SINGAPORE AIRLINES BALANCING ACT

ANALYSIS OF EXTERNAL, INTERNAL AND BUSINESS LEVEL STRATEGY

BUSINESS STRATEGY
MID TEST

BY
RIZKI LINGGA WARYONO
29114904

MASTER OF BUSINESS ADMINISTRATION

SCHOOL OF BUSINESS AND MANAGEMENT
INSTITUT TEKNOLOGI BANDUNG
2015

Chapter 2: The External Environment: Opportunities, Threats, Competition and Competitor

Analysis
Over the past four decade, Singapore Airlines has earned a stellar reputation in the fiercely competitive
commercial aviation business by providing customers with high quality service and dominating the
business-travel segment. Singapore airlines (SIA) is the national carrier of Singapore, which operates
from its hub at Changi Airport and has a strong presence in the Southeast Asia, East Asia, South Asia and
Oceania. Singapore airlines has won the Worlds Best Airline award from CondeNast Traveler 21 out of
the 2 times it has been awarded and Skytraxs Airlines of the Year award three times over the past
decade. SIA also one of the most cost-effective operators.
This chapter will focus on explain about how firm analyze their external environment, depending on
their opportunities, threat, competition and competitor analysis. The understanding of conditions in its
external environment that the firm gains by analyzing that environment is matched with knowledge
about its internal organization.
Firm understand the external environment by acquiring information about competitors, customers, and
other stakeholders to build their own base of knowledge and capabilities. A firms strategic actions are
influenced by the conditions in the three parts of (general, industry and competitor) of its external
environment.
The general environment is composed of dimensions in the broader society they influence an industry
and the firm within it. We can define these dimensions into seven environmental segment:
demographic, economic, political/legal, sociocultural, technological, global and physical.
Analysis of the general environment is focused on environmental trends while an analysis of theindustry
environment is focused on the factors and conditions influencing an industrys profitability potential and
an analysis of competitors is focused on predicting competitors actions, responses and intentions.
The External Environment

Political/Legal Segment
The political/legal segment is the arena in which organizations and interest group compete for
attention, resources and a voice in overseeing the body of laws and regulations guiding interactions
among nations as well as between firms and various local government agencies. Essentially, this
segment represents how organizations to try to influence government and how they try tounderstand
the influences of those governments on their strategic actions.
National political frameworks have a major impact on the operations of the airline industry. This is
because almost all countries have national carrier. Given that these carries are seen as representing the
nation, they tend to receive a great deal of support from government, and globally, many remain
government owned.
In other hand changes to the regulatory framework can have major impact on airlines, particularly those
that are national carrier. Different government bring different political outlooks and strategies, many of
which will significantly impact the aviation industry.
Economic Segment
The economic environment refers to the nature and direction of the economy in which a firm competes
or may compete. In general, firms seek to compete in relatively stable economies with strong growth
potential. Because nations are interconnected as a result of the global economy, firm must scan,
monitor, forecast and assess the health of their host nation and the health of the economies outside
their host nation.
One major economic threat to Singapore Airlines process is the growth in fuel cost. Political unrest in the
Middle East has helped to bring oil prices to unprecedented levels. Which is directly and negatively
impacting airlines fuel cost. Some airlines have opted to pass these increased costs on to customers, but
given that Singapore Airlines already utilizes a premium pricing strategy, there may be limits to extent to
which it can adopt such a strategy.
Sociocultural Segment
The sociocultural is concerned with a societys attitudes and cultural values. Because attitudes and value
form the cornerstone of asociety, they often drive demographic, economic, political/legal, and
technological conditions and changes.
Social trends are also impacting heavily on the operations of airline businesses. Travel particularly to
faraway destinations and to tropical locations, has long been the provision of the more whealty in
society. At the same time, there seems to have been a shift in consumer preferences away from
premium types of travel to the low cost tavel format, as evidence by the huge increase in the number of
low cost carriers.

