Introduction

AirAsia was established in 20 December 1993 with commenced operations on 18

November1996. It was founded by government owned conglomerate (DRB-Hicom) but the
airline was bought over on December 2001 by former Time Warner Executive Tony Fernandez
of Tune Air Sdn.Bhd literally for a token of RM1.00. AirAsia was suffering with an accumulated
RM40 million debt. The airline operation scale started small with only 2 planes when the current
management (Tune Air Sdn Bhd) took over in 2001 from DRB-Hicom. AirAsia primarily serves
Southeast Asia and the surrounding regions. The airline is no stranger to Malaysians as it is
known to be Asia’s largest low fare, no frills, hassle free airline that has been vastly expanding
since 2001. The airline claims “No Admin Fee” surcharge on its customers but has some fees on
certain services which are free on other airlines. AirAsia slogan is “Now Everyone Can Fly” that
sparked a revolution in air travel industry with more people opting AirAsia as their preferred
choice of airline to their designated travel destination. Tony Fernandez exposed a five-year plan
to further enhance AirAsia's presence in Asia at the end of 2006. Rapid advancement of AirAsia
has earned them a reputable image in the air travel business whereby AirAsia now flies to over
120 domestic and international destinations spanning 24 countries. AirAsia covers 108 routes
and operates over 400 flights daily. AirAsia has flown over 55 million guests across the
region and continuously create more extensive route networks.

Porter’s Five Forces Model

Porter's Five Forces is an analytical framework developed in 1979 by Michael Porter. The
framework is designed to clarify the level of competition in a given sector, the forces that affect
the industry and hence where the strong competition will be. This section therefore analyses the
competitive environment of AirAsia using the Porter’s Five Forces.

Threat of New Entrants

The threat of new entry is low to moderate in the airline industry, since setting up an airline
would require a high cost in start-up capital to set up headquarters, purchase or hiring aircraft,
appointment of pilots and staff like air stewards, aircraft maintenance team and etc., as well as
securing airport infrastructure, facilities and airline route access, which are difficult because of
high Government regulatory. This therefore reduces the threat to AirAsia.
Moreover, the fact that brand awareness is important as there is a need for a recognizable
“trustworthy” name in the airline industry, and with already established airlines like AirAsia,
MAS, Firefly and Tiger Airways could prompt potential entrants to reconsider their entry into
the highly competitive industry, which further weakens this force.
However, according to Extra (2012), although the high capital required acts as a barrier of entry,
new entrants may be able to secure second hand aircraft to establish a budget airline, or set up a
small airline that serves only one to two routes. They could also start off with few aircrafts as
AirAsia did.

Threat of Substitution
The threat of substitute in the airline industry is direct to high. Substitutes are items or
administrations which can supplant the first items or administrations and give relatively same
fulfillment to the purchasers. Despite the fact that there are transportation options for clients, for
example, prepare, transport, journey and so on., the geological structure of Asia has influenced
air to venture to every part of the reasonable, effective, and helpful method of transportation.
Additionally, ground transportation loses its allure as a substitute because of its voyage length.
Notwithstanding, the way that there are 59 aircrafts in the business that have a similar flight way
including in excess of one hundred urban areas and islands all through the South Asia, Southeast
Asia and Northeast Asia that makes it less demanding for client to search for an option, and the
choice of air voyagers to substitute Low Cost Carriers (LCCs) like AirAsia for Full Service
Carriers (FSCs) builds the danger of substitute to AirAsia.

Buyer Power
The bargaining power of buyers is high due to the intense competition in the airline industry.
Customers with high price sensitivity tend to compare the prices of the air tickets from different
flight companies, and they make their purchase decision based on the price. This is even made
easier as customers have easy access to the information about airline services such as price and
promotions on the internet, and although AirAsia strives to provide the lowest prices, customers
is still capable of making comparisons between different airlines to select the cheapest deal, thus
increasing their buyer power.
Also, AirAsia’s customers can easily switch to a competitor like MAS, Tiger Airway, Firefly and
etc. if left unsatisfied, as the switching cost - the cost of switching from one seller’s product to
another seller’s product in the airline industry is low. According to Wilkinson (2013), low
switching cost leads to a high bargaining power of buyers. Additionally, low switching cost also
leads to low brand loyalty among AirAsia's customers.

Supplier Power
The bargaining power of suppliers is relatively high. Suppliers will have a greater control and
power when there are many buyers and few dominate suppliers. In terms of aircraft supply, the
market is mainly dominated by Boeing (US) and Airbus (EU), which makes them the only two
suppliers controlling the market hence making them the price determinants and giving them a
relatively high supplier power.
Moreover, high switching costs further increases the power of suppliers. For instance, before
AirAsia switched its aircraft to using Airbus models, it uses Boeing models, and the cost of
switching between these two suppliers was high, as AirAsia had to train its employees to operate
the aircraft features (Man and Justine, 2005). Also, since Airbus uses advanced technology in
designing aircraft, AirAsia is to depend on Airbus’ engineers for maintenance, increasing the
supplier power of Airbus. Wojahn (2012) however argues that despite the high switching costs
for airlines, the power of these suppliers would decrease should airlines choose not to buy/lease
their planes from Boeing and Airbus and go on to purchase second-hand aircrafts from elsewhere
instead.
Competitive Rivalry
Contention among existing rivals in the carrier business is high as key aircraft organizations
contend nearly and firmly for worldwide piece of the overall industry. Value contention is one of
the conspicuous cases of exceptional focused competition in the carrier business since, as said
prior; clients can without much of a stretch change starting with one aircraft then onto the next
because of value issues. In this way, aircrafts confront expanding strain to embrace and execute a
minimal effort passage demonstrate for giving expanding consumer loyalty. In spite of the fact
that this may seem like leverage for AirAsia as a LCC, there are anyway a high number of
opponents who are additionally low passage aircrafts like Tiger Airways, Jet Star Airways, JAL
Express and so on and they may even contend as far as their course offering whereby AirAsia
does not fly.
Additionally, the way that there are high boundaries to exit in this industry additionally
strengthens the opposition between the carriers. When one enters the carrier business, it is once
in a while that the organization will leave the business because of staggering expense in advance
paying, staff conservation, flight scratch-off assets et cetera. IES (n.d) additionally discloses that
the boundaries to exit are high likewise on the grounds that planes are unmistakable resources
that organizations can't utilize them for whatever else other than flying and since they crumble
when not being used, organizations will keep them flying as opposed to mothball them. Besides,
Countries are enticed to endowments as opposed to give their national bearer a chance to leave
the business.
The primary activities in Porter's Value Chain of AirAsia and Tune Group’s
organisational are as follows

