Strategic Management 1

Strategic Management

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 Strategic Management 2

Executive Summary

Air Asia Airline was synonymous with their catchphrase, "Everyone Can Fly," and it is allowing

flying probable for all segments of society, from the middle class to the upper class. It has also

been ranked the top low-cost airline globally. Air Asia should be capable of competing with

competitors via implementing some strategies to maintain its low-cost carrier status. Air Asia

Company has its own vision plus mission. This helps each employee who works at the

company to be recognized for achieving targets in line with the company's vision and

mission. Air Asia is always prepared to face any operational problems, including the current

Covid-19 pandemic, and it develops strategies and plans to address each one. Using the

organization's strategy-formulation analytical structure, I have identified the strategic tools,

which are SWOT analysis, internal and external environment of the company, and VRIO

analysis to evaluate Air Asia Company's strengths, weaknesses, opportunities, as well as threats,

so that Air Asia may detect differentiation and persistent competitive advantage.

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Contents
Executive Summary.....................................................................................................................................2
AirAsia Strategic Management....................................................................................................................5
Introduction.............................................................................................................................................5
Industry Overview...............................................................................................................................5
Company Background..........................................................................................................................5
AirAsia Strategic Thinking....................................................................................................................6
Micro- Environment Analysis..................................................................................................................7
Pestle Analysis.........................................................................................................................................7
Political environment...........................................................................................................................7
Economic environment........................................................................................................................7
Social environment..............................................................................................................................8
Technological environment.................................................................................................................8
Environmental factors.........................................................................................................................8
Legal environment...............................................................................................................................9
Porter’s five forces framework................................................................................................................9
Bargaining power of suppliers.............................................................................................................9
Bargaining power of buyers...............................................................................................................10
The threat of new entrants................................................................................................................10
Rivalry among existing firms..............................................................................................................10
Threat of substitutes..........................................................................................................................10
Strategic Capabilities.................................................................................................................................11
Vision Statement...................................................................................................................................11
Mission Statement.................................................................................................................................11
SWOT Analysis.......................................................................................................................................11
Strengths...........................................................................................................................................11
Weaknesses.......................................................................................................................................12
Opportunities....................................................................................................................................12
Threats...............................................................................................................................................12
AirAsia VRIO Analysis.............................................................................................................................13
Valuable.............................................................................................................................................13
Rare...................................................................................................................................................13
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Costly to Imitate................................................................................................................................14
Organization capability and competences to make the Most of Resources......................................14
Strategic Initiatives....................................................................................................................................15
Recommendations.................................................................................................................................15
Use of E-Commerce...........................................................................................................................15
Aggressive promotion campaign in developing markets...................................................................16
Market segment development strategy............................................................................................16
International expansion strategy.......................................................................................................16
Retrenchment strategy......................................................................................................................16
Strategy choice......................................................................................................................................17
Conclusion.................................................................................................................................................17
References.................................................................................................................................................19
 Strategic Management 5

AirAsia Strategic Management

Introduction

Industry Overview

Malaysia's airline business has a critical part in building the Malaysian economy, as well as

promoting the hospitality, tourism, as well as trade industries. Malaysia's airline sector is still in

its early stages of development (Aprilia et al., 2020, p. 436). Despite being hit by the Covid-19

pandemic, the company has made significant attempts to flourish. The Malaysian airline sector is

divided into two categories: passenger and cargo airlines. AirAsia, Malaysia Airline System

Berhad, Malindo Air, as well as Firefly are some of Malaysia's commercial airline companies

(Wu et al., 2020). Nevertheless, Malaysia's cargo airline consists of only three companies:

Transmile Air Services, MAS Cargo, as well as Athena Air Services.

Company Background

Back in the year 1900, Thai National Airlines was the only airline operating in Bangkok's major

routes to Chiang Mai, offering non-stop flights (Fickry et al 2020, p. 12). However, in the year

1993, AirAsia came into the picture to connect Asia like no other airline company. AirAsia is

centered in Malaysia as well as offers passenger transportation, as well as freight plus courier

services. At the Skytrax World Airline Awards, it was crowned the "Unsurpassed Low-Cost

Airline Company" in the industry for the ninth year in a row. Its theme, "Now Everyone Can

Fly," presented a new meaning of cheap travel. Air Asia began with only two Boeing 737-300

series planes and solely point-to-point operations (Athirah, 2015). It now links more than one

hundred and sixty-five local and international destinations across twenty-five countries. The

company is always coming up with new ways to deliver low-cost transportation. With time,
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AirAsia has been able to gain a good reputation and is one of the most preferred airline

organizations. The company contains five major operational hubs based in Indonesia, Singapore,

Malaysia, Thailand, Japan, as well as Singapore (Aprilia et al., 437). As a result, AirAsia has

been able to interfere with travel norms meant for Asian countries and is referred to as the

Pioneer of low-cost travel in Asia.

