“Singapore Airlines’ competitiveness “;
Singapore Airlines’ competitiveness relies on a dual strategy which was considered unachievable by Michael Porter (1985) as it is the association of differentiation and cost leadership. These two competitive priorities seem to contradict themselves as one aims competitiveness through a higher service quality, thus increasing costs, and the other focuses on cutting costs as much as possible in order to be competitive in terms of the prices of the services rendered. However, SIA has proved this theory wrong as it is the leader in terms of prices in its peer group and has received numerous awards for the quality of its service. Then how does the company do it ?
First of all, through an extensive use of IT. This modern tool allows not only a considerable reduction of costs through an increase in efficiency, but it also offers to the customer an innovative and appealing way of accessing all the information necessary for its flight and other offers from the company. Outsourcing its IT functions to IBM has helped the company to cut its costs and ensure that they are up to date in terms of what they can offer to their increasingly demanding customers.
By always striving to offer a better pre-flight and in-flight experience, SIA has attracted a more wealthy and demanding customer base, in addition to attracting more modest customers through its cost leadership strategy. All of these customers have high expectations in terms of what the company can offer in comparison to other carriers. These expectations are met with continuous innovations which are at the center of the company’s differentiation strategy. These innovations come into account in all possible aspects of the service, in-flight dining, entertainment, seating, and although such changes should strongly impact the company’s costs and jeopardize their capacity to offer cheap tickets, they have found a way to preserve their price competitiveness. SIA has done so by “be[ing] able to dispose of programs or services that no longer provide competitive differentiation” and by offering an experience only slightly better than its competitors. Indeed, through this strategy, the company is viewed by customers as being better than its competitors without having to invest a large amount of money into innovations.
Some examples of the higher quality of service that SIA offers compared to its competitors are the in-flight dining, the Krisworld entertainment system offered to all passengers, or the first-class experience which allows you to have your own private space and a gastronomic meal inside the aircraft.
Easyjet’s competitive approach is much more straightforward as it solely relies on a cost leadership strategy in its peer group, which are budget carriers, while offering an experience similar to those of its competitors. However, what is remarkable is the fact that the company has become the first choice budget carrier in Europe although it only started its operations back in 1995 at Luton airport. So how did Stelios Haji-Ioannou, the founder of the company, manage to plummet Easyjet to the top of the budget carriers in Europe ?
Well as I said at the beginning, he’s managed to do so through extensive cost reductions which consist of a mix of different strategies: “one type of aircraft, point-to-point short-haul travel, no in-flight meals, rapid turnaround time, very high aircraft utilization, direct sales, cost-conscious customer segments and extensive sub-contracting.” All these different elements either contribute to cost reduction or to what makes the company appealing compared to other airlines.
In 1997, two years after starting his operations, Stelios made a contract with Boeing worth $500 million in exchange for 12 737s. This was the start of his strategy of using only one type of aircraft, offering a homogeneous product to all customers. Furthermore, its strategy in utilizing these aircrafts is to have them flying constantly, thus having a rapid turnaround time. This reduces the number of planes and pilots needed for the operations of the company to work. This strategy is however the reason for delays at the end of the day as one delayed flight impacts the schedule of the rest of the day for that particular route. In addition, Stelios studied what the customers expected of the flights in terms of what was offered and decided to utilize a strategy of “Nothing is offered for free, all is for sale”, considering that in-flight meals and snacks were not a necessary element in order to satisfy its customers.
Concerning how the company’s popularity relies also on a few elements. First of all, through their several years of activity, Easyjet has mostly always delivered what was expected and advertised of the service and thus was quickly recognized as being a trustworthy airline company. Furthermore, its advertising campaigns are suited to their customers who are qualified as being “people who pay for travel from their own pockets.” and focus on newspapers, radio or magazines which are more direct approaches to this type of customers. Finally, what is possibly the most appealing feature of Easyjet is the different routes it offers as the company offers regular flights in routes that other airlines often do not cover.