Cost-effective service excellence: lessons from Singapore Airlines Singapore Airlines is known as a paragon of in-flight service. Also, it is a remarkably successful and profitable airline and has been for decades. Loizos Heracleous, Jochen Wirtz and Robert Johnston explain how this combines service excellence with cost effectiveness.

Singapore Airlines (SIA) has obtained the Ultimate goal of proper success: sustainable competitive benefit. It has consistently outperformed the competitors through its 30-year history. In addition , it has constantly achieved significant returns in an industry affected by intermittent durations of disastrous under-performance (see Table 1). Cost-effective support excellence: lessons from Singapore Airlines

SIA has done this by managing to navigate skilfully between poles that a lot of companies think of as specific – providing service excellence in a costeffective way. SIA's awards list is lengthy and recognized. In 2002 alone that won no less than 67 international awards and honours which includes " greatest airline” and " many admired airline” in the world in Fortune's Global Most Admired Companies study. Spring 2004 G Volume level 15 Concern 1 Business Strategy Review


Seeing that Michael Porter's influential recommendation that differentiation and expense leadership will be mutually exclusive approaches and that a great organisation need to ultimately select where the competitive edge will sit, there has been brutal debate about whether a mixed strategy can be achieved – and endured over the longer term. SIA is usually proof the fact that answer to both these questions is usually positive. Therefore , how does it consistently deliver premium service to demanding buyers in an sector where both equally price challenges and consumer expectations had been continually rising? In common with many other organisations with a status for featuring excellent support, SIA provides top managing commitment to service, customer-focused staff and systems, and a customer-oriented culture. Nevertheless , our study into TANTO, spanning many years and at most levels inside the organisation, offers uncovered a number of insights in developing and maintaining a reputation to get service quality that is appropriate to a wide range of service organisations. Ultimately, SIA's success is usually attributed to a customer-oriented lifestyle, its acknowledgement of the significance of its buyers. " Each of our passengers are our connaissance d'être. If SIA works, it is mainly because we have never allowed ourselves to forget that important truth, ” says Dr Cheong Choong Kong, former CEO of SIA.

However , what distinguishes SIA's culture is the fact these are not only abstract, " motherhood” transactions. The ideals of cost effective service quality are enshrined in a unique, selfreinforcing activity system that produces the ideals real for all those employees. We found the five key elements of this activity system (see Figure 1) are: G rigorous service design and development G total development (integrating ongoing incremental advancements with broken, interrupted innovations) G profit and cost intelligence ingrained in all employees G holistic personnel development; G reaping of strategic synergies through related diversification and world-class infrastructure. Rigorous services design and development Twenty years ago Lyn Shostack lamented that assistance design and development is usually characterised by trial and error. Contrary to manufacturing organisations, where R& D departments and merchandise engineers were routine, systematic testing of services, or service engineering, was not the norm. Things apparently have changed little after that. SIA, yet , has always regarded item design and development being a serious, organised, scientific concern.

Performance metrics Revenues $m











5, 133

16, 138

9, 905

8, 969

18, 963

13, 879

12, 103

3, 903

5, 788

5, 207

Net income (loss) $m Net profit margin (%) Functional...


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