Strategic management

UGB202

Introduction to Strategic Management

Individual Report on the Application of the Strategic Management Process

Module Leader: Mathew Teale

Module Tutor: Adeline Sim

Student Name: Adrian Eu Suk King

Student ID: SCSWBABM 1111003

Submission Date: 11 May 2013

Executive Summary

This assignment requires a writer to write a report of any organisation which is involved in transportation and communication industry. The aim and purpose of this report is to examine the strategic management process to one of the industries. The strategic management process will be more emphasise in this report where its importance in the organisation play an important factor in order for the organisation to grow and expand. Malaysia Airlines (MAS) have been chosen as an organisation for this report. Malaysia Airlines is a commercial air travel organisation where they provide transportation service throughout the world, specifically 850 destinations in 150 countries. The organisation company profile will explain more about the history of the organisation itself which are the founder of the organisation, the year it start its services, location, service range, revenue and turnover report. After that, a strategic analysis of the Malaysia Airlines will be explained more which includes general environment, internal environment and competitive environment. In general environment, the weakness of the organisation needs to analyse before the problems and weaknesses itself will take toll towards the organisation. The tool which is going to be used to overcome the weaknesses are pest analysis and swot analysis which consecutively serve its purposes to analyse internal and external factors. In internal environment, a situation that can impact Malaysia Airlines business will be evaluated. It is divided into two categories, value chain analysis and resource based view. Value chain analysis will be used to add value to the organisation itself while resource based view will be use to explain how the resources of the organisation can be use to become an advantage, competitively. After done doing that, strategic formulation is needed for Malaysia Airlines. A proper plan and strategy are needed to achieve the organisation main objectives. Business level strategy and corporate level strategy will be use to explain the competitive advantage and how corporate parent helps its subsidiary company to grow and expand. International strategy is also in included in the strategic formulation in order for Malaysia Airlines to develop its level of competencies and future potential in international arena. Implementation of that international strategy will take to action after evaluation and analysis. In the implementation strategy, a leader with a broad scope of vision and mission is needed in order for the action plan to become reality. With a great leadership skill, the employees will be inspired to work more efficient to achieve the objective that had been set. All the explanation above are supported with proper references using journals, books, internet, articles and updated data from Malaysia Airlines from its company report. Lastly, a conclusion will be made to conclude all of the information from the report.

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TABLE OF CONTENT

Executive summary.........................................................................................................................i

1.0 Introduction..............................................................................................................................1

1.1 Company Profile.......................................................................................................................1

2.0 Strategic Analysis.....................................................................................................................2

2.1 General Environment................................................................................................................2

2.1.1 Scenario Planning...................................................................................................................2

2.1.2 Pest Analysis........................................................................................................................3-4

2.1.3 Swot Analysis........................................................................................................................5

2.2 Competitive Environment.........................................................................................................6

2.2.1 Porter’s Five Forces.............................................................................................................6-7

2.2.2 Strategic Groups....................................................................................................................7

2.3 Internal Environment................................................................................................................7

2.3.1 Value Chain Analysis.............................................................................................................8

2.3.2 Resource Based View............................................................................................................8

3.0 Strategy Formulation................................................................................................................9

3.1 Business Level Strategy............................................................................................................9

3.1.1 Industry Life Cycle................................................................................................................9

3.1.2 Differentiation...................................................................................................................9-10

3.2 Corporate Level Strategy.........................................................................................................10

3.2.1 Growth Strategies.................................................................................................................10

3.2.2 Corporate Parenting..............................................................................................................11

3.2.3 Strategy Evaluation...............................................................................................................11

3.3 International Strategy...............................................................................................................12

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4.0 Strategy Implementation.......................................................................................................13

4.1 Strategic Leadership...........................................................................................................13-14

4.2 Change Management.............................................................................................................14

4.3 Role of Systems.....................................................................................................................14

4.3.1 Organization Structure........................................................................................................15

4.3.2 Organizational Process........................................................................................................15

4.3.3 Strategic Control Systems...............................................................................................15-16

4.3.4 Corporate Governance........................................................................................................16

5.0 Conclusion.............................................................................................................................17

6.0 List of References...............................................................................................................

