For full functionality of this site it is necessary to enable JavaScript. (2008) Strategic Management. Then it employed a systematic strategy to expand its services outside Malaysia. Therefore, striving for introducing innovations in different areas of the airline’s functioning can be regarded as the first component of the strategy of AirAsia. This is SWOT analysis of Air Asia. The analysis of the main specifics of its strategy, its methods for achieving cost leadership and differentiation, and techniques used to sustain its compatibility reveals the secrets of the success of AirAsia. Lowering the price of that product for a time in order to stimulate sales is a tactic. the potential to be, it's competitive advantage. Place There are a lot of operations that are conducted by the company as it is spread across 25 … Dess, G.G., Lumpkin, G.T., Alan, B.E. IvyPanda. 21: pp. The generic strategy that applies to AirAsia is its cost leadership. AirAsia can be possibly competing with other airplane industries if they can make efficiencies to reduce cost and make the low possible fare than other airplane industries. pp. Further expand AirAsiaX’s operations. Diversification strategy is distinct as an organization essentially moves out of its current primary activities by creating a new product for the new market. Besides being the first no-frills, low-fare airline in Asia, it was also the first airline in the region that introduced free seating policy and got rid of the need for printed tickets during the travel long before the competitors introduced the same innovations. The core business concept adopted by airasia is no frills, hassle-free, low fare and low cost. The chief executive of the airline, Fernandes, has also contributed a lot to the differentiation of the company by being open to journalists and providing instant access to all news of the company for mass media. AirAsia applies cost leadership strategy on its operations. Therefore, while focusing on providing the lowest fares, AirAsia puts much effort in sustaining its compatibility with other airlines in terms of the quality of services. IvyPanda. In this case study, AirAsia’s business plan and strategy, sustainability, cost and competitive advantage it has and its management style has been discussed in details. The airline also provides service to Abu Dhabi and London. Airasia has been expanding rapidly ever since and become the leader of low cost airline in Asia and the pioneer of low cost. 1985. Differentiation strategy involves providing a product or service unlike those by competitors. The strategy that they have formulated at the beginnings was a clever blend of proven strategies by other low cost airlines in US and Europe. "AirAsia Company." The company strived for exploring partnerships with companies operating in different regions of the world to have the opportunity to provide low prices. Besides, any strikes of employees or other problems inside the manufacturing company can also directly affect AirAsia and cause serious complications. No plagiarism, guaranteed! The analysis of the methods used by the airline helps to understand the main strengths of its strategy. The new low–cost strategy has led to an increase in frequencies and a 60% cut in headline fares on its five domestic services from Kuala Lumpur. It has hedged 100% of its fuel requirements for the next three years, achieves an aircraft turnaround time of 25 minutes, has a crew productivity level that is triple that of Malaysia Airlines and achieves an average aircraft utilization rate of 13 hours a day. Easy Payment Channel Air Asia Red Carpet Services AirAsia X PORTER'S 5 GENERIC STRATEGIES AirAsia- Type 1 Cost Leadership-Low Cost DEFENSIVE STRATGEY Retrenchment Strategy Bargaining Power of Buyers Intensive Strategy Market Penetration Market Development DIVERSIFIED STRATEGIES Differentiation strategy reduces the threat of new entrant and substitutes because it serves as a barrier to entry. Strategic Management Journal. 118-128. The company implemented no-frills, low-fare concept by offering prices that were nearly 50% lower than the prices of the competitors. While for AirAsia, price differentiation strategy is utilised whereby AirAsia is able to provide affordable price for budget flight. Differentiation strategy reduces the threat of new entrant and substitutes because it serves as a barrier to entry. 1105-1121, Eng, L.G. If the manufacturer is free to increase the prices for its products at any time, as the airline has no choice but to agree to the new price policy, as it heavily depends on the cooperation with the manufacturer. (2006) Carriers within Carriers: A Strategic Response to Low-Cost Airline Competition Transport Reviews. Airasia Generic Strategies Business Strategy Air AsiaCompany BackgroundAir Asia is one of the companies that very successful in adopting the cost leadership strategy as one of their competitive advantages. The company has a current fleet of ninety-two aircraft that include Airbus A321neo, Airbus A320neo and Airbus A320-200. By applying this strategy, carriers have lost their source of competitive advantage by narrowing the strategic cost gap. Air Asia is a low-cost air carrier providing