110594646 Strategic Management AirAsia

EXECUTIVE SUMMARY

AirAsia is well known company for airlines industry especially in all over Asia and being

one of the market leaders in that industry. In order to maintain its brand which is famous with low

cost carrier and to be consumers’ preference to choose using its services offered, AirAsia must be

able to complete with competitors and new entrance by doing some sort of strategies.

AirAsia has very clear vision and mission of the company and this enable each members of

the company work hard to fulfill the vision and mission which has been declare and must achieve

in future for both sort term and long term. But, AirAsia never escape from the problems in term of

its operation and this must be solved by come out with new strategies and proper planning to cope

with that problems.

According to internal and external evaluation of the AirAsia show that the company is

getting above 2.5 score for both of evaluation. This explained that AirAsia does not affect by any

external and internal factors which mean it is good sign for the company. By look into external and

internal factors the company would be also able to identify what kind of strategies and planning

that the company should take in future.

Then after identification and evaluation of external and internal factors, the company can

go further steps with doing matrix evaluation. There are five matrix which are TOWS, space,

Boston Consulting Group (BCG), Grand, Internal-External and competitive profile matrix. Most of

the matrix evaluation shows that the company is in aggressive strategy level and further analysis

shows that the AirAsia must do several strategies which connected with the company’s operation.

The analysis of SWOT and strategic planning come out with the two important strategies

that must be taken by the AirAsia in order to develop its performance of company in future. The

two important strategies are market penetration and market development. These two strategies

classified under aggressive strategies and commonly used to boost or increase sales of company’s

services and automatically increase revenue too. Although both of these strategy have their own

advantages and disadvantages, it is believed that both is the best strategy for the company to take

in future based on analysis done towards the company itself.

1. BACKGROUND

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Airasia as the second Malaysian National Airline, provides a totally different type

of service in line with the nation’s aspirations to benefit all citizens and worldwide

travelers. Such service takes the form of a no frills – low airfares flight offering, 40%-60%

lower than what is currently offered in this part of Asia. Their vision is “Now Everyone

Can Fly” and their mission is to provide ‘Affordable Airfares’ without any compromise to

Flight Safety Standards.

The story of emergence of AirAsia is similar to Ryanair, since both carriers

underwent a remarkable transformation from a money-losing regional operator to a

profitable, low cost airline.

AirAsia was initially launched in 1996 as a full-service regional airline offering

slightly cheaper fares than its main competitor, Malaysia Airlines. Before 2001, Airasia fail

to either sufficiently stimulate the market or attract enough passengers from Malaysia

Airlines to establish its own niche market. The turnaround point of AirAsia is in 2001,

while it was up to sale and bought by Tony Fernandes. Tony Fernandes then enrolled some

of the lending low-cost airline experts to restructure AirAsia’s business model. He invited

Connor McCarthy, the former director of group operation of Ryanair, to join the executive

team.

What is mean by low cost airlines? A low cost airline generally has many features

that differentiate it from the traditional carriers. These features include ticketless travel,

online ticket sales, no international offices, no frequent flyer points, no free food and

beverages, no in flight magazines, no club lounges, use of secondary city airports. Not all

low cost airlines have these features, and not all airlines that have some these features are

low cost airlines. For example, Virgin Express is low cost airline, but still offers

complimentary coffee and in flight magazine, and they are based a Brussels primary

airport. In late 2001, AirAsia was re-launched in Malaysia as a trendy, no-frills operation

with three B737 aircraft as a low-fare, low-cost domestic airline.

Asia’s leading airline was established with the dream of making flying possible for

everyone. Since 2001, AirAsia has swiftly broken travel norms around the globe and has

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risen to become the world’s best. With a route network that spans through more than 20

countries, AirAsia continues to pave the way for low-cost aviation through our innovative

solutions, efficient processes and a passionate approach to business. Together with our

associate companies, AirAsia X, Thai AirAsia and Indonesia AirAsia, AirAsia is set to take

low-cost flying to an all new destinations.

AirAsia X

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-houl business. AirAsia

X’s cost efficiencies are derived from maintaining a simple aircraft fleet and a route

network based on low-cost airports, without complex code-sharing and other legacy

overheads that weigh down traditional airlines without compromising on safety. Guests

continue to enjoy low fares, through cost saving that we pass on to our guests.

AirAsia X’s efficient and reliable operations are fully licensed and monitored by

Malaysian and international regulators, and adhere to full international standards. AirAsia

X is committed in offering X-citing low fares, X-emplary levels of safety and care, and an

X-traordinary in-flight and service experience to all our guests – spreading the amazing

AirAsia experience to X-citing destinations in Australia, New Zealand, China, Taiwan,

Japan, Korea, India, Middle East and Europe.

Vision of the company

Vision of the company is “Now Everyone Can Fly” in term 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.

Mission of the company

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1. To be the best company to work for whereby employees are treated as part of a big

family

2. Create a globally recognized ASEAN brand

3. To attain the lowest cost so that everyone can fl y with AirAsia

4. Maintain the highest quality product, embracing technology to reduce cost and

enhance service level

Values

We make the low fare model possible through the implementation of the following key

strategies:

1. Safety First:

Partnering with the world’s most renowned maintenance providers and complying

with the with world airline operations.

2. High Aircraft Utilization:

Implementing the regions fastest turnaround time at only 25 minutes, assuring

lower costs and higher productivity.

3. Low Fare, No Frills:

Providing guests with the choice of customizing services without compromising on

quality and services.

4. Streamline Operations:

Making sure that processes are as simple as possible.

5. Lean Distribution System:

Offering a wide and innovative range of distribution channels to make booking and

travelling easier.

6. Point to Point Network:

Applying the point-to-point network keeps operations simple and costs low.

Opportunities faced by AirAsia in light of external development

a. Low fare of Indonesia-Malaysia trip

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The fare for Jakarta-Johor Bahru trip cost Rp 100,000 (RM 88.88 one way). And

charge Rp 150,000 for a Bandung-Kuala Lumpur flight, and Rp300,000 for a Surabaya-

Kuala Lumpur trip, whereas a Jakarta-Kuala Lumpur air ticket from Malaysia Airlines

available at travel agents cost Rp 1.4 million. Meanwhile, LionAir on the same route,

charged Rp 1.05 million. The cost fare provided by AirAsia help it open the Indonesia

market.

b. Low fare of Singapore-Bangkok service

AirAsia will increase its services between Singapore and Bangkok by introducing a

second daily flight to its existing schedule. This recent development came barely a

month after Thai AirAsia operations started its first international flight to Singapore in

early February this year. AirAsia is offering its guests promotional fares to/from

Singapore-Bangkok from SGD$23.99 (THB 499) one way from the 28th March to 30th

October 2004. It is much lower than the lowest fare SGD$56 offered by full-services

carrier. This helps it open the Singapore market.

c. Political connection

AirAsia hold 49% of the Thai AirAsia with 1% being held by a Thai individual. The

remaining 50% is held by Shin Corp. which is owned by the family of Thailand’s

Prime Minister, Thaksin Shinawatra. Shin Corp. has financial strength, synergy in

information technology and telecommunications, which support AirAsia internet and

mobile phone bookings. Shin corp. allows subscribers of the Shin mobile phone

flagship, advance information service, being able to reserve tickets through its short-

messaging services (SMS). AirAsiA with its politically powerful backer may well grow

up to bite. This helps it open the Thailand market.

d. Malaysian government support

The Malaysian government supported the establishment of AirAsia in 2001 to help

boost the under-used Kuala Lumpur International Airport. AirAsia’s flights from Senai

are meant to develop Johor into a transport hub to rival Singapore. AirAsia, therefore

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can provide an alternative route to travel to Bangkok, by using Senal Airport in Johor

Bahru, in southern Malaysia.

