Business development essay help: Air Asia – Malaysian airlines

Introduction

Air Asia, also known as second Malaysian Airline has come a long way since it re-launch. Their vision is to become the largest low cost airline in Asia along with serving 3 billion people who suffers from high fares and poor connectivity. They upheld their values very high while they formulated in their journey and they were safety first, high Aircraft utilisation, low fare, no frills, streamline operations, point to point networks and lean distribution system. They still hang on to their title of being ‘the world best low-cost airline’ (Air Asia, 2012).

Liberalisation and Airasia

A substantial economic growth and traffic growth were results of the liberalization. These are positive trends in relation with increased competition and economical gains were the airline industry is concerned. The whole economy tends to be stimulated when there is liberalisation. This will also help the airlines to increase their networks in cross continental markets and offer better competition with an every changing trend. The relationship between liberalisation and the Low Cost Carriers (LCC) cannot be ignored. The reason is that when the Low Cost Carriers grow there will be stimulation in the traffic, increase in the competition, and increase in the quality of pricing, frequency and capacity. There are also chances for increasing the competition in the national aviation industry because the domestic markets will promote further competition (Fu and Zhang, 2010).

These were some advantages that Air Asia got due to the liberalisation of the markets. The Air was made open and they could increase their domestic services. Air Asia realised that the market has potential to be relieved because only 6% of the adult population were using air transport then. The timing and luck has played an important role in establishing Airasia as the world best cheapest carrier. More and more competitors also came in because of liberalisation. The initial support that was given by Malaysian government for the advent of their strategy also cannot be ignored. Liberalisation was responsible for bringing the economy and people of Malaysia to favourable condition where Airasia could operate and become successful (Lawton. & Solomko, 2005).

PESTLE Analysis

Political Analysis

Political situation that is prevalent in the nation or the destination that an airbus operates in are very important. Strangest rules and lack of cooperation from the government will mean that they will not be able to provide optimal service to the customers. The situation is the same with Airasia. It can be seen the initial encouragement that was given to Airasia by Malaysian government were withdrawn when they became successful. They started off as a domestic airline by their services has a wider outreach now. But flying outside Malaysia has always been difficult. There is lack of bilateral agreements. The status is now better as Government is now stimulating the economy and Air buses are popular mediums used for transports now.

Economic Analysis

Landing in the gateway airports are also expensive and this makes it very difficult for Airasia to keep up with the low cost model. The threat of terrorism has also left reluctance in the minds of customers when they consider using the airlines. Another one of the major factors that should be considered is the increase into he fuel prices. The GDP of Malaysia is increasing and the tourism sector in Malaysia is growing that ever. This is also one of the major reasons for the growth of Airasia. There is increased used in Freight services on air carriers. Expansion of various franchises and online trade has positively affected Airasia. On a whole the nature of the economy has lead the customers to depend on air travel more than ever now. Looking at the economic health of Malaysia it can be seen the Malaysia has remained a consistent performer in Asia region and their average growth has remained more than 5% (Market Line, 2011).

Social Analysis

Malaysia is always considered truly Asia and therefore has multiethnic people who speak diverse languages. This is also one of the reasons why the tourism rate is on hike now for the country apart from the features of the land. There is also an increased awareness in the people where holiday and travels are concerned. Education is given high importance in the land now. People are also trying to migrate to different countries and this also gives a surge to airline industry. They respond to advertisements well and are very fond of flying. The land features are also optimal for Airasia to conduct business. The way people respond to rules also vary and Malaysia give high level of importance to family and not individualism.

Technological Analysis

Technological development is global scenario now and IT is still growing. Airasia is at complete advantage in the technological arena as most of the tickets are now sold online. The new employees are also highly concerned about the fuel consumption and the rules of clean energy are also being applied in the case of flights. Technological acceptance makes Airasia deliver their service at a faster pace and has increased its efficiency. this helps the customers to check the flight schedules, and have electronic check ins, there are also chances for pointing low cost terminal where there will modern technology with privately owned shops this will reduce the airport taxes and fares and the bureaucracy of the government.

Legal analysis

The competition Act 2010 was upheld by the parliament and will come to force in 2012. This is a law that will remove appreciate three main pillars. they are there won’t be any more anticompetitive agreements, there won’t be any abuse of the dominant positions, and the dominant ones will not have any ruling in the case of the mergers and acquisitions that are anticompetitive in nature. The Act though may seem good initially is not favourable to Airasia as it will increase competition in the market. This would mean that there won’t be any predatory pricing that is allowed (Chen, 2008).

