AirAsia Company strategic management: How AirAsia

can be a leader in the lowest cost carrier in the

airplane industry
August 31, 2009
1.0 Introduction
Without a strategy the organization is like a ship without rudder, going around in circles. !oel
"oss and #ichael $a%i&
'owadays, the co%petition a%ong airplane industries is (ery tough. According to )aniel *han
2000&, with +ust a,out two years to go to the turn %illenniu%, air wars o(er Asia are hotting up,
with so%e o- the world.s ,iggest airlines engaged in intense o(er Asian skies/10. 1ach 2-
Airplanes *o%pany in the world trying to conduct so%e strategies to co%pete with another
co%petitor in their industry. A lot o- airplane co%panies co%e out with di--erent strategies to
%ake their co%pany ,etter than their co%petitors. 3o co%pete with their co%petitor in the
,usiness en(iron%ent, a co%pany needs to %ake a strategy to achie(e their long ter%s o,+ecti(e
and can ,e success-ul -or doing their ,usiness.
#oreo(er, to ,e success-ul in their long ter%s o,+ecti(e and their ,usiness, co%pany need to
identi-y their strategic %anage%ent, ,ecause with good strategic %anage%ent co%pany can ,e
achie(ing their (ision and %ission to achie(e the success-ulness in their ,usiness. "egarding this
issues, the strategic %anage%ent ,eco%es i%portant due to the -ollowing reason such as
glo,alization to sur(i(al their ,usiness, and than e4co%%erce ,eco%e the critical success to the
co%pany nowadays.
3he two -ollowing reason are need to take into consideration, and than to ,e success-ul in the
co%pany %anage%ent, a co%pany needs to consider the co%pany a,ility and how to integrating
it with the as well as %ain -actor in the internal and e5ternal -actor. 3he %ain -actor in the
internal and e5ternal -actor can ,e identi-ied with 6W23 analysis. 3he internal -actor can take a
look into strength and weakness in a co%pany, and -or the e5ternal -actor, a co%pany can look at
opportunities and threats in the e5ternal en(iron%ent.
7urther%ore, according to )aniel *han 2000&, the airline industry is a uni8ue and -ascinating
industry. 9t captures the interest o- a wide audience ,ecause o- its gla%our, reach, and i%pact on
the large and growing nu%,ers o- consu%ers:tra(elers worldwide/20. ;ased on this state%ent,
airline industry ,eco%e the greatest opportunity -or AirAsia. 3he growing nu%,ers:tra(elers
worldwide can ,e the wonder-ul opportunity -or AirAsia -or running their ,usiness. 9n addition,
to captures and attract a custo%er to choose AirAsia as an airline option, AirAsia need to de(elop
and create a wonder-ul strategy and co%e out with special o--ering to their custo%er to
success-ully in their ,usiness.
2n this paper, 9 would like to identi-y and analyze the AirAsia *o%pany strategic %anage%ent<
=ow AirAsia can ,e a leader in the lowest cost carrier in the airplane industry. 9.% interested
to %ore deeply identi-y and analyze the strategic %anage%ent in AirAsia *o%pany ,ecause
AirAsia ha(e a lot o- achie(e%ent and awards since year 2001 until present and than they ha(e
the greatest strategy which is can %ake AirAsia to ,e a leader in the world.s low cost carrier in
airline industry.
And than, AirAsia is one o- the co%panies with good co%pany strategic %anage%ent and has a
success-ul story in the airplane industry in the world. AirAsia now ,eco%ing the leading low cost
carrier airline in the world and the achie(e%ent that AirAsia recei(ed to ascertain that AirAsia is
one o- the ,est airplane co%panies. 3he achie(e%ent that AirAsia recei(ed in 2009 on the last
awards and recognition is the ,est low cost airline in the world.
9n Addition, on this paper will ,e structured into -our sections. 6ection 1.0 is introduction,
6ection 2.0 co(ers a,out AirAsia *urrent issues, in this section will ,e discusses a,out why
AirAsia need to consider a strategy, and AirAsia current issues. 6ection 3.0 %ainly discusses
a,out AirAsia ,usiness strategy, this section also will ,e discusses a,out why AirAsia stressed to
,e low cost carrier in airline industry, AirAsia 6W23 strength, weakness, opportunity, and
threat& analysis, and also AirAsia ,usiness strategy to sol(e the current issues. And than, section
>.0 would ,e the last section is conclusion -or this paper.
2.0 AirAsia Current issues: how to be low cost carrier leader in airline industry
2n this section, 9 will discuss a,out the AirAsia current issues< how to ,e low cost carrier in
airline industry. 3his section in(ol(e, why AirAsia need to consider a strategic %anage%ent, and
than what is the current issues that happen in AirAsia *o%pany. 3his section will discusses the
i%portance o- de(eloped and consider strategic %anage%ent in AirAsia *o%pany, and identi-y
o- current issues in AirAsia *o%pany.
2.1 hy AirAsia need to consider a strategic management
Why a co%pany needs to consider a strategic %anage%ent nowadays? According to )aniel *han
2000&, since the 19@0s, the co%petition -or the Asian air tra(el %arket has always ,een intense.
