Question aditya Business & Management

AirAsia's business strategy

What was the business strategy of AirAsia and why was the firm was successful in the 2000s?

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Answer Expert #27321

In the Association of South East Asian Nations (ASEAN), AirAsia is the leading low cost-carrier, offering routes across 132 destinations, of which it is the sole connector of 40 destinations (AirAsia, 2016). The company states that its vision is centred on continuing to be the lowest-cost airline in every one of the markets it serves, with the foundations of this mission being built on low-cost, efficiency, strong cash flow, and the stimulation of new markets; these foundations build the strategy of AirAsia, which focuses on combining safety, low fares, quality service and simplicity (AirAsia, 2016b). Clearly, AirAsia are thus opting for a ‘cost leadership’ strategy, given that they are operating as a low-cost carrier rather than the more expensive or luxurious full-service carriers. As such, the strategy of AirAsia can be viewed as a successful one, given that research shows that if low-cost strategies are combined with quality, then a positive relationship with financial performance can also be found (Kurt and Zehir, 2015).

It was cost leadership strategy that can be attributed to the success of AirAsia in the 2000s. In general, the Asian market significantly lagged behind that of Europe and the United States when adopting low-cost airlines, due to a lack of secondary airports, regulated markets preventing entry to international markets, and longer stage lengths of aircrafts (Lu, Liu and Shen, 2006). When the company was bought out by the Tune Group in 2002, and was subsequently relaunched and rebranded into a low-fare carrier, it was one of the first in the ASEAN region to do so. Furthermore, the fact that a large, experienced and established company was in charge of the relaunch meant that the company could utilise an innovative business model in a market that had never before experienced a domestic airline encompassing lean processes, simplicity and efficiency, and all for a low cost (AirAsia, 2016a).

References

AirAsia. (2016a) ‘About AirAsia.’ [Online] [Accessed 1 November 2016] http://www.airasia.com/my/en/about-us/ir-about-airasia.page

AirAsia. (2016b) ‘Strategy.’ [Online] [Accessed 1 November 2016] http://www.airasia.com/my/en/about-us/ir-strategy.page

Kurt, A. and Zehir, C. (2016) ‘The Relationship between Cost Leadership Strategy, Total Quality Management Applications and Financial Performance.’ Doğuş Üniversitesi Dergisi, 17(1), pp. 97-110.

Lu, C., Liu, S.Y., & Shen, S.S. (2006). The low cost model and strategies for Taiwanese airlines. Aerlines Magazine, 34, pp. 1-3.