1.

0 Introduction

The purpose of this assignment is to identify the types of environment faced by an

organisation and to discuss the appropriate change approach that can be used by the
organisation, based on the framework for change developed by Burnes (2004). The company
chosen for the purpose of this assignment is Air Asia Berhad. It is an airline which was
established in 1993 and started its
operations on 18 November 1996.
On 2 December 2001, the heavily
indebted airline was purchased by
its current Group CEO Tony
Fernandezs (Figure 1) via Tune Air
Sdn Bhd for the token sum of RM
1.00. The principal activity of the
Company is providing air
transportation services. AirAsias core business activities include low-cost and affordable
airfares, in-flight services that promote Malaysian hospitality with a huge variety of the local
food and offering, internet and mobile services as mediums for check-in and booking of
tickets. Besides that, lately Air Asia also offers services such as low fare finder, customised
travel, inflight comforts, island & city transfers fly direct, Fly-Thru or self-connect insurance
destination highlights, TuneTalk sim card and airport bus ticketing. The airline also allows its
passengers to experience a new level of shopping on board by preplanning their airline
exclusive gifts and souvenirs with Air Asias catalogues. These inflight duty free catalogue
known as SkyShop offers great savings on perfumes, cosmetics, skincare, jewellery,
confectionary and many more on board Air Asia aircrafts. The development phase of Air Asia
started since it pioneered the short-haul low-cost carrier (LCC) model in ASEAN in 2001. It
has grown from a domestic airline in Malaysia to the leading low-cost airline in Asia serving
around 121 destinations from 16 hubs in Malaysia, Thailand, Indonesia and the Philippines.
Along with its affiliates in Thailand, Indonesia and Philippines, AirAsia Group is the largest
low-cost carrier in Asia in terms of fleet size and the number of passengers carried. AirAsia
has been named the Worlds Best Low Cost Airline in the annual World Airline Survey by
Skytrax for seven consecutive years from 20092015 and the Worlds Leading Low Cost
Airline at the 2014 World Travel Awards.
2.0 Identification of the types of environments and the focus of change by the
organisation.

The types of external environment that causes the airline company to be adaptive to changes
and areas that the company need to focus on changing will be discussed in this section.

Types of environment

The airline industry has contributed to the globalization of the world economy. It
connects buyers and sellers. It also transports goods across nations. It breaks the barrier of
distance and time. Like any other business, the airline industry is impacted by changes in its
external environment. In this paper well use the Political, Economic, Social, Technological,
Environmental, and Legal framework to analyse the airline industry. Well also look at how
the frameworks factors influence the airline industrys fundamentals and change
management can be applied based on Framework for Change suggested by Bernard Burnes
(2004). Like any other industries, Air Asias platform is also very sensitive to changes in the
environmental factors. However, the factors arent controlled directly by the airline
companies in the industry. Companies are forced to alter their business models, pricing,
revenue, and cost structures to suit their customers changing needs in different economic
conditions. As a result, knowledge of the trends and the economic life cycle can help predict
external opportunities. It can also predict risk factors for Air Asia in investing in the industry.
The major players in the Malaysian airline industry including Malaysian Airline (MAS),
Malindo Airlines and Firefly Airlines have contributed significantly to the growth in air
travel. The companies have added customized services and capacity expansion to cater to the
industrys demands.

Political and legal factors include government intervention on economic operations or a

particular industry. Airlines operate in a political environment thats very regulated and
restricted. Malaysian Government intervention can be necessary to protect the passengers
interests and airline operations safety measures. The regulations monitoring Malaysian Civil
Aviation sector are:-

Civil Aviation Regulations 2016

Civil Aviation (Amendment) Regulations 2016
Civil Aviation (Aerodrome Operations) Regulations 2016
Civil Aviation (Fees And Charges) Regulations 2016
The airline industry is widely impacted by regulations and restrictions related to international
trade, tax policy, and competition. Its also impacted by issues like war, terrorism, and the
outbreak of diseases such as Ebola. These issues are political. As a result, they require
government intervention.

