Executive Summary

SilkAir’s success in the regional air transit services has proven to be achieved with the right execution of concern schemes over the old ages.

An analysis of the macro-environment of the air hose industry with the usage of the PESTEL model was necessarily explored to better understand the current state of affairs of the environment SilkAir is runing in. This is done so as to analyse the overall impact on the growing of Silkair. In order to supply a better apprehension of the current competition and the driving force in this competitory industry. the Porter’s five forces theoretical account was used to further analyse SilkAir’s place in the industry.

The resources and competencies of the company is what make it so successful and sustainable today. SilkAir’s strategic capablenesss were accessed with the Value. Rarity. Inimitability. and Non-substitutability ( VRIN ) construct. Several properties were factored into the success of SilkAir accomplishing sustainable competitory advantage in the industry.

In drumhead. SilkAir has been able to keep its place by supplying an extended web of regional travel. along with first-class service and supplying competitory menus. SilkAir works to keep this place by adding new travel paths and guaranting rigorous demands in the choice of its crews and staffs while maintaining its monetary values at the most competitory degrees.

1. Introduction

SilkAir is a entirely owned subordinate of Singapore Airlines formed in 1976. Its freshly appointed Chief Executive Officer ( CEO ) . Leslie Thng. has been portion of the company for 13 old ages. With a current entire fleet of 21 aircrafts. SilkAir operates out of its base at Changi Airport to an extended web of finishs within Asia. This scheme of winging to finishs within five-hour radius has proven to be effectual and works best for the air hose. being one of the most dominant air hoses in Singapore.

The air hose has softly emerged as a strong rival in the short-medium draw market dominated by low-priced bearers such as AirAsia and Jetstar. In add-on to that. SilkAir is by far the most profitable trade name in footings of net income borders. when compared to other air hoses in the Singapore Airlines Group. which includes Singapore Airlines. Tiger Airways and the latest add-on to the group. a long-haul low-cost bearer. Scoot.

Despite the hard operating environment and challenges faced by the air hose. SilkAir continuously maintain its long-run attack to merchandise and service excellence. It has besides introduced new inflight offerings and more significantly. continues to take advantage of chances to spread out its web. In add-on to that. SilkAir continues to increase the capacity to current finishs. Its entirely owned subordinate. Tradewinds Tours and Travel Private Limited. contributes to the success of SilkAir’s scheme in supplying packaged Tourss to finishs flown by the air hose.

2. Macro-environment Analysis

An analysis utilizing the PESTEL model demands to be undertaken on a regular footing as the external environment is highly complex and dynamic ( Thomas 2007 ) . We believe that the undermentioned economic. social/cultural. technological and environmental factors are relevant to SilkAir as it influences the company every bit good as those in the air hose industry.

Economic

Singapore’s unfastened economic system can ne’er be to the full insulated from alterations in the planetary economic system. Bing exposed to the European market. the air hose industry in Singapore has been impacted by the European debt crisis. which set off a moving ridge of uncertainnesss in the economic system and caused a planetary impact. The banking crisis have caused concerns about the handiness of funding needed to assist aircraft makers. Airbus and Boeing. keep their high degrees of production ( Hepher & A ; Evans 2011 ) . The increasing monetary value for aircrafts due to robust demand. coupled with high fuel monetary values led to competition between air hoses to escalate.

Social/Cultural

The altering travel wonts of people have caused certain deductions for the air hose industry. Therefore. there is a demand to provide to the different demands of the assorted groups of riders. More people are going by air than of all time before as it is now much more low-cost due to competition in the market place every bit good as the increased disposable income and passing power of Singaporeans. The air hose and touristry industries have both benefitted from this and important growing is seen in these sectors. An addition in the figure of aged and handicapped travelling. along with the lifting figure of concern travellers and pupils on international survey exchanges contributes to the growing of the air hose industry.

Technological

The increasing usage of the Internet has provided many chances to air hoses such that they are now able to supply internet-based services that include updates on flight information and online ticket engagement. Besides. with the well cheaper menus and price reductions offered by air hoses on their web sites. the figure of visitants to Singapore has kept on increasing ( Economist Intelligence Unit 2012 ) . Booking a flight ticket is now much simpler and air hoses are promoting possible riders to book a flight straight through their web site to avoid holding to travel through travel bureaus.

In add-on to that. advanced engineering has allowed aircraft makers and industry experts to come up with fuel-efficient engines and airframes. and this led to impressive fuel efficiency.

Environmental

The cardinal precedences of the air hose industry include safety. security and the environment. Due to environmental concerns. air hoses are working invariably to make their portion in restricting their clime alteration impact and cut downing C emanations every bit good as noise. The demand to command noise pollution every bit good as energy ingestion is continuously being addressed to air hoses. In an attempt to further better the current conditions. the International Air Transport Association ( IATA ) has besides done its portion by following a scheme. which aims to cut down emanations ( Singapore Airlines 2012 ) .

3. Industry Analysis

The Porter’s five forces theoretical account will assist us to place the attraction of the air hose industry and from this analysis. we can deduce the chief drive forces in this competitory environment.