Environmental Analysis

Environment analysis will consider both the macro analysis and microanalysis of the environment, being an international airline makes Airasia prone to the changes in the micro and the macro environment. The environment is very conductive for the low cost carriers in Asia. The picture of the demand for air travel is very attractive in the current environment with more middle class families exist with a lot of income to dispose. The micro environment analysis will be considered in the porters analyses (Kho, 2005).

SWOT Analysis

Airasia like any other companies in the world have their strengths, weakness, opportunities and threats. They make use of the opportunities to overcome their weakness and strengths to overcome the threats.

Strengths

The operations of the Asia Airlines are of low cost. They have and effective and aggressive management who are sworn in to resolve any issues as they arise, they offer tickets at the lowest fares possible to the customers with the help of a simple business model. They try to penetrated into potential markets and stimulate the people there. The employees in Airasia are multi-skilled and this increases their efficiency in realising the set goals and realising their vision of serving more customers and becoming the cheapest airline service provider without compromising on the service quality. They also have single type fleets and they are easy for pilot dispatch and the maintenance is lower in comparison to other flights. In short it can be said that the values that are accepted by them are their core strengths (Ahmad, 2010).

Weakness

Though prevalent at serving the customer the low cost fare limits the amount of service that can be given to the customer.  They require more people in the human resource as they are handling millions of customers and solving the issues required in a minimum amount of time. There is a large amount of interference from the government when concerned regulation on the deals with the airport and other passenger compensation. The secondary airports are not located in the central location and this limits the passengers who prefer to travel. There are challenges of brand development when the competition is highly prevalent. Outsourcing is a highly relied on method by Airasia. This increases their dependency on the external organisations. Competition is very high now as new service providers are price-sensitive (Wong, 2009).

Opportunities

There is underdevelopment market share and it can be developed through long haul flight. Additional customer services can be added and thus they can differentiate from the LCC traditional model that is adopted by them. They are new routes and deals that are favourable for more flights because of the industry consolidation. The competitors are falling back because of the high fuel prices (Wong, 2009).

Threats

Cost cut method used by other airline services is a threat. There are other low cost carriers who are playing in the field and Airasia has lost in unanimity. The profit has decreased because of high fuel prices. There are fears of terrorism and disasters and they tend to affect the customer confidence.  There is increase amount of control in the hands of the government even in forms of aviation regulation. Value added services are demanded by the customers now and there is an increase in the operation cost for the purpose. The online sales have increased in the case of tickets and system disruption is one of the major threats (Wong, 2009).

Porters Five Force Analysis

Competitive Rivalry within the Industry

Air Asia lacked rivalry in the industry when they established them self with the low cost plan except when Malaysian airlines tried to beat them up by lowering the prices. The competitive rivalry has now reached to the extreme levels and faced competition from different people. The main weapons used for weapon along the competitors remain to be price, innovation and quality of service. Expansion is also limited as certain countries promote their flag competitors.

Bargaining power of the customers

Airasia is a low cost carrier and are not dependent on the travel agents for the sale of their tickets. The choice is higher for them Airasia do direct selling. Events are being sponsored and this does not reduce the power in the hands of the customer. The increasing number of competitors has increased the bargaining power of the customers.

Bargaining power of the suppliers

The requirement of fuel, maintenance and spare parts makes Airasia extremely dependent on the suppliers. But the bargaining power is still string as they have hundreds of flights and services. The loss to Airasia will also mean loss to the supplier. This is one of the reasons why the bargaining power still remains to be high.

Threat of New Entrants

The threat of new entrants is very low in the case of the lucrative industry. In case they barge in Airasia is still at advantage being a trendsetter, innovator and low cost carrier. Tiger Air, Cebu Pacific is example who came in to the industry. It is usually difficult for the new entrants to adhere to the multiple requirements and keep up with the standards and low costs allowed for the external competitors (Ahmad, 2010).

Threat of Substitutes

There is a high level of threat o substitute irrespective of being the most favourable fair bus. Airasia itself has substituted inner city bus or vessel routes in the countries. There is also fear of being substituted by railways. The reason is that the check in time is not high in the case of any of the other alternative forms of travel.

Conclusion

To conclude, it can be said that Airasia though at advantage of being a trendsetter in Malaysia is not devoid of competition. The nature of the whole industry is also applicable to them which are to keep on innovating and implementing new technologies. It can also be said that the strategic moves taken by Airasia has remained the best for a very long time. But they have to improve the quality of their functions including service quality, innovation, technology and timeliness of the flights. Sustainability and competitive advantage matters to them also like many other organisations in various industries of the world.

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