Unit 5 sm

Strategy Implementation
UNIT V NMBA 041
DR. ZIAUL HASSAN BAKHSHI

Strategy Implementation
• Good strategic planning is not enough
• Process by which strategies are put into action
• Process details are unique to each
organization and each strategy
• Sub-strategies, programs, action plans,
policies, procedures, resource allocations,
budgets, authority/responsibility delegation,
teams and task forces, reward and control
systems, and individual assignments

3
Implementing Strategy Through Organizational
Structure, Control, and Culture
• Organizational structure
– Assigns employees to specific value creation tasks
and roles and specifies how those are linked to
increase efficiency, quality, innovation, and
responsiveness to customers
– To coordinate and integrate the efforts of all
employees

4
Implementing Strategy Through Organizational
Structure, Control, and Culture (cont’d)
• Control system
– A set of incentives to motivate employees to increase
efficiency, quality, innovation, and responsiveness to
customers
– Provides feedback on performance so corrective action can
be taken
• Organizational culture
– The collection of values, norms, beliefs, and attitudes
shared within an organizations and that control
interactions within and outside the organization

Keys to Strategy Implementation
• Resources and competencies
• Functional area sub-strategies
• Specific decisions and actions

Strategy Implementation Actions (I)
• Overall strategy broken down into
manageable parts
• Scope of each part defined in detail
• Goals and deadlines set for accomplishment
• Appropriate resources allocated

Strategy Implementation Actions (II)
• Right numbers and types of people assigned
• Policies and procedures to guide their actions
• One person assigned overall responsibility for
each part
• Progress measured and tracked
• Changes and adjustments when appropriate

Examples of Strategy Implementation Actions (I)
• Marketing campaigns – new, refocus, expand or
contract, discontinue, different media, test pilots
• Facilities – new, expand, repurpose, close
• Products/services – new (create, develop, invent),
redesign, add new features, discontinue
• Product prices – raise, lower, bundle or unbundle
products

Examples of Strategy Implementation Actions
(II)
• Operating processes – reengineer, tasks (new,
reorder, combine, separate, perform
differently or less expensively)
• Departments, offices, teams – new, refocus,
discontinue, expand, split up
• Employees – new, transfer, retrain or develop,
lay off
• New systems for monitoring and measuring
operating performance

Resources and Competencies
• Strategy implementation depends on resources and
competencies possessed by the firm
• These include:
– Money in certain amounts
– Physical space of certain dimensions
– Particular types of equipment
– Specified numbers of people with …
– Certain skills, capabilities, and competencies
– Control and reporting systems
– Attitude, intuition, and imagination

Resources and Competencies:
Systems
• Collections of policies, procedures, and protocols,
backed by EDP and communications equipment,
and people who work with them
• Purpose is to simplify and regularize the
performance of routine, high-volume tasks
• Producing results that are as uniform and
predictable as possible
• Modern business organizations depend on them

Organizational Structure
•Organizational design
– Selecting the structure and control
systems that are most strategically
effective for pursuing sustainable
competitive advantage.
•The role of structure and control
– To coordinate strategy implementation.
– To motivate and provide incentives for superior
performance.

Examples of Organizational Systems
• Accounting and budgeting system
• Management information system
• Manufacturing control system
• Compensation and reward system
• Planning system

Human Resources
• People possess competencies and carry out
details of strategic plans
• Personnel costs are high proportion of operating
budget in health care organizations
• Ensure enough people in the right places with the
right competencies
• Balance operational and strategic duties
• Think of strategic human resource management

Organizational Structure
• Taken for granted and assumed immutable
• Formal framework of departments, units, and
groups into which people and the activities
they perform are organized
• Some structures are better suited to certain
strategies than other structures
• A carefully chosen structure can give an
organization a sustainable competitive
advantage

17
• Structure Follows Strategy:
– Changes in corporate strategy lead to
changes in organizational structure

18
• Structure Follows Strategy:
• New strategy is created
• New administrative problems emerge
• Economic performance declines
• New appropriate structure is invented
• Profit returns to its previous levels