Opportunities faced by AirAsia in light of Internal Development

a. Issue of IPO

Kamarudin Meranun, AirAsia’s Executive Director announced the appointment of

Credit Suisse First Boston (CSFB) and RHB Sakura Merchant Bankers (RHB) as the

book runners for the company’s upcoming Initial Public Offering (IPO). The IPO

strengthens AirAsia balance sheet, further cuts its existing low costs at 2.5 US cents per

ASK and accelerates our growth plans throughout Asia. The IPO also allows AirAsia to

expand its fleets of 18 Boeing 737-300s.

b. Political connections

Thai AirAsia is a join venture established by AirAsia with Shin Corp. is owned by the

family of Thailand’s Prime Minister, Thaksin Shinawatra, and about 900 million Baht

will be invested in Thai AirAsia over a five-year period. Shin Corp. oversees the

finance and administration of Thai AirAsia while AirAsia shoulders the responsibility

for marketing and operations. Shin Corp. has financial strength and support AirAsia to

grow. AirAsia with its politically powerful backer may well grow up to bite.

Challenges faced by AirAsia in light of external development

a. Indonesia habit

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Preferences of Indonesian passengers are quite different from the concept of cheap air

travel without extra service for the passengers (free snacks and drinks), and also their

reluctance to bring light baggage. AirAsia prefers passengers with very light and

minimum baggage. If this is the case, it may not last long. But Indonesian domestic

airline companies are able to provide value-added extras like food and beverages as

part of their service to the passengers, although at a relatively higher cost. The

comparative edge of Indonesian domestic airline companies compared to AirAsia

concern habit (culture). Furthermore, Indonesian domestic airlines were already trained

with the low-cost air travel concept, known as tariff war. They have proved themselves

as immune, and managed to survive. Last but not least, the Indonesian government or

domestic airline companies had never announced the availability of a low-cost airline

company of the country. All these affect AirAsia growth in Indonesian.

b. Singapore government rejection

Initially, AirAsia wanted to start flight from the southern state of Johor, near Singapore,

it hoped to attract passengers by running a convenient bus service to the city-state.

However, Singapore quickly quashed that idea. The Singapore government said it

would not approve a bus link for AirAsia because it was not ‘in her nation interest’,

reflecting fears that Singapore’s Changi airport would lose business to Johor’s new

Senai airport. This makes AirAsia cannot abandon the use of Changi airport, and

therefore suffer from a higher cost.

This is because AirAsia flying to Singapore needs to suffer from flight congestion of

Changi. Changi ha drawbacks of flightcongestion that could prevent the quick

turnaround essential to keeping down costs. AirAsia find it stuck between big planes

and circling to wait for a slot to open up, which means extra fuel costs. Moreover, the

SGD$21 departure and security tah of Changi is too high for AirAsia low-cost

operation. AirAsia had asked the Singapore government to waive the fees, however, a

request that was not only rejected but also criticized.

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Beside Singapore – Bangkok, AirAsia now provides an alternative route to travel to

Bangkok, by using Senai airport in Johor Bahru, in southern Malaysia. Seeking to cater

to the different markets, fares for Johor Bahru – Bangkok are generally 20% lower in

comparison to Singapore – Bangkok. AirAsia currently operate daily flight to Bangkok

from Johor Bahru. However, the choice proved unpopular, as the route failed to attract

Singaporeans because of the additional cost and inconvenience of having to travel in

and out of Malaysia by road. All these affect AirAsia external growth.

c. Minimum air-fare rates

AirAsia faces challenges finding open takeoff and landing slots at opportune times, and

Thailand’s regulation that sets minimum air- fare rates. Although Transport Minister

Suriya Jungrungreangkit said the current minimum air-fare regulations will be scrapped

to open up the market, he couldn’t name a date when this will be done. This seems to

be favoritism toward Thai Airways International’s domestic operations, and affects

Thai AirAsia to compete in the Thailand market.

External changes which have impact on AirAsia

a. Asia’s middle class growth

Low-cost airlines are anticipated to have greater potential in Asia as there are many

Asian cities with a population above one million people each as well as a rising middle

class population. This growth of middle class in Asia provides a huge market potential

for AirAsia to grow. However, as the market is becoming larger, more airlines or new

comers would like to get a piece of the action. For example, Budget airlines, it is

estimated, will capture at least 25% of Asia’s air travel market within next 10 years and

a lot of the will be new, not diverted, traffic. Therefore, AirAsia will face more

competitions at the same time. Besides the low-cost airlines, AirAsia still needs to

compete with the conventional carriers. Although extra passengers of the low cost

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airlines will be coming from the new demand to be created by the low fares, the growth

may not be entirely ‘stolen’ from big flag carriers.

b. Actions of Changi and nearby airports

The growth of low-cost airlines in south-east Asia has a significant effect on which

airport will dominate the regional aviation market. Low cost airlines are seen as helping

funnel more passengers to airport hubs. Therefore, there is a realization among regional

governments that they need smashing airports and feisty carriers or they are going to

miss out big time. Therefore, these governments are more willing to support low cost

airlines. For example, the Malaysian government supported the establishment of

AirAsia in 2001 to help boost the under-used Kuala Lumpur International Airport, and

Thai premier’s Shin Corp. form a join venture with AirAsia that would benefit

Bangkok’s new airport and create a new hub at Chiang Mai. Therefore, under this

situation, it helps AirAsia grow in Asia.

Moreover, as there is a growth of several south-east Asian airports, this poses a

challenge to the status of Singapore’s Changi airport as a regional aviation hub. These

airport include Johor’s new Senai airport in southern Malaysia, Bangkok new

Suvarnabhumi airport which will be able to handle 45 million passengers when it opens

in 2005, Bangkok Don Muang which recently overtook Changi in passenger number,

etc. to maintain Changi’s position as the air hub in the region. Singapore is proposing a

budget airline terminal at Changi by 2005 and lower passenger taxes to attract low cost

airlines. This helps AirAsia grow and lower the cost.

c. Action of existing airlines

The existing airlines in south-east Asia have several actions to compete with AirAsia,

for example, some have launched a low cost airline to flight with AirAsia. Singapore

Airlines launched a low cost airline subsidiary, Tiger Airways, in the second half of

2003, only months after the scheduled launch of ValuAir set up by one of its former

executives. Thai Airways have frequency and capacity to offer to their 13 domesttic

destinations. They also have during the past two years, worked to improve operational

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efficiency, slashing unprofitable domestic routes, increasing flights on busy routes,

strengthening yield management and controlling costs. All these make AirAsia face a

huge competition.