Barriers to entry

Barriers to entry are cardinal industry conditions that block possible entrants because the cost of get the better ofing those conditions is more than the net incomes anticipated ( Warner 2010 ) .

The roar in the civil air power industry has led to an increased in both air travellers and air hose companies in the recent old ages ( IATA 2011 ) . Research reveals that. of the expected 3. 3 billion air travellers. 30 per centum will come from the Asia/Pacific ( Clarke 2011 ) .

The air hose concern of course creates a cost barrier as its entry costs are high. its competition lies among the bing participants in the industry. each competing to distinguish itself in footings of service. engineering. travel finishs etc. SilkAir gained competitory advantage in economic systems of graduated table in footings of buying power. Recently the company signed a trade to buy a sum of 68 new aircrafts to run into to the turning demand of riders and replacing its older aircrafts ( Reuters 2012a ) .

Power of Suppliers

In this high cost industry. the providers are fewer hence it posed a comparatively strong influence over the air hose companies. With limited providers. the picks of air hose companies around the universe are merely tight to the two most common aircraft shapers. Boeing and Airbus. Boeing late increased the monetary value of its rider aircrafts by 5. 5 per centum and air hose companies like SilkAir has to perpetrate to the monetary value hiking ( Reuters 2012b ) .

Another cardinal supply to the air hose industry is coal-black fuel. Jet fuel monetary values have been invariably increasing over the old ages ( Platts 2012 ) . The increased in suppliers’ cost necessarily led to the hiking in air ticket and revenue enhancement monetary values but air hose companies have to maintain their monetary values competitory in order continue to pull clients. hence potentially taking a labor on their net incomes.

Power of Buyers

In comparing to regional flights. shift costs are low for consumers and dickering power of purchasers is high. SilkAir should maintain their clients satisfied to avoid the possibility them of exchanging trade names. With the engagement of low-priced budget bearers. purchasers are unfastened to a wider choice of bearers. Surveies showed that most flyers surveyed would desire their air ticket monetary values to be every bit low as possible. they may non be offered the same services as compared to other normal bearers.

The following of import property to flyers is scheduling ( Consumer Travel Alliance 2011 ) . SilkAir has an border over budget bearers as they have the inclination of flight holds and unwanted service experience. As a subordinate of Singapore Airlines. SilkAir have to maintain its criterions up to the grade to keep its clients database. Furthermore. SilkAir focused on regional flights at competitory monetary values to advance growing ( Suhartono 2010 ) . In this manner. the air hose offers more finishs for purchasers to take from.

Menace of Substitutes

There are different intents for people to go by air and concern trips make up the bulk of the statistics ( Mouawad 2012 ) . The menace of replacements prevarications in the promotion of telecommunications and engineerings. Nowadays high-velocity internet entree provides convenience for people to carry on meetings over the air without the demand to be at that place physically. Following. leisure travellers make up the following major part for going. There is a possible that travellers might exchange to going by sea if one twenty-four hours the cost of going by air is excessively high. However most its replacements do non offer the same experience as air travel. for case. sea travel takes a far longer clip and certain of import concern trips can non be avoided.

Competitive Competition

The menace of competitory competition among the air hose industry in Singapore is comparatively high. In recent old ages. the competition has evolved into a monetary value war particularly since the debut of the budget air hoses. In a command to keep its place. SilkAir chose to distinguish itself by winging to more regional finishs at the same clip offering more flight timings to accommodate the turning demand of regional travellers. Despite that. SilkAir is still a strong rival in the short-haul market dominated by budget bearers ( E-Travel Blackboard 2012 ) . 4. Strategic Capabilities of SilkAir

The resources and competencies of a house will put an organisation apart from its rivals. By carry oning an internal analysis and utilizing the ‘VRIN’ ( Value. Rarity. Inimitability. Non-substitutability ) construct. we are able to measure the strategic capablenesss of SilkAir in accomplishing sustainable competitory advantage ( Hoopes. Madsen & A ; Walker 2003 ) .

First. SilkAir has the proven to be successful as a regional feeder for its sister company. Singapore Airlines ( SIA ) . with its premium merchandise ( Thomas 2011 ) . Some of the cardinal factors that have led to SilkAir making really good in the air hose industry as a fully fledged regional bearer include first-class service by employees. push for efficiency. its immature fleet. positive trade name repute and response to crises. In malice of the many challenges faced by the air hose. SilkAir continued to keep a focal point on service excellence ( Singapore Airlines 2012 ) .

The route to success Begins from the hiring procedure. as the right people are an plus for the company and engaging the incorrect people nevertheless. will be a liability for the company. In the add-on to the rigorous choice and hiring of people. SilkAir besides provides extended preparation for its employees in order to develop extremely efficient frontline staff. doing it harder for other air hoses to copy or double. as there is a certain associated mentality and values that the employees of SilkAir possess.

Bing a subordinate to SIA. SilkAir has been recognized as being able to supply the same degree of dependability. safety and service as SIA. albeit at a lower cost. This gives SilkAir a competitory border and added value. as SIA is so one of the sought-after air hoses when it comes to first-class service. There is great accent on supplying attentive. friendly and loosen uping service to those on board the aircraft and this is seen as SilkAir’s genius as they are able to present. In add-on to that. SilkAir has been successful in keeping a immature and modern fleet of aircraft. being known as the air hose with one of the youngest fleets in Asia.