7.0 Appendices

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1.0 Introduction

Malaysian Airline System Berhad is the primary airline of Malaysia. Malaysia Airlines (MAS)

operates flights from Kuala Lumpur International Airport mainly and with a secondary hub

at Kota Kinabalu and Kuching. From the report, the strategic management of Malaysia Airlines

is analysed. The report is produced for Mr Mathew Teale. Most of the resources in this report

are based on report and journal. Besides, articles and newspapers are also being used as the

secondary resources. Gather from latest data, Malaysia Airlines has revenue worth as much as

RM13 billion. In stategy management, there are Strategy Analysis, Strategy Formulation and

Strategy Implementation which are the process to overcome that external factor which consist of

objective to fulfil(Hambrick, 2007). Under the effect of globalization, the world has changed in

every sector and those changes had influenced most of the corporation activities with obstacles to

execute their strategy. A company's finances will be affected if their management fails to

formulate and implement the most efficient and suitable strategy. Strategy analysis, strategy

formulation and strategy implementation are the fundamentals to solve negative factors

regardless what is the problems.

Company Profile

Malaysia Airlines was founded in 1937 through an idea by the Alfred Holt's Ocean Steamship

Company in liverpool work together with the Imperial Airways in from Britain and Straits

Steamship Company in Singapore. This had build the outcome of Malayan Airways

Limited(MAL) on the same year. As usual, this airline faced different types of industrial

challenges throughout these seven decades. Therefore, the company had improved and

repackaged their image and services. Malaysia Airlines started their flight services originated in

Subang Airport and later relocate to Kuala Lumpur International Airport (KLIA). Malaysia

Airlines serve different class of customers in society pyramid. Therfore, Malaysia Airlines

provide different class of seatings which are first class, business class, and economic class.

According to Malaysia Airlines Annual Report on 2012, incredible loss of RM481,457,000 was

hit after the loss on 2011 which was two billion. This shows the incapabilities of management in

Malaysia Airlines to manage the company. Therefore, the management needs to be rearranged

and restructured. Besides, Malaysia Airlines are facing more competitors in the industry such as

Airasia. To overcome this challenge, Malaysia Airlines tried to upkeep with their competitors by

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providing high quality of services in order to win customer's faith and loyalty so that they could

have stable coming back customers. Their strategy was a success and this can be seen when

several awards are awarded by Skytrax UK and World Travel Awards. The awards are the Asia’s

Leading Airline(2011), Asia’s Leading Business Class Airline (2010) and Five Star Airline

(2012). Malaysia Airlines built up their image as the top airline in Malaysia by winning those

award.

2.0 Strategic Analysis

The process of helping a company to have further understanding regarding their external

environment is what we call strategy analysis. Strategy analysis can maximize an organization's

potential, capability and interation between environment. Profit can be achieved if Malaysia

Airlines execute the three strategic processes which are analysis, formulation and

implementation. By doing the analysis of external evnironment and evaluating the internal

environment, we are able to use the chances and discover the industrial potential in the future.

2.1 General Environment

In order to help Malaysian Airlines in fitting itself to conquer the weaknesses, several analysis

such as PEST, scenerio planning and SWOT are carried out. Besieds, general environment acts

as a tool to identify the weakness in Malaysia Airlines which may lead to external environment

that changes rapidly (Henry, 2008:41).