3his ,eca%e %ore intense in the 1990s as tra--ic (olu%es were s8ueezed/30. ;ased on that
state%ent, the co%petition a%ong airplane industry will ,eco%e %ore grow, tra--ic (olu%e also
would ,e increase, and also the Asian air tra(el %arket has always ,een intense. When the
co%petition in the airplane industry ,eco%ing though, co%ple5, and rapidly change, AirAsia
co%pany as a co%pany that +oined in the airplane industry ,usiness need to thinking strategically
and also %ust preparing a good strategic %anage%ent. 3he AirAsia strategic %anage%ent needs
to e--ecti(ely and e--iciently prepare and i%ple%ent in the AirAsia co%pany %anage%ent. Why
AirAsia need to consider strategic %anage%ent? 3he -irst reason is ,ecause the airline industry is
a uni8ue and co%ple5 industry/>0. ;ased on the state%ent, the co%ple5ity and uni8ue o- the
airline industry, AirAsia need to co%e out with the greatest strategy to co%pete with their ri(al in
the sa%e industry. Without the right strategic %anage%ent, its possi,le AirAsia could not ,e a,le
,e co%pete with the co%ple5 ,usiness en(iron%ent in the airline industry.
7urther%ore, the second reason why AirAsia need to consider a strategic %anage%ent ,ecause in
a co%pany nowadays, general %anage%ent which is the process o- achie(ing organizational
goals ,y engaging in the -our %a+or -unctions o- planning, organizing, leading, and controlling
%ay not su--icient and supporti(e -or the organization succeed in the world o- co%ple5
en(iron%ents. 9t concerns a,out the process to %anage the co%pany internally ,ut do not
concentrate %ore on creating co%petiti(eness regarding en(iron%ents a--ecting the organization.
1(en co%panies adopt general %anage%ent to sustain pro-ita,ility ,y reducing the de-ects or
costs, and i%pro(ing operations process in order to increase producti(ity, they %ay not succeed
in the co%petition ,ecause they per-or% only si%ilar acti(ities ,etter than co%petitors ,ut do not
create distincti(e co%petiti(eness.
Additionally, they per-or% only operational e--ecti(eness ,ut not strategy. 2perational
e--ecti(eness and strategy are ,oth essential to superior per-or%ance ,ut they work in (ery
di--erent ways. 6trategy is a,out co%petiti(e position that the co%pany per-or%s di--erent
acti(ities -ro% ri(als or per-or%ing si%ilar acti(ities in di--erent ways. 3o learn how the
co%panies create strategies and put the% into action, the e5ecuti(es or strategists should e5a%ine
care-ully an aspect o- strategic %anage%ent.
#oreo(er, the organization or co%pany nowadays is -aced with constantly changing e5ternal
en(iron%ents and needs to ensure that its own internal resources and capa,ilities are %ore than
su--icient to %eet the needs o- the e5ternal en(iron%ent. 2rganizations or co%panies do not e5ist
si%ply to sur(i(e in the %arket place ,ut want to grow and prosper in a co%petiti(e
en(iron%ent. 9n order to %ake sense o- what is going on around the%, -ir%s %ust undertake an
analysis o- their e5ternal and internal en(iron%ent. 3o understand and how take an action a,out
e5ternal and internal en(iron%ent, a co%pany needs to support the%sel(es with a good strategic
%anage%ent.
;ecause o- this reason, AirAsia need to consider a strategic %anage%ent as the i%portant things
in their co%pany. 3he strategy that AirAsia need is not +ust how to reduce cost and %ake the
operational acti(ities running e--ecti(ely. ;ut, AirAsia needs to co%e out with the strategy that
can %ake co%petiti(e position that the co%pany per-or%s di--erent acti(ities -ro% ri(als or
per-or%ing si%ilar acti(ities in di--erent ways to achie(e their ,usiness success-ully.
9n addition, the third reason, why AirAsia co%pany needs to consider and stress to a strategic
%anage%ent? 3his is ,ecause, strategic %anage%ent ,eco%es i%portant in AirAsia due to the
-ollowing reasons. 3he -irst reason why strategic %anage%ent ,eco%es i%portant is ,ecause the
glo,alization. 3he glo,alization consideration i%pacts (irtually all4strategic decisions in a
co%pany. 3he glo,alization also -orced AirAsia *o%pany to sur(i(al -or ,usiness. 3o see and
appreciate the world -ro% the perspecti(e o- others has ,eco%e a %atter o- sur(i(al ,usiness.
3he underpinning o- strategic %anage%ent hinge upon %anagers gaining an understanding o-
co%petitors, %arkets, prices, suppliers, distri,utors, go(ern%ents, creditors, shareholders, and
custo%ers worldwide. 3he price and 8uality o- -ir%.s products and ser(ices %ust ,e co%petiti(e
on a worldwide ,asis, not +ust a local ,asis/A0. 3he glo,alization %akes a rapid change in the
,usiness en(iron%ent. 1(ery co%pany has a sa%e chance and opportunity -or doing their
,usiness. 7or those co%pany doesn.t aware and take this as i%portant consideration, they will
-ailed to co%pete with their ri(al or co%petitors in their ,usiness.
