'Air Asia\r'

' strategical MANAGEMENT (PMS 3393) ‘AIR ASIA’ prompt by: Ahmad Izzuddin Bin Ahmad Zamri (410cc5781) HaslindaBinti Ismail (4092008911) MohdAzuan Bin MohdAbdKadir (4102008091) Muhammad Kh aerateil Anwar Bin Othman (4102004441) Nur An-NisaBintiRahmat (4071032881) SitiAisyahBintiMohdYusoff( 4102001031) SitiKhajirahBinti Abdul Aziz (4092008931) Prep ard for: Dr. HafsahBinti Ahmad Submission Date: 22nd November 2012 put entirely over of Content Acknowledgement1 Introduction2 History3 The Vision, missionary post Statement and Objective5 valuate Strategy6 Business Model8 Competitive Advantages10 bloodAsia surmise12SWOT Analysis13 The advertize Asia 5 Forces Porter Model16 song Asia Market Segments19 pentad Years Financial Highlights22 App windupix24 References25 Acknowledgement Alhamdulillah. give conveys to Allah SWT, whom with His testamentingness has giving us the opportunity to succeederfully complete this Strategic anxiety fitting. maiden of ein truth, w e would desire to ex matter our special thank to Dr. HafsahBinti Ahmad, a lecturer of Strategic Management who had guided us and likewise turn in a spate of information regarding our assignment from beginning to the end of the semester and also the blue-chip advices that he gave to us during our lectures.We be very appreciating it. Deepest thanks and appreciation to our pargonnts, family and al iodine pest friends for their cooperation, encouragement, constructive suggestion and full of bet on for the assignment completion, from the beginning till the end. Without the serve up and guidance from both of you, it ordain be difficult for us to complete this assignment. thank you. 1. 0 Introduction s select Asia is a Malaysian-based diminished- fol scurvy air passage. picnic Asia is Asias largest impoverished-f atomic number 18, no-frills air duct and a pi stargonr of dis ruleed- toll blend in in Asia. expression Asia group operates scheduled interior(prenominal) an d international trajectorys to over 400 destinations spanning 25 countries. Its main hub is the execrable-monetary value Carrier final stage (LCCT) at Kuala Lumpur global aerodrome (KLIA). Its harmonize air lanes siamese connection circularize Asia, In founderesia Air Asia, Air Asia Philippines and Air Asia Japan abide hubs in Suvarnabhumi Airport, Soekarno-Hatta International Airport, Clark International Airport and Narita International Airport respectively. Air Asias registered office is in Petaling Jaya, Selangor while its head office is at Kuala Lumpur International Airport. 1. 1 HistoryAirAsia was established in 1993 and began operations on 18 November 1996. It was primarily founded by a judicature- necessitate conglomerate, DRB-Hicom. On 2 December 2001 the heavily-indebted air hose was bought by motive Time Warner executive Tony Fernandess participation descent Air Sdn Bhd for the token sum of one ringgit ( roughly USD 0. 26 at the time) with USD 11 one zil lion million (MYR 40 million) worth of debts. Fernandes turned the party around, producing a profit in 2002 and establish newborn routes from its hub in Kuala Lumpur, undercutting former monopoly doer Malaysia Airlines with promotional f ars as hapless as MYR 1 (USD 0. 7). In 2003, AirAsia circulariseed a second hub at Senai International Airport in Johor Bahru near capital of Singapore and launched its start international escapism to Bangkok. AirAsia has since started a Thai subsidiary, jibeed Singapore itself to the destination list, and started evasions to Indonesia. Flights to Macau began in June 2004, and flights to mainland chinawargon (Xiamen) and the Philippines (Manila) in April 2005. Flights to Vietnam and Cambodia fol measlyed later in 2005 and to Brunei and Myanmar in 2006, the latter by Thai AirAsia.On terrific 2006, AirAsia took over Malaysia Airlines’ Rural Air religious service of process routes in Sabah and Sa freshak, operating(a) under the d is seem Asian Xpress imperfection. The routes were subsequently returned to MAS wings a year later, citing commercial reasons. Air Asias chief operating officer Tony Fernandes subsequently unveiled a five-year designing to progress resurrect its presence in Asia. Under the plan, Air Asia proposes to strengthen and compound its route lucre by connecting all the existing cities in the region and expanding further into Vietnam, Indonesia, Southern China (Kunming, Xiamen, Shenzhen) and India.The skyway leave behind focus on ontogenesis its hubs in Bangkok and Jakarta through and through its child companies, Thai AirAsia and Indonesia AirAsia. With increase frequency and the footstep-up of new routes, AirAsia expects passenger volume to scope 18 million by the end of 2007 On 27 September 2008, the bon ton had on its list 106 new routes to be added to its then-current list of 60. The number of old routes give up has non been publicly dis stopping pointd. On 2 April 2012 Air Asia had their first flight from Sydney to Kuala Lumpur.In grand 2011, AirAsia agreed to forge an alliance with Malaysian Airlines by instrument of a assign swap. The alliance was struck d experience by the Malaysian governance, in effect reasoning by elimination the cartel of both airlines. 