Competitive Advantage of SMRT

With the recent news of the chain of SMRT trains breaking down in Singapore and the scrutiny that the SMRT's top management has been put through, which led to the resignation of their then current CEO, Saw Phaik Hwa, having to indadvertedly step down.

Plus just a couple of days ago, it was announced by SMRT that it will put the current train systems under a $ 600 million dollar boost to improve all its systems.

This current hiccup of SMRT, could possibly pave the wave for other competitors, making it easier for them to challenge SMRT in bidding for future constructions of train lines. Hence this lead me to do up a Porter's Five Industry Analysis for the industry SMRT is in. Not limiting myself to the train service alone but, an analysis on a whole, looking at the entire public transport industry. 

Porter’s Five-Forces 

The Porter’s Five-Forces is an analytical tool used for examining the competitive environment and forces, which affects the Public Transport Sector within Singapore. 

Threat of New Entrances

In the case of SMRT, we look at the public transport industry as a whole within Singapore. Firstly having been established and a recognised brand, SMRT has a competitive advantage over new entrants coming into the industry. Looking at Economies of Scale, referring to the spreading of costs of production over number of units produced, deters entry by forcing to come in at large cost (Dess at el, 2010). 

We see from Rajan (2006), The Straits Times, “MRT Trains get $145 million overhaul” stating that $145 million was spend just on the refurbishment of trains interior alone. Thus we can see that Economies of Scale and Capital Requirements in this industry is very high. From Land Transport Masterplan (2008), requirements for start-up and prices of fare are all government regulated and require approvals, from the government and Land Transport Authority (LTA), making threats low. 

The Bargaining Power of Buyers

Buyer’s bargaining power is high as minimum switching cost is incurred, as public transport industry is similar and undifferentiated. Buyers have other alternatives of transport via buses and taxies, making their bargaining power higher. There is hardly a threat of backward integration by buyers as it requires massive amount of capital. As a regulated industry, prices are fixed and determined by the government. Hence shifting the bargaining powers of buyers moderately. 

The Bargaining Power of Suppliers

SMRT has a choice of suppliers to choose from, in the example of taxies if Mazda offers a better package as compared to Toyota they can have a variety of choices as well as substitutes. From SMRT’s fleet of buses, taxies and trains they have number of suppliers. Being the market leader in the Mass Rapid Transit industry and second for taxies, they have a stronger leverage and purchasing power, reducing bargaining power of suppliers. Forward integration is highly unlikely by suppliers due to the establishment of SMRT, making suppliers have a low bargaining power. 

The Threat of Substitute Products

For SMRT, there are only limited substitutes such as walking, cycling, taking private or chauffeured transport. Other than car ownerships we do not see much other threats of substitutes. With recent interventions by the government to increase ridership on public transport, the Certificate of Entitlement (COE) for private motorcar ownerships has increased dramatically. Which has resulted in overall sales of private vehicles declining, as seen from an article in Singapore Business Review (2010) titled “Car sales in Singapore on a downhill” show that sales has reduced by 17.4% in September 2010. Differentiation of substitute product is low and rate of improvement in price-performance relationship of substitute is low, leading to a low threat of substitutes. 

The Intensity of Rivalry among Competitors in an Industry

To have a clearer picture of the rivalry levels within the public transport industry faced by SMRT we have to take a three-tier approach looking at each individually. 

Firstly, starting with railways SMRT has hardly any rivalry with the only one coming from SBS Transit. Secondly, within the bus industry once again SMRT falls behind to SBS Transit who is the market leader, owning 75% of the market shares (SBS Transit, 2011). 

Lastly, for the taxi industry is not SMRT the market leader and trailing behind to Comfort DelGro who owns 15,000 taxies and a handful of smaller players. SMRT has to fight intensely for a bigger share of the market (Taxi Singapore, 2011). 