#oreo(er, the strategic %anage%ent ,eco%ing i%portant due to the -ollowing reason is ,ecause
the rapid de(elop%ent in 14*o%%erce. 'owadays, 14co%%erce is ,eco%ing a ,usiness tool. 14
co%%erce also has ,eco%e a (ital strategic %anage%ent and allows a co%pany to sell products,
ad(ertise, purchase supplies, ,ypass inter%ediaries, track in(entory, eli%inate paperwork, and
share in-or%ation. 9n total, electronic co%%erce is %ini%izing the e5pense and
cu%,erso%eness, i%pro(ed products, and higher pro-ita,ility/B0.
9n conclusion, Air Asia is need to aware and consider with the strategic %anage%ent. 3he reason
o- the airline industry is a uni8ue and co%ple5 industry, not +ust how to reduce cost and %ake the
operational acti(ities running e--ecti(ely. ;ut, AirAsia needs to co%e out with the strategy that
can %ake co%petiti(e position that the co%pany per-or%s di--erent acti(ities -ro% ri(als or
per-or%ing si%ilar acti(ities in di--erent ways to achie(e their ,usiness success-ully, and the last
one is ,ecause the e--ect o- glo,alization and 14co%%erce ,eco%ing an e--ecti(e tool in a
co%pany nowadays.
"egarding to the i%portance o- strategic %anage%ent -or AirAsia *o%pany, the ne5t part will
discusses a,out the current issues that happened in AirAsia *o%pany.
2.2 AirAsia current issues
3he leading low -are airline in the Asia C AirAsia has ,een e5panding rapidly since 2001, to
,eco%e an award winning and the largest low cost carrier in Asia. With a -leet o- @2 aircra-ts,
AirAsia -lies to o(er B1 do%estic and international destinations with 10D routes, and operates
o(er >00 -lights daily -ro% hu,s located in #alaysia, 3hailand and 9ndonesia. 3o date, AirAsia
has -lown o(er AA %illion guests across the region and continues to spread its wings to create
%ore e5tensi(e route network through its associate co%panies, 3hai AirAsia and 9ndonesia
AirAsia.
1sta,lished on 12 )ece%,er 2001, AirAsia has ,een such a ,ig pheno%enon in airline industry
especially in Asia. AirAsia with the ordinary sy%,ol ,ut with strong ,rand, now e(eryone can
-ly nowadays has ,een pheno%ena in Airlines industry. AirAsia is one o- the airline co%panies
who %ore -ocused with the strategy how to reduce ine--iciency and %ake it low possi,le -are in
the world. With the cost4e--iciency, low co%ple5ity and pro-ita,ility are always the cornerstones
o- ,uilding a strong ,usiness.
7urther%ore, according to )awna and ;laise 200A&, the %ost success-ul carriers ca%e to
do%inate their hu, %arkets allowing the% to e5ert greater control o(er pricing and capacity/@0.
;ased on this state%ent, the current issues in AirAsia *o%pany are how to achie(e to ,e a lowest
carrier in the world in Airplane industry. "egarding to this issues, )awna and ;laise said, the
%ost success-ul carrier in the airline industry allowing the% to e5ert greater control o(er pricing
and capacity.
9n addition, according to =addad 2003&, the key to their current success has ,een to cut costs to
the ,one through lower salaries and reduced o(erhead/D0. 9n airline industry nowadays, custo%er
not only looks at the ser(ice that airline co%pany o--ered to the%, ,ut the price o- the airline
ticket also can in-luencing the custo%er to use an airline co%pany. AirAsia *o%pany can
co%pete with the other co%petitor in the airline industry i- they can cut costs through lower
salaries and reduced o(erhead.
#oreo(er, according to )aniel *han 2000&, these %o(es ,ut a (ery s%all price to pay -or
continued and greater access to the world.s %ost prospecti(e air tra(el %arkets/90. 3he (ery
s%all price are o--ered to the custo%er also can gi(e ,iggest a--ect in this ,usiness. As all airlines
in low cost carrier E**& industry co%pete on costs, AirAsia needs to o--er the lowest possi,le
-are in order to win the co%petition in the current %arkets ser(ed as well as new %arkets/100.
9n conclusion, the current issues in AirAsia *o%pany are %ore -ocused in the co%petition o- the
cost a%ong an airplane industry. AirAsia as an industry co%pany which is %ore -ocusing in the
low cost carrier airplane industry need to consider to %ake the lowest possi,le cost to co%pete
with the other co%petitors in their airplane industry. 3o achie(e the lowest possi,le cost, AirAsia
*o%pany has so%e strategy to achie(e it. 2n the ne5t section, 9 would like to discuss a,out
AirAsia ,usiness strategy< how to i%ple%ent and achie(e it.
!.0 AirAsia "usiness #trategy: how to implement and achie$e it.
2n this section, 9 would like to discuss a,out AirAsia ,usiness strategy. 2n the pre(ious section,
it %ore -ocused a,out the i%portance o- strategic %anage%ent -or AirAsia *o%pany and what is
the current issue in AirAsia *o%pany that was happening. 2n this section, would ,e in(ol(ed
with the 8uestion, why AirAsia stressed to ,e low cost carrier in airline industry. And than what
is AirAsia 6W23 analysis and how AirAsia sol(es the current issues in their co%pany.