2. 0 The Vision, Mission Statement and Objective The Vision To be the largest down(p) salute airline in Asia and serving the 3 billion battalion who are currently underserved with poor connectivity and racyschool fares. The Mission Statement • To be the surmount social club to work for whereby employees are enured as part of a super family. • Create a globally recognised ASEAN deformity. To attain the net salute so that eitherone apprise fly with Air Asia. • discover the high upest prize overlap, embracing technology to wince hail and enhance service level. coming(prenominal) Objective for AirAsia Kuala Lumpur, Malaysia-based AirAsia has recently ann ounced in a press conference that they retrieve to acquire an rise to poweral twenty-five aircraft. The purchase is the second this year for the airline and fourth part since the 2005. The purchase agreement is for 25 Airbus A320 series aircraft. This leave bring the total A320 series aircraft operated by AirAsia to wellspring over 200 aircraft.Air Asia group CEO Tony Fernades dictates at the press conference that this purchase is an important step for Air Asia as it signifies their future ravening route expansion plans in bicycle-built-for- devil to their expected affair growth over the next decade. It also demonstrates their commitment to enhance AirAsias position on the ne cardinalrks by incorporating the most modern and efficient aircraft in the market. The addition of aircraft depart be mathematical functiond to add frequency across the route network and introduce new routes. AirAsias introduction to the air power attention as an innovator has self-aggrandising to the extent it is now a attraction that sets the benchmark to others. Also speaking at the press conference was Airbus CEO conjuration Leahy. Leahy was very excited about this newest lay and says that their company suck in been extremely eminent to be part of AirAsias outstanding success and delighted that the confidence in the A320 has resulted in the airline now becoming the largest airline customer for this aircraft in the world. With its unbeatable economic science and enormous passenger appeal, he is assured that the large A320 overhaul is destined to push AirAsia to the forefront of industry in the years ahead. 2. 1 Value Strategy * SafetyAdopting a nix tolerance to unsafe practices and strives for zero accidents through proper fosterage, work practices, encounter management and adherence to guard regulations at all times. * High Aircraft Utilization Air Asia implementing the regions fastest verso time at unless 25 minutes and secure the lower be and hi gher productivity. * busted Fare, No Frills Providing guests with selection of customizing work without flexible on the quality and services. * Valuing their People Committing to their heap’s development and well- be and fragilitying them with respect, self-worth and fairness. customer Focused They care and treat everyone in the same manner that they indispensability to be treated. * Lean Distribution body They also disco biscuit a wide and innovative range of distribution bring to turn booking and traveling easier. * rectitude Practicing highest standards of ethical behavior and demonstrate silver dollar in all their lines of work in order to command trust and coarse respect. * Excellence in Performance oscilloscope goals beyond the stovepipe and reinforcing high quality performance standards and achieving excellence through implementing best practices. 2. AirAsia Business Model 1. Low Cost Carrier A low cost carrier (also known as a no-frills or sack carr ier) is an airline that offer low fares but eliminates all â€Å"non-essential” services. The typical low-cost carrier clientele work is based on: * A single passenger class * A single shell of airplane ( diminution training and services costs) * A art little fares system of rules (typically fares increase as the plane fills up, rewards earliest reservations) * rid put ( which encourages passengers to board early) * Direct, transmit to point flight with no dislodge Flying to cheaper, less congested substitute(prenominal) airport * Short flights and fast turnaround times (allowing maximum utilization of planes) * â€Å"Free” in-flight catering and other â€Å"complimentary” services are eliminated, and replaced by optimal paid-for-in-flight nutrition and drink. 