted strategy. The Bank’s performance is consistent for 10 years now. The bank’s market share in key retail assets is very high. The bank is in the top three in most of the products Bank does not believe in being the market leader in all its products, instead it believes in attaining sufficient volumes to sustain its targeted growth in earnings.

Contributed by:-

Srishti Soin

Section A

Strategic Management

Class of 2013-15

Generic Strategies- Differentiation Strategy

In Differentiation Strategy, the products and services offered by a company are exclusive in ways that are valuable to the customers.  For a successful differentiation it is decisive that a customer should perceive offer as clearly distinct from that of competing product and services and they are expectant to pay a premium price for that. There are in substance two avenues for achieving this: either the product is superior in quality or innovation, or the company succeeds in building a distinct image through dexterous use of marketing tools. Differentiation can be based on number of waverings like broad product line (Campbell’s Soup), innovative design & performance (BMW), distinctiveness (Rolex), reliability (Johnson & Johnson), quality (Sony), superior service (Sony) and so on. But differentiation strategy does not guarantee competitive advantage. If the customer sees meager value in the unique product idiosyncrasy or competitors imitate the attributes, differentiation fails. For precedent Chrysler’s unique 60,000 mile bumper-to-bumper warranty did not produce lasting competitive advantage because Ford and GM copied it.

There are few prerequisite for implementing the differentiation strategy like strong marketing, functional integration, interminable development of new or improved services and likewise. Some of the several benefits of this strategy include, less tariff wars, ardent customer base, accretion of market share.


Contributed by:-

Jay Kumar Gupta

Section B

Strategic Management

Class of 2013- 15

Cost Leadership: A Generic Strategy

Generic strategies, as the name suggests are broad strategies that are not dependant on an industry or a firm. These strategies are applicable at business level and they suggest ways of gaining a competitive advantage.

One of the generic strategies is Cost Leadership Strategy.

A low cost leadership strategy aims at enhancing the ability of a firm to produce goods and services demanded by the customers at a lower cost than that of the competitors. In most of the cases the firms who are trying to incorporate low cost strategies aim to sell mass products or in other words standardize products for the mass market. They generally do not advocate customization for a particular customer’s need, taste or preference.

The Low cost leadership strategies can be imitated by ones competitors, and thus low cost leadership is not a onetime process. A successful way of adopting this strategy can be by using the Japanese mantra of “Kaizen” that focuses on continuous improvement. Continuous rethinking is important for the implementers of this strategy.

A continuous effort to reduce the cost than that of the competitor makes a company efficient in that area. Efficiency attracts more profit margins for the company and act as a strong barrier for the entry of new competitors. However there will always be a threat of big giants or small firms in collaboration with foreign firms entering the market and challenging the cost effective leadership.

In India Big Bazaar has been essentially working on a low cost leadership strategy. It sells branded products that other retailers are also selling but Big Bazaar sells at a price 10-15 percent lower than that of other retailers. How does Big Bazaar do so? Well, Big Bazaar works on a huge scale. It operates in more than 72 cities and is able to apply economies of scale effectively thus giving it the low cost advantage. However this one time idea cannot help them sustain their position as the market leaders, thus they continued to innovate their cost structures seeking low cost suppliers and contracting with suppliers for steady supply. Big Bazaar showed how economies of scale and experienced efforts help to bring down the costs as the capacity grows.

McDonalds is another interesting example of being a cost effective leader. It has been very successful in giving its customers fast food at a very low price. Again the question arises how do they do so? They do so by hiring inexperience staff, they train them rather than keeping professional cooks. This lowers their Human Resource cost and they keep very few highly paid managers. This saving that they do in terms of recruitment helps them offer their products at bargaining prices. McDonald’s innovative ways to reduce the cost enables them to truly serve a “happy meal”.

Contributed by:- 

Deep Narain

Section C

Strategic Management 

Class of 2013-15

Palm Incorporation- Case Analysis

Palm Incorporation, a company which once defined an industry is now a history. What went wrong and why it happened all that we can now see in the hind-sight. In the mid-1990s, the firm developed the first successful hand-held on the market. The 1996 launch of the Palm Pilot moved PDAs from introduction to growth and transformed the industry, as Palm offered a simpler unit, with improved functionality, e.g. the ability to link and synchronize information between the PDA and the office-based PC and improved pen-based technology.  In addition, design innovations, programmability, and better battery power management transformed PDAs into convenient productivity tools, which significantly accelerated user demand.

With the sleeping market suddenly increasing, other firms tried to imitate Palm’s new  concept.  As a result, Palm lost market share to Microsoft’s Palm PC. Not only did firms try to copy Palm’s success, but technology also advanced rapidly in all fields relevant to computer, telecommunication and PDA industries.

Competition grew tense. Microsoft and Sony experimented with pen based PC’s called Tablet PCs which could be operated with a stylus. Firms like Motorola and Nokia sought new ways to enhance their mobile phones. Slowly but steadily, simple devices such as the early Palm hand-helds were driven out of the market.

Palm made a lot of mistakes in assessing the external environment which led to its downfall. They prolonged their decline of the PDA for a long time. Instead of accepting defeat and moving out of the market, they kept on fighting for their position. They tried to shift from their core competence to the software market which led to a lot of wastage of money and resources. Another weakness was the slowing pace of innovation and the lack of coordination between marketing and production at Palm. By the time they realized that demand for PDAs no longer existed, the world had moved on to smart phones. Their timing of entry into the area of smart phones was wrong since there were bigger and better players out there and Palm was already behind competition. Their pricing strategy also did not help since they were losing to competition.

Palm, which started out as an innovator and a leader, completely dissolved over time. Changing some of their strategies could have helped Palm stay in business. When they realized that they were behind, they either colluded with their competition or collaborated with larger players like Microsoft which had the capital and technical know how to innovate on both software as well as hardware front. They could have kept innovating radically knowing that the market would catch up, instead of sitting on the success of their PDAs or they could have just accepted defeat and moved out of the market. They could have explored other emerging markets instead of just the US market and probably recovered their losses.

In the technology field, you can’t stay on top or be the market leader for long and Palm Inc., not realizing this fact plus the mistakes that they made led to its final downfall with HP acquiring most of its business by 2010.

Contributed by:-

Gurleen Dua

Section A

Strategic Management

Class of 2013-15