Strategic Management at Air

Asia
Airline case study Assignment

CONTENTS
1.
2.
3.
4.
5.
6.
7.

Introduction . 2
Executive summary . 2
External factor evaluation matrix 3
Internal factor evaluation matrix .4
Competitive profile matrix 5
Swot Matrix ......6
Questions and answers .7

1 Introduction
The growth of AirAsia is closely associated with the entrepreneurial effort of
Tony Fernandes. Son of a Malaysian doctor, Tony was sent to boarding school
in Britain with a view to following in his fathers footsteps into the medical
profession. The son had other ideas and, after an accounting degree at the
London School of Economics, went into music publishing, first with Virgin,
then Time Warner. He describes his decision to start an airline as follows:
I was watching the telly in a pub and I saw Stelios [Haji-Ioannou] on air talking
about easyJet and running down the national carrier, British Airways. (Sound
familiar? Hahaha.) I was intrigued as I didnt know what a low cost carrier was
but I always wanted to start an airline that flew long haul with low fares.
So I went to Luton and spent a whole day there. I was amazed how people were
flying to Barcelona and Paris for less than 10 pounds. Everything was organized
and everyone had a positive attitude. It was then at that point in Luton airport
that I decided to start a low cost airline.

2 Executive Summary:
Air Asia Airline was established with the dream of making flying possible for
everyone. It has been named as the world's best low-cost airline headquartered
in Kuala Lumpur, Malaysia. Air Asia is one of the award winning and largest
low fare airlines in the Asia expanding rapidly since 2001. With a fleet of 72
aircrafts, Air Asia 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.. Its main hub is the Low-Cost Carrier Terminal
(LCCT) at Kuala Lumpur International Airport (KLIA). It was 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
(about USD 0.26 at the time) with USD 11 million (MYR 40 million) worth of
debts. He managed turned the company to earn profit. In this marketing plan,
we will analysis about Air Asias market summary, whose are their target
markets, which group of the consumer that they focus on, what the market
needs, market trend. We will also using SWOT analysis to analysis Air Asias

strengths, weakness, opportunities and threats. Besides that, we also list out
their competitors. We also discuss about products or services that are provided
by Air Asia, how they succeed and their critical issues. This plan also will
analysis Air Asias marketing strategy, financial status and how they implement
their operations and control risk.

3. EFE OF AIR ASIA

OPPORTUNITIES

Weight

Rate

Provide safety assurance to people

Effective and long-term strategies
More premium seats
Flexible and open culture
Be more customer oriented to gain more
market share
Services provision with ticket price
Separate planes for business class at low
cost
Entrance gate to gain customer trust
THREATS
Singapore airline/southwest airlines
Increase in inflation rate
Climate changes effect airline business
Improving competition
Technology improvement

0.11
0.08
0.1
0.09
0.08

4
3
2
2
4

Weighted
Average
0.44
0.32
0.2
0.18
0.32

0.07
0.05

3
2

0.21
0.10

0.09

0.36

0.08
0.07
0.08
0.06
0.04
1

4
3
3
2
3

0.32
0.21
0.24
0.12
0.12
2.314

3.1 Interpretation
There are many opportunities for AirAsia to improve itself. The AirAsia Airline
can attract the customers by providing safety assurance, can increase the
capacity for business class customers who travel on the regular basis. There
should provision of services alongwith the ticket the customers have purchased
for example bag checking should not be charged separately, It can provide
separate plain , separate services only for businessmen/businesswomen.
Entrance gate services should be provided so that customers should not have
face many sacrifices.

The threat is its competitors like Singapore airline and southwest airlines.
Increase in inflation can harm the AirAsia as it can suddenly face the situation
of crises in which the management of cost leadership is very tough. Climate
changes can effect the airline business as because of these changes there can be
hurdles during the flight and it is not utilizing much of the updated technology,
means it is not adapting the change effectively so this can be a threat because
the competition is going to be increased day by day and they are differentiating
themselves from other aspects as they focus on their customers needs. And the
calculated score in this matrix shows that the result is on average it is somewhat
above than the minor weak result.

4.

IFE of AIRASIA X:

STRENGTHS

Weight

Rate

Low ticket price

Market expansion
Serving more destinations
Providing training to employees through
training academy
Online ticket selling
Call centres and mobile messaging
KoolRed, own social network
Communication with customers
Effective strategies during crisis
X-Factor
First mover advantage
Online provision of facilities
WEAKNESSES
Product oriented
Less service provision
Operational cost is high
No gate at entrance
Strategies are not for long term
Poor staff
Ineffective promotions
TOTAL

