Throughout the history of business firms, engagement in security targets the protection of assets especially in situations when organizations face the pervasive problem of threats of assets coming from both internal and external sources. Threats to the assets of firms are all encompassing to the extent that this problem requires the mobilization of all segments of the organization. (1993) Due to the expanse of the issue of threats to business assets, security management involves a number of challenges focused on the provision and enhancement of security. The first challenge is the identification and targeting of security threats. This involves the cooperation of the entire organization in taking an inventory in order to determine the areas of operation that requires protection as supported by analysis of particular threats. ( 1998) In the case of large organizations with complex operations, the identification and targeting of threatened areas involves the determination of the assets that are important to constitute strategic drivers (1993). The second challenge is the collection of aggregate organizational assets such as skills and other resources that are scattered across the organization. Due to the extent of the issue of security threats, the problem needs organization-wide management instead of just relying on information technology department since security threats constitute both physical and virtual aspects. The department in-charge of overall security management need to link skills and resources in order to gear the organization towards security consciousness. ( 1998)
Ensuring the effectiveness of security management is important because of the serious and long-term effects of disruptions caused by security threats. According to the survey reported by (2003), most companies are not prepared for disruptions caused by security threats. Based on the survey, more than 75 percent of company respondents answered that in their current security management status, experiencing a major disruption on their major revenue drivers would likely to cause long-term damage to their earnings even to the extent of questioning the continuity of its operations. Less than 25 percent of the companies responding to the survey answered that they hold the belief over the ability of their existing security management endeavours to meet sufficiently various contingency areas. More than 33 percent of survey respondents answered that top management of their companies where they belong lack sufficient understanding of the possible effect of security disruptions on the company relative to the degree of preparedness of the firm for potential threats. In addition, the survey also showed that many organization leaders fail to recognize the necessity of enhancing efforts towards risk management and there is also need to improve the communications between or among the various organizational units to integrate security efforts.
Singapore has a vibrant manufacturing and services economy. In 2005, manufacturing constituted 28 percent of the gross domestic product of the country with the remaining percentage contributed by services industry (2007). In addition, Singapore ranks as the fourth biggest center for trading foreign exchange following Tokyo, New York and London with the potential of surpassing the Tokyo operations as long as economic vibrancy remains. Moreover, Singapore constitutes one of the Asian tigers together with Hong Kong, Taiwan and South Korea. Due to its successful market-based economy, it holds the position of being the friendliest economy worldwide hosting a number of multinational corporations and foreign expatriates and other foreign workers. (2006) Overall, Singapore’s economy is highly resilient to shifts in the global economy. In 2001, the country experienced recession due to decline in the performance of the technology industry due to the millennium bug, which constituted a security issue and again in 2003 due to the SARS outbreak. However, the country was able to revitalize its economy and gain an 8.3 percent, 6.4 percent and 7.9 percent increase in gross domestic product in 2004, 2005 and 2006 respectively. ( 2007)
With the persisting vibrancy of Singapore’s economy, the more that security management need attention since there is a greater degree of risk in revenue drivers of companies especially with the entry of multinational corporations into the economy and persisting importance of the economy as a foreign exchange trading channel. Although the economy has not experienced any major security threats since the millennium bug, there is still need to evaluate the existing security management of Singapore. Risk assessment is necessary to determine the existence of risk problems, understand the factors surrounding these risk issues and develop a contingency plan as a preventive measure and in order to have a plan in case of risk actualization. In doing so, Singapore expects to maintain its economic status as an environment conducive to business.
b) History of Security Management in Singapore
Security management in Singapore commenced with the utilization of human resource to guard the assets and premises of the company. This meant that the investment in security covers skills development in human resources to monitor the operations of the company and the entry and exit of people within the company premises. With the advent of virtual security threats, the country also relied on human resources to track network risks and implement security measures to create multi-level walls against these threats and detection programs to apprise the team with the breach of security measures.
As security threats increased and became complicated, security devices emerged to address risks that are difficult for human resources to detect because of time and space limitations. In the case of guarding the business premises, even with guards stationed at the points of entry and exit, there are instances when human traffic is high that threats could still encroach upon the premises. This is because of the human limitation in observing everything at the same time. In the case of virtual risks, there is also the human limitation of observing everything that is occurring in the various networks of the company.
