Strategic Management:

Airasia Strategic Management

Content
Step 1 Identify the firm’s existing vision, mission, objectives, and strategies.-------------------Page1

Step 2 Develop vision and mission statements for the organization. -----------------------------Page 5

Step 3 Identify the organization’s external opportunities and threats. ------------------------Page 5

Step 4 Construct a Construct a Competitive Profile Matrix (CPM). ---------------------------Page 6

Step 5 Construct an External Factor Evaluation (EFE) Matrix.-----------------------------------Page 8

Step 6 Identify the organization’s internal strengths weaknesses. ----------------------------Page 9

Step 7 Construct an Internal Factor Evaluation (IFE) Matrix.------------------------------------Page

11

Step 8 Prepare a Strengths-Weaknesses-Opportunities -Threats (SWOT) Matrix, Strategic

Position and Action Evaluation (SPACE) Matrix, Quantitative Strategic Planning Matrix

(QSPM)

------------------------------------------------------------------------------------------------------------------Page 12

Step 9 Company's competitive advantage-------------------------------------------------------------Page 20

Step 10 How to maintain the advantage---------------------------------------------------------------Page 21

Step 11 Recommend specific strategies-----------------------------------------------------------------Page 25

Step 12 Conclusion ----------------------------------------------------------------------------------------Page 26

Airasia

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Step 1
Company Background
AirAsia was established in 1993 and began operations on 18 November 1996. AirAsia
Berhad is a Malaysian-based low-cost airline. AirAsia is Asia's largest low-fare, no-
frills airline and a pioneer of low-cost travel in Asia.AirAsia group operates scheduled
domestic and international flights to over 400 destinations spanning 25 countries. Its
main hub is the Low-Cost Carrier Terminal (LCCT) at Kuala Lumpur International
Airport (KLIA). Its affiliate airlines Thai AirAsia, Indonesia AirAsia, AirAsia
Philippines and AirAsia Japan have hubs in Suvarnabhumi Airport, Soekarno–Hatta
International Airport, Clark International Airport and Narita International Airport
respectively.

Airasia as the second Malaysian National Airline, provides a totally different type of
service in line with the nation’s aspirations to benefit all citizens and worldwide
travelers. Such service takes the form of a no frills – low airfares flight offering, 40%-
60% lower than what is currently offered in this part of Asia. Their vision is “Now
Everyone Can Fly” and their mission is to provide ‘Affordable Airfares’ without any
compromise to Flight Safety Standards.

The story of emergence of AirAsia is similar to Ryanair, since both carriers underwent
a remarkable transformation from a money-losing regional operator to a profitable,
low cost airline.

AirAsia was initially launched in 1996 as a full-service regional airline offering

slightly cheaper fares than its main competitor, Malaysia Airlines. Before 2001,
Airasia fail to either sufficiently stimulate the market or attract enough passengers
from Malaysia Airlines to establish its own niche market. The turnaround point of
AirAsia is in 2001, while it was up to sale and bought by Tony Fernandes. Tony
Fernandes then enrolled some of the lending low-cost airline experts to restructure
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AirAsia’s business model. He invited Connor McCarthy, the former director of group
operation of Ryanair, to join the executive team.

What is mean by low cost airlines? A low cost airline generally has many features that
differentiate it from the traditional carriers. These features include ticketless travel,
online ticket sales, no international offices, no frequent flyer points, no free food and
beverages, no in flight magazines, no club lounges, use of secondary city airports. Not
all low cost airlines have these features, and not all airlines that have some these
features are low cost airlines. For example, Virgin Express is low cost airline, but still
offers complimentary coffee and in flight magazine, and they are based a Brussels
primary airport. In late 2001, AirAsia was re-launched in Malaysia as a trendy, no-
frills operation with three B737 aircraft as a low-fare, low-cost domestic airline.

Asia’s leading airline was established with the dream of making flying possible for
everyone. Since 2001, AirAsia has swiftly broken travel norms around the globe and
has risen to become the world’s best. With a route network that spans through more
than 20 countries, AirAsia continues to pave the way for low-cost aviation through
our innovative solutions, efficient processes and a passionate approach to business.
Together with our associate companies, AirAsia X, Thai AirAsia and Indonesia
AirAsia, AirAsia is set to take low-cost flying to an all new destinations.