19
• Stages of corporate development
• Simple Structure
• Functional Structure
• Divisional Structure
• Beyond SBU’s

20
• Simple Structure:
– Stage I:
• Entrepreneur
– Decision making tightly controlled
– Little formal structure
– Planning short range/reactive
– Flexible and dynamic

21
• Functional Structure:
– Stage II:
• Management team
• Functional specialization
• Delegation decision making
• Concentration/specialization in industry

22
• Divisional Structure:
– Stage III:
• Diverse product lines
• Decentralized decision making
• SBU’s
• Almost unlimited resources

23
• Beyond SBU’s:
– Stage IV:
• Increasing environmental uncertainty
• Technological advances
• Size & scope of worldwide businesses
• Multi-industry competitive strategy
• Better educated personnel

Matrix Structure
 Two-boss employee

27
Network Structure
Packagers
Designers Suppliers
Distributors
Corporate
Headquarters
(Broker)
Promotion/
Advertising
Agencies
Manufacturers

A good HR strategy:
• satisfy business needs
• is founded on detailed analysis
• can be turned into actionable programmes
• is coherent and integrated
• takes account of the needs of line managers,
employees and other stakeholders

Specific HR strategies
• HC management
• High-performance management
• Corporate social responsibility
• Organization development
• Engagement
• Knowledge management
• Resourcing
• Talent management
• Learning and development
• Rewarding
• Employee relations

HUMAN RESOURCE MANAGEMENT
According to American Management Association:
Human Resource Management is that field of
management which has to do with planning,
organizing and controlling various operative
functions of procuring, developing, maintaining
and utilizing a work force in order that
(a) the objectives for which the company is
established are attained as efficiently and
economically as possible;
(b) the objectives of all levels of personnel are
served to the highest degree; and
(c) the objectives of the community are duly
considered and served.”

OBJECTIVES OF PM/HRM
 It is concerned with the optimum utilization of
the human resources within and organization.
 It is concerned with the creation of conditions
in which each employee is encouraged to
make his best possible contribution to the
effective working of the undertaking.
 It is also concerned with the development of
the sense of mutual respect and trust between
management and workers through sound
relations.
 It endeavors to increase the productive
efficiency to the workers through training,
guidance and counseling and
 It tries to raise the morale of the employee.
PERSONAL

• To recognize the role of HRM in bringing
about organizational effectiveness.
• HRM is not an end itself. It is only a
means to assist the organization with its
primary objectives.
• Simply stated, the department exist to
serve the rest of the organization.
ORGANIZATIONAL

• To be ethically and socially responsible to the needs
and challenges of the society while minimizing the
negative impact of such demands upon the
organization.
• The failure of organizations to use their resources
for the society’s benefit in ethical way may lead to
restrictions.
• For example, the society may limit HR decisions
through laws that enforce reservation in hiring and
laws that address discrimination, safety or other
such areas of social concern.
SOCIETAL

HR is multidisciplinary:
• It applies the disciplines of Economics (wages,
markets, resources), Psychology (motivation,
satisfaction), Sociology (organization structure,
culture) and Law (Maternity Benefit Act, Min.
Wage Act, Factories Act, IRO, etc.).
• HR is embedded within the work of all
managers, and most individual contributors due
to the need of managing people (subordinates,
peers and superiors) as well as teams to get
things done.
UNIQUE ABOUT HRM

Organizational Culture:
Mission and Vision,
Informal Procedures
Organizational Strategies
and Structure: Goals,
Organizational chart
Current Context
(Political Climate, Gov’t
Laws, Economy, etc.)
Review & Evaluation of Human
Resource Activities
Performance
Management
Plan for Future
Human Resource
Needs
Recruitment and
Selection
Training and
Development
Salary, Benefits,
Bonus System
Human Resource Functions
Policies
HRM MODEL

• Human Resource Planning
• Human Resource Policies
• Salary and Benefit Administration
• Human Rights and Labour Laws
• Recruitment, Selection and Orientation
• Performance Management
• Training and Staff Development
• Communications and Counselling
KEY ACTIVITIES OF HUMAN RESOURCES

