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Singapore Airlines Limited: Building a Culture of Service Excellence

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Singapore Airlines Limited: Building a Culture of Service Excellence AHMAD MAHDZAN AYOB SINGAPORE AIRLINES LIMITED: BUILDING A CULTURE OF SERVICE EXCELLENCE INTRODUCTION Business concept innovation (BCI) aims at doing business in ways t at as never been done before. T e goal is to gain competitive advantage in t e marketplace and reap t e benefits of 'first-mover) advantage. T e objective of t is paper to +unpack, t e business model used by Singapore Airlines .imited (SIA), a most successful airline company from an Asian country, w ich as weat ered t e turbulence of t e Asian financial crisis, and came out unscat ed. Hopefully, some useful lessons can be gleaned from t is case study. COMPANY BACKGROUND SIA is one of t e two offshoots of t e Malayan Airways, an airline company formed in 1123 by British interests w en bot Malaya and Singapore were under British rule. 4 en Malaysia was formed in 1153 t e airline became known as Malaysian Airways. In 1155, t e company,s name was changed to Malaysia-Singa ore Airlines (MSA), only to cease operation in 1132 w en bot governments aspired to ave t eir own airlines (Nationmaster, 2005), bearing t eir country,s name.1 T e Malaysian Airlines System (MAS) is t e spin-off on t e Malaysian side w ile SIA goes to Singapore (C an, 2000a). Singapore International Airlines can only operate international flig ts, Singapore being an island city (area 523.5 km2) at t e tip of t e Malaysian peninsula: yet t e company as grown in stature to become one of t e most successful airlines globally. T is is judged from t e various industry awards it as garnered since its inception in 1132. Now, SIA is t e world's second-biggest airline by market capitalization (common stocks valued at USD 5.8 billion) after U.S.,s Sout west Airlines (Morningstar, 2005). Its currents assets are valued at USD 1.2b and current liabilities stands at only USD 2b (Appendix Table A1), w ic gives a current ratio of 2.58, way above t e rule of t umb standard of 2.0. In 2002, SIA sales totaled USD 5,315.5 millions; down from USD 5,133.5 millions of t e previous year (Appendix Table A2). It as a workforce of 21,332 employees drawn from all over t e world. Its major competitors are Cat y Pacific, 1 Singapore left t e Aederation of Malaysia in 1155 to become an independent nation. T is explains t e new name, Malaysia-Singapore Airlines. 1 AHMAD MAHDZAN AYOB Bapan Airlines, and Malaysian Airlines. It also competes against eleven ot er airline companies as listed in .ist A (SIA, 2005)C SIA,s +terrain of combat, (to borrow from Sun Tzu,s Art of War)2 includes East Asia (contributing 28E to sales), Europe (11E), Sout west Pacific (12E), t e Americas, 4est Asia F Africa, and ot er regions (each claiming 3E of sales) (Appendix Table A2). Alt oug 12E of its 2002 sales originated from airline operations, t e company is also involved in airport terminal (2E), engineering (1E) and ot er services (1E). T e four com onents of a business strategy are as depicted in Aig. 1. T ey include t e core strategy, t e strategic resources, customer interface and t e value networ, (Hamel, 2002, p. 33). T e four components are linked by t ree +bridges‘C customer benefits, configuration and company boundaries. In t e following pages, I will attempt to explain ow SIA,s business concept mig t fit into Hamel,s model. Customer Benefits Configuration Co. Boundaries CUSTOMER CORE STRATEIIC VA.UE INTERAACE STRATEIY RESOURCES NET4ORL é ç è EAAICIENCY /UNIJUENESS / AIT / PROAIT BOOSTERS SourceC Iary Hamel. 2002. Fig. 1: Com onents of a Business Conce t 1.0 CORE STRATEGY T e first component of a business concept is t e core strategy (Hamel, 2002, p. 32). Essentially, t e core strategy delineates t e way t e firm as c osen to compete. T e t ree elements t at make up t e core strategy are t e business mission, product/market scope and basis for differentiation. 