AirAsia’s Vision:
To be established as the leading low-cost carrier in the Asian region.

AirAsia’s Mission:
1. To be the best company to work for whereby employees are treated as part of a big
family
1. Create a globally recognized ASEAN brand
2. To attain the lowest cost so that everyone can fl y with AirAsia
4. Maintain the highest quality product, embracing technology to reduce cost and
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enhance service level

AirAsia’s objective:
• Aims to carry 70 million passengers a year, within six years starting from 2014.
• Turn the low-cost carrier terminal at the KL International Airport into the regional
hub for budget travel.
• Plans to introduce more routes, add frequencies and develop the existing ones.

Existing Strategies
 Safety First: Partnering with the world’s most renowned maintenance provider
and complying with the world airlines operation

 High Aircraft Utilization: Implementing the region fastest turnaround time at only
25 minutes, assuring lower cost and higher productivity

 Low fare, no frills: Providing guest with the choice of customizing services
without compromising on quality and services

 Streamline Operation: Making sure the process are as simple as possible

 Lean Distribution System: Offering a wide and innovation range of distribution

channels to make booking and travelling easier

 Point to point Network: Applying the point to point network to keep operation
simple and lower cost

Step 2 Develop mission statement for the organization

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  Customer- Provide low cost carrier for customers
 Products/Service - High quality and safety products and services
 Markets - To be the first choice in ASEAN airlines
 Technology - Posses high technology in its operation
 Concern for survival- Low cost in its operation and maintain financial
stability
 Philosophy- All company’s activities carry out in ethically
 Self-Concept - To be leader in ASEAN airline industry
 Concern for public- Concern for public benefit and affordable to fly with
AirAsia
 Concern for employees- Give rewards to employees who did the best work
Step 3 Opportunities and Threats
Opportunities faced by AirAsia
1. Asia’s middle income growth (soc).
2. The home government support (pol).
3. Applying technology advances in airlines industry (techno) For example e-
ticketing, it is easy for people who are busy with their work and no time to
walk in to the counter for booking ticket.
4. Economic in good condition.
5. The change of lifestyle of the customer.
6. Political connection between home countries with other country.
7. Limited substitutes for airplanes (substitutes). Although there are several
substitutes (i.e. trains and ships) the geographical structure of Asia has made
air travel an efficient, viable, and convenient mode of transportation.
8. “ASEAN Open Skies” agreement. It will allow unlimited flight among
ASEAN’s regional air carriers beginning December 2008.
9. The population of Asian middle class will be reaching almost 700 million by
2010(soc). This create a large market and a hug opportunity for all low cost
airlines in this regional.
Threat

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 1. Price of oil increasing.
2. The culture of passengers is different.
3. Other government countries rejection.
4. Many budget airlines growth.
5. Certain rate like airport departure, security charges and landing chargesare
beyond the control of airlines operator (pol). This is a threat to all airlines
especially low cost airlines that tries to keep their cost as lower as possible.
6. Users perception that budget airlines may compromise safety to keep cost
low (consumer). Consumer feels not safe to use budget airlines since their
price is very low.
7. Supplier of airlines is limited (supplier). Power of supplier is high as there are
limited (availability of) supplier (only Boeing and Airbus), the switching cost
is high (i.e. airplanes and their maintenance are costly) and there are few
substitutes airplanes.
8. Technology problem (techno).For example, overload of information of
hackers, hacked the airlines website and it will give bad impact to airlines.
9. Natural disaster.For example is flood, tsunami, and earthquake at certain
place will influence the business of airlines.

