NUS-DBS International Case Competition 2010 - USC Marshall (Champions)

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NUS-DBS International Case Competition 2010 - USC Marshall (Champions)

  1. 1. Singapore  Airlines:  Flying  to  New  Heights   Conquest  Consul<ng   Emily  Dong  │ Michelle  Li  │Nikunj  Mistry  │ Calvin  Tay  
  2. 2. Value  Proposi<on   Objec<ves   Remain  Customer   Centric   Focus  on  Core   Business  Units   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  3. 3. Value  Proposi<on   Objec<ves   Customer  First   Enhancing  Customer  Experience   Ini8a8ves   Remain  Customer   Centric   Divest  SIAEC   Focus  on  Core   Introduce  Business  Class  Routes  to   Business  Units   Financial  Hubs   Enhance  Customer  Experience  pre-­‐Flight   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  4. 4. Value  Proposi<on   Objec<ves   Customer  First   Value  Added   Enhancing  Customer  Experience   Ini8a8ves   Remain  Customer   Centric   NPV  =  $   Divest  SIAEC   Focus  on  Core   Introduce  Business  Class  Routes  to   Business  Units   Financial  Hubs   Enhance  Customer  Experience  pre-­‐Flight   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  5. 5. Externali<es   Airline  Industry   Sensi=ve  to  Externali=es   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  6. 6. Government  Regula<on     Airline  Industry   Sensi=ve  to  Externali=es   Government  Regula=on   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  7. 7. Expansion  of  Budget  Market     Airline  Industry   Low   Legacy     Cost   Sensi=ve  to  Externali=es   Size  and  Network   Growth  and   Government  Regula=on   Access  to  Capital   Pricing  and   Expansion  of  Budget  Market   Structure   Cost  Structure   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  8. 8. Complex  Opera<ons   Airline  Industry   Sensi=ve  to  Externali=es   Government  Regula=on   Expansion  of  Budget  Market   Complexi=es  of  Opera=ons   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  9. 9. Posi<oning     Large  investment  in   Loyal  customers,  reasonable   Premium  Carriers   innova=on,  superior  product   margins,  economies  of  scale.   and  reputa=on.   Low  margins  with  high   No  loyal  following,  liSle   Standard  Carriers   pressure  from  low  cost,  low   network  effects   differen=a=on   High  volume,  simple   Low  Cost  Carriers   No  loyal  following,  no   business  model,  low  service   differen=a=on   level   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  10. 10. Posi<oning       Large  investment  in     Loyal  customers,  reasonable   Premium  Carriers   innova=on,  superior  product     margins,  economies  of  scale.   and  reputa=on.   KEY  TAKEAWAYS     Singapore  Airlines  must  posi1on  as  a   Low  margins  with  Carrier  to:   Premium  high   No  loyal  following,  liSle   Standard  Carriers   pressure  from  low    cost,  low   1.  Avoid  price  wars  with  LCC  and   network  effects   differen=a=on   Standard  Carriers   2.  ASain  reasonable  margins  for   sustained  survival     High  volume,  simple   Low  Cost  Carriers   No  loyal  following,  no   business  model,  low  service     differen=a=on   level       Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  11. 11. Customer  Interface   Singapore  Airlines   Fulfillment  &  Support   Rela8onship  Dynamics   Rigorous  quality  control  system     Con=nuous  face-­‐to-­‐face   Selec=ve  staff  recruitment  and   interac=on  between  cabin  staff   selec=on   and  customers   Thorough  training  policy       Three-­‐=er  pricing  structure   Extensive  surveys  to  determine   ensures  each  customer  segment   customer  needs  and  preferences     is  clearly  delineated     Informa8on  &  Insight   Pricing  Structure   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  12. 