Individual Assignment Business Strategy MM5012

Chapter 4 Business-Level Strategy RM 7:

Singapore Airlines Balancing Act

Hendra Winata 29111328 Syndicate 2 - MBA X46

Main Ideas of Reading Material

The reading material talking about Singapore Airline (SIA) Balancing Act talking about Business -Level Strategy which succesfully implemented by SIA to : make healthy profits year in year out, in an industry whose performance over the years has been dismal in fact, SIAs profitability has been exceptional, superior in the long term to that of the competitors in its peer group in the industry. Before talking into deep about Business-Level Strategy, it shall take into consideration about below conditions which lead to SIAssuperior Business-Level Strategy as in the case[1]: a. External Environment of SIA such as the airline industry as a whole, impact of government intervention; uncontrollable factors such as oil prices and political events, the perishability of seats, seasonality of demand, long time horizons in infrastructural decisions that inject additional levels of complexity, and lastly the chronically poor and volatile performance of the whole industry. b. Internal Environment of SIA itself at its important strategic choices and resource deployment decisions, in order to get a broad understanding of the companys superior performance. Factors describe in the case such as its young fleet, low staff costs, global revenue base, striving for efficiency, brand reputation, response to crises, and alliance and acquisition strategies. SIA has core competency in costeffective service excellence. In other words, complex matrix of strategic decisions which have been highly consistent over time lead to superior Business Strategy implemented by SIA.

Requirement in Implementing Idea

From figure 1, related to previous chapter there are 2 environment need to analyze before implementing Business-Level Strategy of a company. They are: 1. External Environment: General Environment, Industrial Environment, and Competitor 2. Internal Environment: Resources,Capability, and Core Competency

External Environment

Sustainable Competitive

Internal Environment

Advantage

Business-Level

Figure 1. Framework Flow to Business Level Strategy

Strategy

After analyze those 2 environment, if company succesfully define their core competency which lead to superior and sustainable competitive advantage, then they shall formulate it into Business-Level Strategy. Core Competency is the resources and capabilities that have been determined to be a source of competitive advantage for a firm over its rivals while Strategy is an integrated and coordinated set of actions taken to exploit core competencies and gain a competitive advantage. So, we can define Business Strategy as actions taken to provide value to

customers and gain a competitive advantage by exploiting core competencies in specific, individual product markets [2]. There are 4 Business-Level Strategy divided base on Source of Competitive Advantage and Breadth of Competitive Scope as depict in figure 2 [2]: 1. Cost Leadership with key criteria: a. Relatively standardized products b. Features acceptable to many customers c. Lowest competitive price 2. Differentiation with key criteria: a. Value provided by unique features and value characteristics b. Command premium price c. High customer service d. Superior quality

e. Prestige or exclusivity f. Rapid innovation 3. Focused Low Cost with criteria in general same with Cost Leadership, but in narrow target market. 4. Focused Differentiation with criteria in general same with Differentiation, but in narrow target market.

Figure 2. Business Level Strategy[3] In the case of SIA, they can integrate between Cost Leadership and Differentiation Business-Level Strategy which seems incompatible (see the criteria of both level above). Table 1 show us about integartion on both Business-Level Strategy by SIA. Table 1. SIAs Integrated Business-Level Strategy[1] Cost - Leadership Fleet always young Investment heavily in training employee Maintain labor cost Differentiation Fostering Both Centralized and Decentralized Innovation Make good use of high technology which affect customer experience. Personalizes the customer experience by relaying information about birthdays and preferences from its CRM system to cabin crew members Strategic alignment, not financial returns Create business ecosystems rather than value chains

Outsourced ticketing and payroll processing

3 Practical Implications The implications of SIA when implementing dual-strategy which seems incompatible is SIAs can maintain their competitive advantage because their core competence: costleadership and maintain differentiation in important sector very hard to duplicated to their rival in the industry. With this Business-Leve Strategy integration taken by SIA make other management or business decision maker in the other industry can learn and realize that YES, why not? (to align the incompatible Business-Level Strategy). This phenomenon of apply incompatible dual-strategy already impact in many company/industry, including in my work place industry, Telecommunication. Since IT for internal employee environment sector is just support aspect for our business which is not related directly to our customer, some technology or services become managed by 3rd party with pay as we need. So, we dont buy the technology appliances(hardware), but just pay the services. Why? Because technology in IT has fast growth, so invest in IT hardware is not good investation. In other sector which very sensitive to our customer experience as our core business (data & telecommunication network services and infrastructure), we use high-end technology in term of buy the hardware(appliances) and managed the services by our own quality & trained people.

Lesson Learned Combination of analysis in external environment and internal environment is the first step to gain sustainable competitive advantage which will lead for formulating into superior Business-Level Strategy. Business-Level Strategy can be integrated to being the most superior competitive company although it seems imcompatible like combination of cost-leadership + Differentiation. Investation in human capital is a must since it has intrinsic valuable investment value for the current and future of companys life and have helped company to build and sustain service excellence at levels consistently above the competition because Harness the power of your people and cul- ture rivals cant easily copy our people and organizational culture. Outsource can be optional to consider when that sector which operate or developed by outsource is not the key sector to create firms value.

REFERENCES [1] Heracleous, Loizos, et al (2010). Singapore Airlines Balancing Act, Harvard Business Review. [2] Heracleous, Loizos, et al. Flying High in the Competitive Industry. Cost-Effective Service Excellence at Singapore Airlines, McGraw Hill. [3] Ireland, R. D.; R. E. Hoskisson & M. A. Hitt (2011). The Management of Strategy: Concepts & Cases, 9th Edition, South-Western Cengage Learning.