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Transcript of Strategic mgt
AIR ASIA COMPANY PERSPECTIVE
REPRESENTATIVE COMPETITIVE STRATEGIES
COMPANY COMPETITIVE STRATEGY & FINAL ANALYSIS CONTENT PESTEL ADHWA ATAULLAH BIN JAVES 2010524301
MASDIANSYAH BIN MAJID 2010379243
SHOFIEYAN MIRAJ 2010797275
STEPHEN JENANG MENDIT 2010764427
UMAR SAIFUDDIN BIN SOUBRI 2010319521
Diversification Air Asia focuses on the different strategies which improve its existing assets, by introducing new concepts or improving their services.
In order for Air Asia to maintain their competitiveness as low-priced Airline, they offered low prices of tickets, but to save money they does not offer free food in flight but they sells sandwiches and a few of other basic items.
Product/Service Development Ansoff Matrix
Market Development Growth strategy which enables the business to focus on the process of selling existing products into the existing market.
Effort of the Air Asia on its pricing strategies, advertising and service promotion.
Effort of the airline company in applying online booking, technologies or Information Systems.
Ansoff Matrix Environmental factors consist of the weather and climate change.
The growing desire to protect the environment is having an impact on many industries such as the travel and transportation industries.
General move towards more environmentally friendly products and processes is affecting demand patterns and creating business opportunities.
Environmental factors PESTEL
Technological Factor More people were willing to pay on food and other services in exchange for lower prices.
This give an opportunity for all Low cost carriers (LCCs) to increase their revenues by offering travelling at a much lower fare.
Creating and developing a social culture takes time and effort and a new motive driven company such as Air Asia.
Social-cultural Factor PESTEL
Economic Factor Refer to government policy.
Political factor analysis mainly states about the aviation acts and regulation.
Political factor considers the impact of legislatives changes, stability of the economy and event that related with the government and politics that may affect the business.
Political Factor PESTEL Quick economic growth of Asian country continues to fuel
growth of air travel in Asia.
Rapid growth and increased trade and business will create
competittion which is entrance of other Low Cost Carriers.
Factors that will infulence of economy such as interest
rate, stability of economy, inflation levels will help the airline
to make better decision on how to operate their airline company
effectively. new services such as Internet
E-commerce and internet based activities such as online holiday an hotel. reservation are other areas where AirAsia
can get extra profit.
Reduce operation costs such as saving on
commision for travel agents. this strategy focuses on the different actions of the business that seeks to sell its existing products and services into a new market.
this strategy focuses on extending their services to the entire world. Diversification means when the company is selling new product into new market.
In horizontal diversification, the company will be developing activities that are directly complementary to a company's present activites. AirAsia Key Strategic Vision
To be the largest low cost airline in Asia and serving the 3 billion people who are currently underserved with poor connectivity and high fares
To be the best company to work for whereby employees are treated as part of a big family
Create a globally recognized ASEAN brand
To attain the lowest cost so that everyone can fly with AirAsia
Maintain the highest quality product, embracing technology to reduce cost and enhance service levels Thai AirAsia
Air Asia X Subsidiaries Established in 1993 and began operations on 18 November 1996
Originally founded by a government-owned conglomerate, DRB-Hicom
On 2 December 2001 the heavily-indebted airline was bought by former Time Warner executive Tony Fernandes's company Tune Air Sdn Bhd for the token sum of one ringgit with MYR 40 million worth of debts
Fernandes turned the company around, producing a profit in 2002 and launching new routes from its hub in Kuala Lumpur Establishment Low Cost Carrier (LCC) Business Model
Low Operating Costs Business Model Malaysia-based low-cost airline
The largest low-fare, no-frills airline and a pioneer of low cost travel in Asia
Operates scheduled domestic and international flights to over 400 destinations spanning to 25 countries
Had flown over 100 million guests upon the core believe that “Now Everyone Can Fly”
Main terminal hub is the Low-Cost carrier terminal (LCCT) at Kuala Lumpur International Airport (KLIA) Corporate Profile
d) Threat of New Entrants
Threat of new entrants is moderately low as the entry into the industry requires high capital. Moreover, the industry is also highly regulated since every potential entrant is required to obtain approval from the civil aviation authority of the particular country before the company is allowed to be operated.
e) Intensity of Rivalry
Industry rivalry is moderately high due to competition and high exit cost. Nonetheless, market participants understand and realize that price war is destructive for them and thus they tend to avoid direct price competition to make themselves ‘friendly ’competitors b) Power of Buyers
The power of buyer is high due to almost no switching cost for customers to switch from one LCC to another. In addition, the access to the internet also allows customers to have all the information on prices charged by the different LCCs.
c) Power of Suppliers
The supplier has an upper hand (high power) due to limited number of suppliers (only Boeing and Airbus).
a) Threat of Substitute Products
The possibility threat of substitutes is moderately low; since there are several other substitutes such as cruises, rails, buses and cars. However, the geographical structure of Asia made air travel the most viable, efficient and convenient mode of transportation which is a surplus for AirAsia Analysis of Competitive Forces - Porter’s Five Forces Analysis Threat
Oil price trend
- Aviation turbine fuel (ATF) cost and other operational costs are the same for all airlines, whether it is a low cost or full-service airlines. This adds significantly to cost especially for Airsia, since fuels costs as a percentage of total costs are higher at 26 % for low cost airlines, compared to 20 % for full service airlines.