Marketing

AirAsia, Asia’s leading low cost carrier, recently partnered with Yahoo! Mobile for its very

first mobile campaign. The goal was to encourage interaction with users and increase the

overall awareness of AirAsia and its promotions throughout Asia. Aimed at generating and

maintaining top-of-mind awareness with their reach, Yahoo’s mobile marketing and

advertising solutions provided a key advantage for AirAsia. The campaign saw tremendous

success across seven target markets including Malaysia, Singapore, Thailand, Indonesia,

Philippines, Taiwan, and Hong Kong, AirAsia became the first company on Yahoo Mobile

in Malaysia and the success of the campaign showed how mobile marketing could help

brands successfully communicate with the rapidly growing mobile consumer base.

1.1 IDENTIFY THE FIRM’S EXISTING MISSION

Item Criteria Criteria Stated Criteria Not Stated1 Customers 2 Product/Services 3 Markets 4 Technology 5 Concern for survival, growth and

profitability

6 Philosophy 7 Self-concept 8 Concern for public image 9 Concern for employees

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Existing mission statement of AirAsia:

• To be the best company to work for whereby employees are treated as part

of a big family. (9)

• Create a globally recognized ASEAN brand. (3)

• To attain the lowest cost so that everyone can fl y with AirAsia. (1,8)

• Maintain the highest quality product, embracing technology to reduce cost

and enhance service level. (2,4,5)

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1.2 IDENTIFY THE FIRM’S EXISTING OBJECTIVES

1.2.1 Provide full fledge training and development to AirAsia pilot, aircraft engineers,

cabin crew and guest service staffs

1.2.2 Develop the academy as an aviation training ground towards fulfilling AirAsia’s

aspiration in becoming a regional aviation training hub

1.2.3 Serves as a platform to keep AirAsia on track with the latest industry development

and to incorporate best practice into their operations

1.3 IDENTIFY THE FIRM EXISTING STRATEGIES

1.3.1 Safety First: Partnering with the world’s most renowned maintenance provider and

complying with the world airlines operation

1.3.2 High Aircraft Utilization: Implementing the region fastest turnaround time at only

25 minutes, assuring lower cost and higher productivity

1.3.3 Low fare, no frills: Providing guest with the choice of customizing services without

compromising on quality and services

1.3.4 Streamline Operation: Making sure the process are as simple as possible

1.3.5 Lean Distribution System: Offering a wide and innovation range of distribution

channels to make booking and travelling easier

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1.3.6 Point to point Network: Applying the point to point network to keep operation

simple and lower cost

Key Result Objectives

Key Areas Objectives Measure of performance

1 Marketing Ticket order by online 1

2 Innovation Keep with the latest industry

development

2

3 Human

Organization

Training to all employees 3

4 Financial Resources Allocate financial resources

efficiently

4

5 Physical Resources Search the best physical

resources for operation

5

6 Productivity Provide best service in airline 6

7 Social Responsible Low cost carrier 7

8 Profit Low cost operation 8

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2. DEVELOP NEW MISSION STATEMENT FOR THE ORGANIZATION

(COMPRISING AL NINE ELEMENTS)

Customer - Provide low cost carrier for customers

Products/Service - High quality and safety products and services

Markets - To be the first choice in ASEAN airlines

Technology - Posses high technology in its operation

Concern for survival - Low cost in its operation and maintain financial stability

Philosophy - All company’s activities carry out in ethically

Self-Concept - To be leader in ASEAN airline industry

Concern for public- Concern for public benefit and affordable to fly with AirAsia

Concern for employees - Give rewards to employees who did the best work

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2.1 Evaluation of New Mission Statement on Nine Criteria

Item Criteria Criteria Stated Criteria Not Stated

1 Customers

2 Products/Services

3 Markets

4 Technology

5 Concern for survival

6 Philosophy

7 Self – Concept

8 Concern for Public Image

9 Concern for Employees

3. PROBLEM IDENTIFICATION

No Problem Identification Major Problem/Minor Priorities Of The

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Problem Problem

1.

2.

3.

Increasing

Competition

Customer decrease

Rising fuel prices

Minor

Major

Minor

2

1(need immediate

attention)

3

4. SWOT FRAMEWORK

4.1 IDENTIFICATION THE ORGANIZATION EXTERNAL OPPORTUNITIES /

THREATS

4.1.1. OPPORTUNITIES

4.1.1.1. Asia’s middle income growth (soc)

4.1.1.2. The home government support (pol)

4.1.1.3. Applying technology advances in airlines industry (techno)

For example e-ticketing, it is easy for people who are busy with their work

and no time to walk in to the counter for booking ticket

4.1.1.4. Economic in good condition (econ)

4.1.1.5. The change of lifestyle of the customer (soc)

4.1.1.6. Political connection between home countries with other country (pol)

4.1.1.7. Limited substitutes for airplanes (substitutes)

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Although there are several substitutes (i.e. trains and ships) the geographical

structure of Asia has made air travel an efficient, viable, and convenient

mode of transportation

4.1.1.8. “ASEAN Open Skies” agreement (econ)

It will allow unlimited flight among ASEAN’s regional air carriers

beginning December 2008

4.1.1.9. The population of Asian middle class will be reaching almost 700 million

by 2010(soc). This create a large market and a hug opportunity for all low

cost airlines in this regional

4.1.2. THREATS

4.1.2.1. Price of oil increasing (econ)

4.1.2.2. The culture of passengers is different (soc)

4.1.2.3. Other government countries rejection (pol)

4.1.2.4. Many budget airlines growth (competitor)

4.1.2.5. Certain rate like airport departure, security charges and landing charges

are beyond the control of airlines operator (pol). This is a threat to all

airlines especially low cost airlines that tries to keep their cost as lower as

possible

4.1.2.6. Users perception that budget airlines may compromise safety to keep cost

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low (consumer). Consumer feels not safe to use budget airlines since their

price is very low

4.1.2.7. Supplier of airlines is limited (supplier)

Power of supplier is high as there are limited (availability of) supplier (only

Boeing and Airbus), the switching cost is high (i.e. airplanes and their

maintenance are costly) and there are few substitutes airplanes

4.1.2.8. Technology problem (techno)

For example, overload of information of hackers, hacked the airlines

website and it will give bad impact to airlines

4.1.2.9. Natural disaster (demo)

For example is flood, tsunami, and earthquake at certain place will

influence the business of airlines

4.1.3. EFE MATRIX (EXTERNAL FACTOR EVALUATION MATRIX)

No. Key External Factors Weight Rating Weighted Score

Opportunities

1 Asia’s middle income growth 0.06 2 0.12

2 The home government support 0.07 4 0.28

3 Applying technological advances in airlines

industry

0.04 3 0.12

4 Economic in good condition 0.06 2 0.12

5 The changes of lifestyle of the customer 0.05 2 0.10

6 Political connection between home country

with other country

0.06 3 0.18

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7 Limited substitutes for airplanes 0.10 3 0.30