This resulted to the introduction of security hardware and software to aid the security team in guarding the assets of the business. Security hardware refers to devices designed for installation in the place of business or premises of the company. These works in detecting and recording the occurrence of offences as well as the presence of intruders or objects carried by persons that are not allowed entry into the premises because of the possible utilization of these objects to disrupt operations or cause injury to people working in the premises. Security software pertains to products that utilize information technology in order to limit access or modification of online or network documents and materials by preventing the unauthorized access of particular persons. These include the detection of computer viruses and the interception of information through phone cloning or hacking of computer systems.
Singapore has become a market for the security hardware and software integrated into its security services sector. Common security hardware utilized by business firms in Singapore include access control devices, intruder alarm systems, central alarm monitoring equipment, CCTV equipment, and door-entry alarm devices. Most business firms in Singapore utilize anti-virus software together with firewall solutions albeit only at low levels.
There are three major security management trends in Singapore. First is the engagement in public security amidst the 9/11 incident that propelled the intensification of security at the various points of entry into the country and transportations systems. Second is the intensification of security measures against cyber-crimes due to hacking incidents that could cause great losses to businesses. Third is the consideration of security in retail outlets because of the creation of a number of opportunities for crime in these premises. It is also through the consideration of these trends that explains the forces driving security management in Singapore revolves. (2003)
c) Growth in the Security Management Industry
Data on the security market in Singapore involves the dynamics of local production, import from other countries, and export to other countries of the Singapore market both as a producer of security hardware and software as well as an end-consumer of security systems developed in other countries. There are eight security system components indicating the growth in the security market in Singapore.
First, is the market for electric burglar alarms part of intruder alarm and door-entry systems with growth measured in terms of the value of alarms bought or sold [See Table 1 in Appendix]. Between 2000 to 2002 local production of electric burglar systems decreased in 2001 but picked-up in 2002 due to the 9/11 incident. The same trend appears in terms of exports declining in 2001 rising in 2002. As a security market, the Singapore market decreased its purchase of alarms but spending increased in 2002. (2003) This means that the trend in growth of sales of electric burglar systems find link to the attack on the world trade center that caused a wave of fear across the world because of the sudden vulnerability of a super power.
Second is the growth in the sales of control panels that are important components in all security hardware based on value of revenue generation [See Table 1 in Appendix]. In comparing values in 2000 until 2002, local production dramatically decreased in 2001 and slightly increased in 2002. Exports also decreased in 2001 and slightly picked-up in 2002. The Singapore market decreased its import of control panels in 2001 but less than the decrease in production and export, which again slightly decreased in 2002. (2003) This means that Singapore experienced greater volume of purchases within the local market relative to sales of control panels to the international market. This means that there may be other reasons for the decline in the production and export of control panels such as the demand for other security system components.
Third is the sale of cards integrated with an electronic integrated circuit, which are also called smart cards used in security hardware particularly networked monitoring systems []. Although local production decreased by almost half in 2001, the increase in 2002 constitutes an almost triple value in 2001. Exports also almost doubled between 2000 and 2002 even with a decrease in 2001. Purchases of smart cards by the local market steadily increased between 2000 and 2001. (2003) This means that this security system component is more in demand relative to other devices because this is likely to be patronized by large companies interested in developing a networked security system that covers its entire operation and business premises.
Fourth is growth in sales of proximity cards and tags used in limited access or authorized access []. This component is not largely produced in the local market so that there is little increase and decrease in volume of production but export of this component steadily increased between 2000 to 2002. However, the import of this component is greater that local production or export. (2003) This means that the system of implementing authorized access through proximity cards is one of the preferred security systems in Hong Kong. The increase is due to the popularity of this system in a number of manufacturing and service industries such as the hotel business and science and technology research firms.
Fifth is growth in the sales of cards with magnetic stripe blank [See Table 1 in Appendix], similarly used with proximity cards that track access records in facilities and even in the computer system of business firms, which the company can encode with whatever system commands it wants the card to read. In both local production, exports to foreign markets and imports to international market decreased from 2000 to 2001 and slightly increased in 2002 (2003). This means that there is a stable market for this basic security system component, but there is not so much new buyers for this component. This may be due to the saturation of the market or the preference for other security system components.
