Harvard Case - Scoot: Singapore Airlines' Low-Cost Carrier Strategy
"Scoot: Singapore Airlines' Low-Cost Carrier Strategy" Harvard business case study is written by Glenn Carroll, Jesper Sorensen, Debra Schifrin. It deals with the challenges in the field of Strategy. The case study is 30 page(s) long and it was first published on : Feb 28, 2020
At Fern Fort University, we recommend that Scoot continue its growth strategy by leveraging its core competencies in operational efficiency, technology and analytics, and brand management, while exploring new markets and product development opportunities. This strategy should be underpinned by a strong focus on digital transformation, sustainable practices, and corporate social responsibility.
2. Background
This case study examines Scoot, a low-cost carrier (LCC) launched by Singapore Airlines (SIA) in 2012. SIA aimed to capitalize on the growing LCC market and diversify its portfolio, offering a budget-friendly alternative to its full-service operations. Scoot's business model focused on cost leadership through operational efficiency, technology utilization, and strategic partnerships. The case study highlights Scoot's initial success, expansion into new markets, and challenges in maintaining profitability amidst competition.
The main protagonists are:
- Singapore Airlines (SIA): The parent company of Scoot, with a strong reputation for quality and service.
- Scoot: The low-cost carrier subsidiary, aiming to attract price-sensitive travelers.
- Competition: Other LCCs in the region, such as AirAsia and Jetstar, posing a significant threat.
3. Analysis of the Case Study
Industry Analysis:
- Porter's Five Forces:
- Threat of New Entrants: High, due to low barriers to entry in the LCC market.
- Bargaining Power of Suppliers: Moderate, with airlines relying on aircraft manufacturers and fuel suppliers.
- Bargaining Power of Buyers: High, as passengers have multiple LCC options.
- Threat of Substitutes: High, with alternative modes of transportation like trains and buses.
- Competitive Rivalry: Intense, with numerous LCCs competing on price and service.
SWOT Analysis:
Strengths:
- Strong Brand Association: Leveraging SIA's reputation for reliability and safety.
- Operational Efficiency: Focus on cost optimization and streamlined operations.
- Technology and Analytics: Utilizing data to optimize pricing, routes, and customer experience.
- Strategic Partnerships: Collaborating with other airlines and travel companies.
Weaknesses:
- Limited Network: Compared to competitors, Scoot's route network is relatively smaller.
- Price Sensitivity: Operating in a highly competitive price-sensitive market.
- Customer Service: Balancing cost efficiency with customer expectations.
- Sustainability Concerns: Facing pressure to adopt sustainable practices.
Opportunities:
- Emerging Markets: Expanding into new markets with high growth potential.
- Product Development: Introducing new services and product offerings to differentiate.
- Digital Transformation: Leveraging technology to enhance customer experience and efficiency.
- Strategic Alliances: Forming partnerships to expand reach and offer bundled services.
Threats:
- Intense Competition: Facing aggressive competition from established LCCs.
- Economic Fluctuations: Vulnerability to economic downturns and fuel price volatility.
- Regulatory Changes: Potential changes in aviation regulations impacting operations.
- Environmental Concerns: Growing pressure to reduce carbon emissions.
Value Chain Analysis:
Scoot's value chain focuses on cost optimization throughout the process, from procurement and manufacturing to marketing and distribution. The company leverages technology and analytics to optimize operations and customer service.
Business Model Innovation:
Scoot's business model innovation lies in its low-cost structure, flexible pricing strategies, and digital-first approach. The company utilizes technology to automate processes, streamline operations, and engage with customers.
4. Recommendations
- Market Expansion: Focus on expanding into emerging markets with high growth potential, particularly in Southeast Asia and the Pacific. This can be achieved through strategic alliances with local airlines or through organic expansion.
- Product Development: Introduce new product offerings to differentiate from competitors. This could include premium economy seats, enhanced in-flight entertainment, and personalized travel packages.