2.1.1 Scenario Planning

Scenario planning is defined as procedure of visualizing what upcoming situation or events are

probable, what their effects would be like, and how to respond to, or benefit from,them(Business

Dictionary, n.d.). Scenario planning not only can help to identify future oppoturnity, but also

helps an organization to make critical decision. This can help an organization to utilize

opportunity and stay away from the threat. The scenario planning is mention by Henry (2008) as

a method to find changes and uncertainty in their industry and promote systematic thinking and

even decision making under spontaneus situation. However, Malaysia Airlines did not do proper

scenario planning which make them faced great loss as stated in their annual report 2012. As a

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way to stop this situation continue to grow, Malaysia Airline should really consider and think

deeply of their scenario planning. Besides, the ultimate growth of Airline industry shows

influence to Malaysia Airline scenario planning. Therefore, Malaysia Airline should make use of

PEST and SWOT analysis to identify deeply their market environment.

2.1.2 PEST analysis

PEST analysis most commonly is used to measure a market. By doing the PEST analysis,

Malaysia Airlines will link the entire four factors that may affect their business in general and

competitive environment. As a Malaysian national flag airlines, it is compulsory and a must for

them to follow and obey the political decision and governmental policies. Being an airline

company in Malaysia, always need to cope with the taxes which have been a big obstacles

especially during economy crisis. According to Malaysia Airlines annual report 2011, Malaysia

Airlines had experienced a huge loss as RM400 millions even before taxation is done. This

shows how pathetic and badly the situation of the company was. Furthermore, our current Prime

Minister Datuk Seri NajibTun Razak announced that the minimum wage of private sectors in

Penisular has been set for RM900 and RM800 for those in Sarawak. This increases the burden of

Malaysia Airlines which has approximately 18,000 workers. As a way to overcome the new

policy and adapted to it, Malaysia Airliens hence introduced a new rewarding plan to their

workers. t. In coping with the new policy, Malaysia Airlines has announced on their strategy to

offer permanent staff a maximum two years of unpaid leave only and excluding their subdiaries

which are Maswings and FIrefly.

Airlines biggest expenses will be the crews’ wages and fuel expenses. As global fuel price is

increasing, it influenced Malaysia Airlines operating cost for sure which will directly result the

loss in their profit. Besides, unstable fuel price that influenced economy will affect their shares

price in stock exchange too. (sharif, Ranjbar and Arumugam , 2011). Furthermore, Malaysia

Airlines had increased their flight ticket fares as a way to cover up the administration and

operating cost. As the increment of ticket fares occurred, local citizens with lower or medium

income holders to lessen their frequency to travel on flight. Besides, one of the undeniable

factors is inflation which causes the value of money to be lowered extra money from the wages

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unable to do much extra occasion planning. Prior to the Asian Financial Crisis in 1997, Malaysia

Airlines suffered in the massive losses of RM260million. As a way to overcome the crisis, the

airlines cut a lot of routes which are unprofitable such as Brussels, Darwin, Honolulu, Madrid,

Munich and Vancouver. Besides, approximately a decade later in 2011, frightening loss of

RM2.52billion was “achieved” by Malaysia Airlines and breaks its historical record. This

incident had push the management to terminate the flight to Surabaya, Karachi, Dubai,

Johannesburg in January of the same year. The action was unable to calm the managements who

later ceased the routes to Cape Town, Buenos Aires and Rome in February 2011.

For social factor, we know that there are different types of people with different preference in

this country, so with different culture and thinking in society, not everyone would like to use

flight as their transportation option. This is due to the fear factor that stuck in their heart to feel

insecure with the flight transportation. Therefore, safety is always one of the main feature to be

concerned and make sure the society feel safe with their services. Safety instructions are being

briefed before the flight depart every time and this can prevent chaos to occur if there is any

accident occurs. Besides, insurance is also one of the option for customer to purchase in their

flight ticket. This can relieve the insecurity of passengers when they choose to use Malaysia

Airlines.

In terms of technology, Internet has lead our world to globalization and information explosion

era. Malaysia Airlines sees this as an opportunity to promote their company services to the youth

conveniently. The customers can purchase the flight tickets easily from their website rather than

drive to their branches and queue up which will be even more expensive and time consuming.