12. Strategies  for  Con<nued  Success   Strategy  /   Key  Factors    for   Need  in  order  to   Recommenda8ons   Success   Succeed   An=cipate  customer   Reinforcing  the  Brand   needs   Focusing  on  the   Differen1ate  Service   Quick  reac=on  to   Travel  Experience     Classes   unfavorable  externali=es   Increase  Customer   Convenience   Innova=on   Experience   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  13. 13. Strategies  for  Con<nued  Success   Strategy  /   Key  Factors    for   Need  in  order  to   Recommenda8ons   Success   Succeed   An=cipate  customer   Reinforcing  the  Brand   needs   Focusing  on  the   Differen1ate  Service   Quick  reac=on  to   Travel  Experience     Classes   unfavorable  externali=es   Increase  Customer   Convenience   Innova=on   Experience   Increase  flow  into   Tradewinds   Target  growing  ci=es   Singapore   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  14. 14. Strategies  for  Con<nued  Success   Strategy  /   Key  Factors    for   Need  in  order  to   Recommenda8ons   Success   Succeed   An=cipate  customer   Reinforcing  the  Brand   needs   Focusing  on  the   Differen1ate  Service   Quick  reac=on  to   Travel  Experience     Classes   unfavorable  externali=es   Increase  Customer   Convenience   Innova=on   Experience   Increase  flow  into   Tradewinds   Target  growing  ci=es   Singapore   Discon=nue  SIAEC   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  15. 15. Strategies  are  Reinforcing   Strategy  /   Key  Factors    for   Need  in  order  to   Recommenda8ons   Success   Succeed   Focus  on  Core  Business   An=cipate  customer   Reinforcing  the  Brand   needs   Focusing  on  the   Differen1ate  Service   Quick  reac=on  to   Reinvest  in     Travel  Experience     Classes   unfavorable  externali=es   Grow  &  Reinforce   Premium  Services   Brand   Increase  Customer   Convenience   Innova=on   Experience   Expand   Increase  flow  into   Expand  Tradewinds   Target  growing  ci=es   Tradewinds   Singapore   Divest    SIAEC   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  16. 16. Growth  Through  Equity  Stakes   Historical  growth  strategy  through  pursuing  equity  stakes  in  younger  airlines   25%  Stake   49%  Stake   49%  Stake   Decreased  to  34.4%   Decreased  to  6.47%   Stake  Sold  due  to   following       Underperformance   Stock  Exchange   Stake  Sold  at  Loss   Lis=ng   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  17. 17. Growth  Through  Equity  Stakes     Historical  growth  strategy  through  pursuing  equity  stakes  in  younger  airlines       South  Korea,  Malaysia,     and  Indonesia,   KEY  TAKEAWAYS   registering    the  highest   1.  Too  Mout  of  the  top   growth   uch  Compe11on   15  markets   2.  Have  not  been  successful  in  the  past   25%  Stake   49%  Stake     49%  Stake     The  top  5  markets:     Indonesia     China  ot  look  into  new  equity   SIA  should  n Malaysia   stakes  with  low-­‐cost  carriers   India     Decreased  to  34.4%   Decreased  to  6.47%   Australia   Sold  due  to   Stake     following       Underperformance   Stock  Exchange   Stake  Sold  at  Loss   Lis=ng   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  18. 18. Cri<cal  Role  of  the  Singapore  Girl   A  Unified  Brand   Singapore  Girl   • Asian  values  and  hospitality   • Warm,  caring,  gentle,  elegant  and   serene   Brand  Image   • High  quality   • Innova=ve     • Safety  and  service  excellence     • Consistency   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  19. 19. Cri<cal  Role  of  the  Singapore  Girl           KEY  TAKEAWAYS   A  Unified  Brand     SIA’s  brand  image  is  reliant  on  2  pillars   Singapore  Girl     1.  Singapore  Girl   • Asian  values  and  hospitality   2.  An  ongoing  dedica=on  to  quality  and   service  excellence      arm,  caring,  gentle,  elegant  and   • W serene       Brand  Image   Singapore  Girl  image  is   • High  quality   essen8al  to  the  con8nued   • Innova=ve     success  of  SIA   and  service  excellence     • Safety     • Consistency       Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  20. 20. Focusing  on  the  Customer  Experience   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  21. 