0.08
0.07
0.07
0.03

4
3
3
3.5

Weighted
Average
0.32
0.21
0.21
0.105

0.05
0.04
0.04
0.05
0.08
0.04
0.05
0.02

3.75
3
4
3
3
4
4
3

0.105
0.12
0.16
0.15
0.24
0.16
0.2
0.06

0.05
0.03
0.05
0.06
0.07
0.06
0.08
1

1
2
2
1
1
2
2

0.05
0.06
0.10
0.06
0.07
0.12
0.16
2.555

4.1 Interpretation
AirAsia Airlines is not effective in its marketing strategies because it is not
focusing on customers but making a mistake of marketing myopia. Because of
marketing myopia the strategies of the airline does not remain sustained for the
long time and the strategies are always applied when the certain situation
occurs. It is competing under the cost leadership skill but its operational cost is
high. AirAsia Airlines can increase its strength by cutting the operational cost
slightly and invest that money into the other units to make balance for example
investing into the improvement of poor staff, investment on providing the
services for entrance at gate, or invest some capital on promotions to convert its
weaknesses into the strengths. The weighted average score of internal factor
evaluation for AirAsia is 2.5%. It shows that the result is on average. It should
be improved to increase its score to the minor strength to major strength.

5. CPM MATRIX FOR AIR ASIA X

Air Asia
Factors

Weight

Support
to
customers
Product Quality
Price
competitiveness
Customer loyalty
Global Expansion
Reputation (Safety
Efficiency)
Features

Singapore

Southwest

W.A

Rate

W.A

Rate

W.A

0.05

Rate(AirA
sia)
2

0.1

0.15

0.15

0.15
0.25

4
4

0.6
1

2.5
1

0.375
0.25

3
4

0.45
1.0

0.15
0.15
0.15

3
4
3

0.45
0.6
0.45

2
4
3

0.30
0.6
0.45

3
4
4

0.45
0.60
0.60

0.1

0.4
3.6

0.3
2.425

0.40
3.65

As rating means 1=major weakness, 2= minor weakness, 3= minor strength,

and 4= major strength.
5.1 Interpretation
In this matrix, the result shows that the Singapore airlines is the competitor lies
under the average competitors but the major threat for AirAsia airlines is

southwest airlines because its score also lies in between the range of minor and
major strength category but also slightly above than the minor and major
strength of Airline Asia as it is concentrating on the needs of customers because
of which customer loyalty and services quality increases, and the reputation of
safety as well as it is providing the safety services better than the AirAsias.
AirAsia airline would have to make such kind of strategies that can make it
sustained for the long-run not for the short-run. Because if today Airline Asia is
near to the major strength, tomorrow may be it can fall into the category of
minor weakness. So, AirAsia should have to plan for the uncertain future.

6. SWOT ANALYSIS
SO
Market development (S2,O5).
2. Be more pro efficient at strategy
development (S9, O2).
3 Acquire more customers in order to
gain more competitive advantage (S8,
O5).
4. Open environment with flexibility
(S12, O4).
5. More looking over customer service
through high number of seats (S3, O3).
6. Provide some services (extra
facilities with increasing market share
(S2,O6).
7. Better customer understanding and
relationship (S12, O4).
ST
1 Prices can fluctuate (S1, T3).
2. Competitors can hit your market
share (substitutes) (S3,T3).
3 It can be costly to provide other
facilities (S12,T2).
4. Competitor can gain more share in
market (S2, T1).

WO
1. Acquire customer trust by being
customer oriented (W2, O1).
2. Increasing servicing can be profitable
(W2, O5).
3. Keep eye over promotion effectiveness
through increasing market share (W7,O5).
4. Cost can be controlled through high
number of premium seats (W3,03).

WT
1 Can give competitor edge as compared to
competitors (W1, T4).
2. Provide safety (W4,T5).
3. Be effective at promotional activities
(W7, T4).
4 Strategies should be for long-term
(W5,T3).

Here we have matched the strengths with the opportunities, strengths with its
threats, weaknesses with its opportunities, and weaknesses with its threats. If the
weakness and strengths will lie in the major weakness region it will be very

dangerous for AirAsia. As we can see in the WT portion of the matrix that
strategies should be for the longer period of time, If AirAsia Airline will always
just give the responses according to the situations and if it would not be
proactive no matter how good it is in cost leadership skill, still it is in danger to
face the future uncertain conditions in which it would not be able to make a
decision correctly.

7. QUESTIONS AND ANSWERS

Q1. What is general environment in global airlines industry?
Ans: The general environment in global airline industry is:
Flexible and open culture,
Customer oriented, provision of services,
Relationships with political personalities.
Q2. What factors led to success of AirAsia? As it grew and expanded from
Malaysia to other destinations in South Asia and beyond?
Ans: The following factors led to success of AirAsia as it grew and expanded:

Lowcost,
Training academy,
Call centre,
Mobile messaging,
KoolRed social network,
Online provision of facilities,
More routes and destinations,
Communication with customers,
Effective strategies during crisis and attacks,
X-factor,
first move advantage.

Q3. What brand elements of AirAsias original business model had to be

revisited as it introduced AirAsia X and moved beyond short to medium haul
service to longer haul service? How does its industry and competitive
environment change during this expansion?

Ans: Cost leadership model: short haul to medium changings: excluded

unnecessary facilities for passengers and whoever wanted those had to pay
separately. Services were not included in the ticket price.
Drawbacks: Not customer oriented.
Revisiting factors for business model: Premium seats and service provision.