Strategic Management - Scoot Airlines

RHEA MAUREEN A. MORALITA

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Abstract:
The nature of strategic management and its competitive and institutional context is vital
to the organization success. The researcher selected Scoot Airlines to analyze its core
business, environmental aspects and its strategic plan and business performance. In this
research, the researcher will primary analyzes the macro environmental trends and
industry analysis by utilizing PESTEL analysis and Porter 8 forces. The researcher will
also apply the VRIO model (Barney, 1991) to analyze the organization resources and
capabilities and the Value Chain Analysis (M. Porter, 1985) to evaluate the overall
activities within the organization and the McKinsey 7’s Framework (McKinsey, 1980)
to analyze the organization structure. The researcher will evaluate the findings and
eventually propose strategic plan that enable the company strengthen its core
competency and gain competitive advantage against its competitors. In the latter part,
the researcher will conclude by proving the suitability, acceptability, and feasibility of
the proposed business and corporate strategies.


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Table of contents:
Abstract ------------------------------------------------------------------------------------------1
Introduction ---------------------------------------------------------------------------------4
1: New Mission, Vision, and Objectives - Scoot Airlines ---------------------------5
1.1: Proposed New Mission (Scoot) ------------------------------------------------------5
1.2: Proposed New Vision (Scoot) ------------------------------------------------------6
1.3: Proposed New Corporate Responsibility Values (Scoot) ---------------------------6
1.4: Proposed New Objectives (Scoot) ------------------------------------------------------6
1.5: Proposed New Key Success Factors ---------------------------------------------6
2: Environmental and Industry Analysis -------------------------------------------- 7
2.1: PESTEL Analysis ----------------------------------------------------------------------- 7
2.1.1: Economical Key Driver -------------------------------------------------------------- 8
2.1.2: Technological Key Driver ----------------------------------------------------- 10
2.1.3: Conclusive remarks of PESTEL Analysis ----------------------------------- 11
2.2: Industry Issues ----------------------------------------------------------------------- 12
2.2.1: Porter 8 Forces Analysis (M. Porter 1979) ----------------------------------- 12
2.2.2: Conclusive remarks of Porter 8 Forces Analysis -------------------------- 13
3: Capability Analysis ------------------------------------------------------------------------14
3.1: Concepts and Tools with respect to resources and capabilities ----------------- 14
3.2: Value Chain Model Analysis (M. Porter, 1985) ------------------------------------15
3.3: Competitor’s Strategic Position (Jetstar & Air Asia) -------------------------- 16
3.4: VRIO Application Analysis of Key Capabilities and Statistics ----------------- 16
3.5: VRIO Analysis based on the Findings -------------------------------------------- 19
3.5.1: Analysis of Value and Rarity Factor -------------------------------------------- 19
3.5.2: Analysis of Inimitability Factor ----------------------------------------------------- 19
3.5.3: Analysis of Organization Factor ----------------------------------------------------- 20
3.5.4: VRIO Conclusion (Based from the findings) ----------------------------------- 21
3.6: McKinsey 7’s Framework (McKinsey, 1980) ----------------------------------- 22
3.7: SWOT Analysis (Humphrey, A., 1960) -------------------------------------------- 23
4: Proposed Strategy ----------------------------------------------------------------------- 25
4.1: New Business Strategy: Porter’s Generic Strategies (M. Porter, 1980) ------- 25
4.2: New Corporate Strategy: Ansoff Matrix (I. Ansoff, 1957) ----------------- 27
4.3: Balanced Scorecard and Strategy Map (Kaplan & Norton, 2001)----------------- 29
5: Strategy Evaluation---------------------------------------------------------------------- 31
5.1: Suitability (Ranking Technique) ---------------------------------------------------- 32
5.2: Acceptability ---------------------------------------------------------------------- 33
5.2.1: Risk Approach – Sensitivity Analysis ------------------------------------------- 33
5.2.2: Best Case Scenario (Sensitivity Analysis) ---------------------------------- 34
5.2.3: Worst Case Scenario (Sensitivity Analysis) ---------------------------------- 35
5.3: Feasibility --------------------------------------------------------------------------- 36


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References ------------------------------------------------------------------------------- 37
List of Appendixes:
Appendix 1: Low Cost Budget Airlines Routes ------------------------------------40
Appendix 2: Travel Duration to Kuala Lumpur Malaysia ---------------------------41
Appendix 3: Value Chain Framework ------------------------------------------------------42
Appendix 4: VRIO Framework---------------------------------------------------------------44
Appendix 5: What customers want to experience on board? ---------------------------46
Appendix 6: Porter’s Generic Strategies ---------------------------------------------47
Appendix 7: Ansoff Matrix ---------------------------------------------------------------49
Appendix 8: The SAFe criteria and techniques of evaluation ---------------------------51
Appenidx 9: Diversification Attractiveness Test ------------------------------------52
Appendix 10: Competitor’s Strategic Position (with respect to revenue) -------- 53
Appendix 11: Competitor’s Product/Service Offered ------------------------------------54
Appendix 12: Scoot Organizational Chart ---------------------------------------------55
Appendix 13: LCC Fleet Expansion 2015 ---------------------------------------------56
Appendix 14: McKinsey 7’s Framework (McKinsey, 1980) ---------------------------57
Appendix 15: The trap of competitive box (Piercy, 2009) ---------------------------59
Appendix 16: Proposed Scoot Strategy Map (Kaplan & Norton, 2001) ---------60
Appendix 17: Additional Selected Key Driver of Change (PESTEL) ------------------61


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Introduction:
Air transport has always been considered as a very special sector in the international
context, as it facilitates global and social growth, international and domestic tourism,
and world trade growth (Hardy, 2009). So in this research, the researcher, chose Scoot
Airlines (a wholly owned subsidiary of Singapore Airlines) to analyze low cost carrier
industry issues and create strategic plan by analyzing its resources and capabilities with
the application of value chain analysis (M. Porter, 1985), VRIO framework (Barney, J.,
1991) and McKinsey 7’s Framework (McKinsey, 1980). The researcher will make an
in-depth analysis of industry and environmental with the application of PESTEL and
Porter 8 forces and propose recommendations to improve the core competency of Scoot
and eventually gain competitive advantage against its rivals. In the latter part, the
researcher will evaluate the proposed strategies by utilizing the SAFe (Suitability,
Acceptability, Feasibility, and evaluation) criteria and techniques of evaluation.


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01: Proposed Scoot New Mission, Vision, and Objectives
In this segment, the researcher critically analyzes the existing mission and vision
statements of Scoot which is shown in (table 1) below and eventually created new
statements that are seemly suitable for Scoot Airlines which is discussed further in
(section 1.1 to 1.5) below.
Existing Mission and Vision of Scoot Airlines
Scoot Mission To strive to deliver great flight every time.
Scoot Vision To be the airline for the young.
Table 1: Current Mission and Vision of Scoot (Source: Scoot, 2016 & Researcher’s work, 2016)
In the above current mission and vision statements of Scoot, there are no specific
purpose and clarity as well as the corporate values of the organization. Mission
statement aims to provide employees and stakeholders with clarity about the business.
Vision is the desired future of the organization (Johnson, Whittington, and Scholes,
2011).
1.1 Proposed Scoot New Mission:
The proposed new Scoot mission statement is to provide luxurious experience with
reasonable pricing that is suitable for budget travelers who want to have quality service
and memorable flying experience by satisfying customers and allowing them to be
happy and fully satisfied before, during, and after the flight. Also, to ensure the safety
of the passengers by bringing them’ back to their family safely and by adding more
international destinations. For the employees and stakeholders, Scoot intends to provide
career growth and development for employees and to meet the stakeholder’s needs
(Source: Researcher's work, 2016).
The proposed new slogan for Scoot which is created by the researcher is shown below:
“Travel more, worry less, as you are safe flying with us”. (Researcher’s work, 2016)


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1.2 Proposed Scoot New Vision:
The new vision of Scoot aims to be the world's first choice for budget traveler's by
being the most profitable budget airline in the industry with excellent value added
services for customers that will make them fully satisfied and loyal Scoot air traveler by
ensuring the highest level of service, operations, and safetyness (Researcher's work,
2016).
1.3 Proposed Scoot New Corporate Responsibility Values:
Scoot corporate responsibility is to become more responsible towards community
engagement and to be more environmental conscious (Researcher's work, 2016).
1.4 Proposed Scoot New Objectives:
Scoot new objectives are to establish and operate new regional airline aiming
specifically at ASIAN countries with rapidly expanding markets to Europe and other
international countries. To implement business and corporate strategy which focus on
maximizing revenues, cost reduction, mitigation of risks, and developing core
competency and competitiveness. To identify and develop international alliances and
partnerships with other established and high regarded airlines and to determine the
attractive value added services for passengers (Source: Researcher's work, 2016).
1.5 Proposed Scoot New Key Success Factors:
Scoot new key success factors are: employing an experienced, highly professional
management team including cabin crews, pilots, ground staff, etc. with customer
service oriented; use of advanced aircraft and electronic system on-board; development
and implementation of alliances and partnership with more established airlines
globally; reliability of service pertaining to the: on time arrival of flights, reports of
mishandled baggage, passenger complaints, etc (Source: Researcher's work, 2016).
In these new statements of mission, vision, and the company objectives to achieve the
organizational goals is completely congruent underlying with the new key success
factors of Scoot. However, these statements may embody change in the next 3 years as
LCC industry is tremendously organic in nature (Aviation Economics, 2014).