Hence, Malaysia Airlines is able to deduct and decrease overhead cost and their budget in extra

offices and infrastructure. However, not everyone are well-skilled in using the internet and some

of the rural areas in our country still lack of such services which seems common in most of the

city. Besides, credit or debit card is a necessity in order to purchase from online ticketing system

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which also will be a obstacle for some of the senior citizens. Lastly, we shall concern about the

stability of Malaysia Airlines proxy server which is overloaded sometimes.

2.1.3 SWOT Analysis

SWOT analysis is a method where a structured planning can be done by evaluating the 4 factors

which are strengths, weaknesses, opportunities and threats (Humprey, 2005). Malaysia Airlines

can use SWOT at their own benefits to understand more about the external environment.

Malaysia Airlines is a well known brand name which has become strength of this company to

exploit. With its 70 years of experiences in the airline industry, this brand name has won the

heart of the customers where’s loyalty is important to them. In addition, Malaysia Airlines are

highly recognized by the international organisation. Plus, Malaysia Airlines are also has been

supported by the Malaysian government for years. With this, they can depend on the government

if they are having a financial problem or other difficulties which can benefit them. Malaysian

Airlines won a lot of prestigious awards in the past 10 years and their broad network of

destinations also has become their strength that led the potential and loyal customers to choose

them. Thereby, with this entire strength combine, chances of Malaysia Airline to win and take

control of the industry are higher.

Malaysia Airlines and other companies are not excluded from the organisational weaknesses.

The increasing fuel price had cause Malaysia Airlines huge loss as much as RM1.36

million.Other than that, their operating cost such as landing fees ishigherthatin which are

affecting their financial. This entirely affected their profit and thus giving them problem to be

dealt with. Price war with Air Asiaalso has affected their target in controlling the local

market.Since Malaysian income per capita is lower than other countries, therefore Malaysia

Airlines are now focusing more with the middle and upper class customers.

Malaysia Airlines has analyse its opportunities in the market. Aircraft passengers have been

growing as much as 13.5% every year. By this, Malaysia Airlines are going to take this

opportunity to expand their services in other countries such as China and Japan where the people

over there always travel abroad. The increasing numbers of cargo industry also have become a

profitable sector for Malaysia Airlines. In 2010, the increasing numbers of air cargo service has

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risen to 26.5%. As a result of that, Malaysia Airlines can manage to get a lot of profit in this

growing industry by exploiting the opportunities and turn it into a profit.

In threats, fuel price have been a problem for Malaysian Airlines for years. Inevitably, Malaysia

Airlines operating cost may also increase if the fuel prices increase. Not only that, international

airlines such as Cathay Pacific Airways, Singapore International Airways and Garuda Indonesia

Airways are competing with Malaysia Airlines internationally and Air Asia domestically. The

threat of new entrant also be a factor for Malaysia Airlines to deal with if financial institution

policy changes. Lower interest rate and credit loan willallownew airliners to enter the industry.

The more new airliners enter the industry; the likelihood of Malaysia Airlines to struggle in the

business will be higher. In order to cope with that, Malaysia Airlines need to be more prepared.

2.2 Competitive Environment

According to Mack (2010), competitive environment is defined or explained as a dynamic

system for the business to compete positively in. At such, analysis technique of Porter Five

Forces Framework is executed to understand the environment.

2.2.1 Porter’s Five Forces Framework

Porter five forces is a framework which analyzes the industry and business strategy development

to determine the competitive strength (Porter, 1979). By using this analyzing technique,

Malaysia Airlines can identify the threat of new entrants. Since the needs to start an airlines

company are hard, consequently, the threat of new entrants has reduced. Furthermore, brand

name is important to the customers these days. Adding to that, to go into this business not also

need high capital but also need an establish brand name. Thus, rather than start an establish brand

name, the new threat entrants will focus more on the loyal customer. The only new threat

entrants Malaysia Airlines need to focus more are the international airlines.

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There are two companies that are competing against each other in the aircraft manufacturing

industry which are Boeing and Airbus. Since Malaysia Airlines are choosing Boeing as their

main aircraft, therefore, Boeing has no option to increase their aircraft prices. If Boeing increases

their aircraft price, most probably Malaysia Airlines will change their aircraft to Airbus.

