Strategy and Organisation at Singapore Airlines: Achieving Sustainable Advantage Through Dual Strategy
Singapore Airlines has consistently outperformed its competitors throughout its four-decade-long history, in the context of an unforgiving industry environment. We examine how Singapore Airlines has achieved its outstanding performance and sustained its c
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Abstract Singapore Airlines has consistently outperformed its competitors throughout its four-decade-long history, in the context of an unforgiving industry environment. We examine how Singapore Airlines has achieved its outstanding performance and sustained its competitive advantage, through effectively implementing a dual strategy: differentiation through service excellence and innovation, together with simultaneous cost leadership in its peer group. We examine the organisational elements that have allowed the company to do so, illustrate its strategic alignment using a vertical alignment framework and conclude by highlighting the significant challenges ahead. Keywords Sustainable advantage
Strategic alignment Dual strategy
This chapter is based on Heracleous and Wirtz 2009, Strategy and organisation at Singapore Airlines, Journal of Air Transport Management, 15:274–279. Reprinted with permission. L. Heracleous (&) Warwick Business School, University of Warwick, Coventry, CV4 7AL, UK e-mail: [email protected] J. Wirtz NUS Business School, National University of Singapore, 1 Business Link, Singapore, Singapore e-mail: [email protected]
O. Inderwildi and Sir David King (eds.), Energy, Transport, & the Environment, DOI: 10.1007/978-1-4471-2717-8_26, Springer-Verlag London 2012
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1 Strategy and Organisation at Singapore Airlines: Creating a Global Champion The airline industry has been plagued by several factors such as overcapacity, commoditization of offerings, cutthroat rivalry exacerbated by the entry of low cost carriers, and intermittent periods of disastrous under-performance [1, pp. 89–100, 4]. Several macro-level socio-economic factors such as rising oil prices, the SARS crisis, frequent concerns about the eruption of bird flu, the Asian tsunami and rising terrorism concerns have further impacted profitability adversely. According to IATA, the global aviation industry suffered $31.7bn cumulative losses during the period 2001–2010.1 The outlook for the industry onwards remains bleak; not surprisingly, it is regularly rated as one of the worst performing industries in the Fortune Global 500 rankings. In this challenging industry environment, Singapore Airlines has consistently outperformed its competitors. It has never posted a loss on an annual basis, has achieved substantial and superior returns compared to its industry and has received hundreds of industry awards for its service quality. We suggest that SIA has achieved this outstanding performance by implementing a dual strategy: differentiation through service excellence and innovation, together with simultaneous cost leadership in its peer group (Heracleous and Wirtz 2010).2 Such a strategy has been deemed unachievable by Michael Porter, who held that differentiation and cost leadership must be mutually exclusive since they require different kinds of investments across the value chain [6]. We examine the elements of this dual strategy, outline SIA’s strategic alignment using a vertical alignment fr
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