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02: Environmental and Industry Analysis
In this part, the researcher will identify the industry and the macro environmental issues
by utilizing PESTEL and Porter 8 forces strategic methods that will be discussed
further below.
2.1 Macro - PESTEL Analysis (Aguilar, F., 1967)
PESTEL framework has been selected by the researcher to analyze, monitor, and
identify the key drivers of change or factors that may have an impact to the market
industry.
Factors Areas of Analysis Trends (Positive / Negative)
Political Political situation of
the country
• Airline industry is subjected to various
legislations and regulations that make it
difficult to start up.
• Strict visa policy and border control to
combat terrorisms affect the airline
industry.
• Ability to operate existing routes (Chay,
J.Y., 2013)
• Discriminatory taxes of 30%
(Philippines common carrier tax)
Economical Economy trends,
international trade,
monetary issues and
prevalent economic
factors.
• Emerging Asian markets
• Economic instability resulted to
increased demand for LCC by (6.5%)
(Timms, 2013).
• Volatile fuel prices for the long term
• Short term fuel prices to stabilize
• Strategic geographic location
• Labor shortages &Rising labor costs by
(1/3 of revenue) (IATA, 2016).
• Declines in productivity &Rising in oil
prices (43.82) (Macquarie, 2016)
Social Social cultures;
lifestyle; buyer state of
mind
• Travelling by air is getting more popular
around the globe (6.3% - 6.5%)
(Shankman, 2014).
• Changes in consumer preferences;
customers become much more
demanding and dispute.
• Singapore population expected to reach
(6.9) million by year 2020 (Ong, A.,
2014)
Technological Technological
innovation that may
affect the market
structure
• Intense competition in airline industry.
• Increased use of internet for online air
ticket purchases by (78%) (Airline
Marketing, 2016).
• Mobile application for booking purposes
(rising 19% - 39%) market share


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(Airline Marketin, 2016).
Environmental Environmental
concerns
• Weather and seasons affect tourism
(0.1% - 0.4%) (Singapore Bloomberg,
2015).
• Carbon emissions & haze.
• Singapore is lack of water resources
(Straight Times, 2012).
• Singapore lost almost 30% of its
mangrove area (Straight Times, 2013).
Legal Change in the
legislation in the
industry
• Different country has different rules and
regulations, compliance are compulsory.
• Regulatory changes (China aviation
regulator encourage private airlines)
• Investment constraints particularly as
government entities.
Table 2: PESTEL Analysis - Scoot (Source: Aguilar, F., 1967 &Researcher's work, 2016)
From the analysis above, the political risk factors in Singapore is quite low. In fact,
according to the Political and Economic Risk Consultancy (PERC, 2015) the country
has the lowest political risk. The economy in Singapore is vibrant free-market
economy. The growth is driven by several factors including private consumption
expenditures, local and external demands, and investments. For better analysis, here are
the selected key drivers of change which is likely to have a high impact on the success
or failure of the strategy (Environment, Economical, Technological, and Social), these
are selected by the researcher considering the most important factors that needs to be
addressed.
2.1.1 Economical Key Driver of Change
(1)
This jet fuel price index and price data shows the global average price paid at the
refinery for aviation jet fuel as shown below will have an impactful influence to Scoot
Airlines which may be controllable through advanced jet engines (Joosung Lee &
Jeonghoon Mo, 2011).
17/06/16 Share
in
World
Index
Cts/gal $/bbl $/mt Index
Value
2000 =
100
Vs. 1
week
ago
Vs. 1
month
ago
Vs. 1
yr. ago
Jet Fuel
Price
100% 137.8 57.9 456.3 158.2 -3.5% 0.2% -24.0%
Asia &
Oceania
22% 134.5 56.5 446.3 161.4 -6.2% -0.4% -25.2%


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Europe
& CIS
28% 136.6 57.4 452.0 154.5 -4.1% -1.6% -26.0%
Middle
East &
Africa
7% 131.4 55.2 435.4 164.8 -5.3% -0.9% -24.6%
North
America
39% 140.8 59.1 467.2 157.2 -1.4% 1.9% -22.0%
Latin &
Central
America
4% 146.3 61.5 473.2 170.2 -1.5% 1.2% -21.5%
Table 3: Current Price of Aviation Jet Fuel (Source: IATA Publication, 2016 & Researcher’s work,
2016)
Here there was a consistent growth of aviation fuel cost, the impact on this year's fuel
bill of the global airline industry is -$28.7 billion excluding the handling costs, and the
new fuel price average for year 2016 is $48.6 billion estimated by IATA. So the
increased of fuel prices resulted to increase on costs of operations. However, the fuel
prices in 2016 are at the lowest point which is (-24.0%) lesser from last year based
from the table shown above (IATA, 2016), and this will help airlines to recover costs
and increase their profits as well. Europe and Asia were the highest recorded of
depreciation air jet fuel costs (-26.0% and -25.2%) respectively, so the impact of this
factor is favorable to Scoot Airlines as this will decrease the operating costs of the
company.
(2)
In addition, rising oil prices was considered having a powerful impact, as it reduces
the ability of the low cost airlines to differentiate on the cost front (M. A.R. Sarker, et
al, 2012).
Figure 1: Oil Price - Airline vs. Oil in year 2015 - 2016 (Source: Bloomberg, 2015 - 2016)


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Here the data was derived from the study conducted by Bloomberg, 2016. An increased
in the crude oil price of (43.82) in the 2nd
quarter of year 2016 from (26.21) in the 1st
quarter (2016) poses a risk to the airline industry and considered to become more
impactful in the next 5 years (Macquarie, 2016). Thus, in order to survive from this
economic impact, alternative fuel and new routes at low cost fares will help Scoot
reduce their operating costs.
(3)
Labor cost is another significant expense for the aircraft business (IATA, 2016), that
needs to closely monitor by the company, as this will have a great impact to the
operation costs which can probably lead to over spending. In fact, more than one-third
of the revenue generated each day by airlines goes to pay its workforce (Airlines
Economics, 2016).
2.1.2 Technological Key Driver of Change
Air travel will likely to double over next 20 years because of improved engine and
airframe technologies (IATA, 2015). In here, the air transport is an energy intensive
business but productivity improvements have been substantial as well as the
technological segment and improve the utilization of aircraft (IATA, 2016). (1)
So, as
technology is very dynamic in nature, adaptability (New Aircrafts) of this key driver of
change is significantly needed to consider for Scoot to survive in the industry for long
time.
(2)
The second type of technology innovation driver for aircraft performance is social
demand. Aircraft noise was known to caused hearing impairments in 1980s, public
demand for quieter aircraft accumulated over time (Joosung Lee & Jeonghoon Mo,
2011).So the airlines need to responsed by phasing out deafening aircraft and suggests
quieter aircraft.
(3)
Another technological key driver of change is the increased usage of internet for
booking purposes and to look for more variety of airlines offering the same service
have become a huge impact on the airline industry as well (Airline & Hotel Marketing,
2016).


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Figure 2: Travel Agencies vs. Internet Global Booking (Source: Airline & Hotel Marketing, 2016 &
Researcher’s work, 2016)
Here 78% of travelers exerted through online booking and 22% exerted by travel
agencies, so this represents that customer’s prefers internet booking for their air travel
trips instead of going to several travel agencies. In Asia, the market share of internet
booking rising from 19% to 39%, while in Europe its ranges from 61%-67% (Airline
Marketing, 2016).
In addition, the researcher have provided additional two key driver of change for better
analysis which will be revealed in (Appendix 17: Additional Key Driver of Change –
PESTEL).
2.1.3 Conclusive remarks on PESTEL Analysis
Overall, based from the PESTEL analysis with the key driver of change selected by the
researcher, factors that might negatively affect the operations, earnings and strategies of
Scoot are the environmental (0.4% decrease in LCC), economical in terms of the rising
oil price (43.82) and labor costs (1/3 of revenue), and the technological factors in terms
of innovation and adaptability of new aircrafts. However, the favorable factors such as
economical (dropped of fuel price) to (-24.0% in 2015), technological (rise of internet
global booking users) by (78%) and social (rise of air travel preference) by (6.3% -
6.5%) may have a positive impact to Scoot (Appendix 17: Additional Key Driver of
Change – PESTEL).
22%
78%
Travel agencies vs. Internet Global Booking
Travel Agencies
Internet Global Booking


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2.2 Low Cost Carrier (LCC) Industry Issues
In this segment, the researcher will use the Porter 8 forces model to analyze the low
cost carrier industry issues in terms of industry competitiveness and competitive forces.
2.2.1 Micro - Porter 8 Forces (M. Porter, 1979)
This model identifies and analyzes 8 competitive forces that may have an effect to
Scoot.
Competitive
Forces
Degree level Description
Threats of New
Entrants
Low -
Moderate
• The industry may need huge capital for
competitors to enter (over $2 million) for
LCC in 2015 (ECA LCC, 2015).
• Government legislators are one of the
barriers to enter into the industry.
Supplier's
bargaining Power
Moderate -
High
• Supplier's has the huge impact to the low-
cost airlines carrier (LCC) including
aviation fuel providers and aircraft
manufacturers.
Buyer's bargaining
Power
High • There are various airlines has the same
market share like Scoot (Jetstar, AirAsia,
etc.), so customers has a variety of airlines
to accommodate their travel needs.
Threats of
Substitutes
Low • Travel duration is one of the major criteria,
so air travel is the fastest way of getting to
the destination compared to other
substitutes such as by road, rail, and sea.
Deregulation High • Airline industry is subject to a number of
legislations and regulations (Wensveen,
2007).
• Government opened international market
for all airlines to help global development,
and enable customers to choose from a
wide range of options (IATA, 1965).
Globalization Moderate • Development on airport and aircraft
globally.
• Development of air transport becomes
optimistic despite on decline in the market
(Christian, D., 2011).
Digitization Moderate • Easily adapted due to trends globally.
Market
Competition
High • Intense market competition.
• Market is saturated and hard to survive.
• Various airlines offer the same service
(Jetstar, AirAsia, etc.)
Table 4: Porter 8 Forces Analysis of Scoot (Source: M. Porter, 1979 & Researcher's work, 2016)