Sixth is the growth in sales of cards with a pre-recorded magnetic stripe [See Table 1 in Appendix] with similar use to the proximity cards and blank magnetic stripe cards. The only difference is the pre-recorded commands that the card can read or allow. Local production and exports is greater for this kind of card relative to the blank magnetic stripe card. Although, this component has a bigger market relative to the other card, local production slightly decreased between 2001 and 2002 but exports slightly increased. However, the consumption of the local market of imports decreased by half between 2001 and 2002. (2003)
Seventh is the growth in the sales of television cameras [See Table 1 in Appendix] used in detection and surveillance in business premises. Local production declined but imports increased by almost half and exports increasing by more than double ( 2003). This means that visual security systems remain a preferred mode of security system. The decline in local production but high increase in exports means that Singapore is reselling its imported products while meeting local demand.
Eighth is the growth in the sales of still image cameras and other video cameras [] used to detect, survey and record movements of people in the business to help security personnel in identifying threatening people and security risk objects. This holds the highest record in terms of volume of sales. Similar with television cameras, the local production of video cameras decreased with a great increase in imports to sustain local demand and for export to foreign markets. (2003) The decrease in local production may be due to the cheaper cost of importing video cameras from other countries instead of local production and greater gains in exporting to other markets the video cameras imported into the market.
Overall, although trend in sales of security hardware and security system components is just a partial indication of growth in security management in Singapore, the trends imply several things. One is the existence of a persistent local market for security hardware and software. This is the case even if local production for some components decreased but this is usually off set by imports. This could mean two things for the security management of business firms, on one hand, they may not be sufficiently engaged in investing on security management but on the other hand, business firms may have caught up with current innovations in technology systems so that video cameras constitutes only a basic security measure. Another is the information value that the Singaporean market derives from the being a channel for the producing as well as exporting security hardware and software imported from other countries. This means that the market gains knowledge from exposure to innovations on security systems from research and development in the local market as well as from imports.
d) Forces Driving the Industry
The forces driving the security industry in Singapore is analyzed based on the three areas of security management in the country, which are public security, virtual crime, and retail store security.
In terms of public security, the attacks on the world trade center constituted the landmark driving force for security management in Singapore because of the heightened risk awareness of governments (2003). Due to this event, a number of security measures have been implemented in Singapore. First is the enhanced security at the Changi Airport covering immigration controls and visa requirements imposed upon foreigners entering the country. In addition, objects carried by passengers deemed to pose potential danger to the facility and people are banned and confiscated. Such items include cutlery, razor blades, knives, scissors, darts, toy guns, bats and knitting needles. Moreover, the government spends million on x-ray machines for detecting explosive devices together with the consideration of security innovations such as biometrics for enhanced passenger screening. Second is boosted security through the assignment of uniformed soldiers to maintain security within the petrochemical hub located on Jurong Island. Aside from security personnel, inspections are also conducted over vehicles coming into the island together with a contingency plan in case of fire and other emergency incidents. Third is the addition of security personnel in Singapore’s ports to patrol its waters and support security for water-based key facilities. The government also provides military escort for merchant ships passing the Singapore straits together with a surveillance system to detect security threats. In its ports, x-ray machines are used to detect drugs, human cargo, weapons and bombs. (2003)
With regard to virtual or cyber crime, this constitutes the greatest security threat for Asian countries based on the report by the Interpol that virtual crimes and electronic vandalism would likely increase in Asia. Threats in the operations of e-businesses include stealing and damaging of electronic data, hacking of computer systems, piracy and other forms of intellectual property violations, service disruptions due to viruses. These should take a complex form with technological innovations. (2007) The complexity of information security is a factor that would likely determine the direction of security management in Singapore.