A healthy economy acts as a catalyst for industrial growth. Economic health is also measured
by various economic indicators. Examples of economic indicators include growth in gross
domestic product (or GDP), per capital income, disposable income, industrial production,
level of business, and consumer confidence. Fluctuation in oil prices at global level is another
major factor that impacts airlines profitability. Like most industries, Malaysian airline
industry is impacted by the economic cycles peaks and troughs. The current growth in
developed economies like U.S. thats driven by the loosening monetary policy has resulted in
a rise in business confidence in Asia, industrial production, and international trade (Deimler,
2016). All of these results act as catalysts for Air Asia and the overall airline industry.

The demand for air travel in Malaysia has increased significantly over the years. This
indicates changing travel preferences among the latest generation. Demographic factors play
an important role in forecasting demand and future travel preferences. For example, the
future of Malaysias travel and tourism will be defined by the growth in the millennial
generation. This generation includes 1634 year olds. Retiring baby boomers, people who
were born between 1946 and 1964 spending on travel is expected to decrease. According to
Boston Consulting Groups (or BCG) research, the millennial generation is the future of the
travel and tourism industry. Currently, the travel industry is driven by baby boomers travel
needs. In the next five to ten years the millennial generation will enter their peak earning,
spending, and traveling years. Their spending on business travel is expected to grow by 50%
of the total by 2020. Its expected to remain strong for the next 15 years after that.

Technological advancement has been the driving factor for improving airlines operational
efficiency. Airlines have been able to reduce costs and improve operations by using advanced
aircraft engine technology, IT solutions, and mobile technology. The technology has created
better connectivity and enhanced passengers travel experience (Cederholm, 2014). The focus
of change by Air Asia must be on increasing consumer expectations, growing pressure to
reduce costs and improve operational efficiency as well as shifting the airline landscape.
People have grown accustomed to seeing significant improvements in their experiences with
things they buy. Large and small products are more reliable and more user-friendly than ever
before. Airlines need to make large and ongoing improvements to operate more efficiently.
With few exceptions, the most successful airlines are those with the strictest cost controls.
The biggest lever to reduce costs lies in fuel efficiency, as jet fuel typically accounts for 40 to
55 percent of operating expenses. The rapid growth of air travel in developing markets, such
as Latin America and especially Asia, is shifting the industrys centre of gravity. Air Asia
shoul continue to experience above-average growth rates for the industry, particularly in
emerging economies with many first-time fliers. Worth noting, however, is that Low-cos
Carrier (LCC) also increasingly faces rising customer expectations, especially in mature
markets. Air Asia should focus on the right balance between making investments to improve
the experience they offer and maintaining their cost advantage.

3.0 Description on the framework for change.

Change management has been defined as the process of continually renewing an

organizations direction, structure, and capabilities to serve the ever-changing needs of
external and internal customers. According to Burnes (2004), change is an ever-present
feature of organisational life, both at an operational and strategic level. Therefore, there
should be no doubt regarding the importance to any organisation of its ability to identify
where it needs to be in the future, and how to manage the changes required getting there.
Consequently, organisational change cannot be separated from organisational strategy, or vice
versa (Burnes, 2004; Rieley and Clarkson, 2001). The framework for change designed by
Burnes is as shown in the figure 1 below:-

Figure 1: Framework for change. (Burnes 2004)

According to Karnemelk, the framework above consists of Horizontal axis and Vertical axis
as shown. In the horizontal axis change management is more on slow change &
transformation vs rapid change & transformation. Although circumstances often change in the
blink of an eye, organizations tend to change at a slower pace. Even the most motivated
companies welcome change often encounter stumbling blocks that make transformation more
complicated than they'd originally anticipated. Whether they are looking forward to a merger,
or trying to convince employees to embrace a new procedure, immediate results are not
expected. Instead, they recognize that real change happens slow and steady. The vertical axis
highlights turbulent on environment & large-scale vs. stable environment & small-scale
changes. Against a backdrop of increasing globalisation, deregulation, the rapid pace of
technological innovation, a growing knowledge workforce, and shifting social and
demographic trends, few would dispute that the primary task for management today is the
leadership of
organisational change. All this uncertainty poses a tremendous challenge for strategy making.
Thats because traditional approaches to strategy though often seen as the answer to change
and uncertainty actually assume a relatively stable and predictable world. A stable
environment is one with little or no unexpected or sudden change. However, it is difficult to
find stable environment because of changes in technology, society and other spheres.