Source (https://economictimes.indiatimes.com/topic/AirAsia-Malaysia )

AirAsia Strategic Thinking

AirAsia's overall approach is focused on the no-frills, low-fare idea. In Asia, the corporation

might be considered a pioneer in the field of air travel. The organization implemented a no-frills,

low-fare approach by delivering costs that were approximately half of what competitors were

charging (Adler et al., 2017, p. 319). The company provides low-cost flights but no

complimentary entertainment or meals. Apart from being Asia's first no-frills, low-cost airline, it

was also the first within the country to implement a free seating policy as well as eliminate the

requirement for written tickets during travel, long before rivals followed suit. The organization

has always sought to incorporate innovations that allow clients to purchase tickets and reserve

seats within the most efficient manner possible (Wahlquist, 2016). The process was made more
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straightforward by the use of an easy-to-use webpage and other choices for purchasing tickets,

which contributed to client satisfaction (Wu et al., 2020). As a result, aiming for innovations in

all aspects of the airline's operations might be considered the first element of AirAsia Company's

strategy.

Micro-Environment Analysis

Pestle Analysis

Political environment

It is tough for AirAsia Company to fly outside Malaysia due to bilateral agreements. Beside,

receiving charges is also a significant influencing aspect in the pricing of low-cost flights.

Because bilateral air protection agreements tightly regulate the aviation market, the low-cost

airline business in Southeast Asia has remained underdeveloped (Yashodha et al., 2016, p.

11164). Furthermore, violence has an important effect on airline functions. Air Asia does not fly

in distant places where there is a huge danger of violence, and it functions with extensive

carefulness in regions where violence is prominent but not prevalent (Holmes, 2015).

Economic environment

Despite stiff competition that AirAsia Company is facing from Malaysian Airlines (MAS),

AirAsia's low-cost carriers, which charge lower seat tickets as well as limited in-flight services,

are gaining popularity in the society (Fickry et al., 2020, p. 13). Besides, the aviation industry

has been struck hard by the economic downturn, mostly during this Covid-19 pandemic period.

However, as this market slows, more individuals will want to take advantage of its low-cost seat

tickets (Wu et al., 2020). Another regulative aspect is the price of oil has affected the company’s
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economic environment. When the price of essential oils skyrockets, it becomes extremely tough

for the company to maintain procedure costs under control.

Social environment

AirAsia Company has succeeded to incorporate workers who comprehend numerous languages,

predominantly Asian dialects, to serve its customers through higher service in the best times

possible (Suzhen, 2020). Besides, for a long-haul flight, passengers are reluctant to onboard a no-

frills carrier (Reddy et al., 2021, p. 42). Furthermore, the rise of the aviation sector is aided by

increasingly global society, tourists, as well as a diverse spectrum of educated individuals and

this has helped the company to attract customers from different social backgrounds.

Technological environment

AirAsia Company provides an online service that incorporates air ticketing with car rental, hotel

reservations, as well as travel insurance. This has helped the company to attract more customers

who can now conduct online services at their comfort areas (Athirah, 2015). Besides, AirAsia

Company has forced internet booking facilities to make sure prices are in check. AirAsia

Company has also lately unveiled GO Holiday Break, the airline's online package through which

friends can reserve vacation packages online instantaneously. Additionally, AirAsia has

purchased an A320 to replace the Boeing 737 (Adapa & Roy, 2017. P. 67). The improved energy

consumption and increased volume of the Airbus A320 result in improved reliability and

performance.

Environmental factors
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The Severe Acute Respiratory Symptoms (SARS) outbreak has made visitors afraid to fly.

AirAsia pledges to put "Safety First," to conform to all regulatory bodies, establish and enforce

continually high standards, and safeguard its employees' safety plus friends (Wu et al., 2020).

Besides, the covid-19 pandemic outbreak has also affected the company’s operations. The no

frills services are in place to improve airport and airline cooperation, which helps to reduce

overall airport expenses. Environmental sustainability and energy efficiency are major concerns

for the airline business. Air pollution may be significantly reduced by limiting one's carbon

footprint (Alsalhi et al., 2020, p. 3152). Besides, natural calamities, such as the 2015 Nepal

earthquake and the Indonesian volcano eruption, have had a significant influence on the airline

operations.

Legal environment

Because Air Asia works in numerous regions across Asia, it must follow to the innumerable

guidelines in each region in order to ensure smooth operations. Therefore, AirAsia Company

must certify that the several employment laws in these regions are obeyed (Febrin et al., 2020, p.

178). Furthermore, staff primarily funded by airlines to function in numerous sections is

compensated following the laws of those regions.

Porter’s five forces framework

Bargaining power of suppliers

Reliant on the switching costs linked with varying airplanes, the bargaining power of the AirAsia

aircraft suppliers vary. Therefore, this indicates that the bargaining power of suppliers is surges

when buying new-fangled airplanes and reduced when acquiring second-hand airplanes (Wu et
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al., 2020). When buying new planes, suppliers have more negotiating power, whereas when

buying used jets, they have less.