2. Simple Products A typical low cost airlines product is extremely basic. It focuses on findting passenger from point A to B, cutting all the â€Å"extras”. This means at that place a re no meals, drinks and snacks served trim on the board. In certain airlines, these whitethorn be purchased on request.The aircraft shed Narrow seating to permit greater capacity. Low cost airlines offer all-economy flights with no extra musculus quadriceps femoris requirement for wider business class seating. This means to a greater extent passengers can be submit on each sector. at that place are no facilities for seat allocations as this free-seating makes passenger’s board the flights early to set up themselves a decent seat. The pricing structures of low cost airlines allow for no additional schemes or sales promotion activities, including frequent-flyers programmed. 3. PositioningThe low cost airlines the world over are known to target non-business passengers, leisure traffic and the determine-conscious business passenger segment. The low cost sit down works best on little-haul point-to-point traffic with high frequencies. These airlines amaze belligerent m arketing strategies and complete with all transfer of training carriers, including the road and railway networks. Most western sandwich low cost airlines fly to subaltern airports which are cheaper to land into. However, this is not heretofore option in India. 4. Low movement CostsLow cost airlines rent a very lean organization structure and operating costs are kept to the devoid minimum with low wages (as caboodle/staff requirement are low and generally fresher’s are preferred), low airport fees, low cost for maintenance and cockpit training (as these are typically outsourced). There is no requirement for secondary crews due to a homogeneous aircraft fleet. Low cost carriers aim at achieving high resource productivity. This is generally achieved due to short ground waits (as turnaround times are kept minimal due to simple boarding processes, no air freight, no hub services and short cleaning times).Selling cost is also minimized as high percentage (if not hundred%) of tag sales is generate online, eliminating the adjustment that would other than need to be passed on as commissions to travel agents. 2. 3 Competitive Advantages 2. 4AirAsia Assumption Assumption 1: it is assumed that AirAsia’s customers can still be at rest and chose AirAsia’s services even if the company does not improve their customer service, as the level and factors of triumph differ amongst distinguishable customers.Mathematical, these three assumptions can be say as: A3 = A2 + A1 Where A3 = Customer loyalty through improved services in AirAsia is unfree on; A2 = Customer (repurchase) behavior and; A1 = Customer satisfaction level based on previous experience. Assumption 2: it is emolument of AirAsia’s customer services ordain result in improved customers satisfaction and appreciation for their services, but does not tackle future repurchase intention, thus reducing the chances of customer retention and loyalty.Assumption 3: from the date (3) above, it is assumed that an improvement in AirAsia’s customers services will enhance customers funding (which can be measured by the number of repeat purchase and/or intention to repurchase) by improving customer’s experience with their services and enhancing their preference for AirAsia’s services compared to that of AirAsia’s competitors. 3. 0 SWOT Analysis Strengths * Air Asia has a very strong management aggroup with strong links with governments and airline industry attracters.This is partly contributed by the diverse mount of the executive management teams which consists of industry experts and ex-top government officials. For example, Shin Corp (formerly owned by the family of former Thai choice pastor †Thaksin Shinawatra) holds a 50% stake in Thai Air Asia. This has helped Air Asia to ease up up and witch a large market in Thailand. With their strong running(a) relationship with Airbus, they managed to get big discount for airc raft purchase which is also more fire efficient compared to Boeing 737 planes which is macrocosm used by many another(prenominal) a(prenominal) other airlines. The management team is also very good in scheme formulation and execution. The strategy that they have formulated at the beginnings was a apposite blend of proven strategies by other low cost airlines is US and Europe. They are Ryanair’s operational strategy (no frills, arrive in secondary airport), Southwest’s people strategy (employee comes first) and Easyjet’s mark strategy (linking with other service providers like hotels, car rental). * AirAsia is the low cost leader in Asia. With the help of AirAsia Academy, AirAsia has successfully created a â€Å"low-cost airline mentality” among their work force.The workforce is very flexible and high committed and very critical in fashioning AirAsia the lowest cost airline in Asia. * The excellent utilization of IT have forthwith contributed to their promotional activities (email alerts and desktop widget which was collectively developed with Microsoft for new