21. Who  Is  The  Customer   Airline Customer Value Segmentation (By Revenue) ISSUE     Segmenta=on  By   Frequent  Flier   Program  Data  Is   Insufficient   The  Majority  of  Spending  Is  Done  Through  A  Small  Percentage  of  Customers     Find  Out  Who  These  Customers  Are  And  Tailor  To  Them   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  22. 22. What  Do  The  Customers  Want   Airline Customer Value Segmentation (By Revenue) Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  23. 23. What  Do  the  Customers  Want   Airline Customer Value Segmentation (By Revenue) Key  Takeaway     “High  Road  Warriors”  &  “Global  Stars”  Make  Up  27%  Of   Average  Airline  Revenues     They  Value  Flexibility  &  Recogni=on     Convenience  &  Segmenta8on     Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  24. 24. GeOng  Into  the  Customer’s  Head   Buy  A  Ticket   Board   Ride   Transport  To   Wait  To   Baggage   Airport   Board   Claim   Transport   Check-­‐In   Security   From  Airport   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  25. 25. Mobile  Check-­‐In  For  All   Benefits     No  Need  To  Print   No  Paper  To  Carry   Never  Worry  About  Losing  A   Boarding  Pass  Again   Buy  A  Ticket   Board   Ride   Transport  To   Wait  To   Baggage   No  Excess  Paper  When  You’re  Done   Airport   Board   Claim   Transport   Check-­‐In   Security   From  Airport   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  26. 26. Smart-­‐Card  Check-­‐In  For  The  Elite   How  It  Works   Scan  Smart-­‐Card  At  Kiosk   Scan  Finger  For  Iden=fica=on   Use  As  Boarding  Pass  At  The  Gate   Buy  A  Ticket   Board   Ride   Transport  To   Wait  To   Baggage   Airport   Board   Claim   Transport   Check-­‐In   Security   From  Airport   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  27. 27. Connec<ng  With  Our  Customers   How  It  Works   Receive  Login  For  Internet  At  SIA  Check-­‐ In  Counter   Use  Wireless  As  You  Are  Wai=ng  To   Board   SIA  Customer  Will  Feel  Special  Compared   To  Customers  of  Other  Airlines     Buy  A  Ticket   Board   Ride   Wireless  Login  Will  Terminate  At   Transport  To   Wait  To   Baggage   Airport   Board   Claim   Boarding  Time  To  Ensure  Timely  Boarding   Transport   Check-­‐In   Security   From  Airport   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  28. 28. Expansion  of  Business  Class  Flights   • Increasing  level  of  interna=onal  travel  for   business  purposes   • Corporate  firms  are  willing  to  pay   premium  for  last  minute  flights   • Not  price  sensi=ve     • Targe=ng  financial  centers  of  the  world     Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  29. 29. Financial  Centers  of  the  World   London   New  York   Hong  Kong   Shenzhen   Sydney   Reliability  of   Transporta=on   Ease  of  Access   Quality  of  Public   Services   Professionalism  of   Des=na=on   Language   Accessibility     Unfavorable=   Favorable=   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  30. 30. Which  Ci<es  to  Target   London   New  York   Hong  Kong   Shenzhen   Sydney   Reliability  of   Transporta=on   Ease  of  Access   Quality  of  Public   Services   Professionalism  of   Des=na=on   Language   Accessibility     Unfavorable=   Favorable=   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  31. 31. Which  Ci<es  to  Target   London   New  York   Hong  Kong   Shenzhen   Sydney         Reliability  of   KEY  TAKEAWAYS   Transporta=on     1.  Increased  level  of  interna=onal   Ease  of  Access   business   2.  Increased  travel  to  financial  centers   Quality  of  Public   of  the  world   Services     Professionalism  of     Des=na=on     Language   Priori8ze  Business  Class-­‐only  flights  to   Accessibility     those  ci8es         Unfavorable=   Favorable=   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  32. 32. SIA  Current  Business  Units   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  33. 