• The responsibility for human resource
management activities rest with each MANAGER.
• If a MANAGER does not accept this responsibility
then HR activities will only partially get done.
• HR department provides strategies, systems, tools
and support to Managers to ensure effective staff
management!
RESPONSIBILITY FOR HRM

Organizational/Business Ethics
If ethics deals with the choices (the morality of right vs wrong) that
individuals make in their personal and professional lives, then…..
Organizational business ethics is the application of these morality
related choices as influenced and guided by values, standards, rules,
principles, and strategies associated with organizational activities
and business situations.
“Business ethics deals with choices about what laws should be and whether to follow them,
about economics and social issues outside the law, and about the priority of self-interests
over the company’s interests.”
Laura Nash, Ph.D.
Harvard University.

Ethics influence and contribute to:
Employee commitment.
Investor and customer loyalty and confidence.
Legal problems and penalties.
Customer satisfaction.
The ability to build relationships with stakeholders.
Cost control.
Performance, revenue, and profits.
Reputation and image.
“One of an organization’s most prized assets is its reputation.”
S. Waddock, Ph.D.

Thus, two things become apparent:
1. Organizational/business ethics are the responsibility of
organizational leadership; and
2. The challenge of leaders to create an ethical organization
is….difficult!
“Leaders play THE key role in developing the ethical organization as they confront balancing
operational and profit goals with corporate moral obligations to internal and external
stakeholders”.
Ethics starts at the top!
Teresa Yancey Crane
Issue Management Council

Key Questions for Leaders as they build the ethical organization:
What are my core values and beliefs?
What are the core values and beliefs of the organization?
Whose values, beliefs and interests are impacted by my actions and decisions?
Who will be harmed or helped by my actions and decisions and those of my organization?
How will my core values and those of my organization be affected or changed by my
actions or decisions?
How will I and my organization be affected by my actions and decisions?
Do my actions and decisions represent a consistent set of values?
From this, how will I approach the creation of an ethical organization?
“The ethics of the organization reflect the ethics and skills of leaders.”
Lee Hartman, Ph.D.
Ethics starts at the top!

The Role of Leaders
Develop ethical behavioral influences.
Provide sound ethics training
Instill strong organizational values
Implement plans and strategies to achieve ethical excellence
Build an integrity based organization
“Leading an organization begins by identifying and enacting purpose and ethical values that
are central to internal alignment, external market effectiveness, and responsibility toward
stakeholders.”
Joseph W. Weiss, Ph.D.
Bentley College

Subjective
Moral Development
Appearance of the Act
Intensity of the Choice
Ethical Climate
Culture
Management and Leadership
The Role of Leaders
Develop Ethical Behavioral Influences:
Objective
Code of Ethics
Policy Guidelines
Standards of Ethical Performance
Training
Punishment/Consequences/Discipline
Peer Reporting
“Where does freedom of behavior stop and managed (ethical) behavior start?”
James Collins, Ph.D.

The Role of Leaders
Provide Sound Ethics Training:
Provide rationale for ethical behavior.
Help associates make sense of abstract ethical priorities (policies,
procedures, ethical performance standards).
Provide intellectual weapons to support ethical standards.
Enable associates to recognize issues that may result in ethical dilemmas.
Sharpen sensitivity and conscientiousness of moral issues and moral
solutions.
Strengthen moral courage.
Improve the moral climate of the organization.
“Leaders define and lead the social, ethical, and competitive mission of organizations.”
N. Tichey, Ph.D.