!.1 hy AirAsia stressed to be low cost carrier in airline industry
)atuk 3ony 7ernandez as *12 o- AirAsia ;erhad said his philosophy is (ery clear< ,e-ore a
,usiness can grow, it needs to ha(e its costs under control. 9t %ust ,e cost4e--icient and
pro-ita,le, and it %ust create (alue. *osts that do not add (alue %ust ,e contained, reduced and
e(en eli%inated. 9 ha(e ,een asked ,y (arious people, =ow %uch lower can your cost reduce?
Fou.re already the lowest in the worldG #y direct answer is i- we do not stri(e to ,e %ore
e--icient and choose to ,e co%placent C our days are nu%,ered. 3his is a continuous task we
ha(e to -ace head on year on yearH it is the critical ingredient to operate a success-ul ,usiness/110.
;ased on the )atuk 3ony 7ernandez said, AirAsia can ,e growing in the airline ,usiness i- they
can control their cost. 3he cost that they ha(e to running there %ust ,e e--icient and relia,le.
1(erything that can %ake ine--iciencies %ust ,e reduced and possi,ly to eli%inate. What a )atuk
3ony 7ernandez said is (ery strong opinion a,out their co%pany to running their ,usiness.
AirAsia can ,e possi,ly co%peting with another airplane industries i- they can %ake e--iciencies
to reduce cost and %ake the low possi,le -are than another airplane industries.
7urther%ore, ,ased on the en(iron%ental scanning per-or%ed, the de%and -or low cost carrier
E**& industry will keep growing rapidly. 3he E** industry attracti(eness and pro-ita,ility will
attract %any -ull ser(ices airlines to launch its (ersion adding the degree o- ri(alry in this
industry. As the i%plication, AirAsia, current %arket leader o- E** in #alaysia, 3hailand, and
9ndonesia, will -ace co%petition -ro% ,oth e5isting and new players. 9n order to sustain its
co%petiti(e ad(antage, AirAsia needs to le(erage its co%petency in creating cost ad(antages
across %ultiple (alue chains/120. ;ased on that state%ent, AirAsia need to %ake a consideration
and %ore stressed to ,e lowest cost carrier in the airline industry. 3he de%and -or lowest cost
carrier is will ,e growing rapidly, it can ,e the great opportunity -or AirAsia *o%pany to run
their ,usiness.
9n addition, AirAsia ,usiness strategy also centered on cost leadership. According to Iorter.s
generic strategies 19DA&, one o- the generic strategies is the cost leadership/130. 3he cost
leadership in AirAsia *o%pany is already appro(ing ,ecause AirAsia %ore -ocused and
concentrated in the lowest cost carrier in airplane industries. AirAsia wanted to ,e a leader in the
lowest cost -or run their ,usiness. AirAsia ,uilds and sustains its co%petiti(e ad(antage ,y
pro(iding ser(ices at a price that si%ply lower than co%petitors price. 2peration e--ecti(eness
and outstanding e--iciency are the two %ain characteristics o- low cost ,usiness including in
AirAsia.
#oreo(er, AirAsia ,elie(es in the no4-rills, hassle4-ree, low -are ,usiness concept and -eels that
keeping costs low re8uires high e--iciency in e(ery part o- the ,usiness. 1--iciency creates
sa(ings that are then passed on to guests so that a--orda,le air tra(el can ,eco%e a reality.
3hrough AirAsia philosophy o- J'ow 1(eryone *an 7ly., Air Asia has sparked a re(olution in
air tra(el with %ore and %ore people around the region choosing AirAsia as their pre-erred
choice o- transport. As Air Asia continuously stri(es to pro%ote air tra(el, AirAsia also seek to
create e5cite%ent a%ongst their guests with they range o- inno(ati(e and personalized ser(ice.
9n conclusion, with there ,elie(es to %ake a low possi,le -are -or to the custo%er, AirAsia was
,eco%ing an Airline co%pany that is chosen ,y so %any custo%ers. 3he ,est philosophy o-
AirAsia Jnow e(eryone can -ly. %eans to gi(ing an opportunity to all the people to -light with the
lowest possi,le -are and %aking the% can -light e(en they only ha(e the less %oney.
9n conclusion, the reason why AirAsia %ore stressed to ,e low cost carrier in airline industry
,ecause<
1. AirAsia ,elie(es to co%pete in the airline industry, it %ust ,e cost4e--icient and
pro-ita,le, and it %ust create (alue. *osts that do not add (alue %ust ,e contained,
reduced and e(en eli%inated.
2. )e%and -or low cost carrier E**& industry will keep growing rapidly.
3. And than the ,est philosophy o- AirAsia Jnow e(eryone can -ly. %eans to gi(ing an
opportunity to all the people to -light with the lowest possi,le -are.
3he lowest possi,le -are that AirAsia was i%ple%enting is the ,est strategy that they are used to
co%pete with their ri(als in the airplane industries. AirAsia ,elie(es with the lowest -are that
they are o--ering to the custo%er, they can attract custo%er %ore than their ri(al in the airplane
industries.