The fact that SilkAir operates from the same terminuss as SIA at Changi airdrome instead than the budget terminus besides gives it a competitory advantage. Harmonizing to CAPA ( 2012 ) . SilkAir has thrived and steadily outperformed its low-cost bearer rivals.

5. Current Business Strategy of SilkAir

SilkAir uses the focussed distinction scheme to derive competitory advantage in the Asiatic medium-long draw flights industry. Differentiation refers to holding uniqueness along certain dimension that is sufficiently valued by clients to let a monetary value premium ( Johnson. Whittington & A ; Scholes 2011 ) . The air hose focused on supplying safe. dependable and low-cost air transit services of the highest quality in the part. In add-on. SilkAir aims to be the world’s prima regional full service air hose. SilkAir is presently one of the best regional air hoses and this award has been with SilkAir for more than ten old ages ( SilkAir 2012 ) .

When SilkAir was introduced as a subordinate of Singapore Airlines. its purpose was to aim the lower-cost regional air transit section. The air hose used a cost leading scheme conveying low-cost travel in the part. Air travel in the yesteryear was deemed to be a luxury and merely most concern travellers were non sensitive about the airfare and that market was comparatively little ( Dwyer. Forsyth & A ; Dwyer 2010 ) . Hence SilkAir came into supplying air travel to the part for the monetary value sensitive leisure travellers.

SilkAir’s finish paths increased over the old ages and till today with the inflow of budget bearers. the air hose changed its scheme to focused distinction. In order to maintain its topographic point in the industry. SilkAir stood out as one of the air hoses that provided the best services and has the widest travel webs in most of Asia. Australia. China and India. Today. SilkAir serves 39 metropoliss in 12 states in the part and the air hose besides codeshare with other regional air hoses and serves as some of the air hoses linking flights to other long-haul finishs ( Singapore Airlines 2012 ) .

6. Evaluation of SilkAir’s scheme

First. harmonizing to Lynch ( 2009 ) . suitableness means to be appropriate for the context of the scheme of organisation both internally and externally. The environment can be explored from the mixture of chances to be taken and menaces to be avoided. Competitive advantage can be built on the organization’s strengths. particularly its nucleus competences. and from there organisations may seek to rectify failings that exist.

With the distinction focal point scheme. SilkAir is able to construct sustainable competitory advantage and better the corporation’s public presentation as it fits the state of affairs that SilkAir is in. A distinction focal point scheme capitalizes on SilkAir’s ability to invariably upgrade itself and introduce. Besides. SilkAir will see less competition supplying its service to targeted market sections that are less price-sensitive. Looking at the industry environment analysis. the rivals of SilkAir would hold trouble pulling clients off from the air hose based merely on lower monetary values. Alternatively of merely researching new finishs. SilkAir besides focuses on increasing capacity to current finishs offered. particularly when they see that there is possible growing in these markets.

SilkAir has been successful in making into new market sections in assorted larger states over the old ages. By perforating these possible markets. SilkAir is able to develop its extended web even further. In add-on to that. its competitory menus and particular bundles that include adjustment have besides given SilkAir an advantage over its rivals. Bing in the air hose industry for many old ages. coupled with the current engineering and concern know-how available. it is expected of SilkAir to be even more successful in the hereafter than it already is.

The success of SilkAir’s scheme will finally depend on how it is being delivered by the frontline staff and its cabin crews. Therefore. it is of import for SilkAir to continuously upgrade its human resources to guarantee that they are equipped with the necessary accomplishments. cognition and experience to present the merchandise and service such that it gives the trade name a good repute. as switching the focal point from merchandise to client will let SilkAir to derive market portion for a competitory advantage over other air hoses. Looking at the resources and competencies of SilkAir. it is clear that SilkAir is working towards accomplishing sustainable success in such a hyper-competitive market.

7. Decision

Air travel has switched from a luxury transit to merely a common manner of transit between states. Despite being a subordinate of Singapore Airlines. SilkAir has a positive repute of its ain. The air hose has been a dominant participant in the Asiatic part. known for its first-class service and a broad web of finishs.

Fortunately. effectual concern schemes saw the exponential growing of the air hose over the old ages from a mere figure aircrafts to an impressive recent purchase of 68 new aircrafts. The air hose saw the possible in regional travel and took the chance to spread out its web from 18 to 40 finishs.

SilkAir focused merely within the short-medium draw finishs and its code-sharing with other air hose spouses gave SilkAir the advantage of functioning as a connecting flight for other long draw flights. Although the add-on of several budget bearers may hold affected SilkAir’s client database. SilkAir still maintains its laterality in the industry. However. future uncertainnesss may drive SilkAir to tough places. as the economic system and air hose industry are extremely volatile.

In decision. SilkAir may hold to revise new concern schemes in order to stay sustainable. as its current competitory advantage might be losing its radiance in the industry.

Mentions
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