Introduction
In this essay, I am going to analyse the state of the market and prospects for the Singapore airline industry, especially on Singapore Airline, by using PESTLE tool.
Singapore Airline’s history can be tracked down to 1st May 1947, and more new aircraft were added to Singapore Airline (Malaysia-Singapore Airline) in the 1950s to 1960s, and in 1969, the Airline purchased five B737-100s. Finally in 1972, MSA split to become two new entities- Singapore Airline and Malaysia Airline System.
And in 1977, Singapore moved its airport to Changi Airport, that was the big event at the time. In 1989, Singapore Airline became the first airline to operate a B747-400 on a commercial flight across the Pacific. Singapore Airlines commenced operations from the new terminal 2 at Singapore Changi Airport on 22ed November 1990. In September 1998, SA set new standards in air travel by unveiling a new suite of products and services worth S$500 million all the three classes of travel.
When SA step into 2000s, in February 2004, Singapore Airline made a record for the world’s longest non-stop commercial flight from Singapore to Los Angeles. And Singapore Airline broke the record just month later by a non-stop flight from Singapore to New York. (Singaporeair. com)
PESTLE Analysing
In this chapter, I am going to analyse the state of the market and prospects for the Singapore Airline, by using PESTLE tool. And I will present it for each specific point. Nowadays, the environment and companies have more and more relations than ever, even the smallest change in the external situation can affect the business badly. Therefore, it is extremely important to analyse the macro environment, it has already became a part of the business. The challenges from external environment can basically summarise as political factors, economic factors, social factors, technology factors, environment factors and legal factors.
Political Factors
Political factors refers to governmental policies such as how much does the government support, and what kind of goods and services that government want to provide to its customers. The situation that in Singapore is quite fine, Singapore is a country that quite open to the enterprise, and also the policy to local company is consider as protective. And the government is trying its best to make sure that all the firms can run the best in Singapore included the international firms. Moreover, Singapore Airline’s major shareholder is actually the Singapore Government.
Therefore, there is tremendous support received from the tax to the fuel policies. Even better, in order to avoid monopolising, government gave certain challenges for Singapore Airline, the deregulation of airline industry; it gives the right to other airline companies to entry the market with a lower price, to satisfy the needs of customers. (Sikorski, 1995) Also, the changes in international political landscape made political pressure among the state-owned airlines which compete for the market share.
Recently, the North-Korea’s nuclear bomb testing, middle-east problem, and the fight between India and Pakistan, and those protest happened in China and Japan for Diaoyu Island are the factors that may affect the business.
Economic Factors
A healthy economic environment plays a big part in any business, especially the exchange rates, tax rates or if the country is suffering from economy crisis, these factors affect meaningfully on customer’s desire, but also make changes between suppliers and other relevant partner all over the world of Singapore Airline.
Just like last time when the fuel cost was rising, all the airline industries around world were having a tough time, as well as the Singapore Airline. The major problem that occurred was that, how to give the best service and the best flight experiences while keep an economical price. ( Channelnewsasia. com. Nov 09) Also, as there are more substitutable airlines available in the market, buyers are looking for a cheaper price for the tickets; it is a tough for Singapore Airline to set a price, to satisfy all the customers. (ukessay, cited from Lacar,F. 004)
Singapore Tourism Board has putting a lot of effort to promote Singapore as destination of MICE (Meeting, Incentives, Conventions and Exhibitions) (Singex. net). And also the Universal Studio’s established made Singapore a better place to visit, therefore, the Singapore Airline can gain a lot of customer from this opportunity.
Social Factors
Normally, social and culture factors can be both threats and opportunities for all the firms. For this matter, firms need to take religions, race or even the personal hobbits into count, in order to set a perfect company image, and also to set a brand name in the industry.
In this case, Singapore as a multi-culture country, here are 3 major races that Chinese, Indian, and Malays, therefore it gives a tough question to the manager of Singapore Airline. Due to that the Malays are the original residence of Singapore, therefore the dressing of Singapore Airline is the traditional Malay dresses. Recently, China and India are two “new rich” , and Singapore’s culture is relevant to these two countries, therefore, Singapore can actually developing the market of these two places more, in order to rise the market share, and expand the business, to build the company image wider.
