Singapore Airlines: SWOT analysis, PESTLE analysis and Porter’s Five Forces analysis
Singapore Airlines is the national carrier of Singapore, which has an international presence, but a focus on the Asian and Australasian markets. Founded in 1972, the Airline has grown and consolidated its position over the last forty years to become one of the world’s largest and most successful airlines, with an expansive and relatively young fleet of planes (Singapore Airlines, 2014). According to its published mission statement, "Singapore Airlines is a global company dedicated to providing air transportation services of the highest quality and to maximising returns for the benefit of its shareholders and employees." (Singapore airlines, 2014). But just how well placed is the company to achieving its objectives? The purpose of this paper is to evaluate the business environment, the resources held by the company and the threats and opportunities facing it in the globalised marketplace. The tools used to undertake these analyses are a SWOT analysis, PESTLE analysis and Porter’s Five Forces analysis.
SWOT analysis
A SWOT framework is used to evaluate the internal and external forces affecting the company.
Strengths
• A major strength of the company is its size, brand image, and positioning strategy. In 2010, the airline was named by the International Transport Association (ITA) as the second largest in the world in terms of market value (Heracleous and Wirtz, 2012). Famously, and in an achievement unmatched by any other sector counterpart, Singapore Airlines has reported a profit for every year since it was established in 1972 (Heracleous and Wirtz, 2014). In 2013, the company reported an annual profit of 378.9 million Singaporean dollars (equivalent to just over £186 million GBP) (Singapore Airlines, 2013).
• However, the strength of the company should not be measured only in terms of capitalisation. Singapore Airlines has been described as the best-known brand in the airline industry, and as a standard for other airlines seeking to develop their product and their brand (Heracleous and Wirtz, 2012). The company has managed to secure its position as the industry’s leading brand through the utilisation of a ‘first mover’ business model (Markides and Sosa, 2013). By, for example, being the first airline to offer free refreshments and a choice of meals to economy class passengers in the 1970s, through to being the first airline to take delivery of the new A380 passenger plane in the 2000s, Singapore Airlines has always ensured that it is one step ahead of its competitors (Singapore Airlines, 2014).
Weaknesses
• While the strengths outlined above are certainly unmatched by any other in the industry, the company does still have some weaknesses. Analysts have noted that the company’s investment in low cost, short-haul carrier Tigerair is dragging the company down in terms of profitability (Air Transport World, 2014). In 2014, Singapore Airlines boosted its stake in the company by 7.3 per cent to 40 per cent, but the company has been consistently unprofitable since 2012. In an effort to boost its performance, that company has attempted to establish a presence in markets other than Singapore (particularly in Thailand and the Philippines) but these efforts at market penetration have, to date been unsuccessful. This is a considerable weakness for Singapore Airlines, for low cost carriers in the South East Asian markets have recently been experiencing a boom (Pearson and Merkert, 2014).
• Another weakness is the inability of the airline to recruit additional passengers on its home turf. Although overall passenger numbers have been growing, since 2000, Singapore Airlines has only managed to grow passenger numbers on the mainland (Singapore and Malaysia) by 2 per cent annually (Heracleous, Wirtz and Pangarkar, 2006; Heracleous and Wirtz, 2012). This is because the home market is already mature, and, given increased levels of movement between Singapore and other nations near the peninsula, short-haul routes have experienced the greatest levels of growth.
• With few opportunities for growth in the home market, analysts have pointed to the North American market for growth opportunities for the airline. A weakness therefore is that rather than seeking opportunities to expand into this market, Singapore Airlines instead seems to be shrinking from it. Previously, the company served such important North American hubs as Vancouver, Las Vegas and Chicago (Chan, 2000), but today, it serves only four US cities: San Francisco, Los Angeles, Houston and New York (Pearson and Merkert, 2014). In 2013 alone, the airline’s seat capacity in the North American market dropped by some 16 per cent (Centre for Aviation, 2013). As a result, while the airline is still the largest in Europe, in North America it now lags behind eight other competitors.
Opportunities
• There are considerable opportunities for development in the future. Singapore Airlines is a member of the Star Alliance, the world’s largest and most successful airline strategic alliance, which gives it access to the resources of 24 partners (Heracleous et al, 2006). Since only 11 of these partners thus far fly to Singapore, there are opportunities for further and deeper partnerships. To some extent, the company is already capitalising on these opportunities. Since the firm’s Chief Executive Officer (CEO), Goh Choon Phong took the helm of the airline in 2010, the company has forged 8 new codeshare partnerships with competitor airlines (Riwo- Abudho, Njanja, and Ochieng, 2013).
• Although the airline is struggling in the North American and Southeast Asian markets, opportunities can be found elsewhere. Unique opportunities for growth exist in the Indian market. Singapore Airlines has entered into a joint venture with Indian transportation giant Tata Sons, which will culminate in a new full-service airline Vistara, that is expected to be fully operational by October 2014 (the Times of India, 2014).