service between its main hub in Kuala Lampur, Malaysia and destinations in East Asia. M … … The strategy of AirAsia appears to have more benefits than risks, as it gained huge revenues and worldwide recognition during the short period. However, AirAsia appears to be rather successful in dealing with the competitors, as it is recognized as one of the best companies offering low-cost flights, and its success is rather difficult to be repeated. Indonesia AirAsia offers relatively low-price tickets and it becomes interesting advertisements to promote their services so that they are easily accepted by public. (2003) Using Generic Strategies: Some Caveats Singapore Management Review. By exploring partnerships with low-cost airlines in Asia-Pacific region and Europe, the company managed to keep the prices for long flights relatively low if compared with most airlines. Around the world, it has been observed that low cost airlines pursuing a generic business design have emerged as the most successful. TABLES OF CONTENTS 1.0 Introduction 2.0 Importance of e-Commerce and m-Commerce 3.0 Corporate Appraisal 4.0 Competitive Advantages 5.0 m–Commerce 5.1 Differences of m-Commerce & e-Commerce 6.0 Recommendations 6.1 Benefit of Microsoft Vista and m-Commerce to AirAsia 6.2 Benefit of Microsoft Vista and m-Commerce to Customers 7.0 … With the growth in the LCC, it will create opportunity to others to enter the market. There were studies resulting that adapting one or more forms of generic strategy will enable organisation to outperform better (Murray, 1988). "AirAsia Company." Such innovations made the airline unique and distinguished it from the rest of local companies. Based on the above forces, three strategies are available to choose from. This has allowed AirAsia to position and be the market leader for LCC in South East Asia. The company implemented no-frills, low-fare concept by offering prices that were nearly 50% lower than the prices of the competitors. Airasia Generic Strategies Business Strategy Air AsiaCompany BackgroundAir Asia is one of the companies that very successful in adopting the cost leadership strategy as one of their competitive advantages. He was the first in Asia to use no-frills, a low-cost concept in the airline industry, and his innovation turned out to be a great success. Domestic flights are more susceptible to this risk, as customers are more likely to choose other means of transportation while traveling around the country. Let's see if we can help you! AirAsia has taken advantage from this method to reduce the cost of operations. AirAsia Company. AirAsia increases its efficiency through increased route network and its operating activities by adapting cost optimising techniques such as quick turnaround times and maximizing of flight utilisation for its aircrafts (Shari, 2003). AirAsia X is the only long–haul LCC currently flying the European–Asia Pacific corridor. The airline has established effective cooperation with numerous companies and offers numerous online booking services for hotels, hostels, car rentals, cruises and medical care. Do you have a 2:1 degree or higher? The general strategy of AirAsia is based on the no-frills, low-fare concept. Besides, it replaced its old fleet with fuel-efficient Airbus A320-200 aircraft, which also gave an opportunity to sustain cost leadership. Need a custom Case Study sample written from scratch by Cost Leadership b. Differentiation c. Cost Focus d. Differentiation Focus 4. 390-400, Graham B., Vowles T.M. One of the major pitfalls against attempting to differentiate is by trying to combine low cost and differentiation strategy by starting to add frills in its business model. Easy-to-use website and other options for buying the tickets made the process more convenient and contributed to customers’ satisfaction. Gaining 40 percent market share for a product in order to boost profits is a strategy. Bargaining power of customers has a low threat to AirAsia, as the airline provides unique cost opportunities at the market. The main risk of the company’s strategy is related to its commitment to one aircraft manufacturer. * AirAsia flies to over 60 domestic and international destinations with 50 routes, and operates over 400 flights daily from hubs located in Malaysia, Thailand and Indonesia. New York: McGraw-Hill Irwin. IvyPanda. The importance of pricing strategy is to know the strategies that are used in the market and to analyse the rivals that are present for Air Asia n the airline industry (Shaw, 2016). Short-haul flights of AirAsia are also vulnerable to the impact of rivalry with Malaysian Airlines. Only after ensuring the success of the discussed operation, AirAsia launched long-haul flights. The company includes such affiliate airlines as AirAsia India, AirAsia Japan, AirAsia X, AirAsia Zest, Indonesia AirAsia, Indonesia AirAsia X, Philippines AirAsia, Thai AirAsia, Thai AirAsia X. In the airline industry, it is difficult, if not impossible to achieve product differentiation because the services being rendered are the same. New Jersey: Pearson International Edition, Collis, D. J.,Montgomery, C. A. Air Asia is a low-cost airline headquartered in Malaysia. (assessed on December 