Although Singapore has a low record of virtual crimes, the incidence of crime started with a single case in 1993 and increased to 127 cases by 2000. These cases include swiping of credit cards, mobile phone cloning, and hacking of network for a free access to online products and services. (2003)
The Singaporean government tries to deal with cyber crimes through statutes and penal clauses. Singapore’s Ministry of Defense constitutes the biggest user of information technology with its award of security contracts worth millions for the development and modernization of security systems of the country’s military institutions to deal with virtual threats. (2003)
Business firms seek to enhance security through the integration of virtual private networking to prevent people without authorization from accessing the information technology system of the company (2007). In addition, public key infrastructure is also becoming popular because this e-security system addressed the issues of authenticity, privacy, integrity and non-repudiation. So far, two firms have been given government certification, which are Netrust and ID Safe to issue digital certificates to e-businesses. (2003)
With regard to security in the different retail outlets, the factors that determine the security management of the security industry are thefts in shops and the increasing number of arson incidents within the premises. The extent of loss that retail stores experience due to theft reaches about 10 percent every month. Small retail outlets do not install any security devices to detect thefts because of the cost of enforcing a security system. In lieu of security systems, business owners train their staff and rely on them to monitor the movements of people entering the store. The bigger stores consider a 10 percent loss as unacceptable and with their financial capacity to purchase security devices they install surveillance systems to address the theft issue. Apart from theft, arson also influences the security management of retail industries. Although arson in retail stores contributes ten percent to the total number of fires in a year, this still cause losses to business firms and identifying the culprit for compensation or proof in insurance claims requires surveillance systems. (2003)
e) Key Participants and Competitors in the Industry
Key participants and competitors in the security industry in Singapore may fall under three classifications, which are according to 1) the geographical base of the company, 2) the type of security threats being addressed by the company; 3) the type of security services offered; and 4) the mode of creation and origin of the firms.
In terms of geographical base, competitors in the security industry in Singapore are either local or international based. Local security firms are usually small-scale offering a particular security product or service to the market while international security companies are large-scale able to offer comprehensive security services to their corporate clients. With regard to the type of security threats addressed by the company, services may be to address physical or virtual threats. Firms offering security services for physical threats provide security personnel together with security hardware for detection and surveillance while companies providing security for virtual threats provide a combination of people skilled in information technology, hardware and software to detect intrusions intro premises and unauthorized access of industrial networks. In terms of the type of security services offered, security firms offer hardware, software and skilled personnel singly or as a comprehensive security system. Small-scale industrial clients go for basic services that fit their budget while large industrial clients prefer comprehensive security services. In relation with the origin and the creation of the security firms in Singapore, most of the bigger domestic security firms emerged as extensions of the police force providing security to government facilities and private companies. Due to the changes in the security needs of the public and private sector because of the rise of new threats and the entry of international security to offer comprehensive security products and services, these companies were incorporated to integrate security hardware and software with their security personnel services. This is to develop domestic firms able to compete with multinational corporations.
Task 2: Case Study of SATS Security Services
a) Company History
SATS Security Services (SSS) was formed in 1965 to provide various security services to almost all of the airline companies with operations in Changi Airport as well as other business organizations within Singapore and overseas. The security agency emerged as the subsidiary wholly owned by the Singapore Airport Terminal Services (SATS) and SATS is in turn a subsidiary of group of companies constituted by various Singapore Airlines. The security organization is made-up of auxiliary police force involved in the provision of security services to airline companies and other business firms linked to airport operations. By 1999, the company had 760 employees compared to 450 in 1989. The organization is fast growing with a number of police officers forming part of the training staff and experienced in the utilization of various sophisticated security equipment. (2007)
SSS stands at the forefront of airport and aviation security so that its services encompass the security of aircrafts and passengers. The company’s services cover checking the passport and boarding pass of passengers before they board the plane, detection of forged documents, conducting profile screening of the passengers, identification of baggage to ensure that these are accounted for by owners, screening of baggage through x-ray and other applicable devices, searching plane cabins, providing security for VIP passengers, guarding the external premises of the aircraft to ensure that no unauthorized personnel gains contact with the aircraft, screening of explosives through sniffer dogs, provision of airplane marshals, escorting and guarding of passengers deemed inadmissible, monitoring access controls and CCTV, conducting investigations, provision of advice on crime prevention, and sponsorship of security consultancy and training. (2007a)
b) Business Background