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Based from the above findings, (1)
the market competition is (high), since there are a lot
of LCC who have the same offerings and travel routes like Scoot (Appendix 1: Low
Cost Carrier Routes), it expands to (13%) in 2015 (CAPA, 2016) (Appendix 13: LCC
Fleet expansion). In fact, even first class airlines are offering promotions which is
likely the same range of airfare with these budget airlines: Jet Star and Air Asia
(Appendix 1: Low Cost Budget Airlines Routes). Also, this force is expected to increase
its intensity for both domestically and internationally in the future (Copenhagen
Business School, 2011).
(2)
The threats of Substitutes are low since air travel is more attractive compared to the
other substitutes and duration of air travel is more efficient (Appendix 2: Travel
Duration to Kuala Lumpur Malaysia by rail, road, sea, and air). Although, those
substitutes are generally lower in cost, but air travel is most preferred for long haul trip
(Airline Expert, 2015).
(3)
Supplier’s bargaining power rises (from moderate to high) due to lack of aircraft
manufacturers, so it reduces the bargaining power of Scoot. However, this force is
expected to gradually decline in the mere future (Copenhagen Business School, 2011).
(4)
Buyer’s power is (high) as LCC top players has the same market share and the
perceived commoditization of air travel and low switching cost also contributes to the
buyer’s force (Appendix 10: Competitor’s Strategic Position with respect to Revenue).
2.2.2 Conclusive remarks on Porter 8 Forces Analysis
In conclusion, in order for Scoot to survive in a very saturated market industry and
other barriers mentioned from the above analysis, Scoot need to focus on meeting
industry success and survival factors, this includes (a) excellent customer service
through a wide range of operations, (b) low and competitive pricing, (c) on time
performance and wider networks, (d) loyalty programs, (e) increase frequency, and (f)
attractive offers and deals. So these forces can be exerted as an opportunity for Scoot.


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03: Capability Analysis – Scoot (Low Cost Carrier)
In this segment, the researcher will identify the strategic resources and capabilities by
using the capabilities in the context of the value chain and the application of VRIO for
any distinctive capabilities.
3.1 Concepts and Tools with respect to resources and capabilities
In here, the researcher will utilize the concepts and tools below for the resources and
capabilities analysis of Scoot Airlines.
Concepts,
Tools and
References
Description of Concepts with respects to resources and
capabilities
1. Value Chain
Analysis
(Johnson, G.,
2014)
2. VRIO
Analysis
(Barney, J.,
1991)
3. McKenzie
7’s Framework
(McKinsey,
1980)
Financial
Scoot revenues have increased by (5.3%)
in 2015 from ($856.6) in 2014 to
($902.5) in 2015 (SIA Annual Report –
Scoot, 2014-2015).Cash fund raise of
$2.5 for charity from two-fund raising
events (Scoot, 2015).
Physical
Physical capability in terms of employee
productivity increase by (1%) in 2015
from (23.7) in 2014 to (23.9) in 2015
(Scoot, 2015).
Technological Innovative fleets and easy booking
application.
Organizational
Scoot has a tall and narrow structure
type of organization (Appendix 12: Scoot
Organizational Chart) which lead to
slow down the decision making and
communication of subordinates also high
management (labor) costs.
Human
Scoot has (650) employees and expect to
grow to (1,000) employees including
pilots and cabin crews for the their
expansion (Hardasmalani, R., 2015)
Reputation
Reputable brand and environmental
conscious company and committed to
community.
Table 5: Concepts and Tools (Barney, J., 1991 & Johnson, G., 2014)
The illustration of each concepts and tools (Value Chain Analysis and VRIO Analysis)
will be discussed further below.


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3.2 Value Chain Model (M. Porter, 1985)
This model is the internal processes or activities of an organization that intends to
achieve competitive advantage by delivering value to the customers (M. Porter, 1985).
Below are the activities performed by Scoot:
Primary Activities:
Inbound and Outbound Logistics:
Scoot inbound and outbound logistics operations are complex and involve timely delivery of
fleets. The airline derives value in outbound logistics primary operations via efficient handling of
luggage; flight scheduling; facilities planning; yield management system; and passenger service
system (SIA – Scoot Sustainability Report, 2015).
Operations:
Scoot flies globally to (18) destinations (Scoot, 2015), therefore the scope of its operations is
quite extensive. Scoot competitive advantage in operation is by offering customers increased
security in their checked-in luggage, quick ticket booking, online booking, and other e-services
(Scoot, 2015).
Services:
Scoot has loyalty card or Kris flyer card privileges which may have an add value service for
Scoot's existing and prospect customers; and lost baggage service (Scoot, 2015).
Marketing and Sales:
Scoot marketing strategy is directly communicated to its target market segment by the utilization
of marketing communication mix such as social media and TV advertising, sales promotions,
events and experiences, public relations, and direct marketing (Scoot, 2015).
Supporting Activities:
Procurement:
The whole procurement process of Scoot is automated with strict compliance of rules and
regulations and the company standards to distance themselves from any uncertainties and
fraudulent activities that may harm the company itself.
Technology Management:
Computer reservation system; In-flight system; flight scheduling system; yield management
system; Baggage tracking system (Scoot, 2015).
Human Resource Management:
Pilots and cabin crews safety operation training; baggage handling training; ground crew
customer service training; and in-flight training; agent training (Scoot, 2015).
Infrastructures:
Legal regulatory compliance over financial policy, aviation global regulation; government
legislation and regulations.
Table 6: Value Chain Analysis - Scoot (Source: M. Porter, 19865 & Researcher's work, 2016)
Based from the above findings, Scoot has a good alignment in every component in
value chain activities. However, as technology in an airline industry is very complex
and organic, Scoot need to reevaluate and closely monitor technological aspects and in


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any other activities in value chain to ensure maximizing the value for customers
(Appendix 3: Value Chain Framework).
Value added services are needed to be reassessed against factors that influenced
customers to choose which airlines (Appendix 5: What customers want to experience on
board?), so that Scoot can retain its existing customers and attract new customers.
Scoot could benefit from these opportunities only if they develop their capabilities and
core competencies.
3.3 Competitor’s Strategic Position (with respect to the revenue)
Here the researcher makes a comparative view in terms of revenue between the focus
company and its competitors (Appendix 10: Competitor’s Strategic Position). Scoot
generating revenue with 30% increased in 2014 and 5% increase in 2015, results driven
by the increase in air travel demand by 6.3% - 6.5% (Airline Expert, 2015).
3.4 VRIO Application Analysis of Key Capabilities and Statistics
VRIO framework is focused on four areas of capabilities namely organization value,
rarity, inimitability, and organization support (Appendix 4: VRIO Framework). For
better analysis, the key capabilities can be categorized as follows:
Organization
al Resources
Capabilities
Threshold
Capabilities
(Market
competition)
Human
• Managerial and Leadership Skills
(Directive/Autocratic Approach)
• Professional Expertise & Skill set resources
• Trustworthiness
Financial
• Cash & Other assets
• Capability to raise equity and
• Credit or Borrowing Power
Physical • Plant & other machineries
• Prime Locations
Distinctive
Advantages
(Competitive
Advantage)
Technological
& Innovation
• Innovated Fleets
• Booking application (Company website & mobile
application – IOS & Android Supported)
Organizational • Organization specific operational model
• Management and control system
Reputation • Brand name & Environmental consciousness
• Goodwill and community engagement, etc.
Table 7: Threshold and Distinctive Capabilities (Johnson, G. 2014)


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Human:
Scoot has 650 professional and skilled employees with professional expertise and
relevant skill sets and resources that can help Scoot to have strong workforce (Scoot,
2016). The company will be expanding its employees by 54% or 1000 in 2016. Below
is the distribution of staff strength and productivity:
Category 2014 2015 % Change
Senior Staff 44 59 34%
Technical Crew 61 75 23%
Cabin Crew & Pilots 212 296 40%
Other Ground Staff 198 220 11%
Passenger load carrier per
employee
25,516 25,995 1.88%
Table 8: Distribution of Staff Strength and Productivity (Scoot, 2015 & Researcher's work, 2016)
The company has a clear vision towards their employees with respect to their career
development, as such proper and regular training has been implemented as well (Scoot,
2015).
Financial:
The financial stability is assessed based from its gross profit, total expenditure,
operational profit, and investment costs, including credit or borrowing power of the
company.
Areas 2014
(in millions)
2015
(in millions)
% Change
Revenue S$856.6 S$902.5 5.4%
Total expenditure S$822.1 S$861.7 4.8%
Operational Profit S$34.5 S$40.8 18.3%
Investment costs S$45.1 S$100 121.7%
Borrowing power S$111 S$161 45%
Table 9: Financial Stability (SIA Annual Report - Scoot, 2015 & Researcher's work, 2016)
Based from the above findings, Scoot has a stable financial status with great
performance towards revenue growth by 5.4% and 18.3% in its operational profit which
means, Scoot is having operational efficiency in using their assets effectively.


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Physical:
The physical capability is being assessed in terms of property, plant and equipment
including aircrafts, spares and spare engines, etc.
PPE 2014
(in millions)
2015
(in millions)
Change %
Current Assets S$209.4 S$243.3 16%
Non-current Assets S$579.1 S$648.5 12%
Table 10: Physical capability - SIA Annual Report - Scoot, 2015 & Researcher's work, 2016)
In 2015, there is an increase of the total net assets by 13.10% in reference to the 2014
net assets which shows a good marked for Scoot.
Technological & Innovation:
Under the fleet management of the company, its technological and innovation
capabilities have been developed and gain an increase of 20 more aircrafts for short and
long term haul, as such increase in destinations and routes takes place. Technological
capabilities in terms of booking application and on websites have been improved and
integrated with reservation system as well (Scoot, 2015).
Organizational & Reputation:
Scoot organizational capacity, the areas of focus are proper control structures, excellent
customer service, and structured strategic planning which Scoot adapted from SIA.
Scoot reputation, brand name and its trustworthiness are great as perceived by
customers as Scoot is a LCC and wholly owned of Singapore Airlines, as such the
brand reputation of Singapore Airlines has been adapted by Scoot.