The four quadrants in the framework for change above could be identified and explained
individually. The combination of quadrant 1 and 2 explains situations where organizations
need to make large-scale, organization-wide changes to culture or structure. In quadrant 3 and
quadrant 4 organizations need to make relatively small-scale, localized adjustments to
attitudes and behaviours or tasks and procedures. Combination of quadrant 1 and quadrant 4
focuses on change in the human side of the organization such as cultural, attitudinal and/or
behavioural change. Combination of quadrant 2 and quadrant 3 focuses on change
management in the technical side of the organization, namely structural and procedural.

Now, let us analyse framework for change in each individual quadrants. In quadrant 1, culture
of an organization in a turbulent environment is no longer appropriate. Culture in the entire
organization needs to be change and the sudden approach with emphasis on collaboration and
political dimensions of change is most appropriate. Achieving major changes in structures
and processes at the level of the entire organization; likely to be a top-down implementation
as it concerns the entire organization is a vital factor of quadrant 2. Quadrant 3 emphasize on
changes aimed at the individual and group level to improve performance through changes on
the technical side, small-scale and little implications for attitude and behaviour, so the
approach depends on the organizational structure. The outmost significance of quadrant 4 is
small-scale initiatives with the main objective of performance improvement through
attitudinal and behavioural change at the individual and group level. Planned changes are
appropriate with regard to the matrix, it has often proven difficult to identify where the
organization falls on the continuum. However, the real issue is to identify the main focus of
the change.

According to Burnes, since the need for change often is unpredictable, it tends to be reactive,
discontinuous, ad hoc and often triggered by a situation of organisational crisis. Even though
it is difficult to identify any consensus regarding a framework for
organisational change management, there seems to be an agreement on two
important issues. Firstly, it is agreed that the pace of change has never been
greater than in the current business environment. Secondly, there is a consensus that change,
being triggered by internal or external factors, comes in all shapes, forms and sizes and,
therefore, affects all organisations in all industries.

Overall, the Framework for Change by Bernard Burnes (2004) allows approaches to change
to be matched to environmental conditions and organisational constraints are clearly
attractive. In this case, the concepts which focus on identify the range of situations which
organizations face and match these to a widely group of approaches. By controlling and
managing, the key varieties of change in the organization situations is important for the
organizations that have better choices in what to change, how to change and when to change.

4.0 Discussion on how the approaches can be matched with the types of environments of
the organisation.

The approached suggested by Burnes Framework for Change can be matched with the types
of environments faced by Air Asia in its change management. Given these circumstances, the
airline must continue to focus on top-line growth because their limited profitability depends
almost solely on revenue gains, while increasing productivity in order to shore up and
perhaps even increase margins (R. T. (2005). The way airlines react to and navigate several
trends playing out across the globe will determine carrier performance.

First of all in the case Air Asias industry, safety is the paramount of all its business activities.
In 2013 there were some 36.4 million flights and 16 fatal accidents which mark a significant
turbulent environment for the airline industry. But accidents do happen. For example, over
the last two 3 years Malaysia had some sad reminders of that reality. The two tragedies
involving Malaysia Airlines are still fresh in all of our minds. On the other note, AirAsia
Flight QZ8501 crashed into the Java Sea off Borneo shortly after take-off on 28 December
2014 with no survivors. The safety features best relates to the turbulent environment and
large scale transformation and the environmental factor involved is technological
advancement. Flying today is extremely safe. It wasnt always that way. In the early days it
was a risky business. But right from the beginning there was a transformation among
governments and industry that safety was not a competitive issue. And there has always been
great cooperation among all the industrys stakeholders in efforts to make flying ever safer
(Matai, 2011). As mentioned earlier, this change is initiated in the external environment, and
this requires Air Asia to change in order to remain effective. In the case of a Safety
Management System, its acceptance as a good global safety practices. The external
environment with respect to any firm or collection of firms in a similar industry can be
characterized by the amount of change that is occurring overtime in the environment. This
approach is known as bold stroke in the framework.

