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Industry and Competitive Analysis Air Asia in Indonesia through the Five Forces Analysis

Air Asia is an airline which operates on the South Asian low-cost flight industry. They operate across about twenty countries. Most of them are located in South Asia but the company also flights to London or Australia for instance. Air Asia started in Malaysia but has now three hubs across three countries: Kuala-Lumpur in Malaysia, Bangkok in Thailand and Jakarta in Indonesia. We are going to focus only on the Indonesian market.


Internal Rivalry

According to the geographic and product market, Lion Air, Batavia Air, Mandala Air, Sriwijaya Indonesia and even Garuda Indonesia are Air Asia¶s competitors. They also provide cheap prices and numerous flight routes in South Asia. All these flight companies compete in price except Garuda Indonesia which has a different strategy. As consumer of Garuda, we will get a value-added. Air Asia claims that they have no Admin fees but in reality, there are many additional fees which don¶t exist in other flight companies. Which is free for some companies is not for other ones. For instance, we can speak about booking seats fees or luggage fees. This is definitely the price dimension which matters on this specific market. Thus the firms struggle on their costs. For instance Air Asia is well-known for the considerable development of its Information Technology. Thanks to the considerable use of the IT, they get low costs and are then able to offer low prices. In Asian developing countries, the middle class is growing up. This creates huge opportunities for the airlines. The companies will have to fight to get some market shares because customers are not loyal and switch easily from one company to another. y Entry

Brand awareness is quite important in this industry. To enter this industry not only is required high capital but also brand image. Most of the time consumers choose the product or service they really trust. New entrants have to create brand loyalty by making huge investments to establish their reputation. The government legislation is one of the barriers for entering airlines industry. Therefore it is very difficult getting a new flight route from the government. If Air Asia doesn¶t get any more flightroutes, it may affect their profit because they need to extend their network. Hopefully Air Asia has always been close to the governments in South Asia. For instance in Thailand, Shin Corp formerly owned by the family of former Thai Prime Minister, Thaksin Shinawatra, holds a 50% stake in Thai Air Asia. This helped Air Asia to open up and capture a sizeable market in Thailand. Government policies have limited new entrances, which is a good thing for Air Asia because they are already settled on the market.

that is to say other airlines. train or ship. he can look for indirect substitutes such as bus. That¶s why they are very sensitive to the price not matter the product or the service. y Suppliers Power In airline industry. In the airline industry. Then Air Asia uses the fuel supplier (AVTUR) from Pertamina which prices are very sensitive. First there are only two major planes suppliers which are Airbus and Boeing. But when a company already established creates its own low cost firm. If the customer is looking for transportation for a short distance. they still will make a comparison between the different airlines. repair and overhaul (MRO) facility.KAI so there is no competition. Teleconferencing and other type of business communications may also be substitutes to air travel. Some are the property of the government. If this was not a problem before when they only started in Malaysia. Moreover Air Asia. raw materials. Moreover Air Asia often gives a bad image to the costumers because of their chronic flight delays. People could choose for another company to be sure being on time. there are many companies so many choices. If he is travelling on a longer distance. we can meet two types of substitutes. the railroad industry is monopolized by PT. Moreover Air Asia ordered large amounts from Airbus in order to expand its routes to international routes. However both suppliers provide almost the same standard aircrafts. doesn¶t use catering suppliers. so that the possibility of consumers to switch is low. distribution or locations may also limit the access to the market. the power of suppliers is quite high.Key inputs as technological know-how. the key inputs are not a problem anymore. Besides it is very easy and costless for the customer to switch from one company to another one because many are offering the same service. In Indonesia. Lastly. Regarding the bus and the ship. the direct ones and the indirect ones. Then they would affect the demand for airplanes. Then he will look for substitutes. But travelling will take a longer time. Even if Air Asia always provides the lowest price to the costumer. buyers are much more informed and high-educated. He has to make a strategic choice between time and money. now with three hubs and an important fleet of aircraft it might be too expensive. On the low cost market. y Substitutes and complements Sometimes the consumer is not so much interested in the main product for some reasons. Air Asia must pay attention to this. Air Asia doesn¶t have its own maintenance. They built a strong relationship and Air Asia managed to get big discounts. he will look for a direct substitute. y Buyers Power Nowadays. not having its own MRO facility is a competitive disadvantage. Tiger Airways which has been created by Singapore Airlines is one of the most dangerous competitors of Air Asia. some are private. the main reason will be the price which he judges too expensive. It may affect the ticket price. . They only offer snacks on flight and this is not for free. as Lion Air or Mandala.