This report analysing for SIA how should be respond to the competitive environment base on Porter’s ‘five forces’ model of the opportunities and threats.
Bargaining power of Customers
Buyers bargaining power is very sturdy and have to be more focused on the needs and desires to better serve and satisfy them. Buyers have an effect on an industry through their ability to force down prices, bargain for best quality or more services, and play competitors in opposition to each other. Buyer groups experience low switching costs as they can select one airline company over another, depending on which affords higher deals.
Since Kris flyer program had been promote to retain customer loyalty and if add-on the additional services like in-flight massage treatments or relax air massage bathtub or jacuzzi will be more attractive.
Bargaining power of Suppliers
Boeing and Airbus are the major suppliers of SIA aircrafts, SIA relying on both of this two companies and 11 aircrafts have on order now. Should be order more aircrafts to increase revenue and reduce the rental of leased aircraft cost which was 5% of expenditure in 2017/18.
Since 2016 onwards, fuel prices have keep risen but SIA able to maintained the fuel cost with 27% of expenditure between 2016 to 2018 due to fuel hedging gain in financial year 2017/2018. Staff expenditure was 16% in year 2017/18 and all combine fuel, staff and rental costs were 48% of SIA’s expenses.
Enhance services, Advance technologies and fuel costs all aid to create a strong level of Airline Industry’s supplier power and switching cost also high as well.
Rivalry in the industry
SIA have a major business transformation plan “bold radical measures” started from 2017 because of company first loss within five years since 2012. This transformation has a focus on enhancing cost and service efficiencies to better position the company for long-term growth.
So SIA can developed more revenue to improve processes efficiently and more passengers to filling up more seat per aircraft to be positive impact on the bottom line, as well as enhancing organisational and operational effectiveness.
Threat of new entrants
The aircraft refurbishing solution mainly in the various parts used for cabin and interior are made from different types of lightweight materials to make it luxury quotient of VIP cabins and commercial cabins. In the other hand, decreases the gross weight of aircraft, which result in fuel savings.
We would like to suggest that SIA should redesign a row of three economy seats to be converted into a flatbed for family and friends to become economy class Family Couch, on long-haul flights which like Air New Zealand’s design. Also some parts of aircraft such as lighting and aircon fuel utilization should replace with the solar energy system to decrease dependence on fuels usage.
Threat of a substitute products or services
SIA had target especially on medium and long-haul flight luxurious traveller that alleviation and time when travelling with less cost. In same time developed to train talent staffs to emerged as expert staffs, so their offerings are higher among
than opponent and do not easily to replacement. SIA is focusing substantially on the digital realm, to set up an internal digital-innovation unit to increase its digital capabilities and capacity to reclaim worlds No 1 spot.
On the other hand SIA should be substitute with Humanoid Robot instead of Staffs cabin crews to be vibrant innovation culture in the airline industry and reduce staff cost. Our idea of social Humanoid Robot is Sophia and developed by Hong Kong based company Hanson Robotics. https://youtu.be/8W1KnxP5yIA
As per above SIA analysis, supplier and buyer bargaining power are high, extreme competition amongst airline competitors industry. SIA has to be continuously improve itself in order to stay World best airline every year.