33. SIA  Engineering   MRO  Market   Fuel  costs  have  increased  sharply   Current  air  transport  MRO  market  decreased  $2.3BN   Shorter  economic  aircra[  life  spans   Economies  of  scope  and  scale  business   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  34. 34. SIA  Engineering   MRO  Market   Fuel  costs  have  increased  sharply   Current  air  transport  MRO  market  decreased  $2.3BN   Shorter  economic  aircra[  life  spans   Economies  of  scope  and  scale  business   MRO  market  showing  limited  signs  for  growth     Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  35. 35. Tradewinds   Growth   Top  Markets   Visitor  Days   Singapore’s  visitor   South  Korea,  Malaysia,   Visitor  Days,  es=mated   arrivals  grew  17.6%  year   and  Indonesia,   at  3.6  million  days  for   over  year  to  908,000   registering  the  highest   January  2010,  grew   arrivals,  the  highest  ever   growth  out  of  the  top   8.7%  over  2009  and  are   recorded  in  the  month   15  markets   expected  to  con=nue   of  January   growing.     The  top  5  markets:   Indonesia   China   Malaysia   India   Australia   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  36. 36. Tradewinds     Growth   Top  Markets     Visitor  Days     Singapore’s  visitor   KEY  TAKEAWAYS   South  Korea,  Malaysia,   Visitor  Days,  es=mated   arrivals  grew  17.6%  year     and  Indonesia,   over  year  to  908,000    1.  Direct  1e-­‐in  SIA’s  main  business   at  3.6  million  days  for   registering  the  highest   January  2010,  grew     arrivals,  the  highest  ever   growth  out  of  the  top   recorded  in  the  month  2.  Gives  tourists  another  opportunity  to   8.7%  over  2009  and  are   15  markets   expected  to  con=nue   of  January   come  in  contact  with  Singapore   growing.     Airlines     The  top  5  markets:   Indonesia     China     Malaysia     Con8nue  to  Operate  Tradewinds  as   India   Australia  of  SIA  Group   part       Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  37. 37. Implementa<on  Timeline   2010   2011   2012   2013   Add   Expanding   Add  2   Addi=onal  2   Redesign  Planes   Service  Classes   Loca=ons   Loca=ons   Smart-­‐Card   Begin  Installing   Make  Smart-­‐Card  IDs  Available   Elite  Check-­‐In   Fingerprint  Scanners   To  Elite  Customers   Clear  With   Mobile   Airport   ASach  Barcodes  To  E-­‐Tickets  &   Boarding  Pass   Update  Mobile  Phone  Applica=ons   Security   SIA   Contract   Engineering   Ends   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  38. 38. Valua<on   Sensi8zed  Net  Present  Value   Free  Cash  Flows   $4,000.00     $4.2  bn   $2,000.00     $0.00     2011   2012   2013   2014   2015   2016   2017   2018   2019   2020   2021   Terminal  Growth   $2.5  bn   $2,492.98     3.25%   3.75%   4.00%   4.25%   4.50%   10.51%   $2,973     $3,772     $4,218     $4,699     $5,220     WACC   10.76%   $2,194     $2,917     $3,319     $3,752     $4,219     11.01%   $1,468     $2,125     $2,488     $2,879     $3,299     11.26%   $791     $1,389     $1,718     $2,071     $2,450     11.51%   $158     $703     $1,002     $1,322     $1,665     $1.0  bn   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  39. 39. Financial  Implica<ons   Revenue  and  Net  Income  Growth   $30,000     $25,000     $20,000     $15,000     Net  Income   $10,000     Revenue   $5,000     Base  Case:  2011-­‐2021   $0     •   Average  Revenue  Growth:  6.3%   •   Average  Opera8ng  Margin:  5.08%   Net  Margin  Growth   •   Average  Net  Profit  Margin:  4.06%   7.00%   6.00%   5.00%   4.00%   3.00%   2.00%   1.00%   0.00%   2011   2012   2013   2014   2015   2016   2017   2018   2019   2020   2021   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  40. 40. Singapore  Airlines:  Flying  to  New  Heights   Conquest  Consul<ng   Emily  Dong  │ Michelle  Li  │Nikunj  Mistry  │ Calvin  Tay  