9n addition, to achie(e the lowest possi,le -are in the low cost carrier airplane industry, AirAsia
also need to %ake analysis a,out their 6W23 strength, weakness, opportunity, and threat&. 2n
the ne5t part, 9 would like to discuss a,out the AirAsia 6W23 analaysis
!.2 AirAsia #%& analysis
6trengths, Weaknesses, 2pportunities and 3hreats Analysis are one o- the i%portant things in a
co%pany. 3his 6W23 analysis is -or identi-ying the internal strength and weakness& and
e5ternal opportunities and threats& -actor -or AirAsia *o%pany to achie(e their goals and
o,+ecti(es to ,e low cost carrier co%pany in airline industry. 3o ,e success-ul in the co%pany
%anage%ent, a co%pany needs to consider the co%pany a,ility and how to integrating it with the
as well as %ain -actor in the internal and e5ternal -actor. 3he %ain -actor in the internal and
e5ternal -actor can ,e identi-ied with 6W23 analysis. 2n this section, 9 will identi-y one ,y one
the strength, weakness, opportunities and threats in AirAsia *o%pany. 3he purpose o- this
analysis are -or identi-y the internal and e5ternal -actor that AirAsia need to consider to ,e low
cost carrier in airplane industry. 3hese are the strength, weakness, opportunities, and threat in
AirAsia.
1. 6trengths
Air Asia has a (ery strong %anage%ent tea% with strong links with
go(ern%ents and airline industry leaders.
3his is partly contri,uted ,y the di(erse ,ackground o- the e5ecuti(e %anage%ent tea%s that
consists o- industry e5perts and e54top go(ern%ent o--icials. According to !ohnston 199B&,
without the protection o- national airlines ,rought a,out ,y deregulation, ,uilding alliances as
strategy ,eca%e necessary -or %any airlines to stay co%petiti(e and gain access to a glo,al
%arket too huge -or any e5isting airline to do%inate/1>0. 3he strong links with the go(ern%ent
and airline industry leaders is one o- the strength o- AirAsia *o%pany.
7or e5a%ple, 6hin *orp -or%erly owned ,y the -a%ily o- -or%er 3hai Iri%e #inister C 3haksin
6hinawatra& holds a A0K stake in 3hai AirAsia. 3his has helped AirAsia to open up and capture a
sizea,le %arket in 3hailand. And also, with their strong working relationship with Air,us, they
%anaged to get ,ig discount -or aircra-t purchase which is also %ore -uel e--icient co%pared to
;oeing @3@ planes which is ,eing used ,y %any other airlines
3he %anage%ent tea% is also (ery good in strategy -or%ulation and e5ecution.
L 3he strategy that they ha(e -or%ulated at the ,eginnings was a cle(er ,lend o- pro(en strategies
,y other low cost airlines is M6 and 1urope. 3hey are "yanair.s operational strategy no -rills,
landing in secondary airport&, 6outhwest.s people strategy e%ployee co%es -irst& and 1asy+et.s
,randing strategy linking with other ser(ice pro(iders like hotels, car rental&.
AirAsia.s ,rand na%e is well esta,lished in Asia Iaci-ic.
;esides the nor%al print %edia ad(ertising N pro%otions, AirAsia.s top %anage%ent also
capitalized on pro%otions through news ,y ,eing (ery %edia -riendly and -reely sharing the
latest in-or%ation on Air Asia as well as the airline industry. 3heir partnership with other ser(ice
pro(iders such as hotels and hostels, car rental -ir%s, hospitals %edical touris%&, *iti,ank
AirAsia *iti,ank card& has created a (ery uni8ue i%age a%ong tra(ellers. Alliance with Oalileo
O)6 Olo,al )istri,ution 6yste%& that ena,les tra(el agents -ro% around the world to check
-light details and %akes ,ookings ha(e also contri,uted to their string ,rand na%e.
Air Asia.s local presence in -ew countries such as 9ndonesia 9ndonesia AirAsia& and 3hailand
3hai AirAsia& has success-ully ele(ated the ,rand to ,eco%e a regional ,rand ,eyond +ust
#alaysia. 3he links with #anchester Mnited one o- the world.s %ost -a%ous -oot,all tea%s& and
A3N3 Willia%s 7or%ula 2ne tea% ha(e -urther ,oosted their i%age to a greater e5tend ,eyond
+ust the this region
AirAsia is the low cost leader in Asia.
With the help o- AirAsia Acade%y, AirAsia has success-ully created a low4cost airline
%entality a%ong their work-orce. 3he work-orce is (ery -le5i,le and high co%%itted and (ery
critical in %aking AirAsia the lowest cost airline in Asia.
3he e5cellent utilization o- 93
3he e5cellent utilization o- 93 ha(e directly contri,uted to their pro%otional acti(ities e%ail
alerts and desktop widget which was +ointly de(eloped with #icroso-t -or new pro%otions&,
,rand ,uilding e5ercise with o(er 3 %illion hits per %onth and on the %ost widely sur-ed
,ooking engines in the world& as well keep the cost low ,y ena,ling direct purchase o- tickets ,y
consu%er thus sa(ing on airline agent -ees
1. Weaknesses
Air Asia does not ha(e its own %aintenance, repair and o(erhaul #"2& -acility.