Bargaining power of buyers

Purchasers in the airline industry include travelers, visiting relatives plus friends, as well as

business travelers. Besides, AirAsia’s customers are not able to organize plus coordinate, hence,

have low bargaining power (Chong, 2021). In terms of cargo transportation, bargaining power

increases concerning the increase in cargo.

The threat of new entrants

Liberalization plus deregulation trends have enabled new entrants in the airline Malaysia

business more easily notwithstanding the high expenses linked with startup plus functioning

(Murugan, 2017, p. 187). Therefore, due to an upsurge in low-budget air travel connected with

deregulation within the company, there has been an increase in entry of competitors, thus high

competition.

Rivalry among existing firms

There has been a quick arrival of low-cost transporters, although Asia and the neighbors are in a

tough competition to excel together with well-developed airlines. Besides, firms have resulted in

differentiation as well as cost leadership to survive the competition (Aprilia et al., 2020, p. 439).

Thus, competition makes contention in prevailing companies very high hence affecting AirAsia

Company.

Threat of substitutes
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The threat of alternatives for the airline sector is moderate because, aside from rail, ship, as well

as bus transit, there is no perfect replacement for freight services. Besides, this is owing to the

Asian state's geographical area in compared to the United States plus the United Kingdom, which

makes using other modes of transportation time consuming (Athirah, 2017). The threat of

substitutes for the airline industry is intermediate compared to other transportation modes, thus

indicating that substitutes for alternate methods of transport are fairly low.

Strategic Capabilities

Vision Statement

AirAsia creates value through its vision of becoming Asia's largest low-cost carrier, representing

the 3 billion individuals who are currently under resourced due to poor interconnection as well as

high fares.

Mission Statement

AirAsia's mission is to be the best place to work, where workers are treated like members of a

big family. Construct an ASEAN brand that is well-known around the world, to achieve the

lowest possible cost so everybody can fly with AirAsia and maintain the highest standard of

performance while encompassing technology to cut on costs and improve levels of service

(Fickry et al., 2020, p. 14).

SWOT Analysis

Strengths

One of the key strengths of AirAsia is that the company contains five major operational hubs

based in Indonesia, Singapore, Malaysia, Thailand, Japan, as well as Singapore. Besides, it

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operates as a low-cost airline leader in the Asian industry. Another key strength is that the

company's positioning is consistent and delivers on its promise of affordability (Rohaizad et al.,

2021, p. 13). Additionally, AirAsia Company contains an approximate of three hundred aircrafts

Weaknesses

Due to fluctuations in the price of fuel as well as service costs, it has been a major challenge for

Air Asia Company to maintain their low costs on flights. Similarly, AirAsia Company is

operating in a highly competitive industry; with companies servicing many routes not only in

Asia but also the rest of the world and this has posed a major weakness for the company to

sustain the competition mostly during this Covid-19 pandemic (Rohaizad et al, 2021, p. 14).

Additionally, AirAsia Company does not have its MRO facility.

Opportunities

One of the main opportunities existing in AirAsia Company is that the company can invest in

merging with other low-cost airlines. Similarly, the introduction of more flights for busy as well

as popular destinations across the world has opened more opportunities for AirAsia Company to

expand its operations (Adapa & Roy 2017, p. 69). Additionally, India prefers budget airlines and

hence increased traffic from India. This indicates a match in the target requirements.

Threats

Fuel prices are increasing from time to time and this has posed a major threat to AirAsia

Company. Besides, government costs plus charges that the company doesn't have a mandate over

may cause adverse losses soon (Alsalhi et al., 2020, p. 3154). Operational costs and dynamic

management in the company, it has looked challenging to control low-cost flights.

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AirAsia VRIO Analysis

Valuable

AirAsia Lcc considers the resource to be valuable. They include, marketing expertise, financial

resources, human resources, as well as operations administration. AirAsia Can the Low-Cost

Model Go Long Haul's product plus service offerings are exceedingly innovative (Wu et al.,

2020. The firm's creativity also encompasses other departments, including marketing. The

innovation helps the company's procedures in becoming more effectual. This enables the

company to attain economies of scale and minimize its operational costs (Athirah, 2015). Thus,

the company's proclivity for innovation has demonstrated to be a beneficial resource, allowing it

to efficiently traverse environmental concerns while also taking advantage of prospects

prearranged by the environment.

Rare

The question that "AirAsia Lcc" must ask whether resources that are valuable to the AirAsia Lcc

are expensive or rather to get. If they are not infrequent, both current competitors plus new

entrants will have accessibility to them plus will be allowed to penetrate the competitive

landscape (Alsalhi et al., 2020, p. 3157). AirAsia can the Low-Cost Model Go Long Haul has a

global presence as well as global expansion. Hence, the company is extremely exposed to

worldwide cultures plus numerous societal norms as well as values. As a global conglomerate

plus giant, the company has proved strong