  41. 41. Risks     Risks   Mi8ga8on   Con8ngency   Customer  Perks   Offer  More   Discon=nue   Do  Not  Translate   Services,  but  for   Perks  and   Into  Revenue   a  Price   Increase  In-­‐Cabin   Offerings   Low  Cost  Airlines   Overtake  A   Move  Into  Low-­‐ Invest  In  Low-­‐ Majority  of  The   Cost  Market  With   Cost  Airline   Market   Another  Brand   Compe=tors   Engage  in  Media   Increase  Rewards   Increase  Focus   Blitz  to   and  Benefits   on  Seamless   Emphasize   Frequent  Flyers   Customer   Dedica=on  to   Earn   Experience   Quality   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  42. 42. SWOT  -­‐  Industry   Strengths   Opportuni8es   Increased  propensity  to  fly   Technological  advances   Public  percep=on  of  safe  air   Customer-­‐friendly  service   travel   enhancements   Highly  trained  airline  staff   Ability  to  segment  the  market     Global  economic  downturn   High  spoilage  rate  of  empty  seats   Price  of  fuel   High  capital  outlays     Natural  disasters   Large  workforce  over  large  geography     Weaknesses   Threats   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  43. 43. Reliability  of  Transporta<on   London   New  York   Hong  Kong   Shenzhen   Sydney   Reliability  of   Transporta=on   • Convenience  of  travel  within  the  city   • Taxis   Ease  of  Access   • Trams   • Subway  system   Quality  of  Public   • Cars   Services   • Bus   Professionalism  of   Des=na=on   Language   Accessibility     Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  44. 44. Ease  of  Access   London   New  York   Hong  Kong   Shenzhen   Sydney   Reliability  of   • Accessibility  of  services  to  a  business  traveler   Transporta=on   • Banking  services   Ease  of  Access   • Travel  arrangements     • Network  connec=vity       Quality  of  Public   Services   Professionalism  of   Des=na=on   Language   Accessibility     Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  45. 45. Quality  of  Public  Services   London   New  York   Hong  Kong   Shenzhen   Sydney   Reliability  of   • For  business  travelers  with  extended  stays   Transporta=on   • Health  care   Ease  of  Access   • Telecommunica=ons     • Public  Transporta=on   Quality  of  Public   • Home  planning   Services   • Electricity       Professionalism  of   Des=na=on   Language   Accessibility     Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  46. 46. Professionalism  of  Des<na<on   London   New  York   Hong  Kong   Shenzhen   Sydney   Reliability  of   • Degree  of  business  professionalism   Transporta=on   • Friendliness  to  business  professionals   Ease  of  Access   • Acceptance  of  foreign  businessmen  and  women   Quality  of  Public   Services   Professionalism  of   Des=na=on   Language   Accessibility     Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  47. 47. Language  Accessibility     London   New  York   Hong  Kong   Shenzhen   Sydney   Reliability  of   • English  is  the  primary  language  of  business  around  the   Transporta=on   world   Ease  of  Access   • Use  of  English  in  the  local  areas   • Street  signs   Quality  of  Public   • Communica=on  with  locals     Services   Professionalism  of   Des=na=on   Language   Accessibility     Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  48. 48. Why  Not  To  Go  Low  Cost   Premium   Airlines   High  Levels  Of  Intense  Compe==on   Middle-­‐Market   Airlines   Brand  Dilu=on/Confusion   Discount  Airlines   Low  Cost  Carriers  Cut  Costs  Without   Regard  To  Safety   Uses  Secondary  Airports  –  A   Problem  For  Interna=onal  Flights   Ongoing  Price  Wars  Are  The  Nature   of  the  Industry   Negates  SIA’s  Core  Competencies   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  49. 49. MRO  Value  Chain     Raw  Materials   Opera=ons   Marke=ng/   • Plane   • Training   Service   • Fuel   • Maintenance   Sales   Fly   Send   Pick  Up   For   Repair   Repair   Value  Proposi=on   SIA   Customer  Experience   Implementa=on  
  50. 50. Key  Assump<ons   Assump8ons       Discount  Rate   Terminal  Growth       11.01%   4%           Value  Proposi=on   SIA   Customer  Experience   Implementa=on  

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