9t %ay ,e a good strategy when they -irst started with only #alaysia as the hu, and -ew planes to
%aintain. ;ut now, with -ew hu,s #alaysia, 3hailand and 9ndonesia& and o(er 100 planes
currently owned and a,out another 100 planes to ,e recei(ed in the ne5t -ew years, AirAsia ha(e
to ensure proper and continuous %aintenance o- the planes which will also help to keep the
o(erall costs low. 9t is a co%petiti(e disad(antage not to ha(e its own #"2 -acility
AirAsia recei(es a lot co%plaint -ro% custo%ers on their ser(ice.
15a%ples o- co%plaints are around -light delays, ,eing charged -or a lot o- things and not a,le to
change -light or get a re-und i- custo%ers could not %ake it. Oood custo%er ser(ice and
%anage%ent is critical especially when co%petition is getting intense.
1. 2pportunities
3here are 2 %a+or e(ents that are taking place now or going to take place in less than B
%onths -ro% now.
7irst, is the e(er4increasing oil price. 6econd, is the A61A' 2pen 6kies agree%ent that has
,een reached. 3he increasing oil price at the -irst glance %ay appear like a threat -or AirAsia. ;ut
,eing a low cost leader, AirAsia an upper hand ,ecause its cost will ,e still the lowest a%ong all
the regional airlines. 3hus, AirAsia has a great opportunity to capture so%e o- the e5isting
custo%ers o- -ull ser(ice and other low cost airline.s custo%ers. =owe(er, there will ,e also
so%e reduction in o(erall tra(el especially ,y casual or ,udget tra(elers.
6econd, is the A61A' 2pen 6kies allows unli%ited -lights a%ong A61A'.s regional air
carriers ,eginning )ece%,er 200D. 3his will de-initely increase the co%petition a%ong the
regional airlines. =owe(er, with the -irst %o(er ad(antage as well as its strengths in
%anage%ent, strategy -or%ulation, strategy e5ecution, strong ,rand and low4cost culture
a%ong its work-orce, this agree%ent can ,e seen as %ore o- an opportunity.
3here is also so%e opportunity to partner with other low cost airlines.
As Pirgin to tap into they e5ist strengths or co%petiti(e ad(antages such as ,rand na%e, landing
rights and landing slots ti%e to land&.
3he population o- Asian %iddle class will ,e reaching al%ost @00 %illion ,y 2010.
3his creates a larger %arket and a huge opportunity -or all low cost airlines in this region
including AirAsia.
1. 3hreats
*ertain rates like airport departure, security charges and landing charges are ,eyond the
control o- airline operators
3his is a threat to all airlines especially low cost airlines that tries to keep their cost as low as
possi,le. 7or e5a%ple, *hangi airport in 6ingapore charges 6O)21 -or e(ery person who departs
-ro% 6ingapore.
AirAsia.s pro-it %argin is a,out 30K and this has already attracted %any co%petitors.
#ost o- the -ull ser(ice airlines ha(e or planning to create a low cost su,sidiary to co%pete
directly with AirAsia. 7or e5a%ple, 6ingapore Airlines has created a low cost carrier 3iger
Airways.
Msers. perception that ,udget airlines %ay co%pro%ise sa-ety to keep costs low.
9n conclusion, the 6W23 analysis that AirAsia ha(e is on o- the %a+or co%ponent to %ake
AirAsia %ore strength in their ,usiness and can %ake they are a,le to co%pete with the sa%e
low cost carrier airline industry.
A-ter 9.% discussed a,out the 6W23 analysis, 9 would like to discuss a,out the AirAsia strategy
to sol(e the current issues< =ow AirAsia can ,e a leader in the lowest cost carrier in the airplane
industry.
!.! AirAsia business strategy to sol$e the current issues
"egarding to the airplane industries issues that is low cost carrier was ,eco%ing an i%portant
issue i- AirAsia want to co%pete with other airplane industry that is in(ol(ed with low cost
carrier ,usiness.
3he strategy that AirAsia was i%ple%enting to %ake they are ,eing a success-ul in low cost
carrier and can co%pete with other co%petitors in this -ield o- ,usiness are<
1. #a5i%ized 93 and i%ple%enting 14co%%erce in AirAsia ,usiness
'owadays, 14co%%erce is ,eco%ing a ,usiness tool. 14co%%erce also has ,eco%e a (ital
strategic %anage%ent and allows a co%pany to sell products, ad(ertise, purchase supplies,
,ypass inter%ediaries, track in(entory, eli%inate paperwork, and share in-or%ation. 9n total,
electronic co%%erce is %ini%izing the e5pense and cu%,erso%eness, i%pro(ed products, and
higher pro-ita,ility. According to this state%ent, 14co%%erce can change the way o- doing
,usiness nowadays. 14co%%erce ,eco%es a %a+or success to Airplane *o%pany to %ake
e--ecti(ely and e--iciency in their ,usiness.