- 19 -
3.5 VRIO Analysis based on the Findings
According to the framework, the result should be available for each question to ensure
the organization will able to sustain and gain competitive advantage.
Description
V Value Capabilities are being valued by customers
R Rarity Few or no competitors possess the said capabilities
I Inimitability Capabilities are difficult to imitate by the competitors and
too costly to obtain
O Organized Organizational support
Table 11: VRIO Framework (Source: Barney, J., 1991 & Researcher's work, 2016)
Below are the output analysis added by the researcher.
3.5.1 Analysis of Value and Rarity Factor
Based from the findings, Scoot resources and capabilities with statistical data are
valuable but not rare in terms of threshold capabilities (great performance revenue with
5.4% growth and 18.4% growth in operational profit and 13.10% growth in the total
net assets) and distinctive advantages (increased by (20) more aircrafts; SIA
organization reputation has been adapted by Scoot as perceived by customers). So the
analysis output with respect to value and rarity is valuable but not rare (refer to analysis
output, table 12 below) because there are various players in the market that offer the
same service and with the same resources.
VRIO Framework Questions Analysis
Output
Scoot organizational
resources is?
Not Valuable No
Valuable but not Rare Yes
Valuable and Rare No
3.5.2 Analysis of Inimitability Factor
In this segment, the new entrants and existing rivals will find it difficult and too costly
to imitate or substitute compared to physical assets due to its complexity of the process,
casual ambiguity, skills and competency of workforce and also the culture and history
of the business (huge capital investment over $2 billion and Scoot workforce with over
650 professional and skilled employees). Thus, Scoot organization resources are


- 20 -
valuable but not rare and too costly to imitate or substituted (refer to analysis output,
table 13 below) because skills and competency is extremely rigid to be substituted.
Output
Scoot
organizational
resources is?
Valuable but not rare and too costly to
imitate
Yes
Valuable but not Rare and not costly to
imitate
No
3.5.3 Analysis of Organization Factor
In this part, the organizational and control structures have been structured and
implemented, however, they are need to be configured to have better competitive
advantage against the competitors.
Output
Scoot
organizational
structure and
control is?
Organized properly No
Not Organized Properly and need
development
Yes


- 21 -
3.5.4 VRIO Conclusion (Based from the findings)
Applying the VRIO Framework, below are the findings if capabilities of Scoot are
valuable, rare, inimitable, and supported by the organization. The table below
summarizes the VRIO Framework of capabilities and shows that there is an additive
effect if the organization did or did not meet the four criteria’s.
Valuable? Rare? Inimitable? Supported
by the
organization
?
Competitive
Implications?
Scoot VRIO
Findings
No - - No Competitive
Disadvantage
False
Yes No No No Competitive
Parity
True
Yes Yes No Yes Temporary
Competitive
Advantage
False
Yes Yes Yes Yes Sustained
Competitive
Advantage
False
As the findings shows that Scoot only have a competitive parity advantage against its
competitors, which means, Scoot need to configured its organizational structures (by
transforming from tall to flat organizational structure), advanced controls, newly
developed strategic models, excellent customer service, etc. because Scoot may be wipe
out in the market if those shortcomings and risks will not be reviewed and redesign for
the better competitive and sustained advantage in which sustainable competitive
advantage arises if the organization resources and capabilities are valuable, rare,
inimitable, and supported by the organization (Barney, 1991).


- 22 -
3.6 McKinsey 7’s Framework (McKinsey, 1980)
This framework intends to analyze organizational structure or designs with the 7 key
elements: Strategy, Structure, System, shared values, style, staff, and skills (Appendix
14: McKinsey 7’s Framework).
Areas Details/Definition Scoot Airlines Alignment
Strategy Clear and long term
plan that help to
achieved competitive
advantage and
reinforced by strong
mission, vision, and
values.
Scoot has a long term strategy to be
able to survive in a saturated market
industry (acquisitions and mergers of
Tiger Airways; promise to offer more
international destinations). (CAPA
Aviation Analysis, 2015).
NO
Structure Organizational chart of
the company.
Scoot has a tall and narrow structure
type of organization (Appendix 12:
Scoot Organizational Chart) which
lead to slow down the decision making
and communication of subordinates
also high management (labor) costs.
NO
Systems Process and
procedures of the
company, including
business daily
activities and how
decisions are made.
The whole business process is
mandated to provide complete and
accurate information of operations
(Wilson, C., 2016)
YES
Skills The abilities and
capabilities of
workforce.
Scoot has a “Cadet Pilot Program” in
which employees need to undergo a
comprehensive training program for
safety operations and customer service
(Singapore Flying College, 2016).
YES
Staff The number of
employees needed in
the organization,
recruitment &
selection process.
Scoot has 650 number of employees
and expected to expand upto 1000 in
2016 (refer to section 3.3)
YES
Style Represents the top
management styles.
Scoot management style is having a
directive leadership approach from top
management to low level hierarchy in
the organization (Appendix 12: Scoot
Organizational Chart). (Campbell, C.,
2015).
YES
Shared
Values
The core of the
framework
Scoot adapted the norms and standards
of SIA including the strengthening its
controls and intelectual property
rights, etc. (Scoot, 2015).
YES
Table 16: McKinsey 7’s Framework – Scoot Airlines (Source: McKinsey, 1980 & Researcher’s
work, 2016)


- 23 -
Here the 7 elements are mutually dependent to the other elements, since the strategy
and the structure of Scoot represents a misalignment in the organization resulting to
dysfunctional throughout the organization and can lead to disturbance of the
organizational synchronization. Strategy should be aligned to the other elements by
improving its business and corporate strategy and by transforming the structure of the
organization to flat or wide structure type (Appendix 12: Scoot Organizational Chart)
to minimize the labor costs and cut those divisions or units that are not productive or
unneccesary. So this organizational configurations or structural changes will be
favorable to Scoot.
3.7 SWOT Analysis (Humphrey, A., 1960)
This model is used for strategic planning process by understanding organization's
strengths, weaknesses, opportunities, and threats.
INTERNAL FACTORS
Strengths: Weaknesses:
• Scoot revenues have increased by
2.1% in 2015 from $15.2 in 2014 to
$15.5 in 2015 (SIA Annual Report –
Scoot, 2014 – 2015).
• Scoot added workforce for business
expansion by (54%) in 2016 and
increased in employee productivity
by (1%) as well (Scoot, 2015).
• Scoot technological and innovation
capability has been developed and
gain an increase of (20) more
aircrafts for short and long term haul,
as such increase in destinations and
routes takes place as well (Scoot,
2015).
• Technological capability in terms of
booking application and on websites
has been improved and integrated
with reservation system (Scoot,
2015).
• The procurement process of Scoot is
automated with strict compliance of
rules and regulations and the
company standards to distance
themselves from any uncertainties
• Lack of airline manufacturers and
airport infrastructures commonly in
urban areas in other country of
destination (Copenhagen Business
School, 2011).
• Scoot organizational structure (tall
organizational structure) is not
properly organized and need some
development (Scoot, 2015).
• Scoot is valuable but not rare since
there are various players who have the
same offerings with Scoot, so
differentiation should be established.
• Scoot is lack of on-board
entertainment, games, on-air
connectivity, etc. for customers,
especially those who travel for long
hauls trips (Scoot, 2015).
• Scoot is lack on value added services
including airport transfers, 2-in-1
booking (flight + hotel) at customers
choice (Scoot, 2015).
• Scoot has limited variety of usage for
Kris flyer loyal members (Scoot,
2015)


- 24 -
and fraudulent activities that may
harm the company (Scoot, 2015).
• Scoot flies globally to (18)
destinations (Scoot, 2015).
• Scoot offering customers increased
security in their checked-in luggage,
quick ticket booking, online booking,
and other e-services (Scoot, 2015).
EXTERNAL FACTORS
Opportunities: Threats:
• International alliances and mergers of
network carriers will be a great
opportunity for Scoot.
• Air travel will likely to double over
next 20 years because of improved
engine and airframe technologies
(IATA, 2015).
• Singapore population expected to
reach 6.9 million by year 2020 (Ong,
A., 2014).
• Travel duration is one of the major
criteria, so air travel is the fastest way
of getting to the destination compared
to other substitutes such as by road,
rail, and sea (Appendix 2: Travel
duration from Singapore to KL via
rail, sea, and road).
• Deregulation becomes a threat as,
government opened international
market for all airlines to help global
development, and enable customers to
choose from a wide range of options
(IATA, 1965).
• Changing customer preferences.
• Government & Political interference
may have caused a great damaged to
Scoot, if government is in favors to the
other national airline carrier (Taneja,
1989).
• Haze from forest fires in Indonesia
brings a lot of seasonal smoke in
Singapore resulting in health hazards
and visibility issues and even affects
tourism industry (Singapore
Bloomberg, 2015).
• Consistent growth of aviation fuel
cost, the impact on this year's fuel bill
of the global airline industry is (-
$28.7) billion excluding the handling
costs, and the new fuel price average
for year 2016 is ($48.6 billion)
estimated by IATA.
• Changes in customer preferences.
Table 17: SWOT Analysis - Scoot (Source: Humphrey, A., 1960, Scoot, 2015 & Researcher's work,
2016)
In here, all the findings are derived from the industry (macro and micro environmental)
analysis and capabilities (value chain and VRIO) including the organizational structure
analysis with the application of (McKinsey 7’s Framework) which will be used for the
strategic proposition for Scoot.