1, 2009), Murray A.I. 18(7): pp. It contains thousands of paper examples on a wide variety of topics, all donated by helpful students. The company has always strived for implementing innovations that enable the customers to buy tickets and book seats in the most opportune way. In August 2011 AirAsia and MAS, Malaysia’s national carrier, announced a partnership called the ‘Comprehensive Collaboration Framework’, whereby a share swap deal was agreed between Tune Air, the owner of AirAsia, and Khazanah Nasional, the government backed investment arm owner of MAS. (1988) A Contingency View of Porter’s “Generic Strategies” The Academy of Management Review. AirAsia Thai – Air Asia Thai is a joint venture between Air Asia and Thailand’s Asia Aviation. Such situation enables Airbus to put pressure on the airline. Indonesia AirAsia as launched on ember 2004. ond e in the ently Indonesia has a ength of 100. e e 30 ds, es, 50 million ts and w Airbus A320s. To achieve the goal, it has some strategies such as lean cost structure, different ways of promotion, keeping safety, satisfying guests, and developing human resources (AirAsia.com, 2007, Internet). AirAsia, being a world class leading low cost airline firm has developed a wide range of strategies and plans to help its customers benefit from quality services. Murray (1988) disagrees that cost structure is vital in relation to the output performance compared to the price sensitivity. Air Asia had been established on 12 december 2001 with Dato Sri TonyFernandez as the CEO. : pp. In 2001, AirAsia was heavily in debt and was bought by Tony Fernandes for less than one dollar. If you are the copyright owner of this paper and no longer wish to have your work published on IvyPanda. To export a reference to this article please select a referencing stye below: If you are the original writer of this essay and no longer wish to have your work published on UKEssays.com then please: Our academic writing and marking services can help you! * AirAsia has flown over 55 million guests across the region and continues to spread its wings to create more extensive route network through its associate companies, Thai AirAsia and Indonesia AirAsia. The following sections describe recommended strategies, along with reasoning and expected results, for AirAsia to move forward with. 3 June. The effective strategy aimed at achieving cost leadership and differentiation has contributed to the success of AirAsia. Through this program, members are allowed to earn points for every single cents spent on their products and services. The company is considered one of the best low-cost airlines in the world, with the world’s lowest unit cost. AirAsia has become one of the most successful companies in the airline industry. 3. Airasia flies to more than 61 places with 108 routes and operates 400 flitghts daily from hubs located in Malaysia, thailand and Indonesia. Besides, the company strives for gaining the reputation of the provider of high-quality services. The threat of substitute products or services can be determined as relatively low for international flights of AirAsia. To achieve the goal, it has some strategies such as lean cost structure, different ways of promotion, keeping safety, satisfying guests, and developing human resources (AirAsia… Air Asia. Flights to South Korea are the only ones offering a refund policy. At the moment, they also collaborated with a giant American football club, Oakland Riders to create brand awareness for the local public in order for them to enter the USA market in the future. AirAsia’s success is based on the no-frills, low fare, simple and convenient option air travel. Such situation puts a threat to the company’s compatibility and can affect its leading position in the world of cost-effective air traveling. until now, it has flown over 55million customers across the region. In Kuala Lumpur. In the form of backward, forward, and horizontal integration, AirAsia managed to create its own diversification strategy to … which have helped the brand grow. Even though AirAsiaX faced already established competition when entering the long-haul market it successfully gained market share by utilizing the LCC model. 1. Adopting a suitable strategy depends on the organisation’s industry, customer characteristics and capabilities (Murray ,1988) and (Eng ,1993). Five Forces - an industry-level analysis to determine attractiveness of an industry Threat of New Entrants AirAsias low cost carrier strategy is to maintain efficiencies to sustain the lowest fares, thus being a barrier to new entrants Threat of Substitute As one of the most profitable low cost carriers, it is difficult for competitors to find enough efficiencies to become a substitute for AirAsias niche markets professional specifically for you? Air Asia’s highest fares are 20% below those offered by MAS, and these fares account for only 10% of its total seat sales. The intensity of competitive rivalry can be considered the main threat to AirAsia as the competitiveness of the airline industry is high. Such developed structure lets the company be able to operate international flights for lower prices, as the airline has its hubs in numerous countries. June 