Consequently, Malaysia Airlines can use its bargaining power of consumer to bargain the aircraft

price. This undoubtedly will be an advantage to Malaysia Airlines to save their buying cost that

led Boeing with no other choice to sell its aircraft to Malaysia Airlines since they’re having a

tough time in competing in the aircraft manufacturing industry.

The bargaining power of suppliers is depending on the numbers of alternatives the consumer has.

For Malaysia Airlines, it is difficult to change to another aircraft manufacturer such as Airbus

since their maintenance staff areexperienced with Boeing’s aircraft. By changing the aircraft

manufacturer, Malaysia Airlines need to spend a lot of money to train their maintenance staff

which and switching cost is high.Therefore, the power of suppliers cannot be a negative factor

since Malaysia Airlines only rely on one aircraft manufacturer. Plus, the power of suppliers is

insignificant where Malaysia Airlines has their own aircraft maintenance subsidiary company.

For fuel, the bargaining power of suppliers is not really high since in Malaysia there is only little

petrol organization and the price is set by the government.

2.2.2 Strategic Groups

Strategic groups are used to classify or identity the companies that are having the similar

business model or mixture of strategies applied. (Porter, 1980). As a well known 5 stars airlines

company, Malaysia Airlines always offer various place of destinations throughout the world

where Airasia only provide certain well-known and popular destination. However, Airasia as the

low cost carrier, has advantages in competition as they can always attract customers in Asia that

always go for cheaper option.

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2.3 Internal Environment

An internal environmental analysis is an extensive review of all aspects of a company's

operations, internal guidance and mission. (wiseGEEK, n.d.). Value-chain analysis and resource-

based view can be used as analysis tools.

2.3.1 Value-chain Analysis

Malaysia Airlines primary income is based from logistics services and secondary activities are

aircraft maintenance and technology development. By coordinate these value chain analysis

activities, Malaysia Airlines can have a lower cost structure and increase the value of outcome

product. By increasing the value of outcome product, Malaysia Airlines can compete better in

the industry by understanding the connection between each of the value-chain activity.

Additionally, a proper coordination with their union, customers and suppliers can reduce cost

and adds up the bonding between customers and company itself. As its outcome, improvement of

the performance in Malaysia Airlines primary and secondary activities can be achieved and

higher profit can be gained in the process. .

2.3.2 Resource-based View

Airline industry was slammed pretty hard globally in previous years. Terrorists attack on 11st

September 2001 still horrified the hearts of passengers globally. The strong competitive

environments by low cost carriers such as Airasia in Malaysia is also causing the national flag

carrier to restructure their operations. Their resources such as airplanes and crews quality need to

be concerned and look into deeply. As the oldest flight carrier company in Malaysia, they shall

use this advantage to continue to stay at the frontline in airline industry by using its available

sufficient resources efficiently with the help of government and come up with efficient strategies

as a way to compete and stabilize its own potision in airline industry. .

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3.0 STRATEGY FORMULATION

Formulation of strategies is necessary in order for Malaysia Airlines to achieve its mission and

objectives. An excellent structure and organize strategies will beneficiary to Malaysia Airlines in

competing in the airline industry.

3.1 Business Level Strategy

Business level strategy is very important where it will be use as a method to develop the strategy

at a maximum level. In addition, it is crucial for Malaysia Airlines to implement and adapt to this

strategy because it’s a way for them to make use all of their resources and competency in the

airlines industry to accomplish its corporate level strategy.