- 25 -
04: Proposed Strategy (Business & Corporate)
In here, the researcher will use the combination of business strategy and corporate
strategy. The research data generated from the industry and environmental analysis and
company capabilities in reference to the above SWOT Analysis will be discussed
further below.
4.1 Change in Business Strategy - Porter’s Generic Strategy (M. Porter, 1980)
This model identified three strategies for gaining a competitive advantage over the
competitors (cost leadership, differentiation, and focus). According to Porter, in order
for the organization to compete, they must choose between three generic strategies
(Appendix 6: Porter’s Generic Strategy).
Generic Strategies Description of Strategy
Cost Leadership • Maintain low cost airfare
• Outsourcing (Maintenance, Repair, and Overhaul)
• Seasonal pricing strategy (low fares)
Differentiation
• Expanding into international markets
• Value added service – Airport Transfers
• Innovative aircraft with built-in entertainment per seat
including games, movies, connectivity for on-board
passengers.
• Loyalty membership card – Kris flyer with wider
variety of usage such as (a) convert points to one way
air ticket, 100 point = S$1 redeemable, (b) convert
points to cash donations for charity at customer’s
choice. (c) convert points for upgraded seat from
economy class to premium or business class seats,
5000 points = premium seat, 8000 points = business
seat. (d) Adjusted redeemable points, from 30000 =
free one way flight ticket worth S$300 adjusted to
20000 = free one way flight ticket worth S$200.
• Value added service – 2 in 1 booking (Flight + Hotel)
at customer’s choice with wide range of options for
hotels.
• Value added service – Delayed flights, (a) customers
will have complimentary hotel accommodation for
overnight delays or over 10hours delayed, (b)
customers will have free meal and drinks for short
hour’s delays.
• Value added service – Improved security towards
customers checked-in luggage, online booking, and
other e-services of Scoot.


- 26 -
• Well trained pilots and cabin crews for safety flight
operation.
Table 18: Porter’s Generic Strategies – Scoot (Source: M. Porter, 1980 & Researcher's work,
2016)
In here, the researcher focused on two generic strategies: cost leadership and
differentiation to have better competitive advantage over Scoot’s competitors. These
proposed strategies are completely aligned with the new mission, vision, and an
objective of Scoot which was revealed in the first part of the research (under section 1)
which was created by the researcher.
Scoot need to focus on these two generic strategies so they can compete in the market
and likely to have an edge amongst its rivals. The cost leadership focused on low cost
airfares at all times, so Scoot can capture higher market share than competitors and gain
higher profits. Another key strategy element in the cost leadership strategies is
outsourcing maintenance, repair, and operation (MRO) costs of aircrafts to reduce
operating costs. In the study from global perspective towards LCC, cheap fares are the
main reasons for the success and survival of LCC industry (R. Sarker, Hossan, and
Zaman, L., 2012). From the study, published by (Journal of Aviation Technology and
Engineering), outsourcing for MRO’s will grow from ($9 billion) in 2008 to ($13
billion) in 2017 (Philips, 2008).
The differentiation strategy is focused on value added services for consumers,
respondents in the survey verbally conducted by the researcher; people intend to look
for extra value added services for free (Appendix 6: What customers like to experience
on board?). Results turns out that (32.5%) of 120 respondents would like to have
movies & series, inbuilt in every passenger seats, (22.5%) respondents would like to
have free meals & drinks on board, (20%) are for internet connectivity, and the
remaining (25%) are for games and music entertainment (earphones). Scoot need to
differentiate itself from the customer’s perspective against LCC. Another key strategy
element for differentiation strategies that Scoot should applied apart from the quality of
service through CRM, is the branding advertisement which focus one marketing
abilities in delivering and interacting with prospect and existing customers (Grant &
Jordon, 2012).


- 27 -
New
Existing
So in conclusion, branding, quality and seamless customer service, safety flight
operation, cost reduction, innovative aircraft and added value services are important
factors for Scoot for sustainability purpose and gaining competitive advantage.
4.2 New Corporate Strategy Directions – Ansoff Matrix (I. Ansoff, 1957)
This model helps the organization to map strategic product/service and market growth.
The model has four components: market development, market penetration, product
development, and diversification (Appendix 7: Ansoff Matrix).
Market Development Diversification
• Tie up with government agencies
of least to medium popular
destinations to benefit the
government of the country by
promoting its inbound tourism and
Scoot itself.
• Facilitate network alliances
(international & domestic)
• Expand into international markets.
(Source: Researcher’s work, 2016)
• Gifts and souvenirs such Scoot
T-shirts, key-chains, bags, caps,
pens, notebooks, stationary's,
wallets, cosmetics, etc. available
on board.
• Airport transfers & car rentals
• Hotel and accommodation
(Flight+Hotel)
(Source: Researcher’s work,
2016)
Market Penetration Product Development
• Develop promotional methods (TV
ads, social media, direct mail, etc.)
• Focus on unbundled low cost
model and need based outsourcing
(5% reduce costs).
• Quarterly training (20 hours per
head count) for pilots and cabin
crews for safety flight operations
for customer’s peace of mind.
• Implement CRM or Customer
Relationship Management.
• Introduce new in-flight
entertainment system such as free
streaming of movies/series,
games, music entertainment, etc.
(Appendix 6: What customers
like to experience on board?).
Existing Products/Services New
Figure 3: Ansoff Matrix – Scoot Corporate Strategy (Source: I. Ansoff, 1957 & Researcher’s
work, 2016).
As per the analysis above, the need based outsourcing (MRO’s) for the market
penetration will help Scoot to reduce costs by (5%) in times of low demand in air travel
(Aviation Economics, 2015); several suppliers with structured contract will be needed
here. Quarterly training (20 hours per headcount) for pilots, cabin crews, ground staffs,
etc. for safety flight operations will have customers at ease. Facilitating geographical
M
a
r
k
e
t
s


- 28 -
scope (Grant & Jordan, 2012) international and domestic network alliances and tying-
up with government agencies will help Scoot strengthen its market development.
Diversification to gifts and souvenirs, car rentals & airport transfers, and hotel
accommodation, etc. which came from ancillary revenue will enable Scoot to earn
additional revenue from ancillary. As per the researcher, the motif of diversification is
to spread the risks, thus, the researcher exerted diversification attractiveness test to
determine if diversification create value to customers which is shown in (Appendix 9:
Diversification Attractiveness).
Implementing customer relationship management (CRM) and introducing on board
entertainment systems will enable customers to have luxurious experience and a happy
flight before, during, and after the flight (Appendix 5: What customers wants to
experience on board?). From the study conducted by the professional airline expert,
factors that influenced customers to choose a flight are the price, comfort,
entertainment, and preference (Airline Miles Expert, 2012).
So in conclusion, these suggested new and advanced strategies will greatly affect Scoot
operations, earnings, customer satisfaction, and global networks which are perfectly
aligned to the new mission, vision, and objectives of Scoot (refer to section 1).


- 29 -
4.3 Balanced Scorecard and Strategy Map (Kaplan & Norton, 2001)
This framework focuses on four perspectives: Financial, Customer, Internal Business
Process, and Innovation & Learning.
Areas Target Strategy Description
Financial
Perspective
1. Increase
shareholder value.
2. Increase ROCE
(return on capital
employed) to 10%
per annum.
Revenue Growth Strategy:
• Increase profitability (10% ROCE) by
diversifying products through gifts,
souvenirs, cosmetics, perfumes, travel
insurance, meals, etc. from ancillary
revenues which can increase generating of
revenues.
Productivity Strategy:
• Strengthen alliance and partnership with
international networks such (Tiger and
NokAir in Thailand, etc.)
• Maximize the use of assets or company
resources and capabilities.
• Cost reduction by transforming
organizational structure from tall to flat to
minimize labor costs and have a faster
communication of top management to
lower subordinates.
Customer
Perspective
1. Satisfied and happy
customers.
2. Retain customers.
3. Strong
supplier/dealer
relationship.
4. Wide range of
product availability
and attractive value
added services.
5. Convenience
• Technology advancement of aircraft.
• Increase number of fleets and
international and domestic destinations.
• Technology advancement on board
entertainment such as connectivity,
movies, games, etc.
• Wide range of availability.
• Friendly and helpful customer service
representatives, cabin crews, pilots,
ground staff personnel’s, etc.
• Loyalty recognition or rewards
• High quality of products and services
including those proposed diversified
products.
• Clean and safe environment and aircrafts.
Internal
Perspective
1. Achieve operational
excellence
2. Motivated, happy,
and prepared
workforce
• Monitor market rivalry both existing and
newly startup companies who might be a
big threat to Scoot Airlines and being
trapped in the competitive box (Piercy,
2009). (Appendix 15: The trap of
competitive box).
• Monitor and reassess regularly the


- 30 -
environment (macro and micro) and
market industry to determine key driver of
change which can have a powerful impact
to Scoot Airlines.
• Improve leadership skills and
productivity.
• Adaptability and flexibility and
technology savvy.
• Implement regular training for workforce
particularly those who have direct
interaction to customers or passengers
such as cabin crews, ground staff, pilots,
management, etc.
Innovation
and
Learning
Perspective
1. Research and
development
• Continuous improvement and innovation
• Research and development and
understand customer segments.
Table 19: Balanced Scorecard – Scoot (Source: Kaplan & Norton, 2001 & Researcher’s work,
2016)
Scoot Airlines may achieve extraordinary business performance and alignment of each
strategy and targets mentioned in the above table which will enable Scoot to become
more strategy focused organization. For an instance, in financial perspective, increase
profitability from ancillary revenues will greatly contribute and boosts Scoot’s
earnings, since this ancillary revenues coming from diversified products are attractive
to customers (Appendix 9: Diversification Attractiveness Test). In fact, ancillary
revenues are kept on growing by (5%) per year, according to (Worldwide airlines
ancillary revenue, 2012) and by diversification; Scoot will spread the risks that can
tends to reduce fluctuations in profits (Grant, R. & Jordan, J., 2012).
Also, proposed strategy map have been created by the researcher which will be
revealed in (Appendix 16: Proposed Scoot Strategy Map).