Technological Segment
Pervasive and diversified in scope, technological change affect many parts of societies. These effects
occur primarily through new product, process, and materials. The technological segment includes
theinstitutions and activities involved in creating new knowledge and translating that knowledge into
new outputs, products, process, and materials.
Given the rapid pace of technological change and risk of disruption, it is vital for firms to thoroughly
study the technological segment. The importance of these efforts is suggested by the finding that early
adopters of new technology often achieve higher market shares and earn higher returns. Thus firms
should continuously scan the external environment toidentify potential substitutes for technologies that
are in current use, as well as to identify newly emerging technologies from which their firm could derive
competitive advantage.
In a saturated market like long haul passangerair travel and particularly in the premium market position,
technological innovations are often the arena in which competitions is played out. Airline suppliers
expend considerable levels of research and development in creating new fleets and cabin products in
order to boost sales, and customer enjoy using new technology on airlines not only forreasons of
comfort, but because new fleets evoke in pessengers a sense of security.
Technological developments have had a huge impact on Singapore Airlines, the carrier has one of the
youngest fleets in the industry and prides itself on being the first to adopt new innovations such as
headsets, reclining seats and setback entertainment systems.
The Demographic Segment
The demographic segment is concerned with a populations size, age, structure, geographic distribution,
ethnic mix and income distribution. Demographic segment are commonly analyzed on a global basis
because of their potential effects across countries and because many firms compete in global markets.
Segmenting on the basis of customer factual characteristics such as age, gender, income etc. SIA could
build on from this by looking at them in terms of the other major segmentation variables using multiple
approach to achieve a more complete consumer profle.
The Global Segment
The global segment includes relevant new global markets, existing markets that are changing, important
international political events and critical cultural and institutional characteristics of global markets.
There is little doubt that markets are becoming more global and that consumer as well as companies
throughout the world accept this fact.
SIA customers are located globally with varying wants and needs or behavior and organization attempts
to exploit this by providing airlines service to major cities/routes evidenced by SIA flying to 65

destination in 35 countries on five continents. SIA strong presence in the Southeast Asian region,
connect Singapore to many international destination I the region.
The Physical Environment Segment
The physicalenvironment segment are refers to potential and actual change in thephysical environment
and business practices that are intended to positively respond to and deal with those changes.
Concerned with trends oriented to suistaining the world physical environment, firms recognize that
ecological, social and economic systems interactively influence what happens in this particular segment.
There is increased concern among airline passengers for environmentally friendly services. This
preference is likely to grow in the future due to national carbon reduction targets and increasing energy
prices. Some airlines have already begun to tackle the green issues, integrating it into their corporate
social responsibility (CSR) policies and marketing plans, but SIA has thus far been slow to respond to this
demand from consumer.
Industry Environment Analysis
The industry environment is the set of factors that directly influences a firm and its competitive actions
and responses: the threat of new entrants, the power of suppliers, the powerof buyers, the threat of
product substitutes, and the intensity of rivalry among competitors.
Some methods that usually used to maping external environment was the five forces model which
developed by Michael Porter, as framework to analyze industry and business strategy. The five forces
include threat of new entrant, rivalry among existing firms, threat of a substitutes product or services,
bargaining power of buyers and bargaining power of supplier. In tis case we will use Porter five forces
model to analyze an organizations competitive strength and its position in the industry.
The Five Forces of Competition Model

