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Porter’s Five Forces Model And Porter’s Value Chain for

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on 17 October 2014

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Transcript of Porter’s Five Forces Model And Porter’s Value Chain for


AirAsia is one of the award winning and largest low fare airlines in the Asia expanding rapidly since 2001. With a fleet of 72 aircrafts, AirAsia flies to over 61 domestic and international destinations with 108 routes, and operates over 400 flights daily from hubs located in Malaysia, Thailand, and Indonesia. Today, AirAsia has flown over 55 million guests across the region and continues to create more extensive route network through its associate companies. AirAsia believes in the no-frills, hassle-free, low fare business concept and feels that keeping costs low requires high efficiency in every part of the business. Through the corporate philosophy of “Now Everyone Can Fly”, AirAsia has sparked a revolution in air travel with more and more people around the region choosing AirAsia as their preferred choice of transport.

Threats of New Entrants

• Threat of new entrants is relatively LOW. Why?
– Need a lot of capital, investment and funding.
– Need to conduct in-depth research and development before entering the market.
– Need to spend a lot of money on marketing and advertising.
– Need to hired highly skilled technicians and engineers.
– Need to find an enormous experience workers – pilot, cabin attendants, etc

Threats of Substitutes
Threat of substitutes is LOW due to:
Performance of substitute – cars, trains, buses, ships which is takes longer time to reach destination

Rivals and Competitors
Threat of rivalry and competitors in the flight services is HIGH due to:
Higher number of rivals
Customer easily to switch the airline services
High exit cost

Porter’s Five Forces Model And Porter’s Value Chain for AirAsia in an Airline Industry
Ahmed Salih Mahdi \ P74217

Once entering airline industry, hard to find company exit the industry due to high cost in paying loans, staff retrenchment and flight cancellation refunds
Power of Buyers
Power of buyer is HIGH due to:
Services given has no significant differentiation
Switching cost for buyer is LOW
Buyer have easy access to the information about airline services such as price, promotion

Power of Suppliers
Only 2 major suppliers for aircraft industry – Boeing and Airbus – So, the power of supplier is HIGH
Switching cost is HIGH – aircraft, training of workers

Porter’s Value Chain
Primary Activities
Inbound Logistics
Outbound Logistics
Sales & Marketing

Inbound Logistics
AirAsia currently only running an Airbus planes
can save cost on training of engineering and focusing on other thing such as promotion and innovation.
In-Flight services such as meals get from local delights
Can promote local food at the same time!

Low cost carrier model
Self automation
Customer can book and print the ticket and also check-in by themselves, so this can reduce cost on counter services.
No frills
Customer only pay for flight services charge. If customer need in-flight comfort such as meals, blanket, customer can add-on later.
Cost-saving innovations
Outbound Logistics
Customer can book their ticket and check-in their flight thru online by themselves.
Customer can easily get AirAsia flight service in all Malaysia airport

Sales & Marketing
Sponsor well known sports team
Make a lot of advertisement all over the media –internet , newspaper , tv
Make an flight promotion periodically – twice or more in a year

AirAsia offer other services such as AirAsia Car rental, Cargo, Megastore,Foundation, Travel Protection, etc
AirAsia also offer after-sales-services

Supportive Activities
Technology Development
Human Resource Management
Firm Infrastructure

AirAsia separate their business procurement into different unit such as flight, hotel, in-flight services, merchandise, etc, but everything are connected to the goals of AirAsia.
Each unit can focusing more on their own business.

Technology Development
AirAsia using certain system to support their company operations
Yield Management System (YMS)
Computer Reservation System (CRS)
Enterprise Resource Planning System (ERP)

Human Resource Management
HR hiring multiple skill personnel to increase the quality and efficiency of the company and also will reduce the cost for company such as time and training development.

Firm Infrastructure
AirAsia focus on their goal which is provides the lowest price for customer

1. eAirlines: Strategic and Tactial Use of ICTs in the Airline Industry. Dimitrious Buhalis. University of Surrey.
2. The future of CRM in the airline industry: A new paradigm for customer management. IBM Institute for
Business Value. 2002.
3. AirAsia Corporate Website. http://www.airasia.com.
4. AirAsia – How to book online tutorial.
5. Navitaire Open Skies by Navitaire Reservation and Distribution System.
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