- 31 -
05: Strategy Evaluation
In here, the researcher will conclude by providing suitability, acceptability, and
feasibility evaluation of the proposed strategies mentioned (section 4).
Concept Section Focus Suitable Strategies Address
PESTEL 2.1 Key Environmental
Drivers (Technological,
social, economical,
environmental, etc.)
• Major environmental changes
including environment,
economic, social, and
technological as selected by the
researcher
Porter 8
Forces
2.2.1 Industry Attractiveness
Competitive Forces
(Market rivalry,
bargaining power of
suppliers and buyers,
deregulation, etc.)
• Reducing competitive intensity.
• Development of barriers and
forces
Value
Chain
3.2 Opportunities for vertical
integration or outsourcing
(operations, marketing
and sales, inbound and
outbound logistic, etc.)
• Possible outsourcing of MRO
(maintenance, repair, operation)
of aircrafts.
• Development of technological
aspect (in-built entertainment)
VRIO 3.3 Industry threshold
standards & Bases of
competitive advantage
• Development on organizational
structures, controls, strategic
models, CRM, etc. (competitive
parity)
SWOT 3.5 Strengths towards
opportunities & avoidance
of threats; Opportunities
towards overcoming
weaknesses; and
minimizing weaknesses to
avoid threats.
• Development on overall
business segments.
Porter’s
Generic
Strategies
4.1 Business strategies (cost
leadership and
differentiation).
• Low cost airfare, value added
services, innovative aircrafts,
more international destinations,
loyalty card, etc.
Ansoff
Matrix
4.2 Corporate strategies
(market development,
market penetration,
product development, and
diversification).
• Outsourcing of MRO, CRM, etc.
Table 20: Porter’s Generic Strategies – Scoot (Source: M. Porter, 1980 & Researcher's work,
2016)
Here are the useful techniques that the researcher exerted to evaluate the proposed
strategies. So the strategies can be evaluated to the three SAFe criteria of suitability in
view of organizational opportunities and threats, acceptability to key stakeholders and


- 32 -
feasibility in terms of capacity for implementation (Appendix 8: The SAFe criteria and
techniques of evaluation).
5.1 Suitability – Ranking Technique
Ranking technique provide an initial view of the suitability of strategic options by
comparing strategic options against key strategic factors from the SWOT Analysis
under (section 3.5).
Key Strategic Factors
Strategic
Options
Fit with
technical
competenci
es
Builds
reputation
Increase
Differenti
ation
Increase
Customer
Satisfacti
on
Increase
Profits /
Income
Ranking
Expansion to
global market
ü ü x ü ü 4-1 (B)
Strategic
Alliances
x ü ? ? ü 2-1 (B)
Develop aircraft ü ü ü ü ü 5-0 (A)
Value added
services – Flight
+ Hotel Booking
ü ü ü ü ü 5-0 (A)
Value added
services – On
board
entertainment
ü ü ü ü ü 5-0 (A)
Value added
services – Airport
Transfers
ü ü ü ü ü 5-0 (A)
Value added
services –
Improved luggage
security
ü ü ? ü x 3-1 (B)
Focus on low cost
and need based
outsourcing
ü ü ü ü ü 5-0 (A)
Implement CRM x ü ü ü ? 3-1 (B)
Diversification to
gifts and
souvenirs, etc.
x ü ü ü ü 4-1 (B)
Tie up with
government
agencies
x ü ? ? ü 2-1 (B)
ü = Favorable ? = Uncertain / Irrelevant
X = Unfavorable A = Suitable B = Possible C = Unsuitable
Table 21: Suitability Ranking Techniques – Scoot (Source: Johnson, G. et al, 2014 & Researcher’s
work, 2016)


- 33 -
Based from the ranking technique, the possible strategies that are suitable for Scoot via
ranking are those with the highest ranking 5-0 (A) which means the strategic options
are suitable against the key strategic factors. Thus, proposed strategies could positively
avoid the threats from environmental and industry factors including the intense in the
market rivalry and other key driver of change in the macro environmental analysis and
the 8 forces.
5.2 Acceptability
Here, the strategy evaluation in acceptability is concerned with whether the expected
performance outcomes of a proposed strategy meet the expectation of stakeholders
(Johnson, G. et al, 2014). These have three type of approach: Risk, Returns, and
Reactions of stakeholders. But in assessing the acceptability strategy, the researcher
will exert risk approach.
5.2.1 Risk Approach – Sensitivity Analysis
Here the researcher forecasted two scenarios: best-case scenario and worst-case
scenario, the assumptions are listed below.
Scenario
Analysis
Best-case Scenario Worst-case Scenario
Growth Rate
(GDP)
2016 expected growth rate is at 4.8%
2017 - 5.50% (researcher’s assumption)
2018 - 6.50% (researcher’s assumption)
(Trading Economics Singapore, 2016)
Researcher's Assumptions:
2016 growth rate - 4.0%
Inflation Rate
Cost
2016 expected inflation rate is at -0.35%
2017 – (-1.00%) researcher’s assumption
2018 – (-1.50%) researcher’s assumption
(Trading Economics Singapore, 2016)
Researcher's Assumptions:
2016 inflation rate - 2.0%
Table 22: Scoot Sensitivity Analysis – Best Case and Worst Case Scenarios (Source: Singapore
Trading Economics & Researcher’s work, 2016)
Average growth rate in 2016 is expected at 4.8% and inflation rate of (-0.35%)
according to Singapore Trading Economics. Researcher’s assumption on growth rate is
4% - 4.80% in year 2016-2018 and inflation rate from 1%-3% in year 2016-2018.
Below is the scenario analysis


- 34 -
5.2.2 Best Case Scenario (In millions – SGD)
Figure 4: Scoot Best Case Scenario – Sensitivity Analysis (Source: Scoot Annual Report, 2015 &
In the best case scenario, Scoot will have the capacity and ability to expand its overall
revenue by (5% to 6%) yearly in the next three years, as the GDP is predicted to
increase by 4.8% in 2016, the researcher expected GDP growth by 5% - 6.50% in 2017
and 2018 respectively. Based from the figure above by end of 2016, percentage of
margin increases by (103.79%), (60.72%) end of 2017, and (43.22%) end of 2018
which means market demand increases and operating profit as well. So the effect on
this best case scenario or sensitivity analysis in profitability and performance based
from the assumptions is favorable to Scoot and such results meet the expectations of
stakeholders as well.
2015 2016 2017 2018
Best-case GP margin% 4.52% 9.21% 14.81% 21.21%
Worse-case GP margin% 4.52% 6.36% 7.25% 7.96%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%


- 35 -
5.2.3 Worst Case Scenario (In millions – SGD)
Figure 5: Scoot Worst Case Scenario – Sensitivity Analysis (Source: Scoot Annual Report, 2015 &
While, in the opposed case or the worst case scenario, Scoot may face difficulties in
achieving its goals as the rising of inflation rate (2.0%, 3.5%, and 4.0% in 2016 to 2018
respectively) affects the profitability and performance of Scoot and the slow growth of
economic rate based from the figure above (4.0%, 4.5%, and 4.8% in 2016 to 2018
respectively) may destroy Scoot stakeholder’s value. Thus, in order for Scoot to
overcome the unfavorable condition, Scoot needs to adapt the proposed suitable
strategies mentioned in (section 5.1).
2015 2016 2017 2018
Best-case GP margin% 4.52% 6.36% 7.25% 7.96%
Worse-case GP margin% 40.62% 14.10% 9.76%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%


- 36 -
5.3 Feasibility
In here, the evaluation is measures whether Scoot has the resources and capabilities to
deliver the proposed strategies. Based from the findings in the resources and
capabilities analysis of Scoot (Value Chain, VRIO, and McKinsey 7’s Framework), the
findings are in competitive parity, but, Scoot is valuable in terms of its threshold
capabilities and distinctive advantages. Therefore, Scoot has the capabilities and
resources to implement the proposed strategies which are viable. In addition, these
resources and capabilities can be transformed into competencies of Scoot which can
lead to sustainable competitive advantage.


- 37 -
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- 40 -
Appendix 1: Low Cost Budget Airlines Routes
These are the travel destinations of the top four big players in low cost airline industry.
Scoot Jet star Air Asia
Destinations Australia
Indonesia
Philippines
Malaysia
Thailand
Hong Kong
Macau
Taiwan
Japan
Maldives
Bangladesh
India
China
UAE
Vietnam
Cambodia
Myanmar
Australia
Cambodia
China
Cook Islands
Fiji
Hawaii
Hong Kong
Indonesia
Japan
Macau
Malaysia
Myanmar
New Zealand
Philippines
Singapore
Taiwan
Thailand
Vietnam
Australia
Indonesia
Philippines
Malaysia
Vietnam
Thailand
Hong Kong
Macau
China
Cambodia
Vietnam
Myanmar
Laos
Taiwan
India
Bangladesh
Sri Lanka
UAE
Korea
Japan
Table 23: Low Cost Budget Airlines Routes (Source: Scoot, Jetstar, and Air Asia, 2016 &
Researcher's work, 2016)
All the above mentioned airlines offers almost the same destination from point A to B.
So Scoot, need to collaborate more globally to add more destinations by complying to
the government regulations of prospect countries including the western countries.