These lead to intense levels of rivalry, especially among the two market leaders SMRT and Comfort DelGro who are owners of SBS Transit as well. With the type of services being almost equal on all grounds it leads to little differentiation among products and services. SMRT would have to rely on its core competencies to overcome stronger threats such as being voted Most Eco-Friendly Transport Partner Land Transport Excellence Awards 2010 (SMRT, 2011). 

The level of intensity is high due to such high start up costs, excess revenue for maintenances and construction of depots, creating a high barrier to exit due to big investments. It adds even more intensity from as competitors are all fighting for the same pool of customers. 

Final Deductions

As identified from above:

· Threat of new entrants is low

· The Bargaining Power of Buyers is moderate

· The Bargaining Power of Suppliers is low

· The Threat of Substitute Products is low

· The Intensity of Rivalry among Competitors in an Industry is high.

From the above information, we can see that the industry is in its maturity stage being a consolidated industry, where few large firms, who find it hard to differentiate their products, dominate it. Overall with Porter’s analysis done, it would be an attractive industry to invest in but high start up costs, government regulating and high barriers to exit all hinder many from entering this industry.

A short expose on Corporate Social Responsibility

Corporate Social Responsibility is a view of the organisation and its position in society that accepts a liability among corporations to work for targets as well to aggrandizement profit and a responsibility among affiliated stakeholders to hold the firm answerable for its actions. (Werther and Chandler, 2011) 

CSR is becoming increasingly important to shareholders and stakeholders because it represents change, which will move towards a crack to identify the future of our society. Positively on grounds of generating revenues, rethink on the conventional ways of a business is run. Conflictingly, due to the substantial amount of ethical breaches in recent years, corporate governance has taken higher stance. As changes and diversity in business relations, hierarchy and systems pose insurmountable difficulties in keeping track of a company’s financial stature. (Moorhead and Griffin, 2010) 

CSR is having a wide range of positive impacts across the globe. We can see from this article by Gulf Times (2010), “Vodafone showcases CSR strategy at conference” that CEO of Vodafone Qatar held a meeting to showcase and lay the building blocks to apply principles of social responsibility in Qatari Companies. Saying, that every individual plays a part in shaping what kind of world we want to live in. Explaining how he believes that being a responsible company would make substantial difference to the local people. Not only making money, but having the ability to help those less fortunate, using resources wisely with dignity and integrity. Vodafone went on to further cement this commitment by commissioning the first hybrid powered Base Station in Qatar combining the use of solar and wind energy. Further yet, they launched the first mobile recycling program in all its retail stores. Initiatives are still coming strong till date, with the likes of a charitable fund and many more. 

On the opposite end of the table we have cases such as embezzlements, like this article by Belson (2005), “Out of the boardroom and Into the Courtroom; Bernard Ebbers: Victim Himself or Mastermind?” states how Mr. Ebbers the CEO of WorldCom, over years told countless number of lies to cover up company’s incremental losses, used millions of his shares for personal loans. Claimed to be in the dark about the fraud, stating that he relied on others to handle accountings, accused his Chief Financial Officer of masterminding the fraud.

Which we see how these individuals impact have added to a greater weight on CSR as their actions have made stakeholders more vigilant and interested to know where their investments go and it is towards a good and profitable cause. 

Companies like Body Shop and Proctor and Gamble are known for being a strong advocate for CSR and hence people support them and are willing to pay a higher premium for their products, hence giving them an extra competitive advantage in relation to the competitors. 

Looking more in depth at P&G's CSR, P&G attained huge achievements in business ethics, ranking second in the 100 Best Corporate Citizens list (Baker, 2004). P&G spent great effort in performing good business ethics, and promoting environmental-friendly approach. As Baker (2004) suggested, CSR increases the competitiveness of business under proper management while contributing wealth creativity to society. Several programs such as “Tides Loads of Hope” and “Duracell Power Relief” are launched by P&G to assist those affected in natural disasters. These initiatives has helped P&G in building up its image as a reliable and trusted company, in which people do not mind in paying more for. As you do see parts of their profits do go back into aiding the society.