The Role of Leaders
Instill Strong Organizational Values:
Strengthens the pursuit of better ways to guide employee decisions and
behavior.
Increases awareness and sensitivity to ethical differences across cultures.
Coincides with legal and social pressures.
Ensures that all organizational participants understand and are in close
touch with organizational/ethical values.
Influences the personality, reputation, and image of the organization.
“Leadership requires involvement in stakeholder relationships.”
John Kotter, Ph.D.
Harvard University

The Role of Leaders
Set an example.
Identify ethical weaknesses.
Look to introduce and rebuild ethical
values.
Assess compliance programs.
Get commitment of top managers.
Align ethics with organizational systems.
“The moral decisions of strategy are based and built around ethics. People are
motivated to implement strategies that they believe in, have the ability to enact, and
produce results worth pursuing.”
Ensure consistency in
implementation.
Monitor and assess.
Pursue continuous
improvement.
Design an ‘integrity based
strategy.’
Implement Plans and Strategies to Achieve Ethical Excellence:
G. Hammel, Ph.D.

The Role of Leaders
Build an Integrity Based Organization:
“Leaders monitor and establish the values they wish their company to embody
with stakeholders.”
Create faith in the integrity of common
purpose.
Inspire! Empower! Build trust!
Value ownership and entrepreneurship.
Respect individual creativity.
Understand socio-emotional behavior.
Develop emotional intelligence/moral
Starts at the top….leadership!
Set an example of integrity, honesty, and
consistent behavior and reinforce it with associates.
Be involved.
Pursue a culture of ethics and raise ethical
awareness.
Establish a system of rewards tied to
organizational values.
Make ethics and integrity a core value, and a ‘core
competency.’
P. Quinn and T. Jones
“Academy of Management Review”
January, 2000
consciousness.

McKinsey’s 7 S Model
The7-S model is a tool for managerial analysis
and action that provides a structure with
which to consider a company as a whole, so
that the organization's problems may be
diagnosed and a strategy may be developed
and implemented.

• Strategy
- the route that the organization has chosen for its
future growth; A plan an organization formulates
to gain a
• Structure
- the framework in which the activities of the
organization's members are coordinated. The
four basic structural forms are the functional
form, divisional structure, matrix structure, and
network structure

• Style
• - theleadership approachof topmanagement
and the organization'soverall operating
approach; Also theway in which the
organization'semployees present themselves
to theoutside world, to suppliers
andcustomers

• Skills- what the company does best;
Thedistinctive capabilities & competencies
thatreside in the organization.
• Staff - the organization's human
resources;Refers to howpeopleare
developed,trained, socialized, integrated,
motivated,and how their careers are managed

• Shared values
- originally called superordinate goals; The
guiding concepts& principles of the
organization –values and aspirations, often
unwritten.
• The fundamental ideas around which
abusiness is built; The things that influence
agroup to work together for a common aim

55
Organizational Birth Rates over Time
Time
Birthrate
is rapidly
increasing
Birthrate
tapers off
Numberoforganizations

56
Organizational Life Cycle
ORGANIZATION STAGES OF DEVELOPMENT
1.
Entrepreneurial
Stage
2.
Collectivity
Stage
3.
Formalization
Stage
4.
Elaboration
Stage
Crisis:
Need to deal
with too much
red tapeCrisis:
Need for
delegation
with control
Crisis:
Need for
leadership
Creativity
Provision of clear direction
Addition of internal systems
Development of teamwork
Crisis:
Need for
revitalization
Decline
Continued
maturity
Streamlining,
small-company
thinking
S
I
Z
E
Large
Small
Sources: Adapted from Robert E. Quinn and Kim Cameron, “Organizational
Life Cycles and Shifting Criteria of Effectiveness: Some Preliminary
Evidence,” Management Science 29 (1983): 33-51; and Larry E. Greiner,
“Evolution and Revolution as Organizations Grow,” Harvard Business
Review 50 (July-August 1972): 37-46.

57
Organizational Decline and Death
occurs when an organization fails
to anticipate, recognize, avoid, neutralize,
or adapt to external or internal pressures
that threaten its long-term survival

Stages of Life Cycle Development
• Entrepreneurial Stage- company is created
Crisis: need for leadership
• Collectivity Stage- identifying with the mission
Crisis: need for delegation
• Formalization Stage- use of rules/procedures
Crisis: too much red tape
• Elaboration Stage- collaboration/teamwork
Crisis: need for revitalization

Organization Characteristics During
Four Stages of Life Cycle
60

Types of control
• Control can be establish to focus on actual
performance results (out put), on the
activities that generate the performance
(behavior), or on resources that are used in
performance (input)
11-61

11-62
Evaluation and Control
Types of Controls –
–Behavior controls
•Some examples of behavior controls are company
procedures, quotas of sales calls to potential
customers, and rules regarding attendance and
tardiness.
•Behavior controls are very appropriate when
results are hard to measure and a clear cause-effect
exists between activities (behaviors) and results.