- 41 -
Appendix 2: Travel Duration from Singapore to Kuala Lumpur by rail, sea, road,
and air
This graph represents the efficiency of travel duration via rail, sea, road, and air.
Number in figures are in hour basis.
Figure 6: Travel Duration from Singapore to Kuala Lumpur (Source: Redang, 2016 & Researcher's
work, 2016)
Based from the above findings, air travel is the fastest way to get to the destination,
especially for long haul as transoceanic trip, air travel is unquestionable the fastest way
to get to the destination, even in the shortest trip for an instance Singapore to Kuala
Lumpur, air travel is quicker with travel duration of 1 hour only compared to other
alternatives.
7
44
5
1
0 5 10 15 20 25 30 35 40 45 50
Rail
Sea
Road
Air
Rail Sea Road Air
Travel duration 7 44 5 1
Travel Duration to KL (Rail, sea, road, and air)


- 42 -
Appendix 3: Value Chain Model (M. Porter, 1985)
The value chain analysis describes the activities of the organization performs and links
them to the organization's competitive position. In other words, it describes the
activities within and around an organization and relates them on analysis of competitive
strength of the organization.
Figure 7: Value chain model (Source: M. Porter, 1985)
Inbound logistics: In the production and development activities, organizations need
inputs as goods which are received from the suppliers. Inbound logistics refer to all the
activities related to receive goods from the suppliers, decision about the transportation
scheduling, storing the goods as inventory, managing the inventory, and make the
inputs ready to use for the production of end products.
Operations: These include the production process, development activities, testing,
packaging, maintenance, and all other activities that transform the inputs into finished
product.
Services: Organization offers the services after the products and/or services have been
sold. These service activities enhance the product’s value in the form of after sales
guarantees, warranties, spare parts management, repair services, installation, updating,
trainings, etc.
Outbound Logistics: The finished products are developed using the product related
activities. Now activities are required to transfer the finished products to the customers
via warehousing, order fulfillment, transportation, and distribution management.


- 43 -
Procurement: This is the purchasing activity of the inputs to transform these into
finished products or services. Procurement adds value by the acquisition of appropriate
goods or services at the best price, at the right time, and in the desired place with the
desired quality and quantity.
Technology Management: This is very important in today’s technological driven
environment. Technology can be used in production to reduce cost, to develop new
products, increase customer service facility, build up cost effective process, etc. It
supports the value chain activities such as research and development, process
automation, process design, etc.
Human Resource Management: The key roles of HR are to support the attainment of
the overall strategic business plan and the objectives. As a strategic business partner
HR designs the work positions by hiring, recognition, reward, appraisal systems, carrier
planning, and employee development. They act as an advocate of the employees to
motivate them and create a happy working environment. For the organizational
changing situation, HR executes the strategic needs of the organization with minimum
employee dissatisfaction and resistance to change.
Infrastructure: This includes the planning management, legal framework, financing,
accounting, public affairs, quality management, general management, etc. These are
required to perform the value added activities efficiently to drive the organization
forward to meet the strategic plan and the objectives.
**Source: Recklies, D., 2001. The Value Chain. [Online] Available at:
http://www.themanager.org/Models/ValueChain.htm [Accessed 25 June 2016].


- 44 -
Appendix 4: VRIO Framework (Barney, J., 1991)
The VRIO Analysis is an analytical technique which for each type of resource considers
the following questions (evaluation dimension) for an organization as well as for its
competitors. VRIO is an acronym from the first letters of the names of the dimensions.
Figure 8: VRIO Framework (Source: Barney, J., 1991 and adapted from Rothaermel’s, 2013)
Valuable: The first question of the framework asks if a resource adds value by enabling
a firm to exploit opportunities or defend against threats. If the answer is yes, then a
resource is considered valuable. Resources are also valuable if they help organizations to
increase the perceived customer value. This is done by increasing differentiation or/and
decreasing the price of the product. The resources that cannot meet this condition, lead
to competitive disadvantage. It is important to continually review the value of the
resources because constantly changing internal or external conditions can make them
less valuable or useless at all.


- 45 -
Rare: Resources that can only be acquired by one or very few companies are considered
rare. Rare and valuable resources grant temporary competitive advantage. On the other
hand, the situation when more than few companies have the same resource or uses the
capability in the similar way, leads to competitive parity. This is because firms can use
identical resources to implement the same strategies and no organization can achieve
superior performance.
Even though competitive parity is not the desired position, a firm should not neglect the
resources that are valuable but common. Losing valuable resources and capabilities
would hurt an organization because they are essential for staying in the market.
Costly to Imitate: A resource is costly to imitate if other organizations that doesn’t have
it can’t imitate, buy or substitute it at a reasonable price. Imitation can occur in two
ways: by directly imitating (duplicating) the resource or providing the comparable
product/service (substituting).
**Source: Jurevicius, 2013. VRIO Framework. [Online] Available at:
https://www.strategicmanagementinsight.com/tools/vrio.html [Accessed 28 June 2016].


- 46 -
Appendix 5: What customers want to experience on board?
Figure 9: What customers want to experience on board (Source: Researcher’s work, 2016)
In here, the researcher conducted a verbal survey to 150 participants ages 13 – 75 in
Singapore, with (80%) response rate or 120 respondents. (32.5%) from the respondents
want to experience movies/series to entertain them while on-board, especially for long
haul flights. (22.5%) respondents want to have free meal & drinks on board, (20%) for
internet connectivity. Remaining 25% are come from the respondent who prefers to
have games and built-in earphones, these 25% are mostly come from respondents ages
13-19.
On board value added services
Games 19
Movies/Series 39
Connectivity 24
Built-in earphone for music
entertainment
11
free meal & drinks 27
0
5
10
15
20
25
30
35
40
45
Likablepercentage What customers want to experience on board?


- 47 -
Appendix 6: Porter’s Generic Strategies (M. Porter, 1980)
This framework used to outline the three major strategic options open to organizations
that wish to achieve a sustainable competitive advantage.
Figure 10: Porter’s Generic Strategies (Source: M. Porter, 1980 & Oxford Learning Lab, 2016)
The cost leader in any market gains competitive advantage from being able to produce
products at the lowest cost. To achieve success by using this strategy, the company has
to be the cost leader, rather than one of the firms trying to achieve the position. Some
ways to obtain these low costs include unique access to sources of low cost materials,
outsourcing, efficient manufacturing and avoiding supplementary costs.
A differentiation strategy focuses on designing a product or service with unique
qualities that customers perceive as being better than the products of the competition.
This allows companies to desensitize prices and to focus on those features which
generate value. This leads to higher prices as creating a competitive advantage requires
additional costs which the company will hope to recover through higher prices.
Additionally, producers need to segment markets in order to target goods and services
for each specific segment, thus generating a higher price than the average. The
downside to this strategy is that these unique features will eventually be copied by the
competition or customers could change their tastes and options, so there is a constant
pressure to innovate and continuously improve.


- 48 -
Finally, the focus strategy applies to a narrow segment that is concentrated neither on
cost advantage nor on differentiation. Usually companies using this strategy have a
reduced size, focus all their resources and efforts on a narrow and well defined segment
of market, and have the advantage of a high degree of customer loyalty. They can
therefore pass higher costs on to their customers because close substitute products or
services are less likely to exist. Disadvantages are that these small specialized niches
may disappear over the longer term and it is also possible that some broad market cost-
leader companies start imitating or adapting their products in order to compete directly.
Business level strategy determins a firm’s strategic position in its quest for competitive
advantage when competing in a single industry or product market (Rothaermel, 2013).
**Source: Oxford Learning Lab, 2016. Porter’s Generic Strategies. [Online] Available at:
http://www.oxlearn.com/arg_Marketing-Resources-Porter's-Generic-Strategies_11_33 [Accessed 2
July 2016].


- 49 -
Appendix 7: Ansoff Matrix (I. Ansoff, 1957)
The Ansoff growth matrix assists organizations to map strategic product market growth
Figure 11: Ansoff Matrix (Source: I. Ansoff, 1957)
Market Penetration: In this strategy, there can be further exploitation of the products
without necessarily changing the product or the outlook of the product. This will be
possible through the use of promotional methods, putting various pricing policies that
may attract more clientele, or one can make the distribution more extensive.
The risk involved in its marketing strategies is usually the least since the products are
already familiar to the consumers and so is the established market.
Product Development: In here, the growth strategy new products are introduced into
existing markets. Product development can differ from the introduction of a new
product in an existing market or it can involve the modification of an existing product.
By modifying the product one would probably change its outlook or presentation,
increase the products performance or quality.
Market Development: In this strategy, the business sells its existing products to new
markets. This can be made possible through further market segmentation to aid in
identifying a new clientele base. This strategy assumes that the existing markets have
been fully exploited thus the need to venture into new markets.


- 50 -
Diversification: This growth strategy involves an organization marketing or selling
new products to new markets at the same time. It is the most risky strategy among the
others as it involves two unknowns, new products being created and the business does
not know the development problems that may occur in the process.
**Source: Ansoff Matrix Guide and Analysis, 2013. Ansoff Matrix. [Online] Available at:
http://www.ansoffmatrix.com/ [Accessed 5 July 2016].


- 51 -
Appendix 8: The SAFe criteria and techniques of evaluation
Figure 12: The SAFe criteria and techniques of evaluation (Source: Johnson, G. et al, 2014)
Suitability is concerned with assessing which proposed strategies address the key
opportunities and threats an organisation faces through an understanding of the
strategic position of an organisation: it is therefore concerned with the overall rationale
of a strategy.
Acceptability is concerned with whether the expected performance outcomes of a
proposed strategy meet the expectations of stakeholders. These can be of three types,
the ‘3 Rs’: Risk, Returns and Reaction of stakeholders.
Feasibility is concerned with whether a strategy could work in practice: in other words,
Whether an organisation has the capabilities to deliver a strategy. Here the focus is on
three areas, however: finance, people (and their skills) and the importance of resource
integration.
**Source: Johnson et al., 2014. Exploring Strategy: Text and Cases. 10th edition. UK: Pearson
Education Limited. [ISBN: 978-1-292-00689-5).