3.1.1 Industry Life Cycle

In any industries, introduction, growth, maturity and decline development stages have to go

through including industry products. Malaysia Airlines has gone through the introduction phase

where they had been through a lot of difficulties and up and down since 1937. But unfortunately,

Malaysia Airlines financial report has shown that the company is suffering from internal and

external environment where they are facing profit losses. Malaysia Airlines is now in the growth

stage where they are trying to impose a new efficient strategy to cover up their losses from 2008

to 2012. Malaysia Airlines profit are at the highest in 2008 as much as RM15,570,141 and

decreasing slowly in the past 5 years and the lowest is in the year 2009 that decline as much as

RM11,605,111. Factors that cause this financial downturn are the increasing price of the fuel,

competitiveness of other airlines, poor marketing strategy and high operating cost. In coping

with this matter, Malaysia Airlines is now broadening their flight destination and suspend some

flight from a destination that give less profit, improve quality of service in order to create

customer demand and thus progressing in the growth stage.

3.1.2 Differentiation

Malaysia Airlines impose differentiation strategy by creating various types of seat class such as

Economic Class, Business Class and First Class. This is to ensure that all the variety of services

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that being offer are affordable for the different type of customers. It is also to increase the

advantages in competing by delivering the value added product to differentiate Malaysia Airlines

services from other airline competitors. Adding to that, by letting the customers choose what

type of services they want, the loyalty of the customer would be increased. This shows that

Malaysia Airlines are coping with price sensitivity, switching cost, higher entry barriers and

threat of substitutes, in the five forces. As a result, Malaysia Airlines has successfully competed

in the airline price wars that let the company to gain back profit in 2011.

3.2 Corporate Level Strategy

Corporate strategy signifies actions for Malaysia Airlines to take in gaining its competitive

advantage. Specifically, to help Malaysia Airlines in an advantage where they can control the

market and maximise profit for a long period of time. Thus, this strategy helps Malaysia Airlines

to improve its strategy and at the same time giving them a great position in controlling the

market.

3.2.1 Growth Strategies

Any company can practice four strategies specifically for the growing process. By now,

Malaysia Airlines are targeting to penetrate the international control the local market. Malaysia

Airlines are trying to use its existing services and products to increase their sales. Malaysia

Airlines achieve it by strengthening the bond with their customer to keep using its airlines and at

the same time bringing new customer. For that reason, Malaysia Airlines are now starting to

increase their promotion using social and mass media. Other than that, Malaysia Airlines are also

improving their website to become more convenient and easy with less procedure for all the

customers that wish to book a ticket.

In surviving in the mature market, Malaysia Airlines should prepare more for its opportunity to

expand its growth. Malaysia Airlines as a pioneer and leading the local airlines industry should

increase more their competitiveness in competing in the international market. Taking ASEAN

countries as a first step, Malaysia Airlines should understand more each of the country

geographically, culture and religions. By developing this understanding, customers will tend to

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choose Malaysia Airlines that in the end would increase their sales, profit and penetrate the

international market.

3.2.2 Corporate Parenting

Malaysia Airlines as parent company of MAS Cargo, MASwings, MAS Aerotechnologies and

etc. Malaysia Airlines as the corporate parent can achieve a lot of profit if they integrate all of its

subsidiaries company as an individual business unit. Malaysia Airlines can save cost in

managing all of its subsidiaries company. Not just that, a proper integration between the

subsidiaries company can help Malaysia Airlines to derive its economic scale that will further

move them in accomplishing their goals. Concurrently, Malaysia Airlines can help its

subsidiaries company and put them into an advantage where they can make use ofMalaysia

Airlines expertise and resources. As a result of that, Malaysia Airline’s subsidiaries company

will be enhance in controlling their budget, making decision and planning process. Nevertheless,

if any economic catastrophes occur, therefore, it will become disadvantage for Malaysia Airlines

if its subsidiaries company is in the economic crisis.

3.2.3 Strategic Evaluation

In following the variety formulation strategic plan, strategic evaluation is the most important part

before implementing all of the strategies that been plan. The strategies will be evaluate and

assess to find out its efficiency. In addition, the consistency of the strategies must be in a long

term where the use of the strategies itself can benefit Malaysia Airlines in the coming years

rather than being a yearly plan. It’s obvious that not all of the strategies will become a success,

but at least an initiative to evaluate the plan been done in order to minimize the risk. Thus,

Malaysia Airlines need to select a proper and the best strategies that can help them in realizing

their goal and objectives.