11-63
–Output controls
•What is to be accomplished; focus on end result
through performance targets.
•Some examples of output controls are sales quotas,
cost reduction or profit objectives, and surveys of
customer satisfaction.

11-64
–Input controls
•Resources – skills, abilities, values, motives.
•Input controls are the least useful and are most
appropriate when output is difficult to measure and
there is no clear cause-effect relationship between
behavior and performance (such as in college
teaching).

11-65
–Behavior controls
•ISO 9000 Standards Series is a way of objectively
documenting a company’s high level of quality
operation.
•ISO 14000 Standards Series is a way of to
document the company’s impact on the
environment.

11-66
–Activity Based Costing (ABC)
•Allocation of indirect and fixed costs to individual
products or product lines
•Based on value-added activities
•More accurate charge of costs

Types of Controls
Enterprise Risk Management (ERM)
• (ERM) is a corporate wide, integrated process for managing
the uncertainties that could negatively or positively influence
the achievement of a corporation’s objectives. In the past,
was done in a fragmented manner functions or business units.
Individuals would manage process risk, safety risk, and
insurance, financial and other assorted risks. As a result of this
fragmented approach, companies would take huge risks in
some areas of the business while over managing substantially
smaller risks in other areas.
11-67

Enterprise Risk Management (ERM)
• ERM is being adopted because of the increasing amount of
environmental uncertainty that can affect an entire
corporation. As a result, the position Chief Risk Officer is one
of the fastest growing executive position in US.
11-68

11-69
–Enterprise Risk Management (ERM)
•Identify risks: using scenario analysis or
brainstorming or performance risk self assessments.
•Rank risks: using some scale of impact and
likelihood.
•Measure risks: using some agreed upon standard.

Strategy Review, Evaluation, and Control
Strategy Evaluation
• Adequate and timely feedback is the cornerstone of
effective Strategy Evaluation.
• Strategy Evaluation is important because
organizations face dynamic environments in which
key external and internal factors can change quickly
and dramatically.
• Strategy Evaluation is essential to ensure that the
stated objectives of an organization are being
achieved.

Strategy Review, Evaluation, and
Control
Consonance
Consistency
Feasibility
Advantage
Rumelt’s
4 Criteria

Activity-Based Costing:
A Tool to Aid Decision Making

Activity–Based Costing (ABC)
ABC is designed to
provide managers with
cost information for
strategic and other
decisions that
potentially affect
capacity, and therefore,
affect “fixed”
as well as variable
costs.
ABC is a
good supplement
to our traditional
cost system
I agree!

Activity-Based Costing
Activity-based costing (ABC) involves determining the cost of activities
and tracing their costs to cost objectives on the basis of the cost
objectives utilization of units of activity.
Part of “Activity-Based Analysis”

ABC - 75
Activities performed to fill customer needs
consume resources that cost money.
Customer Activities
Served by
activities
Resources
Activities
consume
resources
Costs
Resources
cost money

ABC - 76
The cost of resources consumed by activities
should be assigned to cost objectives.
Costs Resources
Assigned to
resources
Activities
Assigned to
activity cost
pools
Cost
objectives
Reassigned to
cost objectives

ABC - 77
 Identifying activities.
 Assigning costs to activities.
 Determining the basis for assigning the cost
of activities to cost objectives.
 Determining the cost per unit of activity.
 Reassigning costs from the activity to the
cost objective on the basis of the cost
objective’s consumption of activities.
Operationalizing the two-stage model requires:

ABC - 78
Two-Stage Activity Based Costing
Method
First stage: Costs assigned to resources are
reassigned to activities.
Activity 1 Activity 2 Activity 3 Activity 4 Activity n
Cost of
Resource 1
Cost of
Resource 2
Cost of
Resource n
Continued on next slide

ABC - 79
Two-Stage Activity Based Costing
Method
Second stage: Costs assigned to activities are reassigned to
cost objectives using an activity cost driver.
Activity 1 Activity 2 Activity 3 Activity 4 Activity n
Objective 1 Objective 2 Objective 3 Objective n

ABC - 80
• Unit level activities
• Batch level activities
• Product level activities
• Facility level activities
Manufacturing Cost Hierarchy

ABC - 81
• Cost of raw materials
• Cost of inserting a
component
• Utilities cost of operating
equipment
• Some costs of packaging
• Sales commissions
Unit Level
Examples
This activity is
performed for each
unit of product
produced and sold.

ABC - 82
• Cost of processing sales
order
• Cost of issuing and
tracking work order
• Cost of equipment setup
• Cost of moving batch
between workstations
• Cost of inspection
Batch Level
This activity is
performed for each
batch of product
produced or sold.
Examples

ABC - 83
• Cost of product
development
• Cost of product
marketing, such as
advertising
• Cost of specialized
equipment
• Cost of maintaining
specialized equipment
Product Level
Examples This activity is
performed to support
each different
product that can be
produced.

ABC - 84
• Cost of maintaining general
facilities
• Cost of nonspecialized
equipment
• Cost of maintaining
nonspecialized equipment
• Cost of real property taxes
• Cost of general advertising
• Cost of general administration
Facility Level
ExamplesThis activity is
performed to maintain
general manufacturing
capabilities.

ABC - 85
Benefits Of Activity Based Costing
• Greater understanding of the nature of operations
• More accurate product costing
• Improvement in cost control
• Integration with strategic management accounting

ABC - 86
Practical Advice for Implementing ABC
1. Capture the attention of top management.
2. Don’t shoot the customer.
3. Decide the form ABC will take.
4. Supplement the ABC measures creativity where appropriate.
5. Be careful in costing bottlenecks that create excess capacity.
6. Challenge managers who believe their costs are fixed.
7. Calculate costs top-down and bottom-up.
8. Account for cost of capital.
9. Use multi-functional teams.
10. Don’t underestimate the need for managing change.

How Costs are Treated Under
Activity–Based Costing
ABC differs from traditional cost accounting in three ways.
Manufacturing
costs
 ABC assigns both types of costs to products.
Traditional
product costing
ABC
product costing
Nonmanufacturing
costs

 ABC does not assign all manufacturing costs to products.
All
Some
Manufacturing
costs
Nonmanufacturing
costs
Traditional
product costing
ABC
product costing

Plantwide
Overhead
Rate
Departmental
Overhead
Rates
Activity–Based
Costing
Number of cost pools
Levelofcomplexity
 ABC uses more cost pools.

Each ABC cost pool has its
own unique measure of activity.
Traditional cost systems usually rely
on volume measures such as direct labor
hours and/or machine hours to allocate
all overhead costs to products.
 ABC uses more cost pools.

Activity
An event that causes the
consumption of overhead
resources.
Activity
Cost Pool
A “cost bucket” in which
costs related to a single
activity measure are
accumulated.
$
$
$ $
$
$

Activity
Measure
An allocation base
in an activity-based
costing system.
The term cost driver is
also used to refer to
an activity measure.

Manufacturing
companies typically combine
their activities into five
classifications.
Unit-Level
Activity
Batch-Level
Activity
Product-Level
Activity
Customer-Level
ActivityOrganization-
sustaining
Activity

Strategic Information Systems
Information systems designed to support
or shape competitive strategy.
• Long-range planning
• Response Management
• Innovation

Strategic Advantage
Only when SIS combine with structural
changes can they help provide strategic
advantage.