SSS operates through its mission statement that the company “aims to provide outstanding security services at reasonable cost and at a profit to the company”. In lieu of its mission statement, the company engaged in several business strategies to meet quality service for its clients, offer a reasonable cost to be competitive, and maintain company viability through a stable and growing profit level. (2007b)
Throughout its more than 40 years of operation, the company has experienced steady growth with difficulties coinciding with economic difficulties of the country. During the financial year covering 2003 up to 2004, the company experienced financial difficulties when Singapore’s economy suffered due to the outbreak of the illness Severe Acute Respiratory Syndrome (SARS) that dampened the traffic of tourist travels to the country in early 2003. During this time, Changi airport experienced its lowest passenger record resulting to a number of flight cancellations or suspensions. This followed the threat of terrorism spurred by the attacks on the world trade center in late 2001. Since the company is closely linked to the operations of aircraft firms, the company also suffered resulting to wage cuts. However, the company was able to achieve a respectable revenue level during this time with 9.8 million constituting a decrease of 11.6 percent from the previous financial year. Its profit earnings was attributed to the decrease in cost, write-back in taxes, and profit from its overseas operations. (2007c)
To ensure revenue generation despite economic fallbacks, the company implemented the business strategy of diversifying its earning base by tapping into other growth markets through investments in overseas operations. Profit levels from foreign investments increased by 11.9 percent constituting a 15.5 percent to overall profit before taxation. Foreign investments were placed in Hong Kong, Taipei, India and Maldives, which the company will increase in the next years. In 2004, the company again increased its foreign investments by acquiring an almost 50 percent interest in the firm handling JAS Airport Services in Indonesia for US million. The company expects full ownership of the company in the next years. In the next years, the company will continue with its strategy of strengthening its domestic operations while expanding its foreign operations. (2007c)
The sustainability of the business has been attributed by the company to its staff who are skilled and experienced in security services and who contributes to enhancing the value of the company to clients. SSS has achieved many national awards for its service personnel especially when 1,003 of its staff received excellence awards for their services. The company also received an international award for being an outstanding service company in 2003 for its contribution not only to national but also to international aviation security. The success of the company in aviation security was validated with the consideration of Changi airport as the best airport in the world. This was received by the company through the upgrading of terminals and the installation of a security control center for enhanced monitoring and coordination. ( 2007c)
The challenges facing the company in the succeeding years is increased competition especially with the entry of another ground handler in 2005 and another in-flight catering firm in 2006. These came about due to the steps taken by the Singapore authorities to make ground handling competitive to decrease handling rates. However, the company has been engaged in competitive exercises in its effort to achieve the status of becoming a top aviation security firm in Singapore amidst competition coming from domestic and international companies. In preparation, the company is seeking ways to improve cost efficiency together with service quality in order to achieve cost leadership as well as value differentiation. ( 2007c)
c) How well is the company’s present strategy working?
Despite enhanced competitiveness in ground handling and in-flight catering operations, the company experienced growth in its key operations translated into increase in revenue generation. SSS has five key operations, which are 1) handling of unit services, 2) handling of flights; 3) handling of cargo and mail; 4) handling of passengers; and 5) production of meals.
Data on the trends in operations of SSS [See Table 2 in Appendix] show that the company has experienced positive changes in the volume of its operations. In comparing the data for the financial years 2005, 2006 and 2007, the unit of services handled by the company increased in 2006 but decreased in 2007. This may be due to the entry of competitors in 2007. In terms of the flights handled by the company, volume increased from 2005 to 2007 to show that the company still maintained strength in its ground operations. With regard to the tonnage of cargo and mail handled by the company, the volume increased within the three years to indicate that again the company remains a key firm providing security services on the ground level. In terms of the number of passengers handled by the company in these three years, volume increased to indicate that either or both passenger traffic in Changi airport increased or the company has retained its share of passenger-related service units amidst competition. In relation to the meals produced by the company in its in-flight catering service, the data is divided into meals produced per unit and in total. The unit of meals produced by the company slightly increased. This may be due to the increase in passengers handled by the company. The total or gross meals produced by the company also showed an increase in the three years, which can again be attributed to the increase in passenger volume in the Changi airport. (2007a)
Although the information only pertains to the volume of operations of the company, revenue generation by the firm depends upon the volume of operations multiplied by per unit price. This means with an increasing trend in volume, the company also expects to maintain or increase its revenue generation. There was only a slight decrease in the unit of services handled by the company indicating that some clients may have shifted to another service provider or other competing firms absorbed some of its operations. However, the company still experienced growth through its remaining clients and operations as indicated by the increase in volume of operations units.