Step 4 Competitive Profile Matrix (CPM)

Airasia South Asia Malaysia

Critical Success Factors Weight Rating Score Rating Score Rating Score

1 Advertising 0.03 2 0.07 3 0.10 3 0.10

2 Financial position 0.15 1 0.35 4 0.24 2 0.20

3 Global Expansion 0.05 2 0.09 1 0.10 3 0.10

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4 Product quality 0.04 2 0.15 2 0.10 3 0.15

5 Customer Service 0.13 2 0.02 1 0.08 2 0.13

6 Organization structure 0.04 2 0.09 2 0.14 2 0.11

7 Employee dedication 0.03 1 0.10 1 0.12 3 0.10

8 Management Experience 0.06 3 0.20 2 0.25 4 0.23

9 Customer Loyalty 0.08 3 0.14 1 0.28 2 0.10

10 Market Share 0.20 3 0.35 4 0.40 3 0.31

11 E-commerce 0.02 1 0.17 1 0.07 3 0.19

12 Price Competitiveness 0.27 3 0.31 3 0.37 4 0.40

Total 1.00 2.48 2.25 2.58

As the Matrix shows Airasia has the best financial position. The South Asia has the
best market share. The Malaysia has the best price competitiveness.

Step 5 External Factor Evaluation (EFE) Matrix.

No. Key External Factors Weight Rating Weighted Score
Opportunities
1 Asia’s middle income growth 0.06 2 0.12
2 The home government support 0.07 4 0.28
3 Applying technological advances in airlines 0.04 3 0.12
industry
4 Economic in good condition 0.06 2 0.12
5 The changes of lifestyle of the customer 0.05 2 0.10

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6 Political connection between home country with 0.06 3 0.18
other country
7 Limited substitutes for airplanes 0.10 3 0.30
8 “ASEAN Open Skies” agreement 0.04 3 0.12
9 The population of Asian middle class will be reach 0.04 3 0.12
almost 700 million by 2010
Threats
1 Price of oil increasing 0.04 2 0.08
2 The culture of passenger are different 0.03 1 0.03
3 Other government country rejection 0.07 3 0.21
4 Many budget airlines growth 0.04 2 0.08
5 Certain rate like airport departure, security charges 0.10 3 0.30
and landing charges are beyond the control of
airlines operators
6 Users perception that budget airlines may 0.04 2 0.08
compromise safety to keep low cost
7 Supplier of airlines is limited 0.07 3 0.21
8 Technology is limited 0.03 3 0.09
9 Natural disaster 0.06 3 0.18
Total 1.00 2.72
Step 6 The organization's internal strengths and weakness.
Strengths
1　Low cost for all passenger.It is suitable with their tagline ‘Everyone can fly’
mean to giving opportunity to all people to flight with the lowest possible
fare and making them can flight even they only have less money
2　Has many destinations (operation).Route network of AirAsia has more than
20 countries, for example United Kingdom, Iran, China, New Zealand and
France
3　AirAsia is the lowest leader in Asia (Operation). With the help of AirAsia
Academy, AirAsia has successfully created a “low cost airlines mentality”
among their workforce. The workforce is very flexible and high committed
and very critical in making AirAsia the lowest cost airlines in Asia
4　High Technologies.The excellent utilization of IT have directly contributed to
their promotional activities (email alert and desktop widget which was jointly

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 develop with Microsoft for new promotion), brand building exercise (with
over 3 million hits per month and the most widely surfed booking engine in
the world) as well keep the cost low by enabling direct purchase of ticket by
consumer thus saving on airlines agent fees
5　Get mane awards such as “World’s Best Airlines” for the second year,
6　Asia Pacific’s Best Marketing Campaign (mktg). It shows AirAsia have good
image and performance since it got so many awards
7　The customer can pay their booking ticket by credit card over phone
(operation).
8　Good marketing campaign such as making a year deal with Manchester
United, one of the English Football Club and recently had programmed at
television “Travelog Asia”. This is one of the examples of good marketing
strategy.
9　The current ratio is increase from 1.3 times to 1.47 times. It will make the
company less risk.
10　AirAsia has very strong management team with strong links with
government and airlines industry leader. This is partly contributed by the
diverse background of the executive management team that consist of
industry expert and ex-top government officials.
11　Increasing the profit 1061 million on year 2010 (fin)

Weakness
1, AirAsia receive a lot complaint from customer on their service. Examples of
complaint are around flight delays, being charged of things and not able to
change flight or get a refund if customer not make it. Good customer service
and management is critically especially when competition is getting intense.
2, The facilities at the airport (mgt). There has limited chairs at waiting area.
3, The waiting period between check in and depart is too long (sometimes it takes
around 2 hours for international departure)
4, Apply autocratic management (mgt). They only considered opinion from top

