Air Asia has been successful in attracting the low-cost segment of the market, but may not have sufficient flexibility to respond to a change in the environment such as a surge in business demand or a dramatic decrease in demand because of terrorist attack or high fuel prices. The airline could also form code sharing relationships with low cost airlines in Europe and western Asia. The liberalisation of the market environment is eliminating barriers to entry in the form of governmental restrictions on airline routes. Blue Ocean Strategy in Air Asia. Aircraft manufacturers, however, pose no threat of credible integration. Fernandes was formerly Southeast Asian regional vice president for Warner Music Group from 1992-2001. Use digital technology — Fernandes believes in using digital technology for his businesses. At the same time, the firm’s strengths can help overcome the threats posed by increased competition. His business offices have no walls and he seeks ideas from his staff. Buyers can be segmented into business travellers and recreational travellers with different price sensitivities. Airlines in this competitor group are regional airlines with destinations limited to East Asia. Airports have moderate bargaining power through their ability to provide airlines with gates and ground services. No plagiarism, guaranteed! The five forces analysis suggests that the primary threat in the industry comes from competition among rivals, which is intensified by the possibility that new airlines will enter the East Asian markets. The formation of the AirAsia Group has allowed for the possibility of a single company owning 100 percent of all the AirAsia airlines operating in Southeast Asia… AirAsia has been named the “World’s Best Low Cost Airline” in the annual World Airline Survey by Skytrax for five consecutive years from 2009 to 2013. While air transportation can be differentiated based on the level of amenities available to passengers, the fundamental attribute of transportation service is similar in all airlines. Registered Data Controller No: Z1821391. Our content is published by a team of authors & contributors stemming from multidisciplinary backgrounds, experiences, achievements and various expertise. Air Asia operates with the world’s lowest unit cost of US$0.023/ASK and a passenger breakeven load factor of 52%. The company also has strengths in operational cost containment through very low staff levels, lack of amenities on flights, and standardisation of aircraft which reduces expense for maintenance and parts inventory. Business strategy is a very crucial element for a company. The SWOT process will start by examining the strengths of the Air Asia of today. Air Asia entered the low-cost international market in 2003. In the resource-based theory of the firm, the resources and capabilities of the firm should be the foundation of the firm’s strategy. The firm was founded in 1996 as a low cost domestic airline, and was purchased by Tony Fernandes in 2001. Empirics Asia is operated by the Empirics Publishing Group. The focus of the analysis is on the East Asian region, which is the primary market for Air Asia. All rights reserved. The threat of substitutes in international travel within the region is low because of the absence of viable substitutes. Disclaimer: This is an example of a student written essay.Click here for sample essays written by our professional writers. Air Asia has adopted a generic strategy of cost leadership by reducing the cost of operations and passing the savings through to customers with very low ticket prices. Invest and enhance the AirAsia brand to increase investors' returns. As a result, a threat of entry also exists from established airlines from other regions seeking to expand routes in the East Asian region. Published: 1st Jan 2015 in We've received widespread press coverage since 2003, Your UKEssays purchase is secure and we're rated 4.4/5 on reviews.co.uk. Gap analysis involves determining the discrepancies between the current resources of the firm and the resources necessary to achieve the desired future state (Grant, 2008, p. 162). These systems are also used to maximise load capacity by controlling scheduling and use of aircraft. Opportunities: Opportunities for Air Asia are providing expanded service in the growing East Asian airline market, opening new intercontinental routes, and forming joint ventures or other strategic alliances with competitors in markets not currently served by the airline. which have helped the brand grow. AirAsias business strategy is centered on cost leadership, it targets specific markets (i.e. The airline has a good technology infrastructure that supports very low cost of operations from its use of technology to automate customer processing and to maximise load on flights. There are several marketing strategies like product/service innovation, marketing investment, customer experience etc. Supplier Power: Suppliers in the airline industry consist of aircraft manufacturers, producers of fuel, and airports, with the power of these groups moderate. The low cost airline industry is comparatively new in East Asia, with independent airlines entering this market segment in 2001 (O’Connell & Williams, 2005, p. 260). Air Asia uses only the A320 aircraft, which has a range of only 4,800 km with a full passenger load, which limits the destinations that the airline can serve (Airbus, 2010). The lower staffing creates issues