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Air Asia is the Asian company, it was established in 1993 but its first operation commenced in 18 November 1996.it provide the only transportation services but it also provide the cargo services and courier services. As in the international market he faces severe competition. Air Asia faces many competitions and severe strong challenge of many new airlines and it also face competition with not only international airlines but also local airlines on the various routes to the Europe and Middle East. Because of the high oil prices international aviation industry regulation and some internal factor such as mismanagement corruption and lack of motivation and accountability.
The assignment tells about the three section of the organization. In the first section of the organization are introduction and its corporate strategy development history and its business strategy. And in the second section we focus on the organization external analysis which includes the swot analysis and porter five forces. At the ending or third section we total focus on the organization future strategy, tell in the future if he gone to another country how achieve their target and to beat their competitors. And also describe the strategies of penetration to foreign country, how to stable Air Asia in this country.
The report is about the air line company in Asia which gives the air line services to the passenger namely AirAsia airline. Air Asia company is established in 1993 and firstly commenced operation on November 18, 1996. It was originally founded by a government -owned conglomerate DRB-Hicom.
Asia's well reputed and leading airline established with the dream of building flying possible for everyone. Since 2001, Air Asia has very rapidly broken the travel norms around the world and has become the most leading and innovative airline in the world. Air Asia also invited the low cost aviation through our innovation solution. With a route network that spans through more than 20 countries and it continues to cover the way for low cost aviation, efficient processes and an obsessive approach to business. Air Asia is set to take low cost flying to an all new high with our believe.
Air Asia operate with the world's lowest unit cost of US$0.023/ASK and the passenger breakeven load factor of 52% and world fastest growing airline in the world. It has hedge 100% of its fuel requirement for the next three year. Achieve an aircraft turnaround time of 25 minutes has a crew productivity level that is triple and achieve an average aircraft utilization rate of 13 hours a day.
Air Asia focuses on different major issue first, it is partnering with the world's most renowned maintenance providers and to comply with world airline operation to guarantee the passengers safety. Second, implementing the regions fastest turnaround time at only 25 minutes, to assure lower costs and higher productivity. Third, low fare without compromising on quality and services. Fourth, streamline operation and lean distribution system. Fifth, applying the point-to-point network to keep operations simple and low costs.
Air Asia keeps improving their supportive and their constructive management, and also has won many awards and recognitions in 2008 and 2009. The recent award of the Air Asia is the best airline of the year by Center Asia Pacific Aviation (CAPA), best Asia low-cost carrier by TTG Travel Awards 2009, and world more best low-cost airline by Skytrax.
Focusing on the low cost, long haul segment -AirAsia X was established in 2007 to provide high-frequency and point-to-point networks to the long haul business. AirAsia X efficient and reliable operation are fully licensed and monitored by Malaysian and international regulators. AirAsia X-traordinary in fight and service experience to all our guests, spreading the amazing AirAsia experience to exciting destination in Australia, China, India, Middle East and Europe.
Their vision, under the slogan "Now Everyone Can Fly", is "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
Their mission is, under the banner of 'Affordable Airfares', "To attain the lowest cost so that everyone can fly with AirAsia," without any compromise to Flight Safety Standards, as well as, creating a world wide recognizable brand with a 'family' atmosphere within working conditions for employees. AirAsia's mission statement is to be the "Asia leading low fare no frills airline and first to introduce "ticketless" traveling, Air Asia will be unveiling more incentives in the future to encourage more air travel among Malaysians." Now everyone can fly clearly describes AirAsia's value. Cost advantages created by Air Asia through operational effectiveness and efficiency go directly to the customers. The customer now enjoy much more surplus than before as the fare falls dramatically and Air Asia captures some of the dead weight losses by capturing segments of customers that previously cannot afford the airlines' fare.
Our corporate strategy is to become a global leader in the world through organic growth and offering differentiated travels other than the competitors in the world. We offered attractive customer services and safe environment to their customers. Air Asia achieved the best Asian low cost carrier by TTG Travel award.
Air Asia business strategy is totally concentrated on the cost leadership. Its main aim to target specific competitive markets, and also offer low prices or price sensitivity to their customer. AirAsia provide the services at very low cost than its competitors and it has competitive advantage over its competitors. The central objective is to achieve bigger cost advantage than the rivals by continuously searching areas for cost reduction along with its value chain.