8 “ASEAN Open Skies” agreement 0.04 3 0.12

9 The population of Asian middle class will be

reach almost 700 million by 2010

0.04 3 0.12

Threats

1 Price of oil increasing 0.04 2 0.08

2 The culture of passenger are different 0.03 1 0.03

3 Other government country rejection 0.07 3 0.21

4 Many budget airlines growth 0.04 2 0.08

5 Certain rate like airport departure, security

charges and landing charges are beyond the

control of airlines operators

0.10 3 0.30

6 Users perception that budget airlines may

compromise safety to keep low cost

0.04 2 0.08

7 Supplier of airlines is limited 0.07 3 0.21

8 Technology is limited 0.03 3 0.09

9 Natural disaster 0.06 3 0.18

Total 1.00 2.72

ENVIRONMENTAL THREAT AND OPPORTUNITY PROFILE (ETOP)

Factors Impact of factors Important of factors Environmental treat

1 Economic 10 10

2 Political 5 7

3 Social 7 6

4 Technology 4 5

5 Competitive 5 6

6 Geographic 3 4

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7 Natural Environment 8 5

• Impact from 10 (strong positive) to 0 (strong negative)

• Importance of factor ranked from 0 (unimportant) to 10 (very important)

Comment:

The company is good since the total of EFE Matrix is 2.72. They can continue their current

strategy for improving their business. For the major impact of factors is economic where the

amount is 10 while, for importance of their major factor is 6, which mean quiet important.

Geographic factor give less impact towards AirAsia business.

4.2 IDENTIFYING THE ORGANIZATION EXTERNAL STRENGTH /

WEAKNESSES

4.2.1 STRENGHTS

4.2.1.1. Low cost for all passenger (mgt)

It is suitable with their tagline ‘Everyone can fly’ mean to giving

opportunity to all people to flight with the lowest possible fare and making

them can flight even they only have less money

4.2.1.2. Has many destinations (operation)

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Route network of AirAsia has more than 20 countries, for example United

Kingdom, Iran, China, New Zealand and France

4.2.1.3. AirAsia is the lowest leader in Asia (Operation)

With the help of AirAsia Academy, AirAsia has successfully created a “low

cost airlines mentality” among their workforce. The workforce is very

flexible and high committed and very critical in making AirAsia the lowest

cost airlines in Asia

4.2.1.4. High Technologies (mgt)

The excellent utilization of IT have directly contributed to their promotional

activities (email alert and desktop widget which was jointly develop with

Microsoft for new promotion), brand building exercise (with over 3 million

hits per month and the most widely surfed booking engine in the world) as

well keep the cost low by enabling direct purchase of ticket by consumer

thus saving on airlines agent fees

4.2.1.5. Get mane awards such as “World’s Best Airlines” for the second year,

Asia Pacific’s Best Marketing Campaign (mktg). It shows AirAsia have

good image and performance since it got so many awards

4.2.1.6. The customer can pay their booking ticket by credit card over phone

(operation)

4.2.1.7. Good marketing campaign such as making a year deal with Manchester

United, one of the English Football Club and recently had programmed at

television “Travelog Asia”. This is one of the examples of good marketing

strategy (mktg)

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4.2.1.8. The current ratio is increase from 1.3 times to 1.47 times (fin)

From 1 unit current liabilities can be covered by 1.47 unit of asset. It will

make the company less risk

4.2.1.9. AirAsia has very strong management team with strong links with

government and airlines industry leader (mgt)

This is partly contributed by the diverse background of the executive

management team that consist of industry expert and ex-top government

officials

4.2.1.10. Increasing the profit 1061 million on year 2010 (fin)

4.1.2.2. WEAKNESSES

4.2.2.1. AirAsia receive a lot complaint from customer on their service (mgt)

Examples of complaint are around flight delays, being charged for a lot

of things and not able to change flight or get a refund if customer could

not make it. Good customer service and management is critical

especially when competition is getting intense

4.2.2.2. The facilities at the airport (mgt)

There has limited chairs at waiting area

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4.2.2.3. The waiting period between check in and depart is too long (operation)

It takes around 2 hours for international departure

4.2.2.4. Apply autocratic management (mgt)

They only considered opinion from top management to make the

decision without asking from the other worker opinion

4.2.2.5. Rely on debt to much since ratio for year 2010 is 73.15% (fin)

It is more than half its capital gets from borrower. It will risk the

company

4.2.2.6. The average collection period is quite high which 76 days (fin)

It means the companies have to wait until 76 days to collect their debt

from borrower

4.2.2.7. No MRO (maintenance, repair, overhaul) facility (operation)

Thus AirAsia cannot maintain its own planes. With an increasing fleet

this is a competitive advantage

4.2.2.8. No frills (operation)

They only provide the transportations services. The customer has to

make pre-order for their heavy meal such as nasi lemak during booking

their tickets. If not, they only can buy the chip and beverages

4.1.1. IFE (INTERNAL FACTOR EVALUATION)

No. Key Internal Factors Weight Rating Weighted Scored

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Strengths

1 Low cost for all passenger 0.13 4 0.52

2 Has many destination 0.03 3 0.09

3 AirAsia is the lowest leader in Asia 0.05 4 0.20

4 High Technologies 0.05 3 0.15

5 Get mane awards such as “World’s

Best Airlines” for the second year,

Asia Pacific’s Best Marketing

Campaign

0.03 2 0.06

6 The customer can pay their booking

ticket by credit card over phone

0.04 3 0.12

7 Good marketing campaign 0.03 4 0.12

8 The current ratio is increase from 1.3

times to 1.47 times

0.04 3 0.12

9 AirAsia has very strong management

team with strong links with

government and airlines industry

leader

0.07 3 0.21

10 Increasing the profit 1061 million on

year 2010

0.03 3 0.09

Weaknesses

1 AirAsia receive a lot complaint from

customer on their service

0.04 4 0.16

2 The facilities at the airport 0.06 3 0.18

3 The waiting period between check in

and depart is too long

0.06 4 0.24

4 Apply autocratic management 0.05 2 0.10

5 Rely on debt to much since ratio for 0.03 2 0.06

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year 2010 is 73.15%

6 The average collection period is quite

high which 76 days

0.06 2 0.12

7 No MRO (maintenance, repair,

overhaul) facility

0.15 4 0.6

8 No frills 0.05 3 0.15

Total 1.00 2.75

Comment:

The company is a good since total of IFE matrix is 2.75. They can continue their current strength

to cover their weaknesses to grab the opportunities on the industry

Assessment of culture elements

Score (0-9) for each

Importance Compatibility with

of culture Strategic

Management

1 Founder's beliefs and values 7

2 Key executive's style 7

3 Maturity of organization 8

4 Cohesiveness and collaboration 8

5 Openness and trust 6

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6 Climate and organization 6