With much of Europe supporting companies with a 'Green' image, giving back to the society and having a clean image garnering much support from the their countrymen it leverages them to a higher position in comparison to their competitors around the globe, while looking at the regional level.

In concluding we can see how organisations use CSR to their benefits. It will have long lasting positive results, which can propel the company to do better and even gain a liking among the community. On the other hand CSR has also brought to light some negative cases which has affected the organisations involved, and due to these reasons certain companies are affected in many way and need to built back a trust factor among their stakeholders. Hence adopting a CSR policy does aid in helping move a company forward.

Some Research on Organisational Behaviour

Not too long ago I did up some research and on Organisational Behaviour just to kind of explain what exactly it means and compromises of in relation to an orgainsation and its managers. So here is the work I have come up with, its is succinct and straight to the point, not too long. 

According to Robbins, S. P.

"Organisational Behaviour is a field of study that investigates the impact that individuals, groups and structure have on behaviour within organisations, for the purpose of applying such knowledge towards improving organisation’s effectiveness"

This three-pronged relationship can be focused upon individually and would be fully effective only if all three are comprehensively covered. As the organisation and individual has the power and capacity to influence each other. Organisational behaviour, is more than just for managers as it can work towards enhancing people skills, motivating and stimulating towards innovation and transformation while improving ethical behaviour. From the aforementioned statement, it is evident that Organisational Behaviour is beneficial not only people in management careers but all individuals. Its importance can be seen strongly on how it shapes an individual’s life, as most people are taught and educated in organisations, acquire their creature comforts, start and retire, engage in organisational societies and becomes an integral part of their lives due to duration spent in a corporation (Moorhead & Griffin, 2010). 

Organisational behaviour blends technical skills from various behavioural disciplines principally: psychology, sociology, social psychology, anthropology, and political science. Psychology being the main pillar of study at the individual level and the other mentioned disciplines have helped us understand macro notions such as group processes and organisation (Moorhead & Griffin, 2010). 

Thus, its evident that Organisational Behaviour is beneficial to not only people within management careers. Within individual levels psychology leads to contributing factors such as learning, perception and job satisfaction amongst others. Within the group levels we can infer further and see more support of positive behavioural improvement and attitude changes. This helps in the understanding of individuals better and aids understanding. 

Organisational behaviour amounts too much more than just the role of the manager as, employees who commonly absent themselves adds scarcely in supplementing towards productivity and development of the organisation. Job satisfaction is paramount to analyse performance of an individual towards his work. Contented employees are productive and contribute towards fulfilling an appropriate work culture in an organisation. (V.G. Kondalkar, 2007). 

From the above statements, it further clarifies that organisational behaviour does not only benefit managers but right down to last individual in the organisation. As everybody’s action and reaction affects the organisation. Furthermore theories and models such as The Expectancy Theory of Perspectives, is used to get employees to chart down and measure what motivates them. Thus, the benefit of organisational behaviour is invaluable to the entire organisation as it educates and prepares everyone for this positive change of attitude to work, towards a successful organisation where every individual can reap the rewards. 

We can gather and affirm that organisational behaviour definitely affects the entire organisation and pertains to everybody and not only for people who choose to pursue management careers, to play their functions and roles to move towards improving and building a flourishing organisation.

What makes car prices so steep in Singapore?

This has been a question that I have been curious about for quite some time, what justifies the reasoning behind the extraordinarily expensive car prices in Singapore? I have been asked this question a number of times but did not have any concrete answers, so this lead me to unearthing the answer.

Well firstly. lets state the obvious, car prices as high due to the land constraint, keeping the number of privately owned cars on the road in control to subdue traffic congestion, help control the emissions of green house gases and keep the air clean and reduce pollutions.