Based on the company’s profile ( 2007c), the company holds the position of a leader in the integrated operations of airport ground handling and in-flight catering services at Changi Airport. On the average, the company serves 24.5 million passengers, handles 1.4 million tons of freight, and prepares 22.2 million meals in one year. It has also created a good reputation in the market as a leading
d) What are the company’s resource strengths and weaknesses and its external opportunities and threats?
i) Strengths
The company draws its competitive strength from its ability to differentiate its services relative to its competitors. Differentiation exists in the characteristics of the services that the company offers. First is the company offering of full-range aviation security services from security personnel to hardware installations and even to software monitoring so that the company is able to cover all possible sources of threats to the aviation industry. Second is the strong internal structure of the company translated into motivated employees catalyzing customer satisfaction that in turn leads to firm growth. This is achieved through the implementation of the company of the principle of customer satisfaction with its staff as the initial customers of the company. Motivation comes from the training provided by the company to its staff and the value accorded by the company to skills and experience in security. Third is the global capability of the company’s security services. The company’s updated information on new security innovations in logistics and technology means that the company is always on top or at par with its competitors in terms of security service modernization. Its experiences from operating in other countries means that the company can draw information and techniques from the international aviation security market that it can integrate into its skills development and training exercises. This allows the company to gain mastery not only of the changes in security environment in Singapore but also in developments in aviation security environment in international markets. This implies that the company holds an edge over other domestic firms and gains qualities to compete with international security firms.
ii) Weaknesses
The company has some weaknesses in the current state of its operations. One is its legal constraints and obligations because of the characteristics of the organization. SATS, the parent company of SSS originally held monopoly of airport services in Changi airport but due to the policy of the government encouraging competition the airport authority created an alternative company. Due to this change, SSS was left with 48 airline companies as its clients representing control of 80 percent of the market with its other clients consisting of embassies. However, since the company’s staff is comprised of auxiliary police, it came under the regulation of the national police force making the organization subject to accountability rules and constraints in its operations such as meeting a level of performance in firearms handling. Although this benefits the company through the achievement of high levels of training for its security staff, the company also has to meet other restrictive regulations that may hamper its competitive strategies. This becomes a weakness because its competitors in the local and international market do not experience a similar degree of restriction. In instances when the security industry imposes minimal requirements to competitors, the company may have to achieve a higher level of competency. Second is the higher cost that the company incurs because of its status. This is linked to the first weakness. Since the company has to meet regulations and limitations, it also has to incur higher compliance cost. In the case of higher degrees of training, this means that the company has to incur greater cost in training and retraining its staff when other companies do not need to incur this cost to provide the same service.
iii) Opportunities
As a growing company, a number of opportunities are open to the firm such as expansion into other segments of the security market, expansion into other international markets, and engagement in the new technology of biometrics.
Currently, the company offers its services to aviation companies and embassies. However, there are other segments of the market demanding security services such as utilities, shipyards, financial instiutions and commercial buildings. Although these market segments may demand lesser security personnel, the number of these potential clients could increase the client base of the company and contribute to its profit level. Moreover, the engagement of the company in different sectors would allow the firm to minimize the impact of economic downturns due to the difference in impact on the different industries.
Since the company has already proven its ability to operate simultaneously in the domestic market and in other international markets, it can also expand to other international markets and take-over security operations in national airports in other countries such as China and Thailand with large volumes of passenger and cargo passing through their international airports. The company can offer its global capability in aviation security to compete with international security firms vying control over these markets.