3.3 International Strategy and Globalization

Globalization is a worldwide issue where customer’s needs and wants are being standardized. It

can cause positive and negative effect on any organization depending on how they cope and

make use of the globalization itself as an advantage to them. For instance, the globalization on

fuel price, landing fees and aircraft spare part prices are now standardized accordingly. But

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luckily Malaysia Airlines have their own resources for these three needs where they have their

own aircraft maintenance subsidiary company and support from Malaysia government.In

marketing their product, Malaysia Airlines can use its global brand name to maximize marketing

efficiency. For this reason, Malaysia Airlines should use this opportunity to expand their wing in

the international market. Nonetheless, Malaysia Airlines also need to be aware and choose the

right strategy if they want to penetrate the market.

4.0 STRATEGY IMPLEMENTATION

Well plan strategies are not going to work well with an organization if it’s implemented

inadequately. In getting success in implementing the strategies, Malaysia Airlines need to

increase their efficiency in communication, managing their resources and improve their

employee’s morale. Leadership also playsits role in making Malaysia Airlines to gain success in

implementing the strategies. Therefore, all the staff in Malaysia Airlines should work together in

realizing the strategies to become reality.

4.1 Strategic Leadership

The leader is the only one that can determine the future of any company. Without them, the

chances of any company to collapse and bankrupt will be high. That is because the needs of a

leader in a company affect the path of the company whether it can generate income and be

victorious or it can only make profit losses and bankruptcy in the end. Not a lot of people can be

a great leader but everyone can have the traits of a leader which are visionary, inspire and drive

their followers to achieve success.

It can be said that Malaysia Airlines leadership has weaknesses in scenario planning that causes

market share and revenue losses. For this reason, leadership of Malaysia Airlines should apply

the vision trait in order to cope with changes and for the sake of the company continuity. When

leaders are able to master the vision trait, it will be easier for them to collaborate, motivate, trust,

and interdependence amongst their staff. Plus, the coordination and path of Malaysia Airlines

will be in the same direction of achieving common objectives that may lead Malaysia Airlines to

a bigger industry.

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Malaysia Airlines is now operating in a competitive environment. So, the vision of leadership

can’t be sluggish. Leader task is not just dealing with external factors but also playing an

important role on observing employee’s attitude. Therefore, a leader should know and oblige to

inspire and motivate employees if they’re lacking with something that will affect the vision of

the company. Giving the employees rewards are the best thing to do in making the company

vision to become a reality.

Leader needs to be proactive in handling situation. The needs of keeping the vision on the right

track and the same time monitoring its progress is necessary so that Malaysia Airlines will be

more prepare in enduring and responding towards the changes that happen. Moreover,

democratic leader is important where the leaders itself can put themselves with the employees

and communicate with the employees. Encouragement and understanding can be developing

with the employees if any conflict happen and then settle together as a team. By doing this, the

work rate and performance of Malaysia Airlines will improve and in the end will increase the

profit and maximizes the resources that they have.

4.2 Change Management

Competitiveness in airlines industry has become fiercer than before. Due to that, Malaysia

Airlines should be ready to embrace and adapt to changes in order to compete in the market. In

achieving this, Malaysia Airlines should improve their state division management. This is

because every state division especially in Sarawak is having trouble with the competitiveness

from low cost airlines such as Air Asia and the new low cost airline, Malindo Air. Therefore,

Malaysia Airlines should take a strategic change to their state division in coping with the

external environment.

Poor leadership has been one of many factors that cost their profit losses and customer loyalty.

By implying a proper marketing strategy, Malaysia Airlines will be able to challenge the local

airline industry. Adding to that, improvement in every managing structure in each state division

is a must since the capabilities and set of skills of each employee can be outdated under some

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circumstances. Thus, changes and improvements are needed in order to comply with customer’s

needs and achieving goals.

