Company strategic analysis on: Singapore airlines

Executive summary:This strategic analysis would help to provide better understanding amongst the major competitors of Singapore Airlines. The strategic marketing report would majorly comprise of how the competitors of Singapore Airlines formulate their strategies.

This report would compare the strategies of both the companies i.e. how the organizational structure of each company, management teams, research directions, investments in new products and/or markets, hr policies, mergers and acquisitions to add new competencies, and there in treats in high growth markets such as China and India, have influenced each company’s strategy

The report also comments upon the company’s strategies which would offer better & more growth opportunities as compared to the other. Significant financial data has been collected in order to support the growth opportunities of the same.In the end, various viewpoints have been gathered to explain what would be the potential problems that might arise with the company having a weaker strategy.

Introduction

Singapore Airlines refers to one of the world’s largest passenger airlines. It refers to an airline which has its subsidiaries spread all over. It is one of the fastest growing aircraft with small capacity requirements. .

Singapore Airline has an approximate 49% holding in Virgin Atlantic & engages itself amongst the low cost carrier sector with its stake in Tiger Airways. Singapore airlines refer to one of the largest airlines in terms of generating revenue passenger kilometers. It refers to an airline ranked second largest airline in terms of carrying passengers. Singapore Airlines have also been ranked second largest in terms of its market capitalization i.e. US $14 billion.

As mentioned above that, Singapore Airlines refers to one of the rapidly growing airlines, therefore the number of competitors have been increasing year by year. the two major competitors to the Singapore Airlines would be:Þ    Qantas Airways

Þ    Malaysian Airways

The two airlines mentioned above are the biggest competitors of Singapore Airlines. There are various strategies which have been used by Malaysian Airlines or Qantas Airlines which makes them to compete with the Singapore Airlines. The strategies, how the organizational structure of each company, management teams, research directions, investments in new products and/or markets, hr policies, mergers and acquisitions to add new competencies, and there in treats in high growth markets such as China and India, have influenced each company’s strategy

Competitors Strategy

The major competitor of Singapore Airline refers to The Qantas Airlines. There are various strategies which have been undertaken by the Qantas Airlines which has led to an increase in the number of clients.

The various competitive strategies which have been undertaken by The Qantas Airlines have also led to a shift of number of clients from Singapore Airlines.Some of the strategies which have been undertaken are in reference to the different types of services being offered by The Qantas Airlines. They are:

Þ    In flight entertainment

Þ    Qantas Main Screen

Þ    In flight internet connectivity

Þ    Mobile Phone Trial

Þ    Nine Qantas In-flight news

These are some of the strategies which have been undertaken by the immediate competitor of The Singapore Airlines. All the above strategies have led to a sustainable competitive advantage to The Qantas Airlines.

The service provided to the travelers travelling by Qantas was one of the finest qualities. The in flight entertainment system was equipped with the Panasonic Avionics System. This type of entertainment system is first launched by The Qantas Airlines. It consist of various features such as touch screen options, expanded entertainment options & other communication features i.e. Wi-Fi, USB connectivity, etc.

The Nine Qantas in flight news refers to a type of a bulletin which helps in providing the travelers with the latest news such as sports, fashion, lifestyle, finance, weather forecasts, etc.  An in flight magazine is also distributed amongst the frequent flyers.  This helps the frequent flyers to post comments, blogs relating to their flying experiences, etc. This helps the flyers to be occupied throughout & enjoy the comfortable journey.

Comparison of the strategies

On the basis of the following factors such as the organizational structure, investment in the new product, management team, HR Policies, mergers & acquisitions both the airlines i.e. Singapore & Qantas could be compared.

Þ    Investments in the new product:

A Qantas high amount of investment is being made to come up with new products & services, technology, etc. In order to provide the Australian customers with a quicker service, check in kiosks was made available in Melbourne, Adelaide, Sydney, Perth & Canberra. The Qantas Airlines were the first to fix up check in kiosks at varied places which would help the travelers to check in for their respective flight.