Although the company has integrated advanced technology in its security services, biometrics has emerged as an innovation in security services. There are a number of biometric technologies already existing or being developed. These include fingerprint and hand scanning, iris and retina scanning, facial recognition, voice recognition, thermo scanning, signature and keystroke dynamic recognition as well as DNA comparison. The Singaporean government has commenced the integration of biometric technology in its systems. Since the market has not yet been saturated with the technology, SSS can engage into this technology as part of its overall security service or as a manufacturer and supplier through its international contacts.
iv) Threats
The company faces two major threats, which are 1) new or greater regulations and 2) change in the competitive environment allowing the entry of other players in aviation security.
Changes in regulations may either benefit or threaten the company. Regulations that increase the restrictions to the company comprise a threat to the firm because this would mean greater compliance cost for the firm that its competitors do not incur. Additional cost means that a particular amount is diverted from allocations to investment endeavors and potential profit generation.
A change in the competition in the Changi airport would also threaten the company. Currently the company’s operation is concentrated in its handling of majority of the security units in the airport. However, if the airport authority agrees to open operations to new entrants then the company may have to shift the bulk of its operations in other security markets or spread its operations in the international market but the loss of its control over majority of security in Changi airport would adversely affect the company.
e) Are the company’s prices and costs competitive?
Although the SSS website does not offer information on the cost of its service offerings and the price to consumers, its status indicates data relative to its competitors. SSS is a large company based in Singapore, with operations in four international markets. This means that it is in competition with international security firms based mostly in North America and Europe.
There are only a limited number of domestic security services firms with international operations. In terms of cost, the company incurs greater cost relative to most of its domestic competitors because of its engagement in advanced technology, regulation compliance costs, and its international operations. Its operating cost is almost at par with its closest domestic competitors with international operations. Its operating cost is also less or at par with international security companies operating in more markets around the world and engaged in research and development. Its level of operating cost relative to its competitors indicates that SSS is still a growing company with huge potentials for growth and expansion.
Singapore has created a vibrant environment for companies because of its business-friendly tax regulations that apply to both domestic and multinational companies. This allows companies room to establish their edge in terms of price competitiveness. SSS, similar with other firms, has taken advantage of tax cuts to establish an edge by offering its services for a lesser price. However, for a long time, the company has also monopolized security services in Changi airport, which means that it was able to establish a price that the airline companies are willing to accept and the price. With increased competitiveness and competing firms offering their services for lower prices, airport security operations were opened to other bidders. Overall, this means that the price for its services is less than that of its exclusively domestic operating competitors but its price is at par with that of international companies because of its ability to offer a similar value as these companies. Based on its price level, SSS is a Singapore based security company with international operations able to compete with international security services companies from Northern America or Western Europe.
f) Is the company competitively stronger or weaker than key rivals?
SSS holds relative competitive strength and weakness. In the Singaporean security market, the closest competitor of SSS is Commercial and Industrial Security Corporation (CISCO), with its staff members also considered as auxiliary officers similar to SSS so that these companies are both rooted in Singapore’s police force. CISCO also offers services to both public and private sector concentrating on land transport with government departments and private companies as its clients. Its services include secured transport for banks as well as securing premises of government installations and buildings. The strength of SSS relative to CISCO is its international operations because it concentrated on aviation security with great demand in foreign markets. Its relative weakness is the concentration of its operations in one industry alone.
Similarly, SSS also holds relative strengths and weakness when compared to its international competitors. There are a number of international security firms in Singapore usually offering hardware, software or logistics services. This means that SSS holds the strength of mastery of the domestic security environment and the provision of a complete security services from hardware and software to security personnel skilled in the application of security hardware and software. Its access to advanced technology also allows the company to be at par with the technological capability of international competitors. However, its weakness is in research and development leading to the creation of new security technology because of its provision of comprehensive services. International companies concentrating on hardware or software are able to engage in research and development to become providers of this type of security.
Overall, SSS is in an advantageous position that opens the company to opportunities for growth and expansion. Although it has relative strengths and weaknesses, there is room to direct the company towards worthwhile investments that could heighten its strengths and address its weaknesses.
Task 3: What future strategy might your selected company adopt?
Considering the current position of the company, its future strategy would likely to continue its tactic of diversifying its earnings base as well as improving its competitive position in the domestic and international market. With these goals, the company should expect to heighten its ability to meet industry downturns and expand its operations in the international market.