The social and demographic factor best matches with quadrant 4 where it focuses on
individual & group on their attitudes and behaviours. Planned change is the approach to be
implemented in this context. This will provide a better understanding of how social and
demographic factors influence air travel. It will also show how the factors influence Air
Asias strategies to adapt to the changing trends. For example, knowledge of different groups
travel preferences can help the company to plan its target segments. It allows them to study
which segment can bring higher returns on investment and increase profitability (Clayton,
2014). It allows them to determine and plan future service improvements and change
management strategies. Consumer disaffection is challenging for Air Asia to address because
upgrading the aircraft is an expensive way to differentiate them, and the payback could be
long in coming. Enhancing the soft product through a welcoming and seamless customer
experience across all aspects of air travel, from reservation to touchdown is cheaper, but often
more difficult to implement. Typically, such changes entail a wholesale behavioural and
cultural shift within the organization, particularly for frontline, customer-facing employee.

The economic environment best handled by quadrant 1 from the Framework to Change with
focus on the organisation, culture and emergent change. Emergent change is based on the
assumption that change is a continuous, open-ended and unpredictable process of aligning
and realigning an organisation to its changing environment (Burnes, 2009). Taking into
consideration of volatile economic condition and government regulations of Malaysia which
will continue to limit much consolidation, Air Asia should slowly change its direction and
continue to seek partnerships that can complement and even improve what they do best. In
most cases, corporate level changes to partnerships will be more targeted and synergistic.
Those alliances allow route sharing on a broad basis, but they arent tailored narrowly enough
to allow airlines to strategically fill in specific gaps. For example, according to Shankman
(2014) Qantas which was already part of the one world alliance recently forged such a
targeted partnership with Emirates. Qantas did not have the traffic to fly profitably to multiple
cities in Europe, yet that was a significant demand among its loyal customer base. Emirates,
by contrast, had sufficient demand to access a large number of destinations in Europe, but it
did not have a loyal base of local customers in Australia. The new partnership gives Qantas
access to many more destinations in Europe, and it gives Emirates access to an extremely
loyal base of customers. Hence, adapting this approach of emergent change believed to
benefit Air Asia as well.

Conclusion

Throughout this paper, we analyzed types of environment that influences Air Asia Berhads
change management and the areas that needed to be focused for change by the company. The
framework to analyse the airline industrys.environment factors are Political, Economic,
Social, Technological, Environmental, and Legal aspects. Air Asias focus on change noted to
be satisfying increasing consumer expectations, growing pressure to improve operating
efficiency and also to shift the airline landscape. In tacking the environmental factors and
focus to change, The Framework for Change by Burnes (2004) provides four quadrants which
enable the company to identify the stage of transformation, the level involved, focus on the
aspects to change and lastly appropriate approach to be implemented. Growing pressure to
improve operating efficiency closely linked to safety aspects of operations as well. Political
and legal factor combined with technological advancements are the pressuring point for Air
Asia to make viable changes here. Following the quadrant, this is a turbulent environment
and large scale transformation is needed. Air Asias option here would be to adapt a bold
stroke approach by implementing changes in Safety Management System immediately. In
bringing change to satisfy the increasing consumer expectations the environmental factor
involved would be social and demographic. As suggested by quadrant 4 of the framework, the
change management process must focus on individual & group on their attitudes and
behaviours. The approach most viable will be a planned change. It could be implemented
through a slow transformation process by collection of large data and implementation of
strategies from inside and outside of the organisation. Finally, quadrant 1 of the framework
and suggested approaches will best suit the company in adapting to economic environmental
factor. This process focuses on the overall organisational level and culture. An emergent
change approach is vital here as Air Asia should be seeking for partnership to emerging
markets with other strong airlines to better handle the environment. Route sharing and code
sharing basis could be a strategic change management process suggested under this quadrant
of The Framework for Change by Burnes (2004).
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