With the help of kiosks, the customers were able to seek the confirmation of their tickets, select a preferred seat & have a boarding pass. Huge amount of money has been invested by Qantas Airways to build meeting rooms or waiting rooms for the flyers to wait while the flight was ready to take off.

Þ    Management Team:

The management team of Qantas consists of 2300 pilots approximately. The pilots appointed at Qantas are highly trained, motivated & make a dedicated, focus team of professionals.

The management team at Qantas consists of a pilot, first officer & a second officer. About 80% of the pilots are based in Sydney, Pert, Brisbane, and Melbourne. The training to the entire team is being provided at the Sydney training centre.

The cabin crew of the Qantas Airways consists of 4500 flight attendants. It has 700 international customer service managers & supervisors. There are 550 domestic cabin crews on board. The members of the cabin crew are highly trained & are able to communicate in various languages such as French, German, English, Japanese, Korean, Spanish, Italian, Cantonese, etc.

Þ    HR Policies:

The HR Policies being formulated by Qantas in order to focus on certain key areas. They are as under:

Þ    Build a culture & environment which would encourage the employees to take u the challenge & accept new changes.

Þ    To have an appropriate leadership style which would motivate the employees to work

Þ    To possess a team of highly motivated & talented people

Þ    Follow the rule “Unity in diversity”

Þ    To have an adaptable & a flexible workforce

Þ    Continuous business improvement which would in turn lead to satisfaction of the customers

Þ    To manage the workforce planning, productivity & budgets

Þ    Mergers & Acquisitions:

With the emergence of the aviation sector, airlines have been developing cooperative arrangements so as to offer wider scope & highly efficient services. Many airlines get into different types of ventures or acquisitions in order to provide the customers with a desired level of satisfaction.

Qantas also possess partnership with the leading airlines such as British Airways, Air Pacific, American Airlines, Code share airlines, etc. Qantas has partnership with the well known brand i.e. British Airways. They together provide customers with a wide range of fare & routing options. Qantas & British Airways have the ability to coordinate amongst themselves regarding the services, prices being offered to their customers. The two airlines have joined hands & have expanded their routes in various parts of the world such as Bangkok, Kuala Lumpur, Hong Kong, Singapore, etc.

Another venture which took place was between Qantas & the American Airlines. With this type of arrangement, lounge access was being provided to the customers travelling by the same. Qantas also holds 46.23% share in Air Pacific. Apart from British & Pacific airlines, Qantas also has relationship with many other leading airlines in order to provide a wider network & cover all parts of the world.

Sustainable Growth Opportunities:

The Balance Sheet of Qantas Airways & Singapore Airways is as under. By analyzing both the Balance Sheets, we can figure out i.e. which airline has sustainable growth opportunities in the years to come.

On the basis of the Asset Turnover Ratio & Return on Equity, we can see which of the following two companies have a sustainable growth opportunity in the near future.Asset Turnover Ratio = Assets/ Sales

Qantas Airlines’ 2010 (million US Dollars) = 17048.9/ 11793 = 1.4456

Singapore Airlines’ 2010 (million US Dollars) = 19082.3/ 9081.9 = 2.1011

Return on Equity = Net Profit/ Share Holder’s Fund

Qantas Airlines’ 2010 (million US Dollars) = 99.3/5085.6 = .0195

Singapore Airlines’ 2010 (million US Dollars) = 199.8 /9826.6 = .02033

Hence, from the above two ratios it could be analyzed that Singapore Airlines has a better performance as compared to Qantas Airlines. The Return on equity & Asset turnover ratio for Singapore airline is higher as compared to Qantas Airlines. Hence, it could be concluded that Singapore Airlines has a sustainable growth opportunity in the years to come. This shows that Singapore Airline has been using its assets I the most effective & efficient manner.