Introduction of new low cost carrier
-The introduction of new low cost carrier in future will deliver greater competitor between AirAsia with other low cost carrier, at the same time compete and maintain the market share with full service airlines.
Accident, terrorist attack and disaster that affect customer’s confidence
-This situation is cannot be recognize by airlines management. The possibility of this situation to occur will lead to loss for airline industry because tourist feel insecure to travel when any accident or terrorist attack happened in a particular country. Opportunities
- At present, AirAsia differentiates its no frill product by offering fewer features at substantially low fares. However, this strategy will become generic and same with the entry of low costs carriers waiting in future.
-each of low cost carriers need to try to be different and unique, however must be approached with extreme caution and supervision. Some examples are introduction of seating
ASEAN Open Skies agreement
- This agreement allows unlimited flights among ASEAN’s regional air carriers beginning December 2008. This will definitely increase the competition among the regional airlines. Organisation Management
- AirAsia’s organization structure is rather simple and flat as it involves a group of staff in the company reporting to one manager. This serves AirAsia well as the business requires a structure with fewer levels of management so as to achieve more consistency and cost reduction.
AirAsia was the first airline in Southeast Asia to utilize e-ticketing so that traditional travel agents can be bypassed. This technique was proven to save cost of issuing physical tickets and eliminate the need for large and expensive booking and reservation system.
Human Resources Management
All employees are offered a wide range of incentives that includes productivity and performance-based bonuses, offer of shares and stock options.
AirAsia adopted a sector pay policy that gives extra incentive, with the function not only to improve productivity, but also strengthened employer-employee relationships. Weakness
Fixed-cost perishable product
- Intensive marketing strategies required to fill airline seats
A lot of complaint in terms of services
- hidden charges & no refund
AirAsia does not have its own maintenance, repair and overhaul facility.
- with new hubs (Thailand and Indonesia) and over 100 aircrafts, AirAsia have to ensure proper and continuous maintenance of the planes which will also help to keep the overall costs low. Strength
- strong emphasis on lowering all avoidable cost
Management good in Strategy Formulation
- Ryanair’s operational strategy (no frills, landing on secondary airports), Southwest’s people strategy (employee comes first) and Easyjet’s branding strategy (link with other service providers like hotels, car rental).
First mover advantage
- being first low cost airline in Asia, able to establish itself from other low cost & full service airlines
Well established brand
- local presence in Japan & Thailand successfully promote AirAsia
- ownership of Caterham F1 Racing Team & QPR Football Club by Tan Sri Tony Fernandes
Excellent Utilization of IT SWOT ANALYSIS To ensure its future success based on their achievement present.
1. Conducive Environment for Growth
-The major macro environment factors suggest a very conducive environment for the growth of low cost carriers
2. Strong Finance Resource
- strong finance resource is vital for growth and to wrestle any economic crisis and to sustain the business
3. Obsession with Low Cost Culture
- able to increase profit.
4. Effective in Implementing Cost Reduction Measures
- to achieve profit margins of 38 %( before interests, taxes, depreciation and amortization) which were among the highest in the world for LLC
- to ensure that the central objective of achieving bigger cost advantages than the company’s rivals allows Air Asia to achieve continual success.
5. Effective Marketing “Now Everyone Can Fly”
- This is a huge victory in any marketing strategies positioned itself in customers’ minds
- helps the company to gain new customers as well as retaining some of its existing clients. Comment & Recommendation - performance-based bonuses, shares and stock options Significance Factor of Air Asia Airline Company Analysis of Competitive Forces
to improve the company throughout indentify on what are their business pattern
level of efficiency of their operation
access to the internet also allows customers to have all the information on prices charged(Power of buyers)
understand and realize that price war is destructive
to avoid direct price competition to make themselves ‘friendly ‘competitors. Summarize of Company Competitive Strategy (Porter’s Competitive Force Analysis) Air Asia has developed a unique set of guiding principles - simplicity, cost-efficiency and effectiveness. Total commitment to these principles makes the airline services of Air Asia very user-friendly to its customers
Air Asia was able to achieve a broad market leadership through various acquisition deals over the years even there is a stiff competition in the market
focused mainly on driving the growth of its airline services and improving the company’s financial performance
the differentiated airline services of Air Asia were able to satisfy the needs of customers through a sustainable competitive advantage Conclusion Included political/legal factors, economic factor, Social
cultural, technological, and environment factor.
about the aviation acts and regulation
helps the company make better decision on how to operate their company effectively
to increase their revenues by offering travelling at a much lower fare.
to develop method on how to connect with the society's lifestyle, demographics, and media.
technology advancements also having opportunities to reduce operation costs. Business Strategy Analysis (PESTEL Factor) i. objective
help employees and the organization to understand their roles when executing the company’s strategy
to ensure that employees have a clear understanding and avoid they lose focus. Competitive Strategy