7 Recognition of individual 4

8 Rewards for performance 5

9 Support of individual 6

10 Participation in decisions 8

11 Consistent communication 8

12 Enforcement policies 8

13 Degree of social interaction 7

14 Opportunity for growth 10

15 Level of job security 6

16 Level of technology 7

17 Degree of innovation 9

18 Sense of belonging 5

19 Latitude in job execution 6

20 Sense of urgency 5

Company capability profile – Managerial factors

0% WeakNeutral

Strong 100%

1 Corporate image responsibility

2 Use of strategic plan and strategic analysis

3 Environmental assessment and forecasting

4 Speed of response to changing condition

5 Flexibility of organizational structure

6 Management communication and control

26

7 Entrepreneurial orientation

8 Ability to attract and retain highly creative people

9 Ability to meet changing technology

10 Ability to handle inflation

11 Aggressiveness in meeting competition

12 Others:

27

28

29

30

31

Financial ratio profile

Profitability

Very Low Average Very high

Liquidity

Very Low Average Very high

Leverage

Very Low Average Very high

Activity

Very Low Average Very high

Comment:

Overall the company has strong financial position. Besides, the company has relied more on debt

but they still can generate net profit to shareholders and others. They should decrease the number

of debt towards reducing the risk.

32

Company capability profile – Financial factor

0% Weak

Neutral

50% Strong 100%

1 Accessed to capital when required

2 Degree of capacity utilization

3 Ease of exit from market

4 Profitability, return on investment

5 Liquidity availability internal funds

6 Degree of leverage , financial stability

7 Ability to compete on prices

8 Capital investment, capacity to meet demand

9 Stability of costs

10 Ability to sustain effort in cyclic demand

11 Price elasticity of demand

12 Others:

33

5. MATRIXES

5.1. TOWS MATRIX

Strengths

1. Low cost for all passengers

It is suitable with their tagline ‘Everyone can

fly’ mean to giving opportunity to all people to

flight with the lowest possible fare and making

them can flight even they only have less money

2. Has many destinations

Route network of AirAsia has more than 20

countries, for example United Kingdom, Iran,

China, New Zealand and France

3. High Technologies

The excellent utilization of IT have directly

contributed to their promotional activities (email

alert and desktop widget which was jointly

develop with Microsoft for new promotion),

brand building exercise (with over 3 million hits

per month and the most widely surfed booking

engine in the world) as well keep the cost low

by enabling direct purchase of ticket by

consumer thus saving on airlines agent fees

4. Good marketing campaign such as making a

year deal with Manchester United, one of the

English Football Club and recently had

34

programmed at television “Travelog Asia”. This

is one of the examples of good marketing

strategy

5. AirAsia has very strong management team

with strong links with government and airlines

industry leaders

This is partly contributed by the diverse

background of the executive management team

that consist of industry expert and ex-top

government officials

Opportunities SO

1. Asia’s middle income growth (soc)

2. Applying technology advances in airlines

industry (techno) For example e-ticketing, it is

easy for people who are busy with their work

and no time to walk in to the counter for

booking ticket

3. Economic in good condition (econ)

The change of lifestyle of the customer (soc)

4.Political connection between home countries

with other country (pol)

5.Limited substitutes for airplanes (substitutes)

1. Add new facilities to attract people for using

AirAsia for going to vacation (S1 & S2, O1)

2. Improve new technology for making people

more convince using this airplane (S3,O2)

(Market penetration)

3. Increase destination all over the world (S2,

O3, O4)

4. Improve management for increase marketing

strategies to attract people (S4,S5 & O5)

5. Increase website service to make people easy

to make transaction (S3,O2)

Threats ST

35

1.Price of oil increasing (econ)

2. The culture of passengers is different (soc)

3. Certain rate like airport departure, security

charges and landing charges are beyond the

control of airlines operator (pol)

This is a threat to all airlines especially low cost

airlines that tries to keep their cost as lower as

possible

4. Supplier of airlines is limited (supplier)

Power of supplier is high as there are limited

(availability of) supplier (only Boeing and

Airbus), the switching cost is high (i.e. airplanes

and their maintenance are costly) and there are

few substitutes airplanes

5. Natural disaster (demo)

For example is flood, tsunami, and earthquake

at certain place will influence the business of

airlines

1. Do research and development (R&D) to find

other alternative to reducing in use oil (S1,S6 &

T1)

2. Hire new stewardess for different culture to

make passenger feel comfortable using this

service (S2,T2)

3. Deal with supplier for cheaper in maintenance

cost (S1, S6 & T4) (Backward Integrations)

Weaknesses

1. AirAsia receive a lot complaint from

36

customer on their service (mgt)

Examples of complaint are around flight delays,

being charged for a lot of things and not able to

change flight or get a refund if customer could

not make it. Good customer service and

management is critical especially when

competition is getting intense

2. The facilities at the airport (mgt)

There has limited chairs at waiting area

3. The waiting period between check in and

depart is too long (operation)

It takes around 2 hours for international

departure

4. Apply autocratic management (mgt)

They only considered opinion from top

management to make the decision without

asking from the other worker opinion

5. No MRO (maintenance, repair, overhaul)

facility (operation)

Thus AirAsian cannot maintain its own planes.

With an increasing fleet this is a competitive

advantage

Opportunities WO

1. Asia’s middle income growth (soc) 1. Improve existing facilities in airport (W2,O1

37

2. Applying technology advances in airlines

industry (techno) For example e-ticketing, it is

easy for people who are busy with their work

and no time to walk in to the counter for

booking ticket

3. Economic in good condition (econ)

4.Political connection between home countries

with other country (pol)

5.Limited substitutes for airplanes (substitutes)

& O2)

2. Target on middle – income customer by

affordable price (W1, O1 & O3) (Market

Penetration)

3. Improve management in service such as

prediction in time (W1, O2)

Threats WT

1. Price of oil increasing (econ)

2. The culture of passengers is different (soc)

3.Certain rate like airport departure, security

charges and landing charges are beyond the

control of airlines operator (pol)

This is a threat to all airlines especially low cost

airlines that tries to keep their cost as lower as

possible

4. Supplier of airlines is limited (supplier)

Power of supplier is high as there are limited

(availability of) supplier (only Boeing and

Airbus), the switching cost is high (i.e. airplanes

and their maintenance are costly) and there are

few substitutes airplanes

1. Manage wisely the waiting period in order

our passenger come from anywhere (W3, T3)

2. Efficiently manage the compliant from

passenger to avoid external threat (W1, T2)

(Retrenchment)

38

5. Natural disaster (demo)

For example is flood, tsunami, and earthquake

at certain place will influence the business of

airlines

5.2 SPACE (STRATEGIC POSITION AND ACTION EVALUATION) MATRIX

Strategic Position and Action Evaluation (continued)

39

Factors Determining Environmental StabilityTechnological changes Many 1 2 3 4 5 6 FewRate of inflation High 1 2 3 4 5 6 LowDemand variability Large 1 2 3 4 5 6 SmallPrice range of competing products Wide 1 2 3 4 5 6 NarrowBarriers into entry to market Few 1 2 3 4 5 6 ManyCompetitive pressure High 1 2 3 4 5 6 LowPrice elasticity of demand Elastic 1 2 3 4 5 6 InelasticOthers 1 2 3 4 5 6

Average= (-3.00)

Critical factors:

The most factors effect this environmental stability is demand variables. This is because the low

cost leader in Air Asia. This could make them get many passengers over the world.