Technological Factors
The fourth factor is the technological factor. No matter in which industry, technology has clearly became an attractiveness to some of customers. In airline industries, also, when A380 was just into the market, everyone was wondering when is this big aircraft was going to ready to get into the market. And as what we thought, Singapore Airline has tried out the A380 for the very first time out of all the airlines around the world. New technology does attract customers. Nowadays, IT is everywhere, smartphones, IPad, all this kind of technologies cannot be used on the aircraft with internet.
Even though the first class has the internet access, but if it could be an option for the economy class customers, it might be a big attraction. Availability of other mode of transportation, like high-speed train, try to create some alternatives for the costumers, to satisfy all kind of needs of customers. (studymode)
Environmental Factors
Nowadays, environmental factors play a big part in every business. For example, in the car industry, every brand is trying to promote their “green brand”, like Toyota, Honda. Singapore Airline is doing the same thing for the company.
Especially Singapore has known as the cleanest country in the world, earlier when the A380 aircraft was just launched, Singapore Airline announced that the A380 is “greener” compare to the Boeing 747, due to the seats on A380 are much more available than Boeing 747. The global warming problem is getting serious in these days, so how to set a green image of the company is really important.
Legal Factors
Singapore has split from Malaysia since 1965; the law of Singapore is consider strict compare to other countries. Somehow, this became the reason why foreign investors are willing to invest in Singapore, because of the stable government and the law. For the airline industry, Singapore also has the clear law to protect the customer’s benefits. Moreover, aforementioned, the biggest shareholder of Singapore Airline is actually the Singapore government. Therefore, Singapore Airline should be perfectly understand the legal documents and protect customer’s benefits with it.
Singapore Airline as the one of the most profitable airline in the world, the macro environment plays a big part in the business. By using PESTLE tool to analyses the Singapore Airline can understand better about the strategies of the company, and predict the prospects of Singapore Airline.
Key drivers
In this chapter, I am going to analyses the TWO main factors that may affect the Singapore Airline strategy for next five years. And according to the research and analysing, economy factors and political factors might be the two key drivers. As aforementioned, the economy factors are the main key drivers that may change the strategy of the company in next five years.
The financial crisis which happened in 2007 was hit all around the world, in all industries. Even until now, the economy has not fully recovered from the rescission. Also, the open market of airline industry in Singapore made Singapore Airline tougher, airline like Tiger Airline provides the cheaper price of tickets, and it flies to the country that near Singapore. It does took over a certain percentage of Singapore Airline.
The oil price, hitting a high level of USD 140. 00 per barrel at June, even it did dropped dramatically at the end of 2008. But after that, the price rise to USD 80. 00 at October 2009. Channelnewsasia. com. Nov 09). The unstableness of the oil price makes Singapore Airline tough to set the price of the tickets, and in order to keep the profit rate, the airline may have no choice but rise up the price, but it may cause the loss of customers.
According to the information from CIA, Singapore is a highly developed country, and also has a really successful free market for economy. Therefore, companies can make their own decision by their own mostly. Singapore has a stable political situation, but recently, Singaporean had a protest of against immigrations.
The immigrations and foreign works are the big part of Singapore working participants, if the government reduces the immigrations rate, the salary of local workers would be much higher. Also, this is going to make Singapore a less friendly country to visit for the countries that are tightly related to Singapore. For example, when the Chinese workers started a strike in SMRT Company, the Singapore society insist that Chinese workers did the wrong thing, and in the other hand the China media also reported the same news, and in China, people insist that
Singapore company treat Chinese unequally. This event made Chinese repelled Singapore so badly. Therefore, only because of this incident, many Chinese refuse to visit Singapore and even some Chinese students in Singapore chose not to take any transports from SMRT company anymore, some of them would rather chose to walk.
Conclusion
In conclusion, in order to provide a better service and a profitable business, the economy factors and social factors need to be solved, the company need to figure out a way to solve the problem may occurred.