Functions of an Information System

The Widening Scope of
Information Systems

MAJOR TYPES OF SYSTEMS
• Transaction Processing Systems (TPS)
• Office Automation Systems (OAS)
• Knowledge Work Stations (KWS)
• Management Information Systems (MIS)
• Decision Support Systems (DSS)
• Executive Support Systems (ESS)

Singapore Airlines is in a tough situation but
opportunities for global leadership exist
• Singapore International Airlines (SIA) is facing dramatic
environmental shifts, increasing competition, and
changing customer demand
• Several strategic options exist related to how SIA can
improve its competitive positioning for the long term
• I recommend that SIA pursue a high-end differentiation
strategy based upon unique positioning as the ‘premier
long-distance airline’

environmental shifts, increasing competition, and changing
customer demand
• Several strategic options exist related to how SIA can improve
its competitive positioning for the long term
strategy based upon unique positioning as the “premier long-
distance airline”

The environmental analysis suggests
some important issues
What is really
important?
External
Internal
General Environment:
•Globalization is increasing demand for international air travel (esp. to Asia)
•Political changes include the increase of free trade markets (like Singapore)
•Economic conditions are important as recessions cause price sensitivity
Industry:
•Consolidation in the airline industry is increasing to enhance scale and scope
•Alliances are the hottest strategy tool as companies seek global connections
•Customers are increasingly price sensitive but business segments are loyal
•There are little to no substitutes for international air travel
Competition:
•Key domestic competitors are Japan Airlines, Thai Airways, and Cathay
•Key international competitors are United, KLM, and British Airways
•SIA has the best cost structure for premium level service but losing ground
Strengths:
•Reputation and brand image of the “Singapore Girl”
•Young fleet and excellent training facilities and programs
•Extensive regional and international route network
Weaknesses:
•Increasing difficulty supplying high quality labour at low costs (esp. Singapore)
•“Buttoned Down” image may not be attractive to younger demographic
•High cost structure needed for high quality service is difficult to change

SIA is the largest Asia-Pacific airline
0
5000
10000
15000
20000
1999
Capacity (Available Ton Kilometres)
SIA Cathay Qantas Thai Malaysia

There are three key questions that
should be addressed
Question Option /
Hypothesis
Decision
Criteria
Pros Cons
Invest in VA? Yes Return on
Investment
•Enables a lower
cost product
offering
•Access to younger
demographic
•Complimentary
routes
•Competes with
Star Alliance
•Limited resources/
opportunity cost
•May affect
reputation
Overall Strategy? Low Cost (rather
than Differentiation)
Long Term
Profitability
•Head to head with
new competitors
•Seems to be the
trend in the U.S.
•Fuel costs are
rising
•Lose reputation as
high quality
provider
•Goes against
infrastructure
•Differentiation
may be the only
way to win
Stay in Star
Alliance?
Yes Market Share
Growth
•Cross-selling
opportunities to
new customers
•Access to
additional routes
quickly
•Lose control of
scheduling
•May compromise
the consistent
quality of service

While SIA has a higher OM,
competitors are not far behind
0
10
20
30
1999
Operating Margin - Percentage
SIA Cathay Qantas
Thai Malaysia BA
KLM United American

Asia is projected to be a key market
moving forward
0
500
1000
1500
2001
Projected Passenger Kilometres -
billions
Africa Middle East L.A. Asia Europe N.A.

environmental shifts, increasing competition, and changing
customer demand
• Several strategic options exist related to how SIA can improve
its competitive positioning for the long term
strategy based upon unique positioning as the ‘premier long-
distance airline’

Singapore Airlines should strive for
unique positioning
•This is a critical time as technology and global reach
require a high-end international access airline
•SIA’s best strengths are high end service and global routes
• Going low-cost will damage long-term profit potential
SIA should set a strategic
vision to be the leading global
premier service airlineRisks
Implementation
•Alliances don’t deliver
•Costs get too high
•Other airlines act first
•Invest in VA (but go high end)
•Stay in Alliance
•Expand high quality labour
pool

The growth rate through 2007 is
estimated to be high
6
6.5
7
7.5
8
8.5
Growth
Regional Route Growth - %
NE Asia-SW Asia Eur - NE Asia NA - SE Asia

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