Strategic position and Action (SPACE) (continued)

Average = (-4.00)

Critical factors:

The most factors effect industry strength is profit potential. This is because Air Asia is a low cost

flight for all passengers and they have a good link for their marketing so can attract many peoples

to use it’s as second alternative to go everywhere.

Strategic Position and Action Evaluation (continued)

Factors Determining Competitive AdvantageMarket share Small 1 2 3 4 5 6 LargeService quality Inferior 1 2 3 4 5 6 SuperiorProduct life cycle Late 1 2 3 4 5 6 EarlyProduct replacement cycle Variable 1 2 3 4 5 6 FixedCustomer loyalty Low 1 2 3 4 5 6 HighCompetitor's capacity utilization Low 1 2 3 4 5 6 HighTechnological know-how low 1 2 3 4 5 6 HighOthers Low 1 2 3 4 5 6 High

40

Factors Determining Industry StrengthsGrowth potential Low 1 2 3 4 5 6 HighProfit potential Low 1 2 3 4 5 6 HighFinancial stability Low 1 2 3 4 5 6 HighTechnological know-how Simple 1 2 3 4 5 6 ComplexResource utilization Inefficient 1 2 3 4 5 6 EfficientCapital intensity High 1 2 3 4 5 6 LowBarriers of entry into market Easy 1 2 3 4 5 6 DifficultOthers Low 1 2 3 4 5 6 High

Average = (-4.29)

Critical factors:

The most factors effect competitive advantages are product life cycle. This is because this

organization tries to maintain their service with give lower cost for all passengers. Air Asia also

build good relationship with their supplier of oil to make sure the cost not increase due to

increasing price of oil now.

Strategic Position and Action Evaluation (continued)

Factors Determining Financial StrengthReturn on investment Low 1 2 3 4 5 6 HighLeverage Imbalanced 1 2 3 4 5 6 BalancedLiquidity Imbalanced 1 2 3 4 5 6 BalancedCapital required/capital available High 1 2 3 4 5 6 LowCash flow Low 1 2 3 4 5 6 HighEase of exit from market Difficult 1 2 3 4 5 6 EasyRisk involved in business Much 1 2 3 4 5 6 LateOthers: Slow 1 2 3 4 5 6 Fast

Average= (-4.00)

Critical factors:

The most factors effect financial strength is return on investment. This is because in previous year

Air Asia has bought new airbus and from that investment Air Asia get good in return. Other than

that, Air Asia may expand their business also.

41

Conclusion

CP Average is -30 / 7 = -4.29 IP Average is +28 / 7 = 4.00

SP Average is -21 / 7 =-3.00 FP Average is +28 / 7 = 4.00

Directional Vector Coordinates: x – axis:-3.00 + (+4.00) = 1.00

Y – axis: -4.29 + (+4.00) = -0.29

FP

Competitive Profile X= 1.00 Y=-0.29

42

IPCP

5.3 BCG MATRIX

Relative Industry

Division Revenues(Mil)%

RevenueProfit(Mil) % Profit Market Growth

Share Rate %

PT Indonesia Air

Asia1,083,788,000 28.06% 239,957,000 22.61% 0.40 17

Air Asia Hong Kong

LTD487,952,000 12.63% 98,735,000 9.30% 0.25 10

AA International

LTD453,206,000 11.73% 68,571,000 6.46% 0.22 -10

Thai Air Asia Co.

LTD1,119,739,000 28.98% 488,443,000 46.01% 0.55 18

Air Asia Go Holiday

Co. LTD719,774,000 18.63% 165,705,000 15.61% 0.28 15

Total 3,864,459,000 100.00% 1,061,411,000 100.00%

43

SP

RELATIVE MARKET SHARE POSITION IN THE INDUSTRY

For BCG Matrix, we can use above table and figure that Thai Air Asia Co. LTD contributes

highest percentage in revenue market share followed by other association under Air Asia which is

PT Indonesia Air Asia, Air Asia Go Holiday Co. LTD, Air Asia Hong Kong LTD, AA

international LTD. Association for Thai Air Asia Co. Ltd is fall under Stars. It means this

44

High

1.0

Medium

0.5

Low

0.0

High +20

Medium

Low -20

PT IndonesiaThai Air Asia

Go HolidayHong Kong

AA International

association for Air Asia should do backward, forward and horizontal integration also. In additional,

this association will have opportunities to make more profit in the future by doing more aggressive

strategies such as market penetration, product development and market development. For PT

Indonesia Air AsiaAir Asia Go Holiday LTD, Air Asia Hong Kong, LTD it falls in under Question

Marks which it shows that the division which is also doing aggressive strategies to promote

products. This is because this four association for Air Asia are new in the industry so should do

market penetration, market development, product development and divestiture. For AA

International LTD falls under Dogs. It is shown that this division should do retrenchment,

divestiture and liquidation.

5.4 GRAND STRATEGY MATRIX

45

Rapid Market Growth Quadrant I

Market DevelopmentMarket penetrationProduct DevelopmentForward IntegrationBackward IntegrationHorizontal integrationRelated Diversification

Quadrant IIMarket DevelopmentMarket PenetrationProduct DevelopmentHorizontal IntegrationDivestitureLiquidation

Quadrant IVRelated diversificationUnrelated diversificationJoint ventures

Quadrant IIIRetrenchmentRelated DiversificationUnrelated diversificationDivestitureLiquidation

Slow market growth

Strong Competitive Position

Weak Competitive Position

Air Asia CO. falls under Quadrant II because AirAsia have done many market development in

industry such as launch its first routes to India to Tiruchirapali (Trichy) in the Southern India state

of Tamil Nadu means Air Asia make market development with open new destination for attract

passengers. In quadrant I also explained that Air Asia has strength in market penetration to take

advantage on growth in new global markets because of high demand for lowest possible fare. Air

Asia has now has Route network of Asia within more than 20 countries for example United

Kingdom, Iran, China, New Zealand, and France. In addition, this company has the strength to

launch related diversified products into more promising growth areas. So this quadrant is suitable

for Air Asia because they already diversified many services. Furthermore, Air Asia also high cash-

flow levels and limited internal growth needs.