- Digital Transformation: Invest heavily in digital transformation to enhance customer experience, optimize operations, and gain a competitive advantage. This includes developing a robust mobile app, implementing personalized marketing strategies, and utilizing AI and machine learning for data-driven decision making.
- Sustainable Practices: Embrace environmental sustainability by implementing fuel-efficient practices, reducing waste, and offsetting carbon emissions. This will enhance brand image and attract environmentally conscious travelers.
- Corporate Social Responsibility: Develop a strong corporate social responsibility program to engage with local communities and support sustainable development initiatives. This will build goodwill and improve brand perception.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies: Leveraging Scoot's existing strengths in operational efficiency, technology and analytics, and brand management.
- External Customers: Meeting the needs of price-sensitive travelers while offering a differentiated experience.
- Competitors: Differentiating Scoot from competitors through product development, digital innovation, and sustainable practices.
- Attractiveness: Expanding into high-growth markets, leveraging technology for cost optimization, and enhancing customer experience to drive profitability.
6. Conclusion
Scoot has the potential to become a leading LCC in the Asia-Pacific region by embracing a growth strategy focused on market expansion, product development, digital transformation, sustainability, and corporate social responsibility. By leveraging its core competencies and adapting to the evolving industry landscape, Scoot can achieve sustainable growth and profitability.
7. Discussion
Alternatives not selected:
- Mergers and Acquisitions: While M&A could be considered, it carries significant risks and may not be the most efficient way to expand.
- Cost Cutting: Focusing solely on cost cutting could damage brand perception and customer loyalty.
Risks and Key Assumptions:
- Economic Fluctuations: The success of the strategy depends on a stable economic environment.
- Competition: The competitive landscape could change rapidly, requiring constant adaptation.
- Technological Advancements: The rapid evolution of technology requires continuous investment and innovation.
8. Next Steps
- Develop a detailed strategic plan: Outline specific market expansion targets, product development initiatives, and digital transformation strategies.
- Invest in technology and analytics: Build a robust IT infrastructure and data analytics capabilities.
- Develop a sustainable practices roadmap: Implement fuel-efficient technologies and reduce environmental impact.
- Engage in corporate social responsibility initiatives: Partner with local communities and support sustainable development.
- Monitor performance and adapt: Continuously evaluate the effectiveness of the strategy and make adjustments as needed.
By taking these steps, Scoot can navigate the competitive LCC market, achieve sustainable growth, and solidify its position as a leading player in the Asia-Pacific region.
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Case Description
In December 2019, Scoot, the low-cost carrier (LCC) launched by Singapore Airlines Limited in 2011, had successfully established itself in the Asian market, having flown over 65 million passengers to 68 destinations with a fleet of 48 aircraft. Scoot accounted for 14 percent of seat capacity in Singapore, and 43 percent of LCC capacity out of the country. In 2016, SIA fully acquired and integrated the local LCC Tigerair into Scoot. Scoot's growth, along with the integration of Tigerair, enabled SIA to compete for price-sensitive leisure travelers on short- and medium-haul routes, particularly within Asia, and premium passengers on medium- and long-haul routes. Scoot had been essential to building network connectivity within Asia and allowing SIA to compete effectively with competitors entering the market. Reflecting on Scoot's evolution from 2011 to 2019, Goh Choon Phong, CEO of Singapore Airlines Limited felt that the SIA Group had succeeded in fulfilling its strategic intent of being invested and a market leader in both the full-service and low-cost markets. He contemplated the opportunities and challenges ahead for SIA. Because Scoot operated many places where the full-service airline did not fly, Goh thought that SIA could gain tremendously by making connections between flights by Singapore Airlines, Scoot, and SilkAir-the airline's short-to-medium haul premium subsidiary-as seamless as possible. But there were challenges as well, since Scoot provided different service levels and had been established and run with a high level of autonomy. Goh explained, "There are different expectations between the full service and the LCC if there are any delays. But when you are connecting the two of them, how do you manage the expectations? These are all things that we are still learning. But we are determined, and we think it can be resolved. We are just right at the front of the learning curve."
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