So lets delve straight into it and let us compare a particular model of a car and its price in America and Singapore. For example a Toyota Camry 2011, from Europe Car News website, in America, the model base price is at $ 21, 240 (USD) which is  $27,445.40 (SGD). The price of a Toyota Camry 2011 in Singapore listed online from Sgcarmart.com cost $157,000. That is a difference of $129, 554.60 (SGD), and both the cars sold in America and Singapore are manufactured in Japan.

What I want to know and find out is how does the Land Transport Authority (LTA) calculates what is the right amount to slap on to a particular car when sold in Singapore? Is it justifiable or not. Are they transparent with their frameworks or methods in coming up with the cost of a car sold in Singapore?

From the LTA's website, on Vehicle Ownership, the only breakdown the individual charges that need to be paid when owning a car. Which compromises of:

1. Registration Fee

2. Additional Registration Fee which is that of Open Market Value (OMV) ranging from 100% to 130%

3. Certificate of Entitlement (COE)

4. Exercise Duty (20% of OMV)

5.Life Span of 10 years upon winning the COE.

The above figures are only relevant to buying a car and does not include all the other additional fees incurred once a car is owned and driven in Singapore, like road tax and insurance.

No where on the LTA's website did I find them explaining how do they calculate OMV and COE of cars.

Although there is an online tool which calculates the OMV for you based on a selected car model, available at,  http://app.lta.gov.sg/motoring_vo_omv.asp 

I guess according to them we need not know the process behind it, but just the end result?

Anyways upon searching more, I did find out from One Motoring's website what does the OMV compromises of, taken from there website listed below,

        " What is OMV? It stands for Open Market Value.OMV is assessed by the Singapore Customs (Tel: 6355 2000), taking into account purchase price, freight, insurance and all other charges incidental to the sale and delivery of the car from country of manufacture to Singapore."

Apart from the OMV, from Motoring One again, the other miscellaneous fees include, Vehicle Tax Structure, Goods & Services Tax (GST) of 7%, Vehicle Number Plate, on average, the cost of a set of normal number plate will range between $25 to $30 (special numbers like 888 or 9 can cost an extra of about $5000 dollars and above), Motor Vehicle Insurance and Profit Margin for Motor Distributors after taking into consideration the above variables.

So from researching and reading up, OMV constitutes the amount is cost to bring a vehicle into Singapore without being able to drive it on the roads, and  how much your vehicle is valued. This price is assessed by the Singapore Customs, which includes purchase price, freight, insurance and all other charges incidental to the sale and delivery of the vehicle to Singapore. 

That is the first major aspect of the cost of purchasing a car in Singapore. The other aspect is that of attaining a Certificate of Entitlement (COE). We all know the COE was instituted in 1990 to limit the number of car ownership in Singapore. 

For more information about the COE you can visit the National Library of Singapore website at http://infopedia.nl.sg/articles/SIP_1005_2006-04-07.html 

The COE prices are differ along categories which are broken up into CCs or vehicle types. I have come across so many sites explaining to me the various types of COEs (Non Guarantee COE, Guarantee COE at $XX, etc), guides to purchasing COE and so on. Also if you decide to sell off or de-register your car, how much of your COE can you get back. Based on certain calculations and depreciation of the vehicle you can get back a certain sum of your COE. 

It seems that my search for finding out the calculation of COE prices is more elusive than I thought. There may be information available which justifies the figures for the COE prices but it just seems to difficult to find, or at least for me. From all that a have read or been trying to find out, it has lead me to conclude that, it seems as though the prices of the COE is not questioned and accepted.

Although I do understand the reasoning for the measures taken by the Singapore Government to curb the number of privately owned vehicles on the road, the transparency for the figures that one has to pay in order to own a vehicle is not openly defined. You just have to pay and not know what exactly does the payment compromises or constitutes of. 

I sure do hope this that shed more light on the understanding of car prices in Singapore. It has surely painted a clearer picture for me. Although not all the questions could be answered, the majority of  them have been put to rest.