SIA has lost market share and needs new strategy Since 2014, the number of passe
ID: 396927 • Letter: S
Question
SIA has lost market share and needs new strategy
Since 2014, the number of passengers SIA carried has barely grown, even though Asia-Pacific passenger demand rose some 11 per cent and carrier capacity grew by only 8 per cent. Singapore Airlines (SIA) has just released a disappointing set of financial results, reporting a group net loss of $138 million for the most recent quarter. Passenger yield per kilometre dropped by almost 5 per cent. This negative news led the company's shares to plummet by more than 7 per cent.
The challenges to the group are coming on all fronts. Low-cost carriers are putting the squeeze on conventional point-to-point travel connecting cities in South, East and South-east Asia. In addition, the leading Middle Eastern carriers – Emirates, Etihad and Qatar, known as the ME3 – are also challenging SIA's bread-and-butter premium hub-and-spoke international routings.
Adding to the pressure, the traditional set of competitors that SIA was up against for years – American carriers and other regional players such as Thai Airways and Garuda – has taken strong steps forward. Across the industry, decades of consolidation and rounds of bargaining with pilots, ground crew and in-flight crew have brought costs down and reduced over-capacity. Lower costs and higher revenues have thrust the profits of American carriers skyward. Closer to home, Thai Airways and Garuda have reinvested in the hardware and software of air travel. After a decade of trying to compete with low-cost carriers, they have returned to their roots: competing on long haul for business-class and less price-sensitive economy-class customers, updating their fleets and reinvigorating their in-flight service.
SIA's core business is the premium, long-haul segment. Since 2014, the number of passengers carried by Singapore Airlines has barely budged, yet across the Asia-Pacific, passenger demand increased by 11.2 per cent while carrier capacity grew by only 8 per cent. The Middle East and Europe charted similar numbers. It is clear that SIA is losing market share. Even in a growing market, with demand growth outstripping capacity, SIA is not growing.
The strategic response has been for SIA to try to strengthen its premium services while building a range of offerings across the low-cost and full-service positions using the Singapore Airlines, SilkAir and Scoot (Tigerair merged with Scoot on 25 July 2017) brands.
In response to weak performance, the group has emphasised the need to compete in all segments and to strengthen its low-cost regional and long-haul offerings. But adjusting the portfolio disguises the core problem: SIA as a premium airline is losing in competition in its segment. Placing more emphasis on other segments is an unspoken acknowledgment that the battle cannot be won. This is unfortunate because SIA has been a leading player in the aviation world for 70 years. Throughout its history, it has carefully, consciously and meticulously cultivated its image and services to be the leading long-haul carrier based in Asia.
During the days of leadership by Mr J.Y. Pillay, the company grew from a small regional player of 12 aircraft in the early 1970s to an industry leader in the 1990s. It followed its vision to be a top-quality intercontinental airline of South-east Asian origin, offering the best in-flight service in the world. SIA had no choice but to compete strategically. With no domestic market, the carrier could only book revenue by beating other airlines. And it did this very well, battering Asian, North American and European competitors for decades.
But a history of success does not guarantee a future of success. SIA today has the same vision as it did in the 1970s – so will the same strategy lead to success?
The answer increasingly appears to be "no". The current industry landscape pits Singapore Airlines against a robust set of competitors, led in particular by the ME3. Much as SIA aimed for quality leadership as a matter of national pride and economic growth, the ME3 are part of a large-scale, heavily resourced effort to build air travel that transits through Middle Eastern hubs. These new airports in the Middle East are fantastic, with the airlines offering incredible in-flight service. With national resources willingly devoted to the development of this industry, first-class, business-class and economy-class fliers on these airlines receive more in services than what they pay for. Unsurprisingly, the ME3 have posted five consecutive years of strong growth.
Singapore Airlines has a strong balance sheet, a substantial cash war chest and massive, unmatched experience in providing premium services. It can meet the ME3 carriers head-on if it so chooses. But competing against companies determined to win at all costs can be a taxing proposition. If SIA is willing to endure continued losses for the foreseeable future, then it should continue to meet the ME3 head-on. Alternatively, SIA could chart a new course, aiming at a new market segment.
With growing passenger demand, there is a segment of the market that looks for a price between low-cost and premium, where the flying experience is uncomplicated and pleasant, and where the competitors are still ones that SIA can dominate. What choice SIA makes now is as important as any in its long history. The airline industry has changed, so SIA must change its strategic direction accordingly. The company's leadership must have the courage and foresight to lead the company into new decades of success in a tough industry that is more challenging than ever.
Question:
Relationship marketing is one of the key components of holistic marketing. In the light of the current challenges faced by SIA, discuss why it is vital for the company to establish deep and enduring relationships with each of the following key constituents: a. Customer b. Employees c. Marketing Partners (suppliers and channel members) d. Financial Community (shareholders)
Explanation / Answer
Answer.
Relationship marketing is really important to keep and retain the customers and employees. It focuses on maintaining the internal and external customers of the SIA, rather than increasing sales. It's aims to build strong relationships between all the interested parties of the firm with an intention to grow and acquire high profitability.
a)It is important that the SIA satisfy it's prospective customers and increase the customer base through fair prices and excellent service. If the customer are satisfied they will stay loyal and recommend the company to their relatives and friends and helps in increasing the amount of customers and attract new customers as well.
b) relationship marketing is necessary to keep the employees committed to work and to have a feeling of belongingness towards organisation. If employees are paid competitively and motivated with rewards and recognition they will stay engaged and work to provide effective services.
c) maintaining good relationships with marketing partners and suppliers will help to have required materials and assistance when their is need. It also helps to meet emergency situation with a strong marketing partnership.
d) shareholders or financial communities will be involved in all the aspects of the organisation and their interest to keep them satisfied and tied with the organisation. If they are given concern they will invest more and feel secure.
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