Table of Contents

1. EXECUTIVE SUMMARY .................................... 2

2. BACKGROUND OF AIRASIA ............................ 2
3. ROLES OF TOP MANAGEMENT ...................... 3
4. ENVIRONMENTAL ANALYSIS ......................... 4
5. SWOT Analysis....................................................... 5
6. VISION, MISSION , OBJECTIVES , GOALS.... 7
7. CONCLUSION ....................................................... 8
References .................................................................... 9

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 1. EXECUTIVE SUMMARY

Strategic management has played a key role in the success of many business organizations in
the world including airlines and AirAsia is not exception. Commencing in 1996, within
fifteen years, AirAsia managed to expand its operations into another ten countries. In
addition, through its associate company AsiaX, it launched long-haul low-cost air services
from Malaysia to Australia and the United Kingdom.

This paper will look at the award winning Malaysian low cost carrier- AirAsia’s by analyzing
its strengths and weaknesses using strategic tools such as PEST analysis, SWOT analysis,
Internal and External Factor evaluation and roles of top management. The paper also throw
some insights into the Blue Ocean Strategy concept which is used by AirAsia as one of its
strategic moves.

2. BACKGROUND OF AIRASIA

AirAsia was established in 1993. The company commenced its operations on 18 November
1996. It was originally owned by the government link company, DRB-Hicom, a heavily
indebted airline company purchased by Tune Air Sdn Bhd , a company belonged to former
Time Warner executive Tony Fernandes's company . By the year 2002 Tony Fernandes made
AirAsia a profitable company and launching new routes from its hub in Kuala Lumpur
International Airport at breakneck speed, undercutting former monopoly operator Malaysia
Airlines (MAS) with promotional fares as low as RM1 (US$0.27).

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 3. ROLES OF TOP MANAGEMENT

Roles of the board of directors: The board of directors retains full and effective control
over the affairs of the Company and the Group and has assumed the following to ensure the
effectiveness of the Board and to discharge its duties and responsibilities:

Reviewing and adopting a strategic plan for the company;

Approves the Company’s annual budget and carries out periodic review of the achievements
against business targets;

Identifying principal risks and to ensure implementation of appropriate system to manage

these risks;

Overseeing and evaluating the conduct of the Company’s business;

Succession planning;

Developing and implementing an investor relations program; and

Reviewing adequacy and integrity of the Company’s internal controls.

Roles of chief executive officer:

Advises the Board, promotes organizational and stakeholder change related to organization
mission.

Formulates policies and planning recommendations to the Board.

Decides or guides courses of action in operations by staff.

Oversee operations, implements plans, manages human resources, manage financial and
physical resources.

Assists in the selection and evaluation of board members.

Makes recommendations, support the Board during orientation and self-evaluation.

Roles of middle management:

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Middle manager is in charge of facilitating any changes needed in an organization and
creating an effective working environment.

A middle manager is motivating, leading and inspiring their subordinates. This also includes
building a team and supporting any team member when necessary.

Analyzing a subordinate group in terms of productivity and financial effectiveness, creating a

strategy of improving the current situation and reporting to the executive management in the
form of attending a boardroom meeting or a discussion.

Middle manager is a channel of communication within the organization, as he passes on

major decisions of executives and main goals of an organization to lower levels of
employees. This contributes to better coordination between workers and makes a company
more united.

Roles of corporate planners:

Aid to the Chairman / CEO

Strategic Planners assist the Chairman / CEO to make confidential strategic decisions .

The planner works in coordination with the division heads to ensure that the planning and
measurement systems work together. The planner also ensures that there is no duplication
between the plans made by the various divisions in the organization.

They also act as internal consultants to the leaders of the different divisions in the
organization.

4. ENVIRONMENTAL ANALYSIS

An environmental analysis is done using PEST model. The threats and opportunities have
been identified and discussed below.