Threat of New Entrant

Identifying new entrants is impotant because they can threaten the market share of existing
competitors. One reason new entrant pose such a threat is that they bring additional production
capacity. Unless thedemand for a good or service is increasing, additional capacity holds consumers
costs down, resulting in less revenue and lower returns for competing firms. Often, new entrants have a
keen interest in gaining a large market share. As a result, new competitors may force existing firms to
bemore efficient and to learn how to compete on new dimensions.
The airline industry require a huge capital investment, with at least million of capital required before any
business process, it also would require a lot of logistic works, highly skilled personal such as pilots,
aircraft technicians and speciaise managerial personel which are often limited in resources in the
industry. It is large entry barrier that required to enter aviation business.
In other hand low cost carrier (LCC) airlines type have gain popularity and proven to be profitable airline
business. Many new companies had been form to provide this service around the Asian region
nowadays, and especially for Southeast Asia passenger LCC airlines are more preferable to be used as
role air transportation. Although these LCC were not yet considered as a direct competition to Singapore
Airlines as the target market for these airlines is more for cost conscious traveler, it is possible that in
not so distance future, these LCC will venture into the premium market sector when the company reach
certain level of business expertise. This trend is highly possible and should not be overlooked by SIA in
the long run.
Intensity Rivalry Among Competitors
Because an industry firms are mutually dependent, actions taken by one company usually invite
competitive responses. In many industries, firms actively compete against one another. Competitive
rivalry intensifies when a firm is challenged by a competitors action or when a company recognizes an
opportunity to improve its market position.
The goods in the airline industry have fairly short shelf live , the service is consider a loss once the
airlane take off and all cost incur are not recoverable. SIA that are dominant in Singapore region and
consider in direct competition with SIA are very few, which they are Malaysian Airline System, Japan
Airlines, Cathay Pacific and British Airways.
Most of these carriers are using differentiation strategy approach which concentrates mainly on booking
service and in-flight offering. Frequent flyer programme were also introduces by these airline to retain
customer and generate brand loyalty. On the marketing side, most of these airline are offering high
quality in term full service airlines, however SIA have so far strive in its offering and are reputable of
provide excellence in-flight service and innovative entertainment system. All the above had made SIA
face lesser stress in competition, however the industry is still in very fierce competition giving the
circumstances and SIA would lose out it if fail to maintain its high quality of service. The level of rivalry is
medium.

Threat of a Substitute Product or Service

Substitutes products are goods or services from outside a given industry that perform similar or the
same functions as a product that the industry produces. In general, product substitutes present a strong
threat to affirm when customers face few, if any, switching costs and when the substitutes product price
is lower or its quality and performance capabilities are equal to or greater than those of the competing
product. Differentiating a product along dimensions that customer value reduces a substitutes
attractiveness.
SIA had target business traveler that emphasize on comfort and timewhen travelling and are less out
conscious, this have made other mode of transport a poor substitute for SIA, especially in medium and
long haul flight.
Bargaining Power of Buyers
Firm seeks to maximize the return on their invested capital. Alternatively, buyers want to buy products
at the lowest price, to reduce their cost buyer bargain for higher quality, greater levels of service and
lower prices. These outcomes are achieved by encouraging competitive battles among the industrys
firm.
The airline industry had been commodities over the years, with objectives of getting from one point to
another, it doesnt make a lot difference on which airline they choose, this is true especially for long to
medium haul flight. The passenger in the airline industry consist of business traveler and discretionary
traveler or backpacker traveler. Discretionary traveler are quite flexible on the time and flight
connections, cost is main concern for them. In other hand, business traveler are not so sensitive about
price, instead short travelling time and comfortable journey are priority for them. All of them are would
not hesitate to switch airline if price and timing matched their interest.
Bargaining Power of Suppliers
Increasing prices and reducing the quality of their products are potential means suppliers use to exert
power over firms competing within an industry. If a firm is unable to recover cost increase by its
suppliers through its own pricing structure, its profitability is reduced by its suppliers action.
SIA mainly purchase its plane from Boeing and Airbus. Although there were no apparent substitutes and
high retraining and logistic cost will incur for switching of supplier, the demand is relatively weak for
these supplier in recent year caused limited of demand in aircraft industry. SIA had been continuously
renewing its fleet even during peak of crisis which gives sales order to aircraft manufacturer with usually
cash payment method. This makes SIA an important customer and enjoys high bargaining power over
the manufacturer.

Relative Power of Other Stakeholders

Singapore government plays a role in regulating the country air space, handling landing right to foreign
flight and establishing new landing right with other country, this directly impact on the route SIA ableto
offer and competitionit will face. As major share holder of SIA through Temasek Holding, Singapore
government have the power to intervene policy and business process it needs to.