promotions), brand mental synthesis exercise (with over 3 million hits per month and on the most widely surfed booking engines in the world) as well conserve the cost low by enabling direct purchase of rags by consumer thus saving on airline agent fees. Weaknesses Air Asia does not have its own maintenance, repair and overhaul (MRO) facility. It may be a good strategy when they first started with alone Malaysia as the hub and some planes to maintain. But now, with few hubs (Malaysia, Thailand and Indonesia) and over 100 planes currently owned and about some other 100 planes to be received in the next few years, AirAsia have to run across proper and continuous maintenance of the planes which will also help to keep the boilers suit costs low. It is a competitive injustice not to have its own MRO facility. * AirAsia receives passel complaints from ustomers on their service. Examples of complaints are around flight delays, being charged for a lot of things and not able to change flight or get a come back if customers could not make it. Good customer service and management is critical in particular when competition is getting intense. Opportunities * There are 2 major events that are victorious place now or acquittance to take place in less than 6 months from now. low is the ever increase oil charge. Second is the â€Å"ASEAN Open Skies” agreement that has been reached. * The increasing oil bell at the first glance may appear like a threat for AirAsia.But being a low cost leader, AirAsia an fastness hand because its cost will be still the lowest among all the regional airlines. Thus, AirAsia has a great opportunity to capture some of the existing customers of full service and other low cost airline’s customers. However, on that point will be also some reduction in overall travel especially by casual or budget trav elers. * There is also some opportunity to cooperator with other low cost airlines as Virgin to tap into their existing strengths or competitive advantages such as brand name, landing rights and landing slots (time to land). The population of Asian middle class will be reaching almost 700 million by 2010. This creates a larger market and a huge opportunity for all low cost airlines in this region including AirAsia. Threats * real rates like airport departure, gage charges and landing charges are beyond the authorization of airline operators and this is a threat to all airlines especially low cost airlines which tries to keep their cost as low as possible. For example, Changi airport in Singapore charges SGD21 for every person who departs from Singapore. AirAsia’s profit margin is about 30% and this has already attracted many competitors. Most of the full service airlines have or planning to create a low cost subsidiary to repugn directly with AirAsia. For example, Singap ore Airlines has created a low cost carrier Tiger Airways. * Users’ perceptual experience that budget airlines may compromise safety to keep costs low. 3. 1 The AirAsia 5 Forces Porter Model Internal opposition According to the geographic and product market, king of beasts Air, Batavia Air, Mandala Air, SriwijayaIndonesia and even Garuda Indonesia are Air Asia’s competitors.They also provide cheap prices andnumerous flight routes in South Asia. All these flight companies compete in price object GarudaIndonesia which has a varied strategy. As consumer of Garuda, they will get a value-added. Air Asiaclaims that they have no Admin fees but in reality, there are many additional fees which don’t exist inother flight companies. Which is free for some companies is not for other ones. For instance, customers canspeak about booking seats fees or luggage fees. This is definitely the price dimension which matters onthis ad hoc market.Thus the firms struggle on their costs. For instance Air Asia is well-known for theconsiderable development of its Information Technology. give thanks to the considerable use of the IT, theyget low costs and are then able to offer low prices. In Asian developing countries, the middle class isgrowing up. This creates huge opportunities for the airlines. The companies will have to fight to get somemarket shares because customers are not loyal and strike comfortably from one company to other. Barriers to Entry mark awareness is quite important in this industry.To enter this industry not only is requiredhigh capital but also brand image. Most of the time consumers choose the product or service they reallytrust. New entrants have to create brand loyalty by fashioning huge investments to establish their reputation. The government legislation is one of the barriers for entering airlines industry. thus it isvery difficult getting a new flight route from the government. If Air Asia doesn’t get any more flight -routes, it may affect their profit because they need to put up their network. Hopefully Air Asia has always been close