Strategic Management for Tourism and Hospitality Businesses: Singapore Airlines


 


What are some of the different approaches that are available to Singapore Airlines to help them gain greater exposure to new or existing international and domestic markets?


Singapore Airlines has evolved as one of the most respected travel brands around the world (Singapore Airlines). Singapore Airlines is related to the ever growing and changing global tourism industry, and there are different factors that must be considered in order to make sure that the company is gaining their competitive advantage, in order to maintain and improve their position in the global market. Technologies, deregulated environment, advancement of technology as well as the alliances are different aspects that are important in order for the company to gain greater exposure to their existing and possible markets.


The company can use its different important resources such as their investments in heavy training, use of modern airline fleet as well as computer reservation systems and maintenance and other advance technologies that can help them to improve their service to their customers. 


In addition to that, the company also joined International Air Transport Association or IATA, an international trade body that was created 60 years ago, by group of airlines. As of now, IATA represents 230 airlines that compromise 93% of the scheduled international air traffic (IATA 2008). Furthermore, SIA also joined in the first global airline alliances with Swissair and Delta Airlines in order to form the Global Excellence codesharing alliances. A codeshare allows the company to buy a certain number of seats on a flight that is operated by another airline, and then sell those seats as if on its own aircraft. SIA expand their relationship with its launching of its partnership with the Virgin Atlantic Airways for a codeshare service.


SIA is also investing in other airlines by purchasing stake in different airline companies such as Air New Zealand and Air India.


            It is also important to consider the Australian domestic market and international routes between Australia and the United States, together with the deregulated domestic aviation industry, SIA had been able to deal with major alliance with Air New Zealand and Ansett Australia. The company is currently exploring more direct investment in the Australian market, and this can be done by resurrecting the name of Ansett or start their new domestic airlines.


            There is also a big opportunities for SIA to merge with the existing trans-Atlantic carriers to improve the relationship and connection with the customers that will help to improve the awareness of the market regarding the company.


            Above all, Alliances is also an important factor that can help SIA to improve its relationship and exposure with its existing and new international market. Alliances are agreements that are made in order to cooperate in different scheduling flights as well as share different airport facilities such as lounges and terminal so that the passengers can treat partner airlines as a single entity (Hobley, Woodcock & Place, 2004, p. c114).


 


Identify the advantages and disadvantages of each mode of entry.


            Mode of entry into a selected international market is considered as the channel in which the organization employs in order to gain new entry in the international market (Marketing Teacher, 2008).


            There are three main non-exporting modes of entry: licensing including franchising; strategic alliances; and wholly owned manufacturing subsidiaries.


            Licensing occurs when a specific company leases the use of its intellectual property rights such as their intangible rights like copyrights, patents, brand names, trademarks, technology as well as manufacturing methods to a given local company in exchange of a fee. Royalties is the compensation from the licensing agreement, it can be paid as a flat fee, a fixed amount per unit sold, or percentage of the licensed product or service (Steers & Nardon, 2005, p. 209).


One of the advantages of this mode of entry is that it is considered as a popular means of entry due to the fact that it involves little out-o-pocket expense for the licenser or low entry cost and low direct risk, because the need for the local market research will be reduced, and the licensee may support the product strongly in the new market (Steers & Nardon, 2005, p. 209; Walter & Murray, 1988, p. xlvi). On the other hand, its main disadvantage is that the mother company can lose control over the core competitive advantage of the firm, thus the licensee can become a new competitor to the firm. Furthermore, there will be a lower absolute size of returns from the licensing compared to the returns from other modes of entry. Above all, the exclusivity of licensing, thus the opportunity cost is particularly irksome when the licensee fails to exploit the market opportunity (Walter & Murray, 1988, p. xlvii). Franchising is a special form of licensing that allows the owner of the product or service to have the greater control over how the product is used or marketed (Steers & Nardon, 2005, p. 209).


