Scoot Tigerair Pte Corporation
Scoot Tigerair Pte Corporation has been in service for the last four years. The airline is a low-cost affiliate of Singapore Airlines and its main destinations are China and India. Passenger prefers Scoot over other Singapore airlines because of its affordability, protection, and comfort. In 2015, Tigerair merged with Scoot, which was the birth of Scoot Tigerair Pte, and the number of destinations for the organization has since risen to 60 with a fleet capacity of 38. Factors such as aggressive marketing and advertisement, good leadership and its ability to meet the tastes and preferences of the consumers have been the reason behind the firm's increased revenues in the past few years. The support that Scoot receives from Budget Aviation Holdings (parent company) has also given it sustainability in the market. The company has its headquarters in Singapore Changi Airport.
This paper provides an assessment of the internal and external analysis of the Scoot Airways. Strategic options and recommended strategies for the airline will also be addressed.
Body
External analysis
Scoot has been in the airline market for the only four years, but its success rate remains impressive. The firm's stability has been attributed to factors such as its aggressive marketing, favorable political and legal environment in Singapore and its low-cost strategy. In this section, PESTLE analysis will be essential in the external analysis of the rapid growth of the Scoot Airways.
Political factors
Political factors have a direct impact on the performance of an organization (Tracy 2015, p.53). The airline industry operates under strict regulations and failure by an organization to abide by the legislations set by a country may lead to the withdrawal of their licenses of operations. Additionally, political class may advocate for strict visa policies and tight border controls with the aim of combating terrorists' activities, and this may have an adverse impact on the airline industry. Political instability and high tariffs and discriminatory taxes may also affect the performance of the industry. Singapore enjoys low political risks in the region, and this has provided Scoot an opportunity to establish, increase its consumer base and build on its brand. This implies that political factors are vital towards the sustainability of the firm.
Economic factors
The success of the airline industry is depended on the economic environment. Scoot Airways has in the past five years been a major beneficiary of the economic environment in Asia. The emerging Asian markets, for instance, have expanded the company's consumer base, and this has in return increased its revenues. The economic instability experienced in the region led to an increase in the demand for Low-Cost Carriers by 5.7%. Scoot, thus, took advantage of the situations, increased its fleet size and the number of destinations in the Asian markets (Houston 2017, Web). Singapore lies in a strategic economic position, and this has made it easier for the airline to expand into its markets. The country has also, in the past five years, enjoyed economic stability due to increased Foreign Direct Investment and revenue generation. Apparently, this has significantly contributed to the sustainability enjoyed by the Scoot Airways.
Social factors
Social factors come in the form of buyers will in purchasing tickets, the lifestyle of the consumers and cultures and this tend to affect the productivity of an airline industry. The popularity of traveling by air has increased tremendously across the globe, thus an increase in sales for companies such as Scoot. The population of Singapore has been on the rise over the years, 6.8% of whom prefer low-cost airlines. An increase in population, coupled with the strengthened popularity of LCC, is expected to continue leading to enhanced performance and productivity of the Scoot Airways in the future.
Technological factors
Aggressive competition exists in the airline industry, and this calls for organizations to come up with innovative strategies to remain afloat in the market (Narayana, Appannaiah, and Sathyaprasad 2010, p.76). Companies such as Scoot have been on the frontline in integrating technology into their systems with the aim of boosting their performance. Scoot's Consumers can now book their tickets via the online platform, a move that has helped in bolstering the company's services. Internet booking in Asia rose to 36% in the year ending 2016 while that in Europe improved to 67% in the same year. The company also has a web page that also serves as its advertisement platform. Consumers can now access Scoot's online platform for information on the services as well as offers available. Technological advancement has been a key factor in the enhancement of the productivity of the Scoot Company.
Environmental concerns
Environmental factors are instrumental in the determination of the success of companies operating in the airline industry. Tourism, around the world, is affected by weather and seasons, among many other factors. Scoot Airways takes advantage of these seasons to attract tourists to and from Singapore to try their low-cost brand. In so doing, the firm has enjoyed an increase in sales, especially from destinations in Asia and parts of Europe. The airline also adheres to the set carbon emission policies and at no time has it found itself on the wrong side of the law. Environmental factor, however, is a weak contributor to the airline's growth and stability.
Legal factors
Aviation is one of the most regulated sectors with the primary aim being the provision of safety of the passengers. Law targeting the airline industry varies from one country to the other. Some of those rules and regulations include thus curbing carbon emission, ban on the entrance in the planes with specified gadgets and airspace usage. In Singapore, government legislations barring unfair competition from the new entrants in the market has been pivotal in the strengthening of Scoot's performance. China Aviation Regulator, one of the company's destinations has also, in recent past laws that strengthen low-cost carriers and private airlines and this is good news to Scoot Airways. The legal factors are attractive to the operational efficiency of the company.