Political

There was an on going consolidation in the airline industry as a result of increased

privatization and government deregulation throughout the world. Most governments were
instrumental in the success of the most airlines success in Asia. Most airline companies in

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Asia had full or substantial state ownership , management and control .An example of state
owned or assisted airlines in Malaysia is Malaysian airlines system(MAS) . These companies
were often well subsidized and protected from competition. These companies were focused
on achieving national objectives rather profit oriented.

Economic

The global economic downturn has resulted in decline in airlines business. This affected the
budget airlines as well. However, as for AirAsia this situation created an opportunity. The
leasing costs of airplanes were drastically reduced by about 40%. This enabled AirAsia to
lease planes at a cheaper rate on pass on the cost savings to customers in the form of cheaper
fares.

Social

Economic growth in recent years has led to rapid increase in middle class population in Asia
resulting the demand for air travel to increase. The surge in trade and tourism in Asia also
caused the demand for air travel to increase. More and more people are now willing to travel
at low fares and they are prepared to compromise on food and other services during travel.
The people are attracted by budget air lines because of their low fares as low as 10-20 %of
those charged by full service airlines. The current situation gives AirAsia an opportunity to
adopt differentiation strategy to alienate itself from competitors by offering good customer
service as full service airlines with low fare. This has given AirAsia a competitive advantage.
In addition AirAsia now offers services such as in flight food and drinks , online sales of
hotel, car and holiday reservations and travel insurance, branded credit card .

Technological

Air Asia fully utilize information technology .In fact, Air Asia is the first airline in South east
Asia to use e-ticketing and by pass the traditional travel agents. As a result the airline was
able to save the cost of issuing physical ticket. This has eliminated the need for large and
expensive booking and reservations systems and agent’ commission

5. SWOT Analysis

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A SWOT analysis is done to evaluate the Strengths, Weaknesses, Opportunities, and Threats
involved in AirAsia’s business. It involves specifying the objective of the business venture
or project and identifying the internal and external factors that are favorable and unfavorable
to achieve that objectives. Internal factors as well as external factors are used to analyse
company and the External environment.

Strengths

+ Management team: The real strength of Air Asia is based on its strong management team
with strong links with government s and airline industry leaders. The executive management
come from diverse background which consists of industry experts and ex-top government
officials.

+ Branding: AirAsia’s brand name is well established in Asia Pacific region now. Besides the
normal print media advertising & promotions, AirAsia top management also capitalized on
promotions through news by being very “media friendly” and freely sharing the latest
information on Air Asia as well as the airline industry.

+ Low cost leadership: AirAsia is the low cost leader among airlines in Asia. With the help of
AirAsia Academy, AirAsia has successfully created a “low-cost airline mentality” among
their workforce. The workforce is very flexible and high committed and very critical in
making AirAsia the lowest cost airline in Asia.

Weakness

+ Good customer service is critical: AirAsia receives a lot of complaints from customers
about its service. Examples of complaints are around flight delays, being charged for a lot of
things and not able to change flight or get a refund if customers could not make it. Good
customer service and management is critical especially when competition is getting intense.

+ Aircraft Financing: AirAsia as part of its expansion plan, AirAsia is purchasing more
aircrafts to cater for the increased demand. However, this cost is surging. To overcome this
problem, AirAsia now getting the planes on lease instead of buying.

Opportunities

+ Increased fuel price: The increasing oil price at the first glance may pose threat for Air
Asia. This is not. Being a low cost leader, AirAsia has a upper hand in this matter because its

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cost will be still the lowest among all the regional airlines. Thus, Air Asia has a great
opportunity to capture some of the existing customers of full service and other low cost
airlines customers.

+ Population increase: The population of Asian middle class will be reaching almost 700
million by 2010.This creates a larger market and a huge opportunity for all low cost airlines
in this region including AirAsia.

Threats

+ Competition from other airlines: Now AirAsia is reaping profit margin of more than 30%
and this has already attracted many competitors. Most of the full service airlines already have
or planning to create a low cost subsidiary to compete directly with AirAsia. For example,
Singapore Airlines has created a low cost carrier Tiger Airways.

