4.

0 INTERNAL ENVIRONMENT

Internal environment is the environment that impact directly to the organization. Internal
environment are needed to identify the strength and weakness of Air Asia business through
resources based view and culture.

Core competencies

Air Asia core competencies are offers low-cost and affordable airfares. Air Asia always
offers low cost price to the consumer who choose Air Asia as their transport to move. It is
suitable with the slogan which is “everyone can fly”. Air Asia also offers internet and mobile
services as mediums for check-in and booking. Nowadays, people are moving towards the new
technological environment. So, Air Asia make consumer feel easy to booking and checking the
flight schedule using mobile anytime and anywhere. Another competence is a low-cost no frills
airline, with an extensive regional network in Asia that caters people of all income.

Distinctive competency

Air Asia distinctive competence is a low cost carrier which offers five-star service where
everybody can fly.

Competitive advantage

The three factors that form the competitive advantage for Air Asia in providing the low
cost carriers are the strategic decision in using one type of aircraft, the synergy between Air Asia
management and the employees and the productive and skillful employees. The strategic of using
one type of aircraft can cut the cost down to 50 percent and also cut down the learning curve.
Besides, training time can be reduced and eventually reducing cost since Air Asia use one type
of aircraft. Second factor is the synergy between the Air Asia management and the employees.
Management of Air Asia always support and motivate employees to work and be creative. This
is because without the support from the management, employee will be less motivated in their
creation and it will affect the Air Asia’s performances. So, it is proved that synergy are important
and it hard to be imitate by other competitor. Last factor is productive and skillful of Air Asia
employees. For Air Asia, the methods, procedures and tips that have been created by the
employees have helped Air Asia to thrive on the low cost that they produced. It was the secret
that hard to imitate by other competitor such as the idea of “the one type of aircraft concept”.

Organizational Culture

Organizational culture can be defined as “ a pattern of behavior that has been developed by an
organization as it learns to cope with its problem of external adaptation and internal integration
and that has worked well enough well to be consider valid and to be taught to a new member as
the correct way to perceive, feel and think”

(textbook)

1. Strong team oriented in corporate culture

 Air Asia management always educate employees to focus on core strategy and maintain
the low cost and high productivity

2. Stability

 Air Asia increases the loyalty of the employees by giving the bonuses to all employees
who do well in their job best such as ticket free, holiday, incentives and others
 To keep the stability, Air Asia practicing ESOS (employee share ownership scheme) for
all employees

3. Air Asia provide workers

 Air Asia provides workers who are friendly working environment which are easy and
able to adapt with new environment quickly and sociable.
 Air Asia sponsoring numerous special events such as sponsors ‘Battle of the Year
Malaysia 2015’ at Queensbay Mall, Penang.
 Air Asia strive to be honest non-discriminatory, meritocratic environment

(https://prezi.com/6fcsj3y36vby/airasia-low-cost-budget-airline/)
Financial

Five-year financial reports of Air Asia Company

(RM million, unless For the year ended 31 December

otherwise stated) 2010 2011 2012 2013 2014
INCOME STATEMENT
Revenue 3,948 4,495 4,946 5,112 5,416
Net total expenses 2,881 3,332 3,919 4,194 4,562
EBIT 1,067 1,163 1,027 918 854
Share of results of jointly- - 12 (3) 14 -
controlled entities
Share of results of associates
- (6) 1 42 -
Profit before taxation 1,099 777 963 361 23
Taxation (38) (222) (173) 1 60
Net profit 1,061 555 790 362 83
BALANCE SHEET
Deposits, cash and bank 1,505 2,105 2,233 1,380 1,338
balances
Total assets 13,240 13,906 15,729 17,856 20,664
Net debt (Total debt - Total 6,352 5,676 6,177 8,790 11,390
Cash)
Shareholders' equity 3,641 4,036 4,860 5,001 4,555
CASH FLOW STATEMENTS
Cash flow from operating 1,594 1,404 1,324 961 302
activities
Cash flow from investing (1,868) (487) (1,905) (2,346) (2,154)
activities
Cash flow from financing 1,031 (300) 733 509 1,779
activities
Net Cash Flow 757 617 152 (876) (73)

(http://www.airasia.com/my/en/about-us/ir-5-year-financial-highlights.page)

Table above shows that the financial report for the Air Asia Company for five years which is
from 2010 until 2014. As we can see that, the revenue of Air Asia Company keep increasing
from year to year such as the revenue in 2010 was RM 3948 million were increased to RM 5416
million in 2014.

Value chain analysis

Value chain is a linked set of value creating activities that includes inbound logistics, operations,
outbound logistics, marketing and sales, and service. The goal is to create value that exceeds the
cost of providing the product or services, thus generating a profit margin.

Table shows that the value chain analysis of Air Asia Company using Porter’s value chain. This
value chain divided by two parts which are the primary activity (includes inbound logistics,
operation, outbound logistics, sales and marketing and services) and support activities (includes
procurement, product and technology department, human resources management and firm
infrastructure).

Primary Activity

1. Inbound logistics
  Air Asia is currently now running only one type of aircraft which is an Airbus planes.
With using this one fleet aircrafts, it can save the cost on training of engineering and
focusing on other things such as innovation and promotion.
 For In-Flight services, meals can get from the local delights and we can promote local
food to others at the same time.

2. Operation

 Turnaround time. Air Asia flight takes 25 minutes to turnaround. It means that Air Asia
use the less time on the ground and more time on the air. So, Air Asia gets the high
aircraft utilization, lower cost, greater airline and staffs productivity.

3. Outbound Logistics

 Customers can booking the ticket and check in the flight using online and mobile by
themselves. So, this make customer feel convenience and easy rather than to book ticket
from another flight service that available in Malaysia.
 Then, customer also can easily get Air Asia service in all Malaysia airport. The service is
good and the staffs are customer friendly.

4. Sales and Marketing

 For the sales and marketing, Air Asia makes a lot of advertisement through all media
such as newspaper, television, and internet. This is to ensure people are well known about
the Air Asia such as promotion, discounts, and free seats. Air Asia makes will make
promotion twice or more in a year.

5. Services

 Air Asia offer services such as travel protection, lost and found services, follow up
customer’s feedback and others.

Support Activities

1. Procurement.
  Air Asia separates their business procurement into different units for example hotel, in-
flight services, flight and merchandise but everything is connected with the goals of Air
Asia. So, each unit will focus on their own business.

2. Technology Development

 Air Asia using specific system to support the operations. For example, Air Asia use Yield
Management System (YMS) which will be used to calculate the operating cost and
expected revenues, Computer Reservation System (CRS) functioning as web base
reservation and Enterprise Resources Planning System (ERP) to speed up reporting and
data retrieval.

3. Human Resources Management

 Human Resources department will hiring the multiple skill personnel to increase the
efficiency and quality of the company. Human resources also will reduce the cost for
company such as training development and time.
 Air Asia also hires capable workers, and they assign for multi skilled person that can
maintain the company mission which is low price airline.

4. Firm Infrastructure

 Air Asia will focus on their goal which is provides the low cost carrier for the customer.
It is affordable for customer to pay.
(http://docslide.us/education/porters-five-forces-and-value-chain-model-air-asia.html)