4.3 Role of Systems

Excellent plan strategies won’t work unless leaders and human resources play their role in

implementing the strategies.

4.3.1 Organizational Structure

Organizational structure is a fundamental that can affect the strategy implementation. Effective

use of labor by giving specific task can contribute an advantage in competing in the industry. In

general, the four organizational structures are functional, divisional, entrepreneurial and matrix.

Malaysia Airlines are now using divisional structure to conduct their corporate parenting by

dividing resources in each division. It is essential for them in order to gain profit. Using this

structure, Malaysia Airlines are decentralizing the power of making decision to each division and

that give a clearer goal to the employees to achieve. Nevertheless, the plentiful number of

divisions will cost a lot and sharing of knowledge will be lesser. To respond to that, Malaysia

Airlines should manage all the division under one command center by using network structure

and all the information gathered need to be transmitted to headquarter.

4.3.2 Organizational Process

Malaysia Airlines organizational processes are of consist of entrepreneurial and competence-

building. In entrepreneurial process, employees will bemotivated by delegating some tasks to

them that of course will increase their discipline and efficiency compared to strict control. In

building competency, employee differences of capabilities will be given a specific task to them

in order to gain trust amongst the Malaysia Airlines and the employees itself. By implementing

this, a more proactive and efficient workforce can be produced in the process of achieving the

goals.

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4.3.3 Strategic Control Systems

In improving the employee’s performance and at the same time retaining their performance,

control and reward systems are a must. Well rewarded employees undoubtedly will perform very

well. By implementing this, Malaysia Airlines can manage to deliver consistent services to their

customers. Plus, motivated work force surely will lead Malaysia Airlines to gain profit. As a

result of that, employees that perform with excellence and if the satisfaction towards their job are

high, the probability of staying longer with Malaysia Airlines are also high. Thus, this will surely

eliminate the cost of looking for new employees.

Malaysia Airlines as corporate parent also need to use control and reward system in order to

increase the motivation of the employees to achieve goals that being set. By means of giving

them reward based on their performance, the employee’s tendency of performing at their best

most likely will be high. By doing this, a more standardize employee performance can be

achieved. In addition, controlling the employees is not necessarily being strict with them but

being understanding is the greatest option to choose where employees automatically will increase

their work rate that will lead Malaysia Airlines to compete vigorously in the industry.

4.3.4 Corporate Governance

Corporate governance is where business is managed for the shareholder according to the right

and wishes of the stakeholder. It is also where an organization is responsible for the

stakeholder’s interest in the organization itself. Corporate governance ensures that the

stakeholderreceives something in the forms of money or others.Malaysia Airlines should take the

approach in implementing what they want to do to the stakeholder so that the stakeholder will

feel secure. Openness with stakeholder is a must where company’s finance and planmust be

share to win their trust. Any decisionsare made by Malaysia Airlines can affect stakeholder trust.

Hence, leadership and management of the organization are responsible in balancing the needs of

stakeholders. Finally, a more synchronize and efficient corporate governance is necessary in

planning strategies which can fit the organizational structure that in the end getting control of the

market.

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Conclusion

Strategic management is very important for every organisation. Small organisation to giant

organisation requires strategic management to expand and improve their managing ability.

Adding to that, it can also help them to compete in the industry where all the strategies can be

used to cope with the industry competitiveness itself. Strategic analysis, scenario planning,

PEST and SWOT analysis, Porter five forces, strategic formulation, strategic implementation;

and other strategies are important to imply within the organization. Not just for the sake of

getting profit, but also for long term future. All of the strategies mentioned above can help

Malaysia Airlines to increase their profits and cover their losses. Not just that, the strategies also

can help dealing with the external factors such as competitors, policies, and most importantly the

internal environment itself. Efficiency, cost saving and opportunity exploitation can be achieved

if the strategies are carried out with proper planning. In conclusion, strategic management are not

just a strategy but it can make as a stepping stone to achieve success where it can be used to

analyze strengths and weaknesses that surely will put Malaysia Airlines at great advantages.

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