Diversification of earnings base involves the consideration of both horizontal and vertical expansion. Vertical expansion refers to the growth of the company in terms of scale through the acquisition of smaller firms to form part of the company. These small firms are engaged in business activities similar to the acquiring firm or within the same industry as the larger company. Horizontal expansion pertains to the acquisition or merger of a business firm with other firms engaged in different business activities. In this manner, the company grows through the diversification of its business activities enabling the firm to target different market segments by providing a variety of goods and services.
In terms of vertical expansion, the company can expand its operations through the acquisition of interests or ownership in small security service companies with values aligned with the company and potential of enhancing the position of the firm. In doing this, the SSS achieves additional personnel experienced in various areas of security service delivery, building and operating headquarters located in various areas in the country, and market base of the security company. Most small-scale security service companies in Singapore offer the skills of its security personnel to various private firms such as commercial office buildings, retail shops, banks and financial institutions, schools or educational institutions, and personal security to VIPs. SSS has not yet entered these areas of security services.
With the acquisition of small security companies, SSS will be able to expand the organization in terms of human resource skills. The integration of the staff of SSS with the employees of the small firms leads to the sharing of information, experience and skills resulting to the enhancement of the competencies of the company’s employees. Apart from information and skills sharing, the company will also be able to enter other market segments held by CISCO, its closest competitor. This would enhance the competitive position of the company in the Singapore market because of its wider field of security expertise and bigger market base. By reaching this position, the company will be able to gain greater control of the security market in Singapore and become a prime mover in the industry.
Another mode of vertical expansion is the acquisition of interests or ownership of security firms in other countries whether engaged in aviation or other forms of security. Again, the company should select companies in international markets with potential for internationalization by coming under SSS. Through the acquisition of security companies in international markets, SSS is able to enhance the competencies of the members of the organization in terms of information, skills and expertise sharing to enhance the global capabilities of the company. The acquired company will be able to provide SSS with information on the business and competitive environment in the international market together with an established brand equity, which the company can further enhance by aligning with SSS. Doing so would improve the position of SSS among international security companies because of its presence in different international markets.
With regard to horizontal expansion, SSS has the option to engage in other services closely related to its service offers. It has already done this by engaging in in-flight catering services, which is a distinct activity from security but is still related to aviation in general. Other areas of operation that the company can engage into include transportation system for tourists and VIP visitors, arms and weapons development, biochemical research, and management consultancy. Although, these comprise different activities, the company will be able to succeed because these areas of operation involve skills and logistics similar to its security service operations. In addition, these activities are aligned to security services and the company will be able to engage in R&D.
Improving its competitive position involves the consideration of actions that the company can take to assure its position in its Changi airport operations amidst the threat of new entrants. If the company cannot prevent the entry of new players in airport security, the company can do something to secure the company with the change in competitive environment. Quality service at a reasonable price coinciding with the value of its service offering constitutes a competitive edge for the company. It can defend its position by enhancing its service quality. A promising way of doing this is through its engagement in biometrics technology.
Biometrics market is fast becoming internationally competitive. With the interest of the Singaporean government in biometrics technology, the country has become a host for a number of companies developing this technology. In fact, the government has already awarded the Japanese firm NEC Solutions Asia Pacific Pte. Ltd. with the contract for the development of biometrics passport in 2005. The contract is worth million. The German IT company Siemens is also located in Singapore offering services to support the efforts of companies to integrate biometrics technology into their security management systems. The US firm Identix Incorporated, a market leader in biometrics is also active in the Singapore market. However, the biometrics market is still developing in Singapore. In Changi airport, the integration of biometrics in airport security is still underway. ( 2007) This means that SSS can invest in the technology for the Changi airport in order to enhance security for airlines and passengers as well as improve the competitive status of the company despite of the opening of airport operations to new entrants.
Continuing the diversification of earnings base and the enhancement of competitive position of SSS is possible through the high level of competencies that the firm holds enabling the company to have a foundation for solidifying its present operations and resource support for expansion. Through these endeavors, the company is able to grow into an international firm while protecting its market base in the domestic market.
Credit:ivythesis.typepad.com
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