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 management to make them decision without asking from the other worker
opinion.
5, Rely on debt to much since ratio for year 2010 is 73.15%. It is more than half
its capital gets from borrower. It is risk of the company.
6,The average collection period is quite high which 76 days. It means the
companies have to wait until 76 days to collect from borrower.
7, There are no maintenance, repair and overhaul facility operation. Thus AirAsia
cannot maintain its own planes. With an increasing this is a competitive
advantage.
8,No frills operation. They only provide the transportations services. The
customer has make pre-order for their heavy meal such as nasi lemak during
their tickets. If not, they only can buy the chip and beverages.

Step 7, Construct an Internal Factor Evaluation (IFE) Matrix.

No. Key Internal Factors Weight Rating Weighted Scored

Strengths
1 Low cost for all passenger 0.13 4 0.52
2 Has many destination 0.03 3 0.09
3 AirAsia is the lowest leader in Asia 0.05 4 0.20
4 High Technologies 0.05 3 0.15
5 Get mane awards such as “World’s 0.03 2 0.06
Best Airlines” for the second year,
Asia Pacific’s Best Marketing
Campaign
6 The customer can pay their booking 0.04 3 0.12
ticket by credit card over phone
7 Good marketing campaign 0.03 4 0.12
8 The current ratio is increase from 0.04 3 0.12
1.3 times to 1.47 times

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 9 AirAsia has very strong 0.07 3 0.21
management team with strong links
with government and airlines
industry leader
10 Increasing the profit 1061 million on 0.03 3 0.09
year 2010
Weaknesses
1 AirAsia receive a lot complaint from 0.04 4 0.16
customer on their service
2 The facilities at the airport 0.06 3 0.18
3 The waiting period between check in 0.06 4 0.24
and depart is too long
4 Apply autocratic management 0.05 2 0.10
5 Rely on debt to much since ratio for 0.03 2 0.06
year 2010 is 73.15%
6 The average collection period is 0.06 2 0.12
quite high which 76 days
7 No MRO (maintenance, repair, 0.15 4 0.6
overhaul) facility
8 No frills 0.05 3 0.15
Total 1.00 2.75

Step 8 SWOT and Quantitative Strategic Planning Matrix (QSPM)

Strengths

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1. Low cost for all passengers
It is suitable with their tagline ‘Everyone can fly’
mean to giving opportunity to all people to flight
with the lowest possible fare and making them can
flight even they only have less money
2. Has many destinations
Route network of AirAsia has more than 20
countries, for example United Kingdom, Iran, China,
New Zealand and France
3. High Technologies
The excellent utilization of IT have directly
contributed to their promotional activities (email
alert and desktop widget which was jointly develop
with Microsoft for new promotion), brand building
exercise (with over 3 million hits per month and the
most widely surfed booking engine in the world) as
well keep the cost low by enabling direct purchase of
ticket by consumer thus saving on airlines agent fees
4. Good marketing campaign such as making a year
deal with Manchester United, one of the English
Football Club and recently had programmed at
television “Travelog Asia”. This is one of the
examples of good marketing strategy
5. AirAsia has very strong management team with
strong links with government and airlines industry
leaders
This is partly contributed by the diverse background
of the executive management team that consist of
industry expert and ex-top government officials

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Opportunities SO

1. Asia’s middle income growth (soc) 1. Add new facilities to attract people for using
2. Applying technology advances in airlines industry AirAsia for going to vacation (S1 & S2, O1)
(techno) For example e-ticketing, it is easy for people 2. Improve new technology for making people more
who are busy with their work and no time to walk in to convince using this airplane (S3,O2)(Market
the counter for booking ticket penetration)
3. Economic in good condition (econ) 3. Increase destination all over the world (S2, O3,
The change of lifestyle of the customer (soc) O4)
4.Political connection between home countries with 4. Improve management for increase marketing
other country (pol) strategies to attract people (S4,S5 & O5)
5.Limited substitutes for airplanes (substitutes) 5. Increase website service to make people easy to
make transaction (S3,O2)
Threats ST