5.5 IE MATRIX

46

Division Revenues % Profit % EFE IFE (Million) Revenue (Million) Profit PT Indonesia Air Asia 1,083,788,000 28.06% 239,957,000 22.61% 3.10 2.80Air Asia Hong Kong

LTD 487,952,000 12.63% 98,735,000 9.30% 2.30 2.00AA International LTD 453,206,000 11.73% 68,571,000 6.46% 2.00 1.55Thai Air Asia Co.

LTD 1,119,739,000 28.98% 488,443,000 46.01% 3.30 3.20Air Asia Go Holiday

LTD 719,774,000 18.63% 165,705,000 15.61% 3.00 2.50Total 3,864,459,000 100.00% 1,061,411,000 100.00%

2.0

High3.0 to 4.0

3.0

1.0

Medium2.0 to

3.0

Low1.0 to

The IFE Total Weighted Scores

.

As the result, Thai Air Asia Co. LTD for i.e. Matrix under (division falls into cell I, ii and iv which

is “grow and build”. Intensive (backward, forward, and horizontal integration, market penetration,

market development, product development) strategies can be more appropriate for this area. Thai

Air Asia Co. LTD can improve the intensive strategy for market penetration b create interesting

marketing or events to attract people know well about this Thai Air Asia Co. Ltd service and the

company can also do market development and product development strategy since Air Asia is one

of company who give lowest cost airline in Asia. It means that the company can increase their

advertising and marketing strategies in order to compete with their other associate company. Other

than that, Thai Air Asia Co.LTD can explore to new market in order to boost their sales.

5.6 COMPETITIVE PROFILE MATRIX

47

I II III

IV V VI

VII VIII IX

Average2.0 to 2.99

Weak1.0 to

Strong3.0 to

4.0

3.0

2.0 1.0

The

EF

E T

otal

Wei

ghte

d S

core

s

From the CPM table,, it shows that overall performance goes to MAS where the company get a

total highest score compare with Air Asia and Fire Fly. The overall performance made by MAS

achieved is better than competitiveness. The larger different for MAS comparing others is quality

and services. This is because MAS already conquer based on their services is same like high class

services comparing Air Asia and Fire Fly. In additional, Air Asia also can compare with MAS

based on their price. As we know, Air Asia gives lower rate comparing others.

Company Capability Profile – Competitive Factors

0% WeakNeutral

(50%)Strong 100%

1. Product strength, quality, uniqueness

2. Customer loyalty

3. Market share

4. Low selling and distribution costs

5. Use of experience curve for pricing

6. Use of life cycle of products and replacement

cycle

7. Investment in new product development by

R & D

8. High barriers to entry into the company's

markets.

9. Advantage taken of market growth potential

10. Supplier strength and material availability

48

Critical Success Factor WeightAir Asia MAS Fire Fly

Rating Score Rating Score Rating Score1. Advertising 0.12 3 0.36 4 0.48 2 0.242. Product quality 0.10 3 0.30 2 0.20 2 0.203. Price competitiveness 0.12 2 0.24 3 0.36 1 0.124. Management 0.17 3 0.51 4 0.68 2 0.345. Financial position 0.12 2 0.24 4 0.48 1 0.126. Customer loyalty 0.13 2 0.26 3 0.39 1 0.137. Global expansion 0.15 2 0.30 3 0.45 2 0.308. Market share 0.09 2 0.18 3 0.27 1 0.09TOTAL 1.00 14 2.39 26 3.31 12 1.54

11. Customer concentration

12.Others:

49

7. QUANTITATIVE STRATEGIC PLANNING (QSPM)

Key Factors Weight Market

Development

Market

Penetration

OPPORTUNITIES AS TS AS TS

1 Asia’s middle income growth (So) 0.06 3 0.18 3 0.18

2 The home government support (P) 0.07 2 0.14 - -

3 Applying technological advances in

airlines industry (T)

-For example e-ticketing. It is easy for

people who are busy with their work and

no time to talk in to the counter for

booking ticket

0.04 - - - -

4 Economic in good condition (E) 0.06 3 0.18 3 0.18

5 The changes of lifestyle of the customers

(So)

0.05 3 0.18 - -

6 Political connection between home

country with other countries (P)

0.06 - - 2 0.10

7 Limited substitutes for airplanes (SU)

-Although there are several substitutes

0.10 4 0.40 - -

50

(trains and ships), the geographical

structure of Asia has made air travel an

efficient, viable, and convenient mode of

transportation

8 ‘ASEAN Open Skies’ agreement

- It will allow unlimited flight among

ASEAN’s regional air carriers beginning

December 2008

0.04 - - - -

9 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

0.04 2 0.08 4 0.16

THREATS

1 Price of oil was increasing (E) 0.04 2 0.08 1 0.08

2 The cultural of passengers are different

(S)

0.03 2 0.06 - -

3 Other government countries rejection. (P) 0.07 3 0.21 - -

4 Many Budget airlines growth (C) 0.04 1 0.04 3 0.12

5 Certain rates like airport departure,

security charges and landing charges are

beyond the control of airline operator.

This is a threat to all airlines especially

low cost airlines that tries to keep their

cost as low as possible

0.10 3 0.30 - -

6 User’s perception that budget airlines may

compromise safety to keep costs low (C)

0.04 - - - -

51

7 Supplier of airplanes is limited (S)

-Power of supplier is high as there are

limited suppliers (only Boeing and

Airbus), the switching cost is high

(airplanes and maintenance are costly),

and there are few substitutes for airplanes

0.07 - - - -

8 Technology problem (T)

-overload of information or hackers

hacked the airlines website and it will

give bad impact to airlines

0.03 - - - -

9 Natural disaster – flood, tsunami and

earthquake at certain place will influence

the business of airlines

0.06 3 0.18 2 0.36

TOTAL 2.03 1.18

STRENGTH

1 Low cost for all passenger

-it is suitable with their tagline ‘Everyone

Can Fly’, means to giving an opportunity

to all the people to flight with the lowest

possible fare and making them can flight

even they only have less money

0.13 4 0.52 4 0.52

2 Has many destination

-Route network of AirAsia has more than

20 countries. For example, UK, Iran,

China, New Zealand and France

0.03 3 0.09 4 0.12

3 AirAsia is the low cost leader in Asia 0.05 4 0.20 - -

52

-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.

4 High technologies

-The excellent utilization of IT have

directly contributed to their promotional

activities (email alerts and desktop widget

which was jointly developed with

Microsoft for new promotions), brand

building exercise (with over 3 million hits

per month and on the most widely surfed

booking engines in the world) as well

keep the cost low by enabling direct

purchase of tickets by consumer thus

saving on airline agent fees

0.05 - - 3 0.15

5 Get many award

-Such as the “World Best Airlines” for the

second year, Asia Pacific’s Best

Marketing Campaign. It shows AirAsia

has a good image and performance since

it get so many awards

0.04 2 0.08 3 0.12

6 The consumer can pay their booking by

credit card over phone

0.03 - - 2 0.06

53

7 Good marketing campaign

-Such as making a year deal with

Manchester United

0.04 2 0.08 3 0.12

8 The current ratio is increase from 1.3

times to 1.47 times (fin)

From 1 unit or current liabilities can be

covered by 1.47 unit of asset. It will make

the company less risk.