Air Asia always looking to keep the operations simple and more efficient to keep the cost low, another AirAsia way to save cost is not to provide the food and drinks on the plane as the main purpose of the airline is just to move someone from one to another place cheaply. It sells food, snacks, and beverages, on the plane. So customer who want to eat or drink can just buy what they want through this AirAsia can get more and more profit from the sales and the food and the beverages because it sells the products for higher prices than supermarket or wholesaler prices.
Air Asia does promotion by television, in tabloids, and in the newspaper, but also promotes the brand by sponsoring the amazing race Asia along the show and to have a sponsorship deal with England best football club Manchester United (MU). AirAsia also maintained the safety of the airplanes by complying with the highest international aviation safety standard and practices.
Air Asia satisfying customers is the key for long term success, and it always tries to satisfy its customers by flying on time and during the flight time tries to create its team friendly atmosphere to every customer.
Air Asia has a very strong management team and have strong link with the government and the airline industry leaders. Air Asia has a well strong name in the air line industry because they perform their operation in multiple countries like in Malaysia, Indonesia and Thailand etc. It has the competitive edge over its competitors because it provides the low cost traveling services all over the world. It also introduces the air buses on which he gives special discount to its customer and it also reduces the fuel cost. Its sponsorship deals with the Manchester United football which is the best in England and also in the world best football club increase the global brand recognition. It used the IT into their operation and get latest information to make newer airplanes. Differentiate from the other air lines; provide the timely services to their customer and more focus on the IT to create the innovation other than the competitors. Fifty percent of Air Asia Thailand which is held by the Thaksin Shinawara enabled opening up of Thai market with large share. Air Asia has the partnership with other industries such as hotels, car rental firms, hospital include medical tourism, and Citibank has created a very unique image among travellers and also low cost leader in Asia.
Air Asia has consumed the high fuel consumption in 2008 which also decrease the overall profit and it also fluctuate and unstable the markets lead to increase the operational especially in the airline industry. Recently Air Asia have the poor reputation with customer, this is due to the late timing of flight arrival and the cancelation of the tickets and due to the non-central location of secondary airport it also increase the number of customer complaint. Air Asia can not maintain, no maintaianence, repair facility available, with increasing fleet this is a competitive advantage.
In Asia the oil prices are increase very heavily it may be threat for the Air Asia but Air Asia is the low cost leader in the Asia pacific is the opportunity for the Air Asia to capture all the possible existing customer of full service among other low cost airlines customers and being low cost leader in the Asia it has the upper hand on the regional airlines has it big opportunity of the Air Asia. Asian middle class population is reaching almost 700 million by 2010, this create a large market share and huge opportunity for the Air Asia. Air Asia also offers new services such as holiday package and to increase sales, it gives you fidelity cards group discount etc. Air Asia also provide the online facility to get the ticket online and partnership with the Virgin airline which is the American company has well brand name , time slots , landing rights which is the big opportunity fir the Air Asia airline to grow more in the competitive market. Low cost philosophy strategy of Air Asia airline allow to opened more new routes to capture the middle class people in Pakistan, China, Bangladesh and in India.
The threat to Air Asia is enter the potential entrant in the market like recently Singapore airline but Air Asia is the low cost leader in the market there is no more threat to the company, they already provide the low cost customer services to their passenger other than its competitors. They create a well brand name and win an airline award of the year in 2008 and generate more and more profit, so there is no major threat to the Air Asia Company.
Porter Five Forces:
Bargaining power of Supplier:
Bargaining power of supplier is high because monopoly in the industry driven by Airbus and Boeing. That's why there is not too much alternatives for airlines and there is no much more room for them to bargain. Therefore there is no major substitute available in the market, switching cost are high.
Barganing power of Buyer:
Barganing power of buyer is high because they have the internet facility and also mobile technology through which it can easily acess the pricess of which airline price are the lowest price.then you can easily move from one airline to an other airline that's why barganing power of buyer is high.
Air Asia has the low cost strategy in the leading market of airlines, it offer various discount on thier different package like holiday package. Therefore the competitive rivalry is in the favour of the Air Asia company and it leads in the Asian market, so there is no high competitve rivalry in the market.
Threats of Substitute:
Basically Air Asia cover many countries across the borders areas and its Asian region is very vast and with its geographic make up air travel is not only a feasible service but it is more efficient and effectiveness. This make the substitution is very low for the Air Asia airline.
Thraet of new Entrants:
Threat of new entrant is normally based on the market entry barriers like Government policies, tax, economies of scale brand identity, and access distribution. Air Asia has the low cost and market leader and has high capital investment in the market and gain huge market share and also have competitive advantage over the competitors , so finally the threat of new entrant is low or moderate because Air Asia is the market leader in the Asia pacific region.