1.Price of oil increasing (econ) 1. Do research and development (R&D) to find other
2. The culture of passengers is different (soc) alternative to reducing in use oil (S1,S6 & T1)
3. Certain rate like airport departure, security charges 2. Hire new stewardess for different culture to make
and landing charges are beyond the control of airlines passenger feel comfortable using this service (S2,T2)
operator (pol) 3. Deal with supplier for cheaper in maintenance cost
This is a threat to all airlines especially low cost (S1, S6 & T4) (Backward Integrations)
airlines that tries to keep their cost as lower as possible
4. Supplier of airlines is limited (supplier)
Power of supplier is high as there are limited
(availability of) supplier (only Boeing and Airbus), the
switching cost is high (i.e. airplanes and their
maintenance are costly) and there are few substitutes
airplanes
5. Natural disaster (demo)
For example is flood, tsunami, and earthquake at
certain place will influence the business of airlines

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 Weaknesses
1. AirAsia receive a lot complaint from customer on
their service. Examples of complaint are around
flight delays, being charged for a lot of things and
not able to change flight or get a refund if customer
could not make it. Good customer service and
management is critical especially when competition
is getting intense
2. The facilities at the airport. There has limited
chairs at waiting area
3. The waiting period between check in and depart is
too long (operation). It takes around 2 hours for
international departure
4. Apply autocratic management. They only
considered opinion from top management to make
the decision without asking from the other worker
opinion
5. No MRO (maintenance, repair, overhaul) facility
(operation). Thus AirAsian cannot maintain its own
planes. With an increasing fleet this is a competitive
advantage.
Opportunities WO
1. Asia’s middle income growth (soc) 1. Improve existing facilities in airport (W2,O1 &
2. Applying technology advances in airlines industry O2)
(techno) For example e-ticketing, it is easy for people 2. Target on middle – income customer by affordable
who are busy with their work and no time to walk in to price (W1, O1 & O3) (Market Penetration)
the counter for booking ticket 3. Improve management in service such as
3. Economic in good condition (econ) prediction in time (W1, O2)
4.Political connection between home countries with

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other country (pol)
5.Limited substitutes for airplanes (substitutes)

Threats WT
1. Price of oil increasing (econ) 1. Manage wisely the waiting period in order our
2. The culture of passengers is different (soc) passenger come from anywhere (W3, T3)
3.Certain rate like airport departure, security charges 2. Efficiently manage the compliant from passenger
and landing charges are beyond the control of airlines to avoid external threat (W1, T2) (Retrenchment)
operator.
This is a threat to all airlines especially low cost
airlines that tries to keep their cost as lower as possible
4. Supplier of airlines is limited. Power of supplier is
high as there are limited (availability of) supplier (only
Boeing and Airbus), the switching cost is high (i.e.
airplanes and their maintenance are costly) and there
are few substitutes airplanes.
5. Natural disaster. For example is flood, tsunami, and
earthquake at certain place will influence the business
of airlines.

QUANTITATIVE STRATEGIC PLANNING (QSPM)

Key Factors Weight Market Market

Development Penetration
OPPORTUNITIES AS TS AS TS
1 Asia’s middle income growth (So) 0.06 3 0.18 3 0.18
2 The home government support (P) 0.07 2 0.14 - -
3 Applying technological advances in airlines industry (T) 0.04 - - - -
-For example e-ticketing. It is easy for people who are
busy with their work and no time to talk in to the counter