such as delays in turnaround time that result in delays in departures, with inadequate communications and support for delayed passengers. After he turned around AirAsia, in 2003 Fernandes lobbied Dr. Mahathir to raise the “Open Skies” idea with leaders of Thailand, Indonesia, and Singapore, leading to these nations giving AirAsia and other budget airlines landing rights. The airline’s business model also reduces its ability to attract the business market that values flight scheduling, on time flights, and convenience. The low cost group of competitors focus on flights taking passengers directly from the point of origin to their final destination, although transfers may be necessary to consolidate passengers and maximize capacity utilisation. Company Registration No: 4964706. AirAsia India is an airline in India headquartered in Bangalore, Karnataka.The airline is a joint venture with Tata Sons holding 83.67% stake in the airline and AirAsia Investment Limited (Malaysia) holding 16.33% stake. The producers of fuel have relatively strong bargaining power because oil prices are established by global markets with airline consumption representing only a small portion of oil industry sales. The Crowd-Funding Campaign will be in cooperation with Channel News Asia, one of Asia’s biggest TV Channels! With the perfectly set goals, mission and listed strategy ensures the well functioning of the corporation. Airlines in this competitor group use a differentiation generic strategy based on frequent flight scheduling and use of airports conveniently located with respect to major urban centres, with a wider range of services justifying higher ticket prices. A SWOT analysis can be used to identify the resources and capabilities of Air Asia and the way the firm can use these resources to take advantage of opportunities and counter threats (see Appendix C). It may be a good strategy when they first started with only Malaysia as the hub and few planes to maintain. The propensity of air travel in East Asia is relatively low compared to the global average of 2.0 trips per year, with India at .1 and China at .3 (O’Connell & Williams, 2006, p. 362). Air Asia should offer some flights designated as “business class” that provide a wider range of services for business travellers at a higher price than its normal flights. Besides that, this will also determine if Air Asia has a chance and market opportunity to expand their business in European market, specifically the UK market. Passion — Passion seems to be a common denominator among achievers in business, the arts, sports and other fields. Legal: The nations in East Asia have various ownership and anti-competition laws that affect the ability of airlines to merge or to acquire an airline (Hsu & Chang, 2005, p. 558). Together they form a collective of committed media individuals who passionately write to bring and deliver to readers valuable content on Asian startups, entrepreneurship and developments. The air transportation market in the East Asian region is in the growth stage of development, which is characterised by a rapid rate of increase in sales (Inglada, Rey, & Cote-Millan, 2006, p. 9). When we interact with objects connected to the network, and […], Italian Police Finally Released Underwater Footage Of Sunk Cruise Ship, Italian police have finally released footage video showing the insides of the wrecked cruise ship, Costa Concordia. To use this approach, the firm assesses its resources, determines the capabilities that can provide it with competitive advantage, select a strategy that matches resources and capabilities with opportunities, and identify resource gaps that have to be filled (Grant, 1991, p. 115). Buyer Power: Buyer power in the airline industry is weak because of fragmentation of buyers and the large numbers of potential buyers. Another social trend is the increased use of personal computing devices, which intersects with the technology drivers in the airline industry. He said it took him seven years to consciously and consistently build up the AirAsia brand name and logo as distinct and internationally known. 1659 Words 7 Pages. In January 2012, the Costa Concordia struck a reef off the island of Giglio and capsized, killing 32 people. In particular, the author applies Porter‟s generic strategy especially Low-Cost Leadership strategy to competitive strategy, to argue that AirAsia‟s success that strict with low-cost. The culture that we have stems from the fact that we want openness and we want people to be creative and passionate about what they do. Many airlines compete in the East Asian market, each of which has different strategies and different brand reputations. You don’t need to be inspired to action. The growing population and affluence in the region will produce greater demand for air transportation in the long run. Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UKEssays.com. His AirAsia Foundation also recently supported the social enterprise Rags2Riches led by Reese Fernandez-Ruiz of the Philippines. Copyright © 2003 - 2021 - UKEssays is a trading name of All Answers Ltd, a company registered in England and Wales. He bought the company for one ringgit (about 26 US cents). This thesis explained in detail the AirAsia‟ strategy and whole operations that keep the cost low through the value chain analysis. Buyer power is somewhat strengthened by low switching costs in the industry, with buyers able to chose among many different competing airlines. Dynamic corporate culture — Fernandes said: “In AirAsia we consider ourselves basically a dream factory. It is included the airlines company, Air Asia Company. Pick all the topics you are interested in to fill your Empirics Profile with stories you'll love from other authors. Page 2 Contents Microeconomics and Strategy Market structure and industry analysis 3. Air Asia is the first low cost airline to have formed a joint venture for the procurement of aircraft with a competitor, JetStar, which is based in Singapore (Quantas, 2010, 1). Social: The social trend in East Asia is towards increased consumption including transportation consumption because of the economic growth in the region. Flat organisation structure has encouraged their employees to work as a team despite of department limitations. Empirics Asia is an open-access knowledge sharing platform that seeks to facilitate the collective exchange of insights, ideas and experience throughout Asia. The strategy that they have formulated at the beginnings was a clever blend of proven strategies by other low cost airlines is US and Europe. Political: The trend is toward liberalisation of the airline markets in East Asia to allow airlines access to markets without the need for a specific bilateral agreement concerning air transportation between nations. STRATEGY Strategy-People AirAsia treats their officers as they are part of the firm. We deliberately decided that we wanted a company where people can pursue their passion and we wanted to make use of all the talent that we have in-house. The Asean super app for booking flights, hotels, activities, food, unlimited deals and so much more! Study for free with our range of university lectures! The business model would continue to follow the cost leadership generic strategy. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs. Information collected by many smart objects will change the landscape both in the financial industry and in the whole industry. Chopard is a 153-year-old Swiss luxury watch brand. This strategy would address the problem of low market share in the business segment of the market and diversify the market base if competition in the low cost segment increases. The airline adds significant value to the customer in its operations, which has reduced costs to allow the fares to be the lowest in the world. AirAsia airline is the second national airline in Malaysia. The technology systems are flexible enough to respond to any change in customer requirements, and have been a factor in promoting the acceptance of paperless tickets in Malaysia (Sulaiman, Ng, & Mohezar, 2008, p. 149). Air Asia has high technical fitness, but only moderately high landscape fitness. He is exceptionally passionate, not only about his firms, charities and employees, but also about sports. Air Asia has implemented the strategy of joint ventures to create market share in the Asia markets and launched several joint ventures in different countries, like, India, Japan and China. Free resources to assist you with your university studies! Competitors in the airline industry can be divided into the two main groups of full service airlines and low cost airlines. A PESTLE analysis provides an assessment of the industry environment, which is necessary to create a context for the airline industry analysis (Grant, 2008 p. 68). Because of the difficulties that the firm has with customer care and complaints, the after sales service segment reduces value for the customer. While a strong foundation does not guarantee a solid house, it is the only basis upon which to build. Branding — JG Summit Holdings founder John Gokongwei Jr. years ago told me that earning profits is not enough in business, that it is important to create a brand or brands. In the low cost segment of the industry, taking advantage of this opportunity would require Air Asia to adopt a strategy that restructured in the industry (Cockburn, Henderson, & Stern, 2000, p. 1127). Business travellers value flight schedule and convenience in an airline with price often a secondary consideration. The airline has been successful because it has taken an entrepreneurial and innovative approach to the market, leveraging its competencies to create automated ticketing processes and to reduce other operational costs. The airline has a breakeven load factor of only 52% and the world’s lowest airline unit cost of $.23 per passenger kilometre (O’Connell & Williams, 2005, p. 265). AirAsia has the distinction of being the largest airline in terms of destinations and fleet size in its home country Malaysia. Who is 49-year-old Tan Sri Anthony Francis “Tony” Fernandes, who has built the publicly listed AirAsia Group into Asia’s largest low-cost airline, with over 120 destinations servicing over 220 million passengers? The airline’s difficulty with attracting business passengers because of its business model may ultimately have a negative effect on its market share as business travel in the region increases. The value chain analysis disaggregates the activities of the firm to determine which activities add the most value to customers (Grant, 2008, p. 145). Expansion of the AirAsia network in a prudent and disciplined manner. see more. Air Asia has developed and implemented a proprietary yield management system, computer reservation system, and enterprise resource planning system.
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