Alliance is another mode of entry. Its main advantage is that it can impart to the company a relative advantage in terms of size or an ability to learn the field in faster manner. Furthermore it can also help to provide a complement to areas in which it is lacking (Fuerst & Geiger, 2003, p. 62). This is due to the fact that it can help a company to find an opportunity to increase its growth and access to new markets while avoiding excessive tariffs and taxes that are associated with the process of importing different products (Ajami, Cool, Goddard & Khambata, 2006, p. 27).


On the other hand, the main disadvantage of strategic alliances is its cost. Alliances are costly, not only because of the cash leaving the hand of the company but because to the returns from which it could be denied. In addition, alliances can create indirect costs by process of blocking the possibility of cooperating with the competing companies and organizations, thus there is a possibility in denying the company with different financing options (Fuerst & Geiger, 2003, p. 62). Furthermore, partners are limit on profit repatriation to the parent office (Ajami et. Al., 2006, p. 27).


The main advantage of the wholly owned subsidiaries is its technological competence that helps to reduce the risk of losing over the competence. Thus the reduction of risk can help to maintain the competitive advantage of the company. In addition, the parent company holds a strong control over operations in different countries where that subsidiary does business. The said thing is important because it helps to coordinate all the aspects of the conducting business among the different locations of the company. Above all, wholly owned subsidiaries may be expensive but it may help to pay for a company to add value at each and every stage as well as help in utilization of the modality that will help to provide opportunity in adding and maximizing the value (as cited in Brien, 2006).


On the other hand, the main disadvantage of the wholly owned subsidiary is that it is considered as the most expensive mode of entry in terms of requiring the necessary investment capital (as cited in Brien, 2006).


Given the current market in Australia, is this a market SIA should seek to enter? If so, which would be the most effective entry mode to use?


            The Australian domestic market, as well as the international routes between the country and the United States can be considered as a strong opportunity for the company to expand their size as well as to expose their company to a new market.


            In terms of the situation of the company, as well as the government of Australia, it will be important and feasible to use wholly owned subsidiary as the mode of entry in the country. This is due to the fact that it will be important to have a full control over the processes and activities of the company, primarily in a market like Australia. Furthermore, it is also important consider that alliance will not be a feasible mode of entry because Ansett Australia, one of its partners in its major alliance n 1997, had collapse and made the Australian aviation be dominated by Qantas. By doing this the company will be able to apply and implement their standards. It is also important to consider the invitation of the Australian market, particularly the Australian airline industry for new competitors.


 


References


 


About Us (2008). IATA. Retrieved September 30, 2008, from http://www.iata.org/about/


 


Ajami, R., Cool, K., Goddard, J. & Khambata, D. (2006). International Business: Theory and Practice, M. E. Sharpe


 


Brien, M. (2006). Wholly Owned Subsidiaries for Callaway Golf in Argentina, AMBA, Retrieved September 30, 2008, from http://www.iobriens.net/ amba606/reports/Argentina%20-%20WOS%20-%20Meg%20OBrien%20Wk9.doc.


 


Fuerst, O. & Geiger, U. (2003). From Concept to Wall Street: A Complete Guide to Entrepreneurship and Venture Capital, FT Press


 


Hobley, G., Woodcock, N. & Place, J. (2004). ‘Singapore Airlines: Expanding Horizons’, In C. Hill, G. Jones & P. Galvin, Strategic Management: An Integrated Approach, Australia: John wiley & Sons Australia, Ltd.


 


Modes of Entry into International Markets (Place) (2008). Marketing Teacher, Retrieved September 30, 2008, from http://www.marketingteacher.com/L essons/lesson_international_modes_of_entry.htm


 


Singapore Airlines Company Information (2008). Singapore Airlines. Retrieved September 30, 2008, from http://www.singaporeair.com/saa/en_UK/c ontent/company_info/index.jsp


 


Steers, R. & Nardon, L. (2005). Managing In the Global Economy, M. E. Sharpe


 


Steers, R. & Sharpe, M. E. (2005). Managing In The Global Economy, M. E. Sharpe


 


Walter, I. & Murray, T. (1988). Handbook of International Management, John Wiley and Sons


 



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