3, 2019. https://ivypanda.com/essays/airasia-company/. All work is written to order. Such approach allowed the company to cut the expenses for fuel and remain competitive. Customers have the choice of customizing services without compromising on quality and services. These are: differentiation, cost leadership, and focus. As what the slogan says now everyone can fly which actually attract thecustomers to buy the … The primary benefits include huge popularity of the airline due to its exceptional low fares. Besides, the company adjusted the services to the needs of the patients of long-haul flights by offering new services regarding the opportunity to choose between the classes of the cabin and hot meals. New entrants have small chances to put a threat to such well-recognized companies as AirAsia as existing companies have big opportunities for addressing new threats by investing their capital in the means able to retaliate against new companies. AirAsia took advantage from the existence of e-commerce which is easier technique in providing information. 9(4): pp. The strategy of gradual expansion of services let the airline achieve great sustainability in the market of international flights. The firm was re-launched as a no-frills airline in … The company stands out from the rest of Asian airlines by offering the most attractive fares. Porters 5 Generic Strategies. In the LCC segment, cost is the competitive priority and it determines market position. AirAsia is the biggest low-cost airline in Asia. The lowest possible fare that AirAsia was implementing is the best strategy that they are used to compete with their rivals in the airplane industries. In the beginning, the company focused on improving the system of providing local low-fare flights and achieved great success. Company Registration No: 4964706. Competitors tend to know how big the market is and how good the opportunity is in Asia. Economic Logic (How do returns be obtained?). While being a low-fare airline, AirAsia offers the range of services typical for integrated service providers. "AirAsia Company." The brand name is a major strength to AirAsia wherein a lot of effort is being done. Thus, it becomes a threat to Air Asia. The firm was founded in 1996 as a low cost domestic airline, and was purchased by Tony Fernandes in 2001. (2019, June 3). With the idea of low cost flight, AirAsia wins the market of both medium and low income customers. Staging and Pacing (what will the speed and sequence of moves?). 15(2) : pp. The firm was founded in 1996 as a low cost domestic airline, and was purchased by Tony Fernandes in 2001. For example, while entering the Asia-Pacific region the company explored partnerships with such low-cost airlines as Australia’s Virgin Blue, Singapore’s Tiger Airways, and Indonesia’s Lion Air. Every frill or service adds to cost and reduced the strategic cost gap, thus curbing the flexibility to offer innovative price deals. How is it similar to and different from the strategies of those carriers? * Create new segment in airline travel based on value and service. (September 26, 2006), AirAsia Taked Flights on Low Cost Carriers Business Week (Online) Available from http://www.businessweek.com/globalbiz/content/sep2006/gb20060929_437421.html (assess on December 2, 2009), Shari M. (September 1, 2003) A Discount Carrier Spread its Wings Business Week (Online), Available from: http://www.businessweek.com/magazine/content/03_35/b3847132_mz033.htm (assessed on December 2, 2009), Teece, D.J., Pisano G., Shuen, Amy (1997) Dynamic Capabilities and Strategic Management Strategic Management Journal. Customer loyalty is build by the differentiation, which could act as a defence against rivalry (Eng, 1994). Malaysia government has supported AirAsia through the opening of the LCC terminal in Kuala Lumpur International Airport, which enhanced its competitive edge by reducing costs and better logistic planning (Euromonitor International, 2009). 4th Edition. 49-61, Carpenter, M.A., Sanders W.G. The largest airline in Malaysia the business is known to be highly employee centric. With the idea of low cost flight, AirAsia wins the market of both medium and low income customers. With so many different branches, costs remain low by sharing the same ticketing system, uniforms, equipment and more. The company can be considered as an innovator in the sphere of air traveling in Asia. 43-48, Flouris T., Walker T.J., (2005) The Financial Performance of Low Cost and Full Service Airlines in Times of Crisis Canadian Journal Administrative Sciences. * Main base is located at the Low Cost Carrier Terminal (LCCT) at Kuala Lumpur International Airport (KLIA). The airline launched its sister company AirAsia X and attracted new investors to ensure the cost leadership in long-haul international flights. The airline used joint ventures to ensure the cost leadership in international short-haul flights. Under the cost leadership strategy, level of operation efficiency is vital as it assist in achieving cost advantages than the rivals by searching continuous areas for cost reduction along its value chain that leads to economies of scale (Eng, 1993). You can use them for inspiration, an insight into a particular topic, a handy source of reference, or even just as a template of a certain type of paper. Copyright © 2003 - 2021 - UKEssays is a trading name of All Answers Ltd, a company registered in England and Wales. 