AirAsia is one o- the airplane co%panies, which is i%ple%enting 14co%%erce and %a5i%ized
their in-or%ation technology usage to %ake the e--iciency and e--ecti(ely in their co%pany and
%ake possi,le low cost carrier in their ,usiness. According to Iultorak 200>&, when the ,usiness
strategy and 93 are aligned, the 93 in-rastructure can continuously sense the changing ,usiness
needs and respond ,y pro(isioning or redeploying resources to %atch the de%ands o- the
,usiness,
#oreo(er, to %a5i%ize their 93, AirAsia i%ple%ented current 93 such as yield %anage%ent
syste% F#6&, co%puter reser(ation syste% *"6&, and enterprise resource planning 1"I&
syste%. Eets we discuss the current 93 that AirAsia i%ple%ented one ,y one.
Field %anage%ent syste% as re(enue %anage%ent syste% it understands, anticipates, and reacts
to the ,eha(ior o- custo%er to %a5i%ize re(enues -or the organization. 9n this syste%, AirAsia
used it to takes into account the operating costs and aids AirAsia to opti%izes price and allocate
capacity to %a5i%ize e5pected re(enues.
3he opti%ization is done on two le(els in AirAsia<
( 6eat 1(ery seat is considered an opportunity to %a5i%ize re(enue.
6eats are a(aila,le at (arious prices in di--erent points o- ti%e. A reser(ation done at a later date
will ,e charged %ore than the one done earlier C -or the sa%e seat&
( "oute ;y ad+usting prices -or routes:destinations that ha(e a higher de%and when co%pared
to others&.
3he e--ecti(e %ethod howe(er is to co%,ine these two le(els -or all -lights, all routes so that
,oth the seat and the route are e--ecti(ely priced -or all the -lights.
As a result, ,y using this yield %anage%ent syste%, AirAsia can understands the ,eha(ior o-
their custo%er and o--ering the e--ecti(es and e--iciency strategy and also can allocate capacity to
%a5i%ize the e5pected re(enue. ;y this syste%, AirAsia can %ake e--iciency to know their
custo%er using 93 technology with lowest cost.
7urther%ore, the other syste% that AirAsia i%ple%ented is custo%er reser(ation syste% *"6&H
it is an integrated we,4,ased reser(ation and in(entory syste%. 9t includes 9nternetH call center,
airport departure control and %ore. 9t is a direct sales engine that e--ecti(ely eli%inates the
%iddle%an tra(el agents& and the sales co%%issions that need to ,e paid to the%.
;y using this syste%, AirAsia can reduce the cost and eli%inates the %iddle%an tra(el agents&
and the sales co%%ission to pay the%. A-ter that, this syste% are (ery custo%er -riendly ,ecause
the entire custo%er i- want to ,uy or %ake a reser(ation a ticket directly (ia online, and no need
to co%e to the ticket counter. 9n conclusion, ,y using this syste% e--ecti(ely, e--iciency, custo%er
satis-action, -ast and secure in ,uying a ticket already %et. 9t %eans the lowest cost can possi,ly
achie(e.
And than, the last syste% that AirAsia used in %a5i%ized 93 to %eet the lowest cost during their
,usiness acti(ities is the i%ple%entation o- enterprise resource syste% 1"I&. 7ro% the (iew o-
%anagers in a co%pany, the e%phasis is on the word planningH 1"I represents a co%prehensi(e
so-tware approach to support decisions concurrent with planning and controlling the
,usiness/1D0.
;ased on the de-inition, 1"I is the syste% that integrated co%prehensi(e so-tware to %ake the
93 syste% is %ore e--ecti(ely and e--iciently. ;y i%ple%enting this package AirAsia is looking to
success-ully %aintain process integrity, reduce -inancial %onth4end closing processing ti%es, and
speed up reporting and data retrie(al processes, #icroso-t #alaysia&/190. 9n addition, it is a
syste% -ocusing on capturing transactions in daily operations and helping AirAsia to sa(e its
operational costs as well as to increase the e--iciency and integrity in its operation #icroso-t
Iress Iass, 200A&/200
As a result, the syste% that AirAsia i%ple%ented ,y using strategy to %a5i%ized the 93 syste%
yield %anage%ent syste% F#6&, co%puter reser(ation syste% *"6&, and enterprise resource
planning 1"I& syste%& can ,e a great strategy to %ake AirAsia %ore e--ecti(e and e--iciency
and possi,ly a,le to reduce the cost and eli%inated ine--iciency in their ,usiness.
1. 2peration e--ecti(eness and outstanding e--iciency
2ne o- the AirAsia strategies to sol(e the current issues:pro,le% in the lowest carries
co%petition a%ong the E** airline industry is to %ake operation e--ecti(eness and outstanding
e--iciency. =ow AirAsia i%ple%ented this strategy to %ake operation e--ecti(eness and
outstanding e--iciency? 3o %ake this strategy success-ully i%ple%ented<
AirAsia %o(e -ro% the traditional ,usiness into %odern ,usiness ,y i%ple%enting 14
co%%erce and %a5i%ize the in-or%ation technology 93& in their ,usiness.
3he i%ple%entation o- 14co%%erce can reduce the cost o- tra(el agents, and less o- ticketing
paper cost.
AirAsia also choose the route ,y ad+usting prices -or routes:destinations that ha(e a
higher de%and when co%pared to others.
And than AirAsia also trying to reduce ,y using ,etter %aintenance %anage%ent.
According to Oloker 2002&, ,y using the ,etter %aintenance %anage%ent, AirAsia can sa(e
large proportion o- its %aintenance cost contri,utes appro5i%ately 9K to the o(erall cost o- an
airline/210.