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 for booking ticket
4 Economic in good condition (E) 0.06 3 0.18 3 0.18
5 The changes of lifestyle of the customers (So) 0.05 3 0.18 - -
6 Political connection between home country with other 0.06 - - 2 0.10
countries (P)
7 Limited substitutes for airplanes (SU) 0.10 4 0.40 - -
-Although there are several substitutes (trains and ships),
the geographical structure of Asia has made air travel an
efficient, viable, and convenient mode of transportation.
8 ‘ASEAN Open Skies’ agreement 0.04 - - - -
- It will allow unlimited flight among ASEAN’s regional
air carriers beginning December 2008
9 The population of Asian middle class will be reaching 0.04 2 0.08 4 0.16
almost 700 million by 2010. This creates a larger market
and a huge opportunity for all low cost airlines in this
region
THREATS
1 Price of oil was increasing (E) 0.04 2 0.08 1 0.08
2 The cultural of passengers are different (S) 0.03 2 0.06 - -
3 Other government countries rejection. (P) 0.07 3 0.21 - -
4 Many Budget airlines growth (C) 0.04 1 0.04 3 0.12
5 Certain rates like airport departure, security charges and 0.10 3 0.30 - -
landing charges are beyond the control of airline
operator. This is a threat to all airlines especially low cost
airlines that tries to keep their cost as low as possible
6 User’s perception that budget airlines may compromise 0.04 - - - -
safety to keep costs low (C)
7 Supplier of airplanes is limited (S) 0.07 - - - -
-Power of supplier is high as there are limited suppliers
(only Boeing and Airbus), the switching cost is high
(airplanes and maintenance are costly), and there are few
substitutes for airplanes
8 Technology problem (T) 0.03 - - - -
-overload of information or hackers hacked the airlines

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 website and it will give bad impact to airlines
9 Natural disaster – flood, tsunami and earthquake at 0.06 3 0.18 2 0.36
certain place will influence the business of airlines
TOTAL 2.03 1.18
STRENGTH
1 Low cost for all passenger 0.13 4 0.52 4 0.52
-it is suitable with their tagline ‘Everyone Can Fly’,
means to giving an opportunity to all the people to flight
with the lowest possible fare and making them can flight
even they only have less money
2 Has many destination 0.03 3 0.09 4 0.12
-Route network of AirAsia has more than 20 countries.
For example, UK, Iran, China, New Zealand and France
3 AirAsia is the low cost leader in Asia 0.05 4 0.20 - -
-With the help of AirAsia Academy, AirAsia has
successfully created a “low cost airline mentality” among
their workforce. The workforce is very flexible and high
committed and very critical in making AirAsia the lowest
cost airline in Asia.
4 High technologies 0.05 - - 3 0.15
-The excellent utilization of IT have directly contributed
to their promotional activities (email alerts and desktop
widget which was jointly developed with Microsoft for
new promotions), brand building exercise (with over 3
million hits per month and on the most widely surfed
booking engines in the world) as well keep the cost low
by enabling direct purchase of tickets by consumer thus
saving on airline agent fees
5 Get many award 0.04 2 0.08 3 0.12
-Such as the “World Best Airlines” for the second year,
Asia Pacific’s Best Marketing Campaign. It shows
AirAsia has a good image and performance since it get so

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 many awards

6 The consumer can pay their booking by credit card over 0.03 - - 2 0.06
phone
7 Good marketing campaign 0.04 2 0.08 3 0.12
-Such as making a year deal with Manchester United
8 The current ratio is increase from 1.3 times to 1.47 times 0.07 3 0.21 3 0.21
(fin)
From 1 unit or current liabilities can be covered by 1.47
unit of asset. It will make the company less risk.
9 AirAsia has a very strong management team with strong 0.03 2 0.06 2 0.06
links with governments and airline industry leaders
-This is partly contribute by the diverse background of
the executive management team that consist of industry
experts and ex-top government officials
WEAKNESSESS
1 AirAsia receives a lot complaint from customers on their 0.04 3 0.12 3 0.12
services
-Examples of complaints are around flight delay, being
charged for a lot of things and not able to change flight or
get a refund if customer service and management is
critical especially when competition is getting intense
2 The facilities at the airport 0.06 2 0.12 - -
-There are limited chairs at waiting area
3 The waiting period between check in and depart is too 0.06 3 0.18 3 0.18
long
-It takes around 2 hours for international departure
4 Apply autocratic management 0.05 - - - -
-They only considered opinion from top management to
make the decision without asking opinion from the other
workers
5 Rely on debt too much since the debt ratio for year 2010 0.03 2 0.06 2 0.06
is 73.15%. It is more than half of the capital get from
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 borrower
6 The average collection period is quite high which 76 0.06 - - - -
days. It means the company has to wait until 76 day to
collect their debt form borrower
7 No MRO (maintenance, repair, overhaul) facilities 0.15 3 0.45 - -
-Thus, AirAsia cannot maintain its own planes. With an
increasing fleet this is a competitive disadvantage
8 No frill 0.05 4 0.20 4 0.20
TOTAL 2.29 1.92