105-126, Porter M.E. specific markets-price sensitive customers (including first-time fliers). 22(1) : pp. The general strategy of AirAsia is based on the no-frills, low-fare concept. Registered office: Venture House, Cross Street, Arnold, Nottingham, Nottinghamshire, NG5 7PJ. Its affiliate airlines, Thai AirAsia and Indonesia AirAsia fly from Suvarnabhumi Airport, Thailand and Soekarno-Hatta International Airport, Indonesia, respectively. Meranun had bought over Air asia for RM 1.00 with a RM 40 million debt. Air Asia X – The only international AirAsia affiliate that operates long-haul routes to Europe and Australia. Air Asia had been established on 12 december 2001 with Dato Sri TonyFernandez as the CEO. The company opted for a dynamic, layered-hedge strategy to pay for fuel in advance. In order to succeed in the LCC segment, AirAsia will need to maintain its low cost elements in their business design, as it is critical to the long-term success. * Low cost short and long haul with no-frills. travel insurance) and holiday products. The company managed to economize its expenses and offer the prices that differed significantly from the prices of the competitors. Through this program, members are allowed to earn points for every single cents spent on their products and services. The analysis of Porter’s five forces can help to reveal the potential success of AirAsia in the airline industry. Your privacy is extremely important to us. Looking for a flexible role? In particular, we apply Porter's (1985 Porter, M.E. While for AirAsia, price differentiation strategy is utilised whereby AirAsia is able to provide affordable price for budget flight. Cooperation with low-cost partners let the company enter different markets without investing immense sums of money. on the value for money, striving to become a service leader instead of a price leader. AirAsia, being a world class leading low cost airline firm has developed a wide range of strategies and plans to help its customers benefit from quality services. Air Asia operates with the world’s lowest unit cost of US$0.023/ASK and a passenger breakeven load factor of 52%. The results of this study have shown that there is a positive and significant relation between differentiation strategy and promotions on competitive advantage of Indonesia AirAsia. 49(2): pp. However, Eng (1993) indicated that Porter discouraged organisations to combine the said strategies as it is inconsistent as for example differentiation is related to cost. 3. The company operates Airbus A320-200 fleets. It operates both international and domestic flights with help of its affiliated airlines AirAsia India, Philippines AirAsia, Indonesia AirAsia, Thai AirAsia and AirAsia X to deal with long-hauling routes.. Besides, the company organized the flights in such way that the planes returned to the original departing cities on the same day, which enabled the airline to avoid spending on crew accommodation and other allowances at the arriving cities. The company has also launched Citibank–AirAsia credit card, which lets the customers earn the points and enjoy discounts. The company has indicated that synergies between the internal and external factors could develop a competitive advantage. The main hub of the airline is the international airport Kuala-Lumpur. Competitive Advantage of AirAsia a. Study for free with our range of university lectures! The database is updated daily, so anyone can easily find a relevant essay example. At this stage, the airline offered full services for relatively low prices, if compared with Malaysia Airlines. The company has managed to deliver low fares by consistently keeping cost low through high efficiency in every art of the business and maintaining simplicity. Free resources to assist you with your university studies! Michael Porter, believed that the basis for this advantage falls under 3 base strategies of Cost leadership, Differentiation and Focus. The airline started providing regional short-haul flights to neighboring countries. The second component of the strategy can be identified as a gradual expansion. 3 Air Asia Current Business Strategies Air Asia wants to be the lowest short-haul airline in every market it goes in. An extended route system will most certainly be a key differentiator and to sustain its competitive advantages, resources and capabilities need to be analysed further. Of new entrant and substitutes because it serves as a government-controlled airline in every market goes. Services provided weak differentiation AirAsia fly from Suvarnabhumi Airport, Indonesia, respectively entrant substitutes! Only ones offering a refund policy the system of providing local low-fare flights and achieved success! Providing information Technologies LLC, a company registered in England and Wales instead of a price.. Distinction of being the pioneer of low cost carrier Terminal ( LCCT ) at Kuala Lumpur international Airport,,. 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