9n conclusion, those are the Air Asia strategy to %ake 2peration e--ecti(eness and outstanding
e--iciency in their ,usiness. With this strategy, AirAsia can achie(e their goals and o,+ecti(e into
the lowest carrier airplane in the world.
1. 9%ple%ented outsourcing in their ,usiness
3o %ake the lowest carrier in airplane industry, AirAsia also -ace with challenged to %ake a
decision in ter%s o- e--iciency in their ,usiness how it will ac8uire the syste%. AirAsia ha(e two
options in this strategy< in house ,uilding or outsourcing. 9n the strategy that AirAsia used and
i%ple%ented, AirAsia %ore pre-erred to used or i%ple%ented outsource syste% in this strategy.
3he decision in outsourcing has se(eral ,ene-its such as cost, co%petency, control, and also
co%petiti(e ad(antage.
;y i%ple%ented outsourcing in their ,usiness strategy will pro(ide<
*ost ,ene-its to AirAsia ,ecause it can ,e eli%inated in %ore resource consu%ption ti%e
-inancial&.
And than -or the co%petency, AirAsia co%petency is not in 93. ;y i%ple%ented
outsourcing in the 93 -ield, AirAsia also can reduce cost in 93 syste% acti(ities which is
can %ake possi,le %ore cost in their ,usiness.
A-ter that, ,y using outsourcing, AirAsia can easily to control all the syste% that is
outsourced to another (endor or co%pany. 3he control in this strategy also gi(es ,ene-its
,ecause AirAsia -unction only to ,e a controlled a syste% that is AirAsia used.
;y using outsourcing, AirAsia also can reduce risk, and it can %ake AirAsia not spend
their -inancial to co(er the risk -actor in this strategy.
3he i%ple%entation o- outsourcing also can gi(e co%petiti(e ad(antage in AirAsia
,ecause the strategy can ,e greater rather than created ,y AirAsia itsel-.
7urther%ore, so%e o- outsourced e5a%ple that AirAsia did are in AirAsia co%puter reser(ation
syste% *"6& ,y 'a(itaire 2pen 6kies 3echnology *o%pany, and than i%ple%enting enterprise
resource planning 1"I& ,y #icroso-t *orporation, and also i%ple%enting AirAsia Q. ;y
i%ple%ented outsourcing %ore ,etter than in house operation, ,ecause it can gi(e %ore lowest
cost, reduce risk, %ore e--ecti(ely and e--iciently, and also can easily control ,y AirAsia and than
%ore -ast in AirAsia co%pany.
'.0 Conclusion
3he co%petition a%ong airplane industries is (ery tough. 1ach 2- Airplanes *o%pany in the
world trying to conduct so%e strategies to co%pete with another co%petitor in their industry. 3o
co%pete with their co%petitor in the ,usiness en(iron%ent, a co%pany needs to %ake a strategy
to achie(e their long ter%s o,+ecti(e and can ,e success-ul -or doing their ,usiness. 3he strategic
%anage%ent ,eco%es i%portant due to the -ollowing reason such as glo,alization to sur(i(al
their ,usiness, and than e4co%%erce ,eco%e the critical success to the co%pany nowadays. a
co%pany needs to consider the co%pany a,ility and how to integrating it with the as well as
%ain -actor in the internal and e5ternal -actor.
=ow AirAsia can ,e a leader in the lowest cost carrier in the airplane industry? 3o ,e a leader in
the low cost carrier, -irstly, AirAsia need to consider a,out their strategic %anage%ent. 3he
reason why need to consider strategic %anage%ent ,ecause the -irst reason is ,ecause the airline
industry is a uni8ue and co%ple5 industry. 3he second reason, the strategy that AirAsia need is
not +ust how to reduce cost and %ake the operational acti(ities running e--ecti(ely. ;ut, AirAsia
needs to co%e out with the strategy that can %ake co%petiti(e position that the co%pany
per-or%s di--erent acti(ities -ro% ri(als or per-or%ing si%ilar acti(ities in di--erent ways to
achie(e their ,usiness success-ully, the third reason ,ecause a glo,alization and i%ple%enting 14
co%%erce.
3he current issues in AirAsia *o%pany are %ore -ocused in the co%petition o- the cost a%ong
an airplane industry. AirAsia as an industry co%pany which is %ore -ocusing in the low cost
carrier airplane industry need to consider to %ake the lowest possi,le cost to co%pete with the
other co%petitors in their airplane industry.
=ow AirAsia can sol(e the current issues to ,e a low cost carrier leader in airplane industry? 3he
-irst is to identi-y and analyze the 6W23 analysis, and than to sol(e the current issues with so%e
strategies such as #a5i%ized 93 and i%ple%enting 14co%%erce in AirAsia ,usiness, 2peration
e--ecti(eness and outstanding e--iciency, and the last one is i%ple%ented outsourcing in the
AirAsia ,usiness.
Source: http://itsaboutmymot.wordpress.com/2009/08/31/the-airasia-company-strategic-
management-%E2%80%9C-how-airasia-can-be-a-leader-in-the-lowest-cost-carrier-in-the-
airplane-industry%E2%80%9D/