Chapter 3: The Internal Environment: Resources, Capabilities, Competencies and Competitive

Advantage
One of the conditions associated with analyzing a firms internal organization is the reality that in
todays global economy, some of the resources that were traditionally critical to firm efforts to produce,
sell, and distribute their goods or services such as labor costs,access to financial resources and raw
materials, and protected or regulated market are still important; but it is now less likely that these
resources will become core competencies and possibly competitive advantages.
Firm use their resources as the foundation for producing goods or services that will create value for
customers. Value is measured by a product performance characteristics and by its attributes for which
customers are willing to pay. Firms create value by innovatively bundling and leveraging their resources
to form capabilities and core competencies.
Resouces, Capabilities and Core Competencies
Resources, capabilities, and core competencies are the foundation of competitive advantage. Resources
are bundled to create organizational capabilities. In turn, capabilities are the source of a firms core
competencies, which are the basis of establishing competitive advantages.
Broad in scope, resources cover a spectrum of individual, social and organizational phenomena. By
themselves, resources do not allow firms to create value for customers as the foundation for earning
above-average returns. Indeed, resources are combined to form capabilities.
SIA manages its two main resources planes and people so that its service is better than rivals and its
cost are lower. The airline invests heavily in areas of the business that touch the customer in order to
enhance SIA premium positioning. Everything behind the scenes is subject to rigorous cost control.
As tangible resources, a firm borrowing capacity and the status of its physical facilities are visible. Te
value of many tangible resources can be established through financial statement, but these statements
do not account for the value of allthe firm assets, because they disregard some intangible resources. The
value of tangible resourcesis also constrained because they are hard to leverage it is difficult to derive
additional business or value from a tangible resources.
There are several SIA tangible resources that is support them to got competitive advantage position,
which SIA spends more than its rivals in key areas:

Buying new aircraft

SIA replace its fleet more frequently than do competitor
Depreciating aircraft
It dependences aircraft over 15 years compared with the industry standard of 25 years
Training
The airline invest heavily in inducting and retraining employees
Labor costs on flights

SIA staff each flight with more cabin crew members than no other airlines
Price per aircraft
SIA is usually a showcase customer for aircraft makers, place large orders and often pays in cash

Compared to tangible resources, intangible resources are a superior source of capabilities and
subsequently, core competencies. In fact, in the global economy, the success of a corporation lies
more in its intellectual and systems capabilities than in its physical assets.
Because intangible resources are less visible and more difficult for competitors to understand, purchase,
imitate, or substitute for, firm prefer to rely on them rather than on tangible resources as the
foundation for their capabilities.
This is Several tangible resources that have by SIA and it spends less, partly as a consequence, on:

Fuel, maintenance and repair

SIA operating costs are lower because its fleet is young and energy efficient
Innovation
it invests in both radical and incremental innovations
Salaries
SIA keeps salaries low by offering employee bonuses of up to 50% depending SIA profitability
also, the airline reputation attracts younger worker
Sales and administration
Customer loyalty, a lean headquarters and constant cost cutting keep the airline expenses low
Back-office technology
SIA choose to lag behind rivals in areas that dont affect the customer experience

The firm combines individual tangible and intangible resources to create capabilities. In turn, capabilities
are used to complete the organizational tasks required to produce, distribute and service the goods or
services the firm provide to customers for the purpose of creating value for them.
Core competencies are capabilities that serve as source of competitive advantage for a firm over its
rival. Core competencies distinguish a company competitively and reflect its personality. Core
competencies emerge over timethroughan organizational process of accumulating and learning how to
deploy different resources and capabilities.
Having strong capabilities and core competencies, SIA is out performing among other competitor. First is
cost-effective service excellence. This core competencies is combined and maintained by business
strategy such as management strategy by communicating and motivating employees to build up SIA
reputation along with its mission, managing strategic resources by creating and managing subsidiaries to
improve SIA as wholly its excellence service and valuing network where SIA have built good long-term
relationship with its suppliers, partners and coalition to ensure continuously its excellent standard
services in high price sensitive market. Besides, rigorous service design and development, total
innovation, profit and cost consciousness ingrained in all employees, holistic staff development, and