Future strategy of Air Asia:
For the future strategy of the Air Asia is that, Air Asia is basically a cost leader between his own competitors. Its create innovation provide the higher class services to their customer. They totally dominate in his region. They also provide the on time service in the region which is basically is the Asia pacific. We achieve the entire target like competitive advantage; cost leadership, more innovative in our region, that why we penetrate to other market. Therefore we penetrate to other market or you can say foreign market like in Pakistan. But in future I recommend that it goes to the Pakistan to provide the services of high class services and also low cost. But in Pakistan Air Asia going with the aim in the future low cost leadership in Pakistan they introduce the some strategies like
Proper recruitment process of their staff.
Specialized people are hired.
Introduce the proper organization structure
But in the Pakistan I think that there is no major threat of the competitor enough in Pakistan like Air Blue and the Sheen Air line. But in Pakistan it becomes the leader because in Pakistan only three air lines are working. There services is not cheap and some time it is much on time provide the services and have not executive class of airlines and they have not control on their cost because the Pakistan International Air line is also down because their has no more expenses to bear because they already in loss and according to the other two air lines they also follow the same thing happening. But the Air Asia is the low cost leader in the Asia pacific over their competitors. When you move to other foreign market, you see the whole country politically, economically how much is strong in the economy and also include the social cultural factor, technological factor, legal factor and environmentally you check it. But in Pakistan the economically is average their, increase the oil prices but the tax rate is lower than other countries. When we launch our product into Pakistan firstly we introduce our services provide the quality according to the customer requirement and also provide the on time deliveries their staff is also cooperate and also create friendly environment with their passenger. They also invest in the good personal selection and training. And after this they are monitoring their customer satisfaction because customer is always the key for the organization. In Pakistan Air Asia offer differential price into the different season according to the peak season and the off season. To become the leader also in Pakistan there is no demand in the peak season can be cultivated
And according to the price in the Pakistan the Air Asia introduces the different pricing strategies on the different routes:
Firstly which type of Aircraft he used it.
Second the cost of the operation.
And after this they are require to introducing the places and channels where the people bought the ticket is easily available. The channel is basically is the direct marketing, they should use the agent to sold their tickets, basically these agent have the approved travel agencies. Your agencies is sales only your airlines tickets. You give the commission to their travel agencies on the international route or the domestic route, the commission is:
International sector = 8%
Domestic sector = 4%
All these offices are the computerized and directly linked to the head office which you place wherever in Karachi or Lahore etc.
Air Asia also invests in the promotion of their airlines in Pakistan. They use the way of promotion like on TV commercial, you use the celebrity couples from the Pakistan when the season is off specially. You also give the add on news paper and used brochures. Air Asia also offers more flights in June and July because the Pakistani people go for the Umrah and Hajj. They also introduce the more package on the Umrah and Hajj, people move to your airline.
Air Asia flexible fares- plan ahead and pay less, book international and the domestic flights early as possible because earlier you buy, cheaper you fly. And also give the discount on business class and economy plus, economy classes. And give the family offer in the business class if you buy three tickets get one free. The offer is available on the international routes.
Air Asia also targets the people demographically according to their income segmentation and their occupation. The target the upper class and the upper middle class. They also have target in the future behavioral segmentation (occasion based) like;
New Year occasion
When Hajj operation is going people flying different from different cities of Pakistan to Saudi Arabia for the performance of Hajj.
Eid occasion come people are come to Pakistan outside the country move to their home together their families.
People prefer the New Year occasions with their family come to Pakistan and going to the outside Pakistan they give the low cost services other than their competitors. Air Asia basically compete easily in Pakistan because there is no major competitors in the market, they have the low cost award winner of the Asian airlines.
Air Asia should also decentralized its structure in the Pakistan, increased motivation; give easy access of information and the resolution of the conflict.
Air Asia gives the empowerment to their employees because they take an active part to make decision this make the employee productive with their job and feel more satisfaction to their function. And the employee would feel more independence they perform their duties more satisfaction and without hesitation.
Reduce the overhead cost because labour is more effective. You give the less input it create the more output achieved and can saved the resources utilized in other areas and also introduce more training courses for the employee to increase the quality of the workforce could be increased.
Hire the expertise to improve the efficiency of their services to save the overhead cost. Communicate with the employee more friendly and motivate them to encourage in the decision making.
They advertise more and more on TV, Billboards because advertisement gives the more customers to you.