Problems to the company with weaker strategy:

From the above financials it could be seen that Qantas Airlines refers to a weaker airline in terms of generating revenues. Hence, there would be potential problems which might arise for the airline in the years to come.Executive Summary

In recent years, the personal computer manufacturing company Lenovo has utilized unique competitive strategies to achieve a rapidly increasing share of the computer and notebook market. After acquiring the IBM brand name and laptop division, Lenovo soon became a major player in the corporate market, inheriting along with IBM’s notebook division technology and executive staff a reputation and branding that allow Lenovo a 19% market share in the international corporate notebook computer market.

However, Lenovo is continuing to optimize their strategies for competing in a market dominated by major players Hewlett-Packard and Dell who account for 21% and 54% of the international corporate market, respectively. In the next year, Lenovo will be losing the rights to use of the IBM branding on their Thinkpad notebook series. This poses an interesting strategic problem: how can Lenovo continue to improve their share of the corporate notebook computer market once it has lost the IBM brand name?

In this paper, we attempt to address this issue and analyze Lenovo’s outlook critically, making the following important strategic suggestions:

• Lenovo should concentrate effort on outperforming competition in the high-end market, maintaining the Thinkpad brand identity for quality products

• Lenovo should begin marketing mid-range laptops along with the Thinkpad to corporate clients, becoming a “one-stop shop” for a company’s notebook needs, providing top of the line Thinkpads to executives, and a range of less expensive but similarly high quality products to lower spectrum employees.

• Lenovo should considering spinning off a company to market their high-end Thinkpad line under a brand name that might not raise suspicion about quality.

Introduction

Lenovo Group refers to a Chinese multinational company which majorly deals in computer technology which manufactures, develops & desktops, laptops, notebooks, servers, workstations, IT software’s & some of the related services. Headquartered in Hong Kong, Lenovo is currently operating in Beijing, China, Morrisville, US & Singapore with many centers spread almost all across the globe. Some of the centers where Lenovo is currently are Shanghai, Xiamen, Chengdu in China, Shenzhen, and Yamato in Japan.

Lenovo merged with the PC division of IBM for $1.75 billion, which used to sell the ThinkPad notebooks, in the year 2005. The company refers to one of the largest PC makers all over the world once it acquired the PC segment of IBM. It is the market leader in China & also enjoys its presence all across the globe.

Current Market Situation:

Segment:

The products being offered by Lenovo refers to

Þ    Workstation

Þ    Personal Computer (Desktop)

Þ    Storage Devices

Þ    Servers

Þ    Laptops & notebooks

Þ    IT software’s

Þ    Accessories & upgrades

The number of IT software’s offered by Lenovo are marketed under the name Think Vantage & has been generating about half of the revenues in China & greater Asia/Pacific regions. Lenovo’s major chunk of business comes from selling desktops, laptops & notebooks & the workstations. The highest revenue generating countries refers to Japan, China & US. Most of the desktops & laptops are being sold in the countries mentioned above.

Industry:

Customers:

The major customers of Lenovo could be summarized under the two main heads i.e. corporate & big business houses. The big & medium sized corporate houses are more prone to buy PC for their business purposes. Desktops refer to one of the major products that generates high amount of revenue. The major reason is that the desktops are cheaper as compared to laptops & notebooks available with the company.

There has been a consistent rise in the revenues generated by sale of laptops. Increased portability & high speed of laptops have replaced the old desktop in the corporate market.

Even as performance and price remain priority, additional factors like energy-efficiecy, size, weight, and noise have become increasingly important. The ratio of desktops to laptops evolved from 75/25 in 2004 to 70/30 in 2006 and desktop managers reported in 2006 that their laptop usage plans over the next two years were 1.5 times greater than their desktop usage plans.

Marketing Mix:

4P’s of the Marketing Mix for Lenovo have been discussed as under:

Product

Price

Place

Promotion

Competitors:

Dell is currently the top enterprise desktop and laptop supplier in the world. Dell supplies both desktops and laptops to more than half of North American and European enterprises, doubling its closest competitor in both notebook and desktop PC sales. In North America, Dell is winning 60% of the desktop and 58% of the laptop market. Dell’s strengths lie in its low prices and product support. However, low R&D budget prevents Dell from producing new innovative products.

