Management Development Institute of Singapore
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Management Development Institute of Singapore Enterprise Resource Planning (ERP) system and Competitive Advantage – A Case Study Date: 21st May 2015 Prepared for: Mr Stanley Tan Prepared by: Igor Mysliwiec G1403967N Diploma in Business Administration (International Business DBID2 1501A) Word Count (excluding cover page, table of content & references): 1524 1 Table of content Contents Executive Summary ................................................................................................................. 3 Introduction .............................................................................................................................. 4 Use of ERP system into Singapore Aviation industry ........................................................... 5 1. The threat of New Entrants .......................................................................................... 6 2. Threat of Substitutes ..................................................................................................... 6 3. Bargaining Power of Customers .................................................................................. 6 4. Threat of Internal Rivalry ............................................................................................ 7 5. Bargaining Power of Suppliers .................................................................................... 7 Recommendation ...................................................................................................................... 8 Conclusion ................................................................................................................................. 9 References ............................................................................................................................... 10 2 Executive Summary In report below I am going to prove that ERP systems work positively for Singapore Airlines’ interest by greatly assisting it with achieving Competitive Advantages. I’m going to shortly describe ERP systems and Michael Porter’s 5 Forces Analysis at first by also to give an example of 5 Forces Analysis conducted on Singapore Airlines. Then I’m going to present short introduction of the Aviation Industry in Singapore and its flag carrier – Singapore International Airlines. Afterwards I will implement few modules of ERP by 5 Forces Analysis on Singapore Airlines in the following order: 1) Threat of New Entrants; 2) Threat of Substitutes; 3) Bargaining Power of Customers; 4) Threat of Internal Rivalry; 5) Bargaining Power of Suppliers. I’m going to use three modules of ERP in my report, as following: finance management, supply-chain management and logistics. I’m going finish my report by summarizing all matters stated in conclusion. 3 Introduction Enterprise Resource Planning is a useful managerial tool which can target the company into the right direction to achieve competitive advantage over its competitors. This particular system consists of many modules, each working for other business division. ERP can be realized through market research, such as Michael Porter’s 5 Forces or SWOT, as well. Every industry uses different ERP modules – the ones suiting its requirements. For my assignment I would like to use Michael Porter’s 5 Forces Analysis to reveal useful Enterprise Resource Planning system modules for Singaporean Aviation Industry and its major company which also classifies as the best airline service in the world. The ERP system is a software used in business management for storing and managing data from business processes, such, as Product Planning, Manufacturing, Marketing and Sales, Inventory Management or Shipping and Payment. Its benefits are among cost cuttings, faster and better decision making or improved workforce productivity. ERP can be divided into three types, depending on the corporation’s size: Industry Specific, Web-based and Small Business ERP. Singapore Airlines’ Resource Planning system will be based on the Industry Specific type of ERP. For the Singapore Airlines’ ERP system I would like to use particular modules: Michael Porter’s 5 Forces Analysis composes of 5 elements: Internal Rivalry which means existing competition to the chosen company, Threat of New Entry (new companies that have a chance to enter the market), Substitutes (products fulfilling the same role as the chosen one) and Bargaining Power of Buyers (level of pressure from the customers) & Suppliers (market of inputs). Michael Porter’s 5 Forces Analysis can be extremely useful in achieving competitive advantage as it deeply penetrates the market revealing both existing and future competition, as well as the problems with suppliers or customers which the company have chance to solve. Below is an example of Porter’s 5 Forces Analysis for Singapore Airlines: 4 Use of ERP system into Singapore Aviation industry Aviation in Singapore is a primary element of Singaporean economy. It includes sixth busiest airport in the world and is an important economical contributor – in 2009 only it contributed S$14.2 billion directly to the Singaporean GDP. Singapore Aviation is concentrated around the Changi Airport and its flag carrier – Singapore Airlines. Singapore Airlines is the biggest and main carrier of Singapore, it has connections with over 60 cities in 30 countries on 6 continents. SA was founded in 1972 and grew to the size of respected travel brand around the world. Its mission “Singapore Airlines is a global company dedicated to providing air transportation services of the highest quality and to maximising returns for the benefit of its shareholders and employees.” is consequently carried out. Since 2010, Singapore Airlines are the second biggest airline brand on the world. The largest ERP systems provider for over 120 airlines is SAP (Systems Applications and Products in Data Processing, Germany) – it covers areas such as finance, supply-chain management and logistics. Singapore Airlines also uses MRO functions (maintenance, repair and operations), as well offered by SAP systems. 5 1. The threat of New Entrants Though the threat of new entrants on the Singaporean airline market is very low, Singapore International Airlines using well – managed supply-chain is growing each year by expanding to new connections in different countries and monopolizing Singaporean market with its cheap subsidiaries – Scoot, SilkAir and TigerAir, all under SA’s management system. Enormous entry capital or the fact that the flag carrier is government-owned make the threat of new entrants even lower as the requirements for entering the market are too high. This is also a reason why Singapore Airlines gain competitive advantage – the monopolization of Singaporean market makes them flag carrier “to and from” the country and the new entry is almost impossible, available only for the biggest airlines of the world. 2. Threat of Substitutes In order to successfully compete with moderate threat of substitutes, which are the low cost carriers or high speed rail services, Singapore Airlines launched two low cost carriers of its own – TigerAir in 2003 and Scoot in 2012. They operate on more than 100 destinations, offering low-cost tickets, discounts on particular travels and decreased prices for hotels, holidays and car rentals. Thanks to proper financial management Singapore Airlines can compete with 60 different airline companies offering flights for every continent. 3. Bargaining Power of Customers The bargaining power of customers is also a moderate threat for the Singapore Airlines, however, the company uses its wide online offer to oppose this threat. Nowadays it’s the customer who decides which airline to choose as he can easily compare prices online between airlines which also offer many loyalty reward programs or promotion and cheaper tickets. All these aspects are also introduced by Singapore Airlines on the international market, however, Singapore Airlines can offer more than its competitors – the highest level of customer service on board – which was many times rewarded by international quality awards. It is also their biggest advantage placing SA on top of global competitive advantages. Its symbol is the “Singapore Girl” which is as well one of arguments for this airline’s quality. 6 4. Threat of Internal Rivalry The threat among existing competition is moderate as there are more than 60 different companies working on the market but only few major, large competitors such as British Airways, Lufthansa, Emirates or Qatar Airways. These companies, however, have the tendency to work most on their national territory creating specific niche markets. To compete with all, Singapore Airlines use logistics and financial modules of ERP systems by offering more flights to countries on other continents than Asia, such as Europe or Northern America. Other aspect is to fight the “price war” on the global field and set promotions to be more competitive. This, along with its high standard service quality, allows Singapore Airlines to achieve competitive advantage. 5. Bargaining Power of Suppliers The strongest threat to the Singapore Airlines is the bargaining power of suppliers. There are only two major global suppliers in the world’s aviation industry: Boeing and Airbus, and SA uses both of them for new planes and spare parts for their existing machines. The second threat are the uncontrollable fuel costs with which no airline company has any advantage. Singapore Airlines try to work with its suppliers by rarely used MRO functions of ERP systems. MRO (maintenance, repair & operations)