Internal analysis of the Scoot Airways
The company has enjoyed tremendous growth in the past five years, and this is expected to improve in the future. There are various internal factors that have been instrumental towards the company's enhanced productivity. Good leadership and a collaborative organizational structure are categorized as one of these aspects. The firm is headed by a visionary leader Lee Lik who has been a pivotal factor in ensuring that Scoot aligns to its set goals and objectives and that it enjoys a competitive advantage in the market. Under his leadership, workplace relationship has improved significantly, thus bolstering the productivity of the employees. The Human Resource department hires skilled and experienced employees that in return bring a new level of professionalism within the company. An open suggestion policy system within the company provides an opportunity for all the employees to contribute innovative ideas on measures that the firm can embrace in enhancing its productivity. By embracing such a platform, Scoot has managed to penetrate the airline market that most start-up companies find challenging (Huang, Dyerson, Wu and Harindranath 2015, pp.45-47).
When the company was launched, it only had six airplanes, but the fleet size has since grown to 38 with more than 60 destinations. This rapid growth has been attributed to measures such as merging and partnership with organizations such as Tigerair Pte as well as the support received from the parent company Budget Aviation Holdings. All the workers of Scoot are urged to ensure that they maintain a good relationship with the customers, and this has been vital in enhancing the firm's demand and building on its brand and reputation. Finally, the incorporation of advanced technological systems as part of the organizational operations has played a huge role in bolstering the company's quest in delivering services that meet consumer tastes and preferences (Singapore Business Review 2017, Web). In conclusion, based on this information, it is clear that internal factors have also been critical to the growth experienced by the Scoot Airways in the past five years.
SWOT Analysis (Scoot 2017, Web)
Strength
- A strong connection with its parent company in Singapore
- Collaborations with Tigerair, thus leading to its expansion
- Aggressive marketing and advertisement-reliance on advanced technology
Weaknesses
- Low fleet size thus affecting its competitiveness
- There are restrictions on access to some of its routes
- Challenges of a less established brand
Opportunities
- Increased consumer demand on low-cost carriers
- Construction of the fourth terminal at Changi Airport
- Expansion in the Asian market
Threats
- Fluctuation in fuel prices
- Increasing operational costs and location drawbacks
Strategic options
Diversification and differentiation
One of the strategic options of the firm entails diversification of its production process with the aim of increasing its sales and profit maximization (Sharp and Dawes 2001, pp.738-739). The airline, for instance, seeks to grow ultra-long-haul routes into new and existing targeted destinations. Consumers will also enjoy value-added services such as online booking and enhanced security towards heir checked-in luggage. According to the firm's CEO, this strategy aims at attracting more consumers to the enterprise, thus bolstering its sales. Pilots and cabin crew will also have to be trained for safe flight operations on those long routes (Skift 2017, Web). The move is also focused on ensuring that Scoot expands to the international markets, thus gaining a competitive edge over the rivals in the market while at the same time improve its returns. As a push to ensuring that this strategy is a success, the company has placed an order for 67 A350-900s that will ply the long routes.
Cost leadership
Cost leadership is vital in yielding an organization's competitiveness over its rivals in the market. Some of the measures that the company needs to put in place include maintenance of low-cost airline fares compared to its rivals at all times (Johnson, Whittington, and Scholes 2011, p.47). This will be instrumental in attracting more consumers to the brand. Low-Cost Carriers are dependent on cheap fares and by Scoot ensuring that airline fares are affordable and that it embraces a seasonal pricing strategy, it will capture a large market share and have its profits improve significantly (Gudmundsson 2015, pp.34-36). Another aspect of cost leadership that the firm can embrace is the outsourcing of its operations such as repairs and maintenance as well as logistics. In so doing, this will help in addressing issues related to an increase in the airline's costs of production.
Recommended strategy
The most appropriate business strategy for the Scoot Airways will be cost leadership. One of the primary goals of the firm is to increase its productivity while cutting down on its costs. The company can attain this goal by embracing cost leadership as one of its primary strategies. Setting low ticket prices for all the company's flights as compared to those of its rivals in the market, for instance, will attract more consumers aboard. Additionally, a seasonal pricing strategy will bolster the firm's customer-base. Having maintained a reputation for passenger safety plus its affordable prices, the company will witness a significant enhancement in revenue generation as well as its profitability levels. Other than the implementation of low airline fares, it will also be vital for the company to outsource most of its operations such as repairs and procurements with the aim of cutting down on its costs of production. Apparently, delivery of airplanes and parts required for the maintenance of these planes will be improved. The company will also reduce expenses incurred in hiring employees to carry out repairs and supplies. A combination of cheap fares and outsourcing will contribute to an enhancement in Scoot's market share and a boost in its profitability.
Conclusion
Scoot Airways has enjoyed growth and sustainability in the past five years, and this has been attributed to both external and internal factors. Political and economic stability enjoyed in Singapore has played a significant role in the firm's market sustainability. Additionally, Scoot has embraced advanced technology in most of its operations, including online booking and internet marketing. Merging with Tigerair Pte has also helped in boosting its financial growth and performance. It should, however, be noted that the company also faces threats of fluctuation in fuel prices and restrictions on some access routes. Strategies such as cost leadership and differentiation can help increase the firm's success rate.
Bibliography
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