HP maintained its solid No. 2 desktop supplier status and recently overtook Lenovo for laptops, supplying desktops to 27% and laptops to 21% of North American and  European enterprises. HP has also improved significantly year-over-year, especially across laptops. It gained 6% in the North American enterprise laptop market and 5% in the European enterprise laptop market in the last year. These gains will continue, since HP recently refreshed its entire lineup of Intel-based laptops in 2007 with Intel’s Santa Rosa release. However, HP is behind in product quality and product support, according to surveys of customer satisfaction.

SWOT Analysis of Lenovo

In order to get a better sense for Lenovo’s outlook in terms of the corporate market and the impending loss of the IBM branding, it is helpful to analyze the company’s strengths, weaknesses, opportunities and threats in terms of the problem. These key parameters are summarized here.

Strengths

Lenovo’s major strengths lie in its current brand image and market share. On the international scale, Lenovo ranks third in corporate sales behind Hewlett-Packard and Dell. It shows tremendous capability for improvement, however, due to its clearly superior reputation for high quality, high end products inherited from IBM. In addition, executives maintained from IBM’s notebook division provide the valuable experience that a relatively new foreign player normally would not have in the corporate (especially US) market. However, Lenovo already has a strong base in China, with a 29% share of China’s PC market.

There is limited competition for existing IBM/Lenovo corporate customers, because of existing reputation and connections formed by transferred IBM staff. The historic brand image and continuing innovation in the high-end market makes products like the ThinkPad X300 a “must-have” for a CEO to show off and use. The strength here lies in the capability for creativity in producing a high-end product with all the bells and whistles necessary for a corporate executive. Lenovo provides a highly versatile notebook product line, in addition to its high-end ThinkPad. As a “one-stop shop” company, Lenovo shows promise – its product lines covers mid to high end products, now supporting Linux products. In addition, in-house manufacturing specialization allows for lower marginal costs – this leads to a more competitive position for a price war.Weaknesses

Since Lenovo is a new player in the international stage it has plenty of weaknesses in its outlook. In general, its team has less market knowledge than local experienced players in the US market like HP and Dell. Lenovo has just begun to develop its service team in the US – it still manages to provide top of the line customer service, but the system is not optimized.

Lenovo’s major weakness, however, is in the stigma associated with Chinese products and companies with a reputation for skimping on quality to achieve low costs. A customer in the states is likely to mistrust the Lenovo brand in favor of the more  wellknown and trustworthy, American IBM logo. It is this weakness that Lenovo must overcome in the next year as the IBM branding disappears from its products.

Opportunities

With low marginal costs and a wide product spectrum, Lenovo has the opportunity to become a one-stop powerhouse in the corporate market, providing high-end executive computers with the IBM ThinkPad line, and high-quality, middle-spectrum computers for lower level employees on the corporate ladder. In addition, a developed electronics department allows Lenovo the opportunity for creating synergies between corporate addons like cell phones and Pocket PCs.

Threats

In general, the weakness of the US economy and the dropping value of the dollar might pose a threat to Lenovo’s growth. Rivalry between Lenovo and other companies in the corporate market like HP and Dell already pose a significant challenge, but Apple is showing a growing strength in the corporate market that must be addressed as Lenovo seeks to become the dominant international corporate

Evaluation of the market theories

Marketing

There are two main focuses for marketing to the corporate market, both seeking to address the major concerns of corporations in computer purchases: functionality and need for service. These are addressed through the relationship model and transaction model for marketing. The relationship model involves retaining customers with continuous innovative products and satisfying customer service – by maintaining a solid customer base and providing them with consistent quality and support, Lenovo will build a reputation that will earn it more customers. IBM consistently did this in the past, so Lenovo’s first concern is maintaining the same standard of quality, innovation and service that IBM provided.