reaping of strategic synergies through related diversification and world-class infrastructure are
continuous building up its core competencies.
Another core competencies of SIA is its unique brand which consists of its name first in flight as well as
its employees. SIA is known as pioneering by contiously being the first in airline industry. For example
they first introduced hot meals, free alcoholic and non-alcoholic beverages, and hot towels with a
unique and patented scent, personal entertainment system, and video on demand in all cabins. SIA
keeps driving innovation as an important part of its unique brand. Also, its employees symbolized as
Singapore girls that are representing charming,graceful, gentle and courteous is unique in the world
which immediately linked to its unique brand.
Building Core Competencies
Two tools help firms identify their core competencies. The first consists of four specific criteria of
suistainable competitive advantage that can be used to determine which capabilities are core
competencies. The second tools is the value chain analysis. Firm use this tool to select the value creating
competencies that should be maintained, upgraded or developed and those that should be outsourced.
The Four Criteria of Sustainable Competitive Advantage
Capabilities that are valuable, rare, costly to imitate, and nonsubstitutable are core competencies. In
turn core competencies can lead to competitive advantages for thefirm over its rival. Capabilities failing
to satisfy the four criteria are not core competencies, meaning that although every core competencies is
a capability, not every capabilities are core competencies. A sustainable competitive advantage exist
only when competitors cannot duplicate the benefits of afirms strategy or when they lack the resources
to attempt imitation.
Valuable capabilities allow the firm to exploit opportunities or neutralize threats in its external
environment. By effectively using capabilities to exploit opportunities or neutralize threats, a firm
creates value for customers.
Rare capabilities are capabilities that few, if any competitors possess. A key question to be answered
when evaluating this criterian is, How many rivals firms possess these valuable capabilities?.
Capabilities possessed by many rivals are unlikely to become core competencies for any of the involved
firms.
Costly to imitate are capabilities that other firms cannot easily develop. Capability that are costly to
imitate are created because of one reason or a combination of three reasons. First, a firm sometimes is
able to develop capabilities because of unique historical conditions. As firms evolve, they often acquire
or develop capabilities that are unique to them.
A second condition of being costly to imitate occurs when the link between the firm core competencies
and its competitive advantage is casually ambiguous. In these instances, competitors cant clearly

understand how a firm uses its capabilities that are core competencies as the foundation for
competitive advantage.
Social complexity is the third reason that capabilities can be costly to imitate. Social complexity means
that at least some and frequently many, of the firms capabilities are the product of complex social
phenomenon.
Nonsubstitutable capabilities are capabilities that do not have strategic equivalent. This final criterion
is that there must be no strategically equivalent valuable resources that are themselves either not rare
or imitable.
SIA Organizational Competitive Advantage
SIA have some competitive advantage that makes their company being advance in airways industry,
which could called as the five pillar of SIA organizational activity system, described below are rigorous
service design and development, total innovation, profit consciousness ingrained in all employees,
achieving strategic synergies, and developing staff holistically.
Rigorous service design and development
SIA has a service development department that hones and thoroughly tests any change before it is
introduced. This department undertakes research, trials, time and motion studies, mockups, assessing
cutomer reaction, to ensure that a service innovation is supported by the appropriate procedures.
Underpinning the continuous innovation is a corporate culture that accepts change and development as
just not inevitable, but as a way of life; a cultural element that is also inculcated at the national level by
Singapore government. A trial that fails or an implemented innovation that is removed after few month
is acceptable, and damages no one reputation.
At SIA it is expected that any innovation may have a limited shelf life. SIA recognises that to sustain its
differentiation, it must maintain continuous improvement, and be able to dispose of programs or
services that no longer provide competitive differentiation or that could be offered in a different way.
SIA recognises that its competition does not just come from within the industry. Instead of aiming to be
the best airline its intention is to be the best service organization. To achieve that, SIA employs broad
benchmarking not just against its main competitors, but against the best-in-class service companies.
Total innovation
SIA does not aim to be a lot better but just a bit better in everyone of its functions and offerings than its
competitors. This not only means constant innovation but also total innovation innovation in
everything, all the time. Importantly, this also supports the notion of cost-effectiveness. Continuous
incremental development comes at a lower cost than radical innovation, but delivers that necessary
margin of value to the customer: In addition to incremental improvements, SIA also implements