0.07 3 0.21 3 0.21

9 AirAsia has a very strong management

team with strong links with governments

and airline industry leaders

-This is partly contribute by the diverse

background of the executive management

team that consist of industry experts and

ex-top government officials

0.03 2 0.06 2 0.06

WEAKNESSESS

1 AirAsia receives a lot complaint from

customers on their services

-Examples of complaints are around flight

delay, being charged for a lot of things

and not able to change flight or get a

refund if customer service and

management is critical especially when

competition is getting intense

0.04 3 0.12 3 0.12

2 The facilities at the airport

-There are limited chairs at waiting area

0.06 2 0.12 - -

3 The waiting period between check in and 0.06 3 0.18 3 0.18

54

depart is too long

-It takes around 2 hours for international

departure

4 Apply autocratic management

-They only considered opinion from top

management to make the decision without

asking opinion from the other workers

0.05 - - - -

5 Rely on debt too much since the debt ratio

for year 2010 is 73.15%. It is more than

half of the capital get from borrower

0.03 2 0.06 2 0.06

6 The average collection period is quite

high which 76 days. It means the

company has to wait until 76 day to

collect their debt form borrower

0.06 - - - -

7 No MRO (maintenance, repair, overhaul)

facilities

-Thus, AirAsia cannot maintain its own

planes. With an increasing fleet this is a

competitive disadvantage

0.15 3 0.45 - -

8 No frill 0.05 4 0.20 4 0.20

TOTAL 2.29 1.92

8. LONG TERM OBJECTIVES AND ALTERNATIVES STRATEGY

8.1 LONG TERM OBJECTIVES OF MARKET DEVELOPMENT

8.1.1 To increase net profit and sales of AirAsia for the future

55

8.1.2 To conquer the airline market share in the world

8.2 ALTERNATIVE STRATEGIES

8.2.1 STRATEGY 1: Enter the new geographical area such as Africa, United Arab

Emirates (UAE)

8.2.1.1 ADVANTAGES

8.2.1.1.1 It will increase the number of sales of AirAsia and also makes more

profit for the company

8.2.1.1.2 It also can build the customer preference to use AirAsia services for

reach their destination

8.2.1.2 DISADVANTAGES

8.2.1.2.1 It has high risk whether the AirAsia airline will be accepted or not at

the new places

8.2.1.2.2 Uncertainty of demand of consumers towards the company new

location since the other airline company offered to that location

before AirAsia enter

56

8.2.2 STRATEGY 2: offer new destination that hardly to reach

8.2.2.1 ADVANTAGES

8.2.2.1.1 Offer an additional location that hard to reach to the customer to

need to go there in fast, indirectly can increase the AirAsia profit

and sales

8.2.2.1.2 Increase customer loyalty towards AirAsia for providing them

chance to go hard reach location with low cost rate

8.2.2.2 DISADVANTAGES

8.2.2.2.1 AirAsia incurred higher risk in case if there has no demand towards

the service and it will affect the number of sales and profit of the

company

8.2.2.2.2 AirAsia has high expenses due to buy the new airplane such as

Fokker, hire additional employees to fulfill the service

57

9. STRATEGY IMPLEMENTATION (POLICIES & ALLOCATE RESOURCES)

9.1.MICKINSEY 7’s IMPLEMENTATION FRAMEWORK

9.1.1. STRATEGY

The strategy of market development and market penetration must be implemented

in the company in term of its operation. The market development strategy means

such as opening the new routes for airlines in new location to attract more

customers. The market penetration strategy is such as do mass marketing via many

sources especially media to attract customer using airline services offered by the

company.

9.1.2. STRUCTURE

The company must be the divisional structure based on geographic area such as

Indonesia, Filipina, Thailand, and other destinations of airlines because this will

make the company more focus on its geographical area of airlines performance.

58

9.1.3. SYSTEM

The company must be come out with new management information system within

company for effectively disseminate any important information to staff and top

management of the company. Any complaint or problems could be managing

efficiently by doing this system.

9.1.4. STYLE

Maintaining its current style of promotion must be based on its present current

tagline “Low Cost Carrier”. For that can the company can obtain loyalty from their

customer and maintaining high revenue.

9.1.5. SHARED VALUE

Concern more towards its shareholders by increase of dividend payments to them to

get full support and loyalty towards the company. They will feel it is worth it to

invest in the company and definitely drag others investors to invest.

9.1.6. STAFF

Provide development training to all staff for always maintain its services that have

been provided to customers. Staff should always know the current development and

changes which are the company made.

59

9.1.7. SKILL

The company should look out more to employ expertise in term of develop its

operational system and also marketing strategies. This is because nowadays

customers tend to be attracted with implementation of mass marketing by using

latest technology devices.

10. CONCLUSION AND RECOMMENDATION

In conclusion, the AirAsia Company has a good performance after it launches the

new strategy which is the cost carrier in Asia for airline industry. Nowadays AirAsia is

such a well known and establish company in airlines industry and conquer the Asia market.

Clearly state vision and mission of the company helps the company to set a proper conduct

and action to achieve the two important things.

60

Based on the external and internal evaluation factors shows us that the AirAsia

Company can cover or face any barrier come from the both factors. This is because both of

the external and internal factors evaluation is above 2.5 and made us realized that the

company is not really affected with both factors. Next is the company formulation of

strategies, in strategic management do has five ways in order to determine the appropriate

strategies for the AirAsia Company. The five ways are TOWS matrix, SPACE matrix,

BCG matrix, Grand Strategy matrix, and lastly Competitive Profile matrix.

According to the five matrix ways, there are two strategies who get the first and

second highest scores and for that the two strategies have been chosen as the most

appropriate strategies that the company must implemented and take action regarding on

that. The two strategies are market development and market penetration. These two

strategies is important for the company in future development because they can help the

company to maintain its current perfectly performance and the most important can help

company to obtain higher revenue and sales.

For example, the AirAsia opened its route of airlines services to India which is not

ever implemented before. This is one of example market development strategy. Whenever

the company feels worth it to open operation in India and quite high in demand, the

company will open the same thing but different area in India is called market penetration.

In our recommendation, we actually based on these two strategies which are market

development and market penetration. We recommend that AirAsia should open new

operation in the new geographical area that have never been reached before by the AirAsia

company such as the Africa and United Arab Emirates in order to enlarge its current

market share in airlines industry. By doing this hopefully can increase the company’s

revenue or sales by attracting more consumers using AirAsia services.

61

Besides that, we also recommend that AirAsia Company should open new

operation or make an additional route to the company’s airlines at place which the

companies already open the operation before. Basically this has been done to increase the

market share of the company and also as one of the mass marketing ways to increase

revenue of the company. For example currently the company had opened its operation in

India and the company should open the new operation in the other part of India and this is

what market penetration strategy will be implemented.

62