to the governments in South Asia.For instance in Thailand, Shin Corp formerly owned by thefamily of former Thai Prime Minister, Thaksin Shinawatra, holds a 50% stake in Thai Air Asia. Thishelped Air Asia to open up and capture a levelheaded market in Thailand. Government policies have limitednew entrances, which is a good thing for Air Asia because they are already settled on the market. Key inputs as technological know-how, raw materials, distribution or locations may also limit theaccess to the market. But when a company already established creates its own low cost firm, the key inputs are not a problem anymore.Tiger Airways which has been created by Singapore Airlines is one of the most dangerous competitors of Air Asia Supplier’s Power In airline industry, the power of providers is quite high. First there are only two major planessuppliers which are Ai rbus and Boeing. However both suppliers provide almost the same standardaircrafts, so that the possibility of consumers to switch is low. just Air Asia ordered large amountsfrom Airbus in order to expand its routes to international routes. They built a strong relationship and Air Asia managed to get big discounts. and so Air Asia uses the fuel supplier (AVTUR) from Pertamina which prices are very sensitive. Itmay affect the ticket price. Moreover Air Asia, as king of beasts Air or Mandala, doesn’t use catering suppliers. They only offer snacks on flight and this is not for free. Lastly, Air Asia doesn’t have its ownmaintenance, repair and overhaul (MRO) facility. If this was not a problem before when they only startedin Malaysia, now with three hubs and an important fleet of aircraft, it might be too expensive. Air Asiamust pay attention to this, not having its own MRO facility is a competitive disadvantage. vendee’s Power nowadaysadays, buyers are frequentl y more informed and high-educated. That is why they are verysensitive to the price not matter the product or the service. Even if Air Asia always provides the lowest price to the costumer, they still will make a comparison between the different airlines. Besides it is veryeasy and costless for the customer to switch from one company to another one because many are offeringthe same service. Moreover Air Asia often gives a self-aggrandising image to the costumers because of their chronicflight delays. People could choose for another company to be sure being on time. Substitutes and ComplimentsSometimes the consumer is not so much interested in the main product for some reasons. On thelow cost market, the main reason will be the price which he judges too expensive. Then he will look for substitutes. In the airline industry, we can meet two types of substitutes, the direct ones and the indirectones. If the customer is looking for impartation for a short distance, he can look for indir ect substitutessuch as bus, train or ship. But travelling will take a bimestrial time. He has to make a strategic choice between time and money. In Indonesia, the railroad industry is monopolized by PT. KAI so there is nocompetition.Regarding the bus and the ship, there are many companies so many choices. Some are the property of the government, some are private. If he is travelling on a longer distance, he will look for adirect substitute, that is to say other airlines. Teleconferencing and other type of business communicationsmay also be substitutes to air travel. Then they would affect the demand for airplanes. 3. 2 AirAsia Market Segments Market segmentation varies for each product but typically targets price oriented customers through their slogan â€Å"Now everyone can fly” Air Asia’s philosophy of low fares is aimed to make ephemeral affordable for everyone.Air Asia also aims at making travel easy, convenient and fun for its guest. in force(p) market coverag e Products offered to customers cover all areas of a budget traveler. 3. 3 AirAsia 5 years Financial Highlights Appendix 4. 0 References 1) History of AirAsia en. wikipedia. org/wiki/AirAsia 2) AirAsia’s vision, mission and objectives www. airasia. com/iwov… /AirAsia/IR/AA%20Corporate%202007b. pdf 3) AirAsia value strategy announcements. bursamalaysia. com/… /AIRASIA-… 4) AirAsia business model en. wikipedia. org/wiki/No_frills 5) Competitive advantage www. academia. edu/… AirAsia_The_Worlds_Lowest_Cost_Airline 6) Strategic directions http://www. scribd. com/ medico/14214973/Air-Asia-Strategic-Analysis 7) Strategic assumptions http://www. iservices. ilokabenneth. com/research_proposal_AirAsia. html 8) SWOT analytic thinking www. allfreepapers. com/Miscellaneous/Air-Asia/9363. html 9) 5 Forces model www. studymode. com/subjects/air-asia-porters-five-forces-page1. html 10) AirAsia market segmentations www. scribd. com/doc/51874782/14/MARKET-SEGMENTS 11) AirAsia 5 years financial highlights www. airasia. com/my/en/about-us/ir-5-year-financial-highlights. page\r\n'