Step 9 Company's competitive advantage

Current Value
We make the low fare model possible through the implementation of the following
key strategies:
1. Safety First:
Partnering with the world’s most renowned maintenance providers and complying
with the with world airline operations.
2. High Aircraft Utilization:
Implementing the regions fastest turnaround time at only 25 minutes, assuring
lower costs and higher productivity.
3. Low Fare, No Frills:
Providing guests with the choice of customizing services without compromising
on quality and services.
4. Streamline Operations:
Making sure that processes are as simple as possible.
5. Lean Distribution System:
Offering a wide and innovative range of distribution channels to make booking
and travelling easier.
6. Point to Point Network:
Applying the point-to-point network keeps operations simple and costs low.

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Step 10 How to maintain the advantage
In order to maintain advantage, the company need doing their work with the
opportunities. Below is the opportunities faced by AirAsia of external and internal
development:

1. Opportunities faced by AirAsia in light of external development

a. Low fare of Indonesia-Malaysia trip

The fare for Jakarta-Johor Bahru trip cost Rp 100,000 (RM 88.88 one
way). And charge Rp 150,000 for a Bandung-Kuala Lumpur flight, and
Rp300,000 for a Surabaya-Kuala Lumpur trip, whereas a Jakarta-Kuala
Lumpur air ticket from Malaysia Airlines available at travel agents cost Rp
1.4 million. Meanwhile, LionAir on the same route, charged Rp 1.05
million. The cost fare provided by AirAsia help it open the Indonesia
market.

b. Low fare of Singapore-Bangkok service

AirAsia will increase its services between Singapore and Bangkok by

introducing a second daily flight to its existing schedule. This recent
development came barely a month after Thai AirAsia operations started its
first international flight to Singapore in early February this year. AirAsia is
offering its guests promotional fares to/from Singapore-Bangkok from
SGD$23.99 (THB 499) one way from the 28th March to 30th October 2004.
It is much lower than the lowest fare SGD$56 offered by full-services
carrier. This helps it open the Singapore market.

c. Political connection

AirAsia hold 49% of the Thai AirAsia with 1% being held by a Thai

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 individual. The remaining 50% is held by Shin Corp. which is owned by
the family of Thailand’s Prime Minister, Thaksin Shinawatra. Shin Corp.
has financial strength, synergy in information technology and
telecommunications, which support AirAsia internet and mobile phone
bookings. Shin corp. allows subscribers of the Shin mobile phone flagship,
advance information service, being able to reserve tickets through its
short-messaging services (SMS). AirAsiA with its politically powerful
backer may well grow up to bite. This helps it open the Thailand market.

d. Malaysian government support

The Malaysian government supported the establishment of AirAsia in

2001 to help boost the under-used Kuala Lumpur International Airport.
AirAsia’s flights from Senai are meant to develop Johor into a transport
hub to rival Singapore. AirAsia, therefore can provide an alternative route
to travel to Bangkok, by using Senal Airport in Johor Bahru, in southern
Malaysia.

2. Opportunities faced by AirAsia in light of Internal Development

a. Issue of IPO

Kamarudin Meranun, AirAsia’s Executive Director announced the

appointment of Credit Suisse First Boston (CSFB) and RHB Sakura
Merchant Bankers (RHB) as the book runners for the company’s upcoming
Initial Public Offering (IPO). The IPO strengthens AirAsia balance sheet,
further cuts its existing low costs at 2.5 US cents per ASK and accelerates
our growth plans throughout Asia. The IPO also allows AirAsia to expand
its fleets of 18 Boeing 737-300s.