6. VISION, MISSION , OBJECTIVES , GOALS

MISSION

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 Air Asia. Maintain the highest quality product, embracing technology to reduce cost
and enhance service levels.

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.

AirAsia’s vision is to be the largest low cost airline in Asia serving the 3 billion people who
are currently underserved due to poor connectivity and high fares and it aspires to be a the
leading low-cost carrier in the Asian region that offers five-star service with 95% of on time
performance. At the same time, it wants to promote Malaysian hospitality and the local food.
In addition to charging lowest fares and focusing on customers, it also would like to develop
various products and services. AirAsia’s mission is to be the best employer, create a globally
recognized ASEAN brand, to be the lowest cost budget airline and to maintain the highest
quality serviceby embracing technology. Air Asia’s value system (vision, business model and
core values) is central to its success as a leading budget airline in Malaysia. The core values

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of Air Asia area dopting safe practices, valuing its employees, focusing on customer,
maintaining highest standard of corporate integrity and commitment for performance
excellence.The goals and objectives of Air Asia are guided by its corporate vision and
missionwhich include emphasis on safety, customer focus, operational excellence and human
capital development .In maximizing shareholders’ value, AirAsia also intends to create more
profit by expanding its business to other Asian countries. Besides, it also has started to add
routes and network in a prudent calculated way. Whilst going through a calculated expansion
routes and networks, the company also ensures to reduce the risk of business loss. The
companies goals now is to carry 70 million passengers a year, within six years starting from
2014, develop the low-cost carrier terminal at the KL International Airport into the regional
hub for budget travel , introduce more routes, add frequencies and develop the existing
routes.

AirAsia builds and sustains its competitive advantage by providing services at a price that is
simply lower than competitors’ price. Operation effectiveness and outstanding efficiency are
two main characteristics of low cost businesses including AirAsia. The Sources of cost
advantages contributable to the low cost business model for each activity in AirAsia value
chain. These cost advantages constitute AirAsia order winner in competing with its rivals as
they enable AirAsia to provide the lowest cost service.

7. CONCLUSION

To be a leader in the low cost carrier industry, AirAsia needs to use strategic management
continuously because the airline industry is a unique and complex in nature. The budget
airline needs not just reduce cost and make the operational activities running effectively but
also needs to come out with the strategy that can make competition irrelevant or uncontested
market space through differentiation which AirAsia already doing but it has to enhance it
further. In a conference recently CEO Datuk Tony Fernandes said that AirAsia is in the best
financial position now and it would continue its focus on lowering cost, improving returns
and expanding its network. Despite the share increase in prices of oil and aviation fuel
resulting from the Middle East crisis, Datuk Tony Fernandes has assured to the customers
that it will impose fuel surcharges.

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References
1) Sen Ze and Jayne Ng, Air asia story, How a young airline made it possible for everyone to
fly and become a runway success practically overnight.

2) http;www.scribed .com/doc/18152552/Ryanair-Case ( retieved on 20/3/2011)

3) Gerry Johnson ,Kevan Scholes & Richard Whitington , Ryanair CompetitiveChallenges

and strategic choice in the budget airline industry ,(page 694 - 707) –Low fares airline ,
Exploring Corporate strategy,8th edition

4) AirAsia Berhad, Annual Report 2007.2008 and 2009

5) Danny Yap and Elaine Ang, Blure Ocean Strategy for Corporate Malaysia (Article
published in the Star,Daily on 16/7/2007

6)http://www.airasia.com/iwovresources/my/common/pdf/AirAsia/IR/AA_4Q10_Analyst_
Pesentation.pdf( retrieved on 2/4/2011)

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Hall,One Lake Street,Upper Saddle river ,New jersey

http://docslide.us/documents/electrolux-assignment-on-strategic-management.html