2 Read more t an 20 years ago, I cannot remember t e secondary source: but it left a lasting impression in my mind. 2 AHMAD MAHDZAN AYOB 1.1 The Business Mission A search of t e literature failed to uneart SIA,s mission statement. Even t e company,s website did not carry a mission statement. Does t is mean t at SIA is more of a doer t an a firm mired in r etoric, w ich seems to be t e preoccupation of 4estern companies? Aor example, t e Mission Statement of Sout west Airlines isC dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.3 It as to be assumed, t erefore, t at SIA,s top management as been able to communicate in ot er ways to its employees about t e company,s mission, and t at a written mission is unnecessary. T ere is no doubt t at SIA,s implicit mission is to meet t e needs of customers beyond t eir dreams! T is is evident from t e accolades and awards t at SIA as received from aviation bodies. By 1131, SIA became t e nint largest airline in t e world, up from t e 53t position prior to its spin-off from MSA, ac ieved due to a continuous average annual growt rate of 25E over its initial seven-year period (Harvard Business Sc ool, 1181, cited in C an, 2000a). T e raison d,etre for SIA was service, and at t e eart of its service reputations is t e 'Singapore Iirl) (C an, 2000a).2 1.1 Product3Mar,et Sco e SIA,s major product is air travel. Since it as no domestic routes to monopolize, SIA ad to target t e global market and compete wit more experienced players. In 1133, SIA set up its subsidiary Singapore Airport Terminal Services .td (SATS) to provide ground services. In 1133, toget er wit British Airways, it introduced t e supersonic Concorde on t e .ondon-Ba rain-Singapore route. T is service ad to be terminated in 1180. SIA,s geograp ical area of operations includes East Asia, Europe and 4est Pacific (Appendix Table A3). 3 Arom company,s websiteC ( ttpC//www.sout west.com/travel_center/customer_service_ commitment. tml) 2 T e creator of +Singapore Iirl, is Ian Batey, aut or of Asian Branding a Great Way to Fly (Prentice Hall / Pearson Education, April 2002). 3 AHMAD MAHDZAN AYOB 1.3 Basis for Differentiation T e airline industry is a service industry. Service is provided by people: ence t e basis for differentiation in t e airline industry is t e way t e company,s employees treat customers. SIA stewardesses are dressed in an elegantly crafted Malay sarong kebaya, designed by famous fas ion ouse, Pierre Balmain (C an, 2002a). Passengers are treated to excellent food, served wit lots of smiles, warm towels, and attention to details. T e airline provides all passengers, regardless of class, wit cocktails, fine wines, and in-flig t movies at no extra charge. In fact, SIA pioneered all t ese 'frills,) w ich were followed by ot er airlines of t e East (MAS for example). Singapore Airlines (SIA) as also introduced t e innovative new Raffles Class SpaceBed. T e ground-breaking new forward facing bed (measuring 38) x 23)) provides first-time luxury and comfort, ensuring t at passengers wake up at t eir destination feeling refreshed and ready to go (Anon, 2005). 1.0 STRATEGIC RESOURCES 1.1 Core Com etencies SIA,s core competencies include t e skills of its top management at planning marketing strategies and t e interpersonal skills of its flig t attendants. Making flig ts as comfortable as possible is w at t ey do best. 1.1 Strategic Assets SIA is now t e world's largest operator of t e Boeing 333 family of aircraft, following t e arrival of a new B333-300 in Singapore on 5 May 2005. T at delivery broug t to 58 t e number of Boeing 333s operated by SIA. Of t ose, 12 are B333- 300s, 31 B333-200s and 15 B333-200s Extended Range. Currently, SIA as on order 11 new B333-300s Extended Range aircraft, w ich will be delivered from late 2005 onwards. 4it t e latest addition, Singapore Airlines now as a total 10 aircraft, wit an average fleet age of 5 years and 2 mont s, maintaining t e Airline's position as an operator of one of t e world's youngest fleet of aircraft (Anon, 2005b). Employees are also SIA,s strategic assets. T ey are selected from t e global labor market, including its pilots. Its flig t attendants come from all countries of t e Asian region w ere its aircraft flies. T ey speak all major 4 AHMAD MAHDZAN AYOB languages of t e Sout /Aar East Asian region P Malay/Indonesian, Mandarin, Bapanese, and Lorean. 1.3 Core Processes Serving customers on t e airplane is SIA,s core process, w ich translate customers‘ payment into value and utility. In-flig t service includes serving customers wit food and drink, providing t em wit information on anyt ing asked, providing customers wit blankets, assisting t em wit t e carry-on luggage, and a ost of ot er assistance.
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