frequent major initiatives aiming to sustain service excellence. Organizational initiatives include SIAs
Outstanding Service On The Ground program, Transforming Customer Service and Soar, for
Service above all the rest. As a way of inspiring discontinuous service innovations, SIA strives to gain a
deep understanding of trends in customer lifestyles, and debates their implications for the future of
better service in the air.
SIA has made a clear strategic choice of being a leader and follower at the same time. It is a pioneer on
innovations that have high impact on customer service (for example in-flight entertainment, gourmet
cuisine that includes fine wines, the ability to order ones choice of dishes in advance by internet, beds
in the air). However, it is at the same time a fast follower in areas that are less.
Profit-consciousness ingrained in all employees
Despite SIAs focus on service excellence and innovation, managers and staff are simultaneously aware
of the need for profit and cost-effectiveness. Any proposed innovation is analysed carefully on the
balance of expected customer benefits versus costs. A solid business case needs to be made to support
all proposed innovations and new service offerings. Station managers and frontline staff know that they
should balance passenger satisfaction versus cost-effectiveness in their decisions. The importance of
efficiency in the company culture is reinforced by SIAs physical spaces. In contrast to the companys
world-class fleet, there are no grand or expensive decorations and furnishings at the companys
headquarters for example. The HQ is characterised by a simple, functional design that epitomises the
drive for internal efficiency.
Achieving strategic synergies through related diversification and infrastructure
SIA utilizes related diversification to reap cost synergies and at the same time control quality and enable
transfer of learning.Subsidiaries serve not only as the development ground for wellrounded
management skills, and a corporate rather than a divisional outlook through job rotation, but also as
sources of learning. Related operations (such as catering, aircraft maintenance, and airport
management) have healthier profit margins than the airline business itself because the industry
structure is more favorable in those sectors.
Value Chain Analysis
Value chain analysis allows the firm to understand the parts of its operations that create value and those
that do not. Understanding these issues is important because the firm earns above average returns only
when the value it creates is greater than the cost incurred to create that value. Its derived from value
chain activities that defined as activities or tasks the firm complete in order to produce product and then
sell, distribute, and service those products in ways that create value for customers.
Competencies, Strength, Weakness and Strategc Decisions
A major strength of the company is its size, brand image and positioning strategy. SIA has been
described as the best known brand in the airline industry, and as a standard for other airlines seeking to
develop their product and their brand. The company has managed to secure its position as the industry
leading brand through the utilization of a business role model. For example being the first airline to offer

free refreshment and a choice of meals to economy class passangers, through to be the first airline to
take delivery of the new A380 passenger plane, SIA has always ensured that it is one step ahead of its
competitors.
While the strength outlined above are certainly unmatched by any other in the industry, the company
does still have weakness. In effort to boost its performance that company has attempted to establish a
presence in market other than Singapore but these efforts at market penetration have to date been
unsuccessful. This is a considerable weakness for SIA.