Inbound logistics: As inbound coordination’s includes diverse classifications in carrier industry

for instance how to plan flights, watching out for their rivals that what methodology they are
receiving how to support in market, and how to remove their cost as they oversee eco-
friendliness by buying it propel when costs are low, and how to design courses as they generally
plan short courses so their expenses are low.

Outbound logistics: As AirAsia for the most part utilizes their tasks through online as their
ticketing procedure is absolutely on the web and client can get their tickets book on the web and
they can likewise print their loading up card from their homes, AirAsia utilizes general electric
motor for their client security as clients are the fundamental inclination of the organization.

Sales and marketing: AirAsia has a solid brand name, now days showcasing significantly affect
any associations deals, so AirAsia do notice by supporting "The astonishing effortlessness", and
well known Manchester united (mu) football club, painting a portion of its flying machine with
club hues and games star, and above all CEO Fernandez himself wear AirAsia official red top
and T shirt in relatively every official capacity.

Services: Now a days holding a client is a troublesome undertaking so to conquer this AirAsia
and Tune’s group give distinctive kind of administrations to its client like if flight is postponed
by over three hours then u$ 61 e-blessing voucher is given, traveler can likewise pre-book their
checked stuff for a lower rate, and clients can likewise online book lodgings, inns, lease an auto
and therapeutic administrations.
Bolster exercises: The esteem chain investigation has some help exercises also. The help
exercises that AirAsia needs to follow with a specific end goal to keep their business spotless and
operational are;

Firm infrastructure: AirAsia has a solid firm framework they have advanced from an exemplary
lcc into an incorporated specialist organization, they are centering towards their objectives, they
are giving the least expensive passage, they are investigating new markets, and basic leadership
process is basic.

Human resource management: AirAsia enlist fit laborers, and they allocate multi-talented
individuals with the goal that they can defeat their cost in term of human asset and can keep up
their organization mission of low value carrier, and they additionally repay their workers as far
as execution.

Innovation improvement: AirAsia utilizes diverse kind of innovation to limit its cost and to make
their task simple and productive, they are utilizing yield administration framework (YMS) which
considers the working expense and expected incomes, and they additionally utilize PC
reservation framework (CRS) as it is online reservation and stock framework as it is an
immediate deal motor which disposes of the center man, and they likewise actualized
undertaking asset arranging framework (ERP) which spares the time at month end shutting, and
accelerate announcing and information recovery forms.

Ansoff Matrix

Recommendations from the Ansoff matrix

Market penetration

An organization's current items are showcased to its current clients to pick up piece of the overall
industry with a specific end goal to expand income through advancing the item, repositioning the
brand et cetera. AirAsia and Tune’s group has just been doing market entrance as its ease
procedure is intensely advanced and the organization is dependably in the feature over a few or
the other issue identified with its technique. In any case, its market infiltration has 2
requirements to be specific striking back from contenders and legitimate limitations.
Market Development

This offers existing items to new markets meaning AirAsia and Tune’s group is extending its
short-pull and whole deal courses in more districts in Asia, which again the organization has just
been doing market advancement as it is reliably endeavoring to open new courses in various
nations.

Product Development

Here new or altered items are conveyed to existing clients, supplanting old items with new ones.
This is a high hazard action as a result of new vital abilities as it acing new innovations and there
is even task administration chance. AirAsia and Tune’s group is ceaselessly attempting to
enhance and extend its market under its present system.

Diversification

This is the most elevated hazard technique as the organization showcases new items to new
clients consequently leaving from its current markets and items, which isn't fitting for the
organization. It appears as though AirAsia and Tune’s group has effectively pulled in and
entered the business sectors by offering its items at most moderate and sensible value, the item
being the in-flight administrations and low-toll plans and advancements. As it is the main bearer
crosswise over ASEAN with dissimilarity of representatives and culture, hence giving it
additionally justification for extension.

Conclusion

There are two methodologies that AirAsia and Tune’s group can actualize with a specific end
goal to expand advertise power and increment benefit. In view of the circumstances broke down,
AirAsia and Tune’s group could additionally enhance its IT offices like web based booking
administration or enhance its administration framework and so on., since greater part of AirAsia
and Tune’s group deals depends on online ticket deals. Additionally, by pouring exertion on
additionally enhancing its administration framework will empower AirAsia and Tune’s group to
identify its qualities and shortcomings and this enhancing it by applying successful systems like
cost-authority technique and procurement methodology. This will empower Air-Asia to stay
aggressive in Asia's aircraft industry. In conclusion, obtaining methodology is likewise vital for
AirAsia and Tune’s group as this specific technique can catch the market out of Southeast Asia.