The transaction model involves making new business deals by spreading to new potential markets. In this sense, Lenovo uses China as its base for expansion, capitalizing on the low cost of manufacturing as well as the fast-growing market which allows the company to create enough revenue to support development in markets around the world. While companies such as Dell and Hewlett-Packard are trying to penetrate the Chinese market, Lenovo is trying to break into the international market out of an established base in the wide Chinese market.

Management

Lenovo’s major move to provide proper organized and experienced involved hiring a large number of IBM’s former notebook executives in order to transfer the culture and structure of IBM in their company. Chairman Liu Chuanzhi is known for having a thorough approach to decision making. His management team studies other leading  firms and reads foreign management journals. There is a strong commitment to learning and copying successful techniques within the company that should lead to a versatile company in future climates.

IBM Branding

Lenovo has made full use of the IBM name, barely associating themselves with the IBM product until very recently. This may have set them up for failure once their rights to the IBM title expire at the end of this year and they lose their brand recognition, but while it was used, the IBM name helped Lenovo maintain its solid base with customers in the corporate market. Recently, Lenovo has emphasized the brands “ThinkPad” and “IdeaPad,” establishing these as the definition in high-end products, separating them  from the IBM name as much as possible. Once Lenovo can no longer brand their product with the IBM name, they may depend instead on recognition of the ThinkPad and IdeaPad.

Customer Awareness

Lenovo makes an effort to make sure that the Lenovo brand is well known and trusted as it continues to grow and produce computers in the international market on their own name. Co-branding, where two companies work together to create marketing synergy, can be used to great effect here – Lenovo’s sponsorship of the Winter Olympics in Turin and the Summer Olympics in Beijing have served to continue to establish the Lenovo name as one that is trusted in general, just as the IBM name was.Growth opportunities

Recommendations

In order to help maintain the positive brand identity of Lenovo’s, we therefore suggest that Lenovo not only begin to provide a wide spectrum of qualities of product but also that they form two separate companies for the marketing of these different products. The main focus of this diversification will be to attack the mid-spectrum corporate market and provide a wider spectrum of solutions for corporate customers, making a direct play for the products that have made Dell dominant in the market. It is likely, however, that an association of lower-quality Lenovo products with ThinkPads will diminish the ThinkPad reputation and lose customers in the long run. In order to attack the Dell market safely, without diminishing existing profits in the high-end corporate market, the ThinkPad should be marketed through a spin-off company centered in Silicon Valley – the reputation of such a company centered on marketing the ThinkPad would hold up much better than the current apparent strategy of marketing both Lenovo and ThinkPad products under the same brand after the loss of the IBM brand name.

We also concluded from our research that the American corporate market is a slow growing market to focus on. While we chose the corporate market as the focus of our project because of IBM’s reputation for providing high quality notebooks for corporate executives, a much more rapidly developing and high-potential market is the Asian consumer market. Lenovo already has a significant base in the Chinese consumer market, but Apple, Dell and HP are all moving into this and other Asian markets rapidly. Recently, Lenovo stole several of Dell’s Asia executives to prevent competition for the market, and the introduction of Dell’s IdeaPad system, a high quality ThinkPad like notebook that rivals Apple for multimedia and personal uses seems to be Lenovo’s strategy for the consumer market.

Lenovo brands new IdeaPads and ThinkPads with neither the IBM nor the Lenovo logos, though new users have already complained that the IBM logo is conspicuous in its absence on these new systems. In the corporate market, Lenovo therefore should focus on attacking Dell’s main source of corporate income by providing a more desirable mid-spectrum product under the Lenovo branding, and maintain its high quality executive reputation by continuing to provide the most features under a ThinkPad branding kept separate from the Lenovo image. While the corporate market in America may revitalize with the end of the current recession, Lenovo should also focus on expanding in the Asian consumer market, which seems most ripe currently for notebook sales.

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