Chapter 4: Business-Level Strategy

A business level strategy is an integrated and coordinated set of commitment and action the firm uses to
gain a competitive advantage by exploiting core competencies in specific product markets. In other hand
customers are the foundation of successful business level strategies. When considering customers, a
firm simultaneously examine three issues: who, what, and how. These issues, repectively, refer to the
customer groups to be served, the needs those customers have that the firm seeks to satisfy and the
core competencies the firm will use to satisfy customers needs.
The Purpose of a Business Level Strategy
The purpose of a business level strategy is to create differences between the firms position and those of
its competitors. To position itself differently from competitors, a firm must decided whether it intends
to perform activities differently or to perform different activities. Strategy defines the patch which
provides the direction of actions to be taken by leaders of the organization. In the current complex
competitive landscape, successful use of a business level strategy result from the firm learning how to
integrate the activities it performs in ways that create superior value for customers.
Types of Business Level Strategies
Firms choose from among five business level strategies to establish and defend their desired strategic
position against competitors: cost leadership, differentiation, focused cost leadership, focus
differentiation, and integrated cost leadership/differentiation. Each business level strategy helps the
firms to establish and exzploit a particular competitive advantage within a particular competitive scope.

Cost Leadership Strategy is an integrated set of actions taken to produce goods or service with features
that are acceptable to consumers at the lowest cost, relative to those of competitors. Firms using the
cost leadership strategy commonly sell standardized goods or services to the industry most typical
customers. Process innovations, which are newly designed productions and distribustion method and

technique that allow the firm to operate more efficiently, are critical to success use of the cost
leadership strategy.
Differentiation strategy is an integrated set of actions taken to produce goods or service that customers
perceive as being different in ways that are important to them. While cost leadership serve a typical
customer in industry, differentiators target customers for whom value is created by the manner in which
the firm product differ from those produced and marketed by competitors.
Through the differentiation strategy, the firm produces nonstandardized product for customers who
value differentiated features more than they value low cost. To maintain success with the differentiation
strategy result, the firm must consistenly upgrade differentiated features that customers value and or
create new valuable features without significant cost increase.
SIA Busines Level Strategy
SIA had mainly using related diversification strategy at the corporate level, expanding its business into
airline catering, aircraft maintenance and airport terminal service. It used dual strategy of
differentiation and cost leadership, achieving cost effective service excellence by exceptionally high
business efficiency. Integrated cost leadership/Different strategy usually used to efficiently produce
products with some differentiated features. Efficient production is the source of maintaining low cost
while differentiation is the source of creating unique value.
The company had achieved high business efficiency by implementing several organizational activity.
There are first, have structured service design and development, allocate dedicated department for its
product design and run through countless testing to enable a perfect quality on its final product meeting
latest expectation.
Secondly it uses total innovation with dedicated department monitoring closely consumer trend in the
next five years, concentrating on slight improvement but over broad aspect, enabling a cost effective yet
highly productive innovation. The company also allows itself to be a followers on its weak point, copying
other successive development
Third it cultivates a profit consciousness culture, educating employee on the importance of profitability
and strive balance between customer satisfactions and product offering are gone through profit/cost
analysisprior to launching. The company also set up system that rewards employee based on
profitability inducing peer pressure on wastage and encourage team work to boost its productivity.
Fourth the company achieve cost synergies through diversification and infrastructure of its subsidiary.
Vertical integration allows the company to have better quality control enhance knowledge and reduce
cost at the same times. The company also manage its subsidiary with clear expectation and allows its
subsidiary to subject to market discipline.

Finally, the company develop its staff holistically with rigorous interview and training, promotes self
direct continuous learning to boost self esteem. This made the company competence in the ability to
achieve a differentiated offering with exceptional levels of efficiency
Michael Porter argued that dual strategies would be impossible to achieve and be sustained over time,
because they necessitate contradictory investment and organizational process. Service excellence and
innovation require significant resource investment, as well as a value system that privileges the pursuit
of excellence, cost leadership on the other hand requires cutting cost wherever possible while
maintaining adequate quality, and a value system that privileges thrift. Porter argued that a company
should not attempt to realize more than one generic strategy since it would risk being stuck in the
middle, achieving neither cost leadership and differentiation.
Porter conceded that firms could temporarily achieve such strategies if competitors are stuck in the
middle, having achieved neither cost leadership nor differentiation.