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 b. Political connections

Thai AirAsia is a join venture established by AirAsia with Shin Corp. is

owned by the family of Thailand’s Prime Minister, Thaksin Shinawatra,
and about 900 million Baht will be invested in Thai AirAsia over a five-
year period. Shin Corp. oversees the finance and administration of Thai
AirAsia while AirAsia shoulders the responsibility for marketing and
operations. Shin Corp. has financial strength and support AirAsia to grow.
AirAsia with its politically powerful backer may well grow up to bite.

Marketing Development

AirAsia, Asia’s leading low cost carrier, recently partnered with Yahoo! Mobile for its
very first mobile campaign. The goal was to encourage interaction with users and
increase the overall awareness of AirAsia and its promotions throughout Asia. Aimed
at generating and maintaining top-of-mind awareness with their reach, Yahoo’s mobile
marketing and advertising solutions provided a key advantage for AirAsia. The
campaign saw tremendous success across seven target markets including Malaysia,
Singapore, Thailand, Indonesia, Philippines, Taiwan, and Hong Kong, AirAsia
became the first company on Yahoo Mobile in Malaysia and the success of the
campaign showed how mobile marketing could help brands successfully
communicate with the rapidly growing mobile consumer base.

Other factors in the Airasia work in maintain the company

1. STRATEGY
The strategy of market development and market penetration must be implemented
in the company in term of its operation. The market development strategy means
such as opening the new routes for airlines in new location to attract more
customers. The market penetration strategy is such as do mass marketing via many
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sources especially media to attract customer using airline services offered by the
company.

2. STRUCTURE
The company must be the divisional structure based on geographic area such as
Indonesia, Filipina, Thailand, and other destinations of airlines because this will
make the company more focus on its geographical area of airlines performance.

3. SYSTEM
The company must be come out with new management information system within
company for effectively disseminate any important information to staff and top
management of the company. Any complaint or problems could be managing
efficiently by doing this system.

4. STYLE
Maintaining its current style of promotion must be based on its present current
tagline “Low Cost Carrier”. For that can the company can obtain loyalty from their
customer and maintaining high revenue.

5. SHARED VALUE
Concern more towards its shareholders by increase of dividend payments to them to
get full support and loyalty towards the company. They will feel it is worth it to
invest in the company and definitely drag others investors to invest.

6. STAFF
Provide development training to all staff for always maintain its services that have
been provided to customers. Staff should always know the current development and
changes which are the company made.

7. SKILL

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 The company should look out more to employ expertise in term of develop its
operational system and also marketing strategies. This is because nowadays
customers tend to be attracted with implementation of mass marketing by using
latest technology devices.

Step 11 Recommend specific strategies

STRATEGY 1: Enter the new geographical area such as Africa, United Arab
Emirates (UAE).

1. Advantage
It will increase the number of sales of AirAsia and also makes more profit for
the company
It also can build the customer preference to use AirAsia services for reach
their destination
2. Disadvantage
 It has high risk whether the AirAsia airline will be accepted or not at the new
places
 Uncertainty of demand of consumers towards the company new location
since the other airline company offered to that location before AirAsia enter

STRATEGY 2: offer new destination that hardly to reach

1. Advantages
 Offer an additional location that hard to reach to the customer to need to go
there in fast, indirectly can increase the AirAsia profit and sales
 Increase customer loyalty towards AirAsia for providing them chance to go
hard reach location with low cost rate

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2. Disadvanteges
 AirAsia incurred higher risk in case if there has no demand towards the
service and it will affect the number of sales and profit of the company
 AirAsia has high expenses due to buy the new airplane such as Fokker, hire
additional employees to fulfill the service.

Step 12 Conclusion

In conclusion, the AirAsia Company has a good performance after it launches the new
strategy which is the cost carrier in Asia for airline industry. Nowadays AirAsia is
such a well known and establish company in airlines industry and conquer the Asia
market. Clearly state vision and mission of the company helps the company to set a
proper conduct and action to achieve the two important things.

In the two recommendation, it actually based on these two strategies which are market
development and market penetration. The recommend that AirAsia should open new
operation in the new geographical area that have never been reached before by the
AirAsia company such as the Africa and United Arab Emirates in order to enlarge its
current market share in airlines industry. By doing this hopefully can increase the
company’s revenue or sales by attracting more consumers using AirAsia services.

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