- 52 -
Appendix 9: Diversification Attractiveness Test (Grant & Jordan, 2012)
Here the researcher conducted verbal interview with 80 respondents which shows that
diversification into these categories will have a high attractiveness to customers, so
these has created value to customers.
Figure 13: Diversification Attractiveness Test (Grant & Jordan, 2012 & Researcher's work, 2016)
Gifts and
souvenirs
T-shirts Cosmetics Perfumes
15-20 35.0% 36.0% 13.0% 15.0%
21-35 38.0% 46.0% 43.0% 51.0%
36 Above 27.0% 18.0% 44.0% 34.0%
35.0% 36.0%
13.0% 15.0%
38.0% 46.0%
43.0%
51.0%
27.0%
18.0%
44.0%
34.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
% of attractiveness


- 53 -
Appendix 10: Competitor’s Strategic Position (Revenue)
In here the researcher make a comparative view in terms of revenue of the focus
company which is Scoot and its top competitors (Jetstar & Air Asia).
Figure 14: Competitors Strategic Position - Revenue (Source: Scoot, Jetstar, and Air Asia, 2013 – 2015
& Researcher’s work, 2016)
**Source: Qantas Annual Report – Jetstar 2013 – 2015 [Online] Available at:
https://www.qantas.com.au/infodetail/about/investors/2015AnnualReport.pdf [Accessed 15 July
2016].
**Source: Airasia Annual Report 2013 – 2015. [Online] Available at:
http://www.airasia.com/my/en/about-us/ir-annual-reports.page [Accessed 15 July 2016].
**Source: Singapore Airlines Annual Report – Scoot Airlines 2013-2015. [Online] Available at:
https://www.singaporeair.com/saar5/pdf/Investor-Relations/Annual-Report/annualreport1415.pdf
[Accessed 15 July 2016]
2013 2014 2015
Scoot 657 857 903
Jetstar 3,028 3,222 3,464
AirAsia 1,737 1,840 2,140
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
In SGD millions
Competitors Strategic Position (Revenue)


- 54 -
Appendix 11: Competitor’s Product/Service Offered
In here, the researcher makes a comparative view in terms of business segmentation
between the main company (Scoot) and its rivals.
Areas Scoot Jet star Air Asia
Travel trips Short and long haul
travel
Short and long haul
travel
Short and long haul
travel
Product & Services Scoot travel agents
(third parties), 24/7
customer service,
snacks on board,
flight booking, travel
guide, insurance, and
refund service.
(Source: Scoot, 2016)
24/7 customer service
assistance, direct mail
service, safety,
refund, flight
booking, and
customized travel,
and meals on board.
(Source: Jet star, 2016)
Flight booking,
customized travel, in-
flight comforts, island
and city transfers,
hotel and tours, and
travel insurance.
(Source: Air Asia,
2016)
Table 24: Competitors Product & Services Offered (Source: Scoot, Jetstar, and Air Asia, 2016 &
Researcher's work, 2016)
**Source: Air Asia Product / Service Offered. [Online] Available at:
http://www.airasia.com/sg/en/about-us/our-offerings.page [Accessed 15 July 2016].
**Source: Jetstar Product / Service Offered. [Online] Available at:
http://www.jetstar.com/sg/en/flights/food-and-drinks and http://www.jetstar.com/sg/en/customer-
guarantee [Accessed 15 July 2016].
**Source: Scoot Product/Service Offered. [Online] Available at:
http://www.flyscoot.com/index.php/en/agent-info [Accessed 15 July 2015].


- 55 -
Appendix 12: Scoot Organizational Chart
Figure 15: Scoot Organizational Chart (Source: Scoot, 2016 & Researcher’s work, 2016)
Scoot has a tall and narrow structure type of organization, thus slow movement in
decision making process becomes the primary issue in the organization, and the rising
of labor costs due to various level of management contributes to the operations costs of
Scoot.
**Source: Scoot Organizational Chart. [Online] Available at:
http://www.singaporeair.com/htdocs/local/uk/TAW/19may16-SIA-ESTABLISHES-HOLDING-
COMPANY-FOR-SCOOT-AND-TIGER-AIRWAYS.pdf [Accessed 16 July 2016].


- 56 -
Appendix 13: LCC Fleets Expansion 2015
Table 25: LCC Fleets Expansion (Source: CAPA Aviation, 2016)
**Source: LCC Fleets Expansion [Online] Available at:
http://centreforaviation.com/analysis/southeast-asias-low-cost-airline-fleet-expands-by-13-in-2015-
as-short-haul-capacity-growth-slows-260689 [Accessed 17 July 2016].


- 57 -
Appendix 14: McKinsey 7’s Framework (McKinsey, 1980)
This model can be applied to many situations and is valuable tool when organization
design is at question.
Figure 16: McKinsey 7’s Framework (Source: McKinsey, 1980)
Strategy is a plan developed by a firm to achieve sustained competitive advantage and
successfully compete in the market.
Structure represents the way business divisions and units are organized and include the
information of who is accountable to whom. In other words, structure is the
organizational chart of the firm. It is also one of the most visible and easy to change
elements of the framework.
Systems are the processes and procedures of the company, which reveal business’ daily
activities and how decisions are made. Systems are the area of the firm that determines
how business is done and it should be the main focus for managers during
organizational change.


- 58 -
Skills are the abilities that firm’s employees perform very well. They also include
capabilities and competences. During organizational change, the question often arises
of what skills the company will really need to reinforce its new strategy or new
structure.
Staff element is concerned with what type and how many employees an organization
will need and how they will be recruited, trained, motivated and rewarded.
Style represents the way the company is managed by top-level managers, how they
interact, what actions do they take and their symbolic value. In other words, it is the
management style of company’s leaders.
Shared Values are at the core of McKinsey 7s model. They are the norms and
standards that guide employee behavior and company actions and thus, are the
foundation of every organization.

**Source: McKinsey, 1980 & Jurevicius, O., 2013. McKinsey 7s Model. [Online] Available at:
https://www.strategicmanagementinsight.com/tools/mckinsey-7s-model-framework.html [Accessed
25 June 2016].


- 59 -
Appendix 15: The trap of competitive box (Piercy, 2009)
This model shows the risk of getting trapped inside the competitive box while the
important changes occur outside the box, as market is dynamic and continue reshaping
and redefining (Piercy, 2009).
Figure 17: The trap of competitive box (Piercy, 2009)
By using this model, Scoot need to monitor closely new type of competitors as this will
be likely to get on top of the market leaders or otherwise increase their market share
slowly as market is organic and not fixed.
**Source: Piercy, 2009. Market-Led Strategic Change.4th edition. Oxford: HarperCollins
Publishers. [ISBN: 978-1-85617-504-3].


- 60 -
Appendix 16: Proposed Scoot Strategy Map (Kaplan & Norton, 2001)
Financial
Perspective
Customer
Perspective
Internal
Perspective
Innovation
And Learning
Perspective
Figure 18: Proposed Scoot Strategy Map (Source: Kaplan & Norton, 2001 and Researcher’s work,
2016)
Increase
Shareholder Vallue
Revenue Growth
Strategy:
Increase ROCE by 10%
per annum

Productivity Strategy:
Cost reduction; maximize
use of assets; strengthen
network alliance

Customer
Acquisition
Customer
Retention
Loyalty recognition/rewards; High quality of products/services; developed
aircraft for on-board entertainment (movies, games, music, etc.); Friendly
and helpful workforce (cabin crews, pilots, ground staffs, etc.); Clean and
safe environment; increase number of aircrafts; mopre international
destinations and routes, etc.

Achieve
Operational
Excellence
Motivated, Happy, and
Prepared Workforce
Monitor market rivalry both
existing and newly start-up
companies; monitor and reassess
regularly the environmental (macro
& micro) and market industry to
determine key driver of change.

Improve leadership skills and
productivity; adaptability,
flexibility, and technology savvy;
implement regular training for the
whole workforce.

Research and Development
Continuous improvement and innovation; research
development; understand customer segments; strategy
competency; climate for action.


- 61 -
Appendix 17: Additional Key Driver of Change (PESTEL)
Environmental Key Driver of Change
Haze which came from forest fires in Indonesia brings a lot of seasonal smoke in
Singapore resulting in health hazards and visibility issues and affects tourism and
airline industry. Below is the Pollutant Standards Index (PSI) value that gives an
indication of the air quality.
Figure 19: Environmental Issues (Source: Straights times, 2015)
Based from the figure above, the National Environment Agency stated that the haze
level climbed to 400, a potential life threatening to ill and elderly residents (Straight
Times, 2015). With this PSI level, tourism dropped and estimated impact to Singapore
tourism and airline industry could range from 0.1% to 0.4 % (Singapore Bloomberg,
2015). Thus, this factor could greatly hit the earnings of Scoot and may affect the
operations due to the PSI level is considered hazardous which is internally driven by
the environmental key driver of change.
Social Key Driver of Change
Travelling via air is getting more popular around the globe and people are getting more
aware of different tourist areas (Shankman, 2014).
Figure 20: Air Passenger Growth Rate (Source: IATA, 2016)


- 62 -
This growth trend is expected to increase more in the future, as passengers prefer to
travel via air for different reasons including the travel duration, comfort, etc.
(Adamkasi, 2016). So this key driver of change is mainly favorable to Scoot. From the
study conducted by (IATA, 2016), there is an increaase in annual growth of air
passenger traffic average of (6.3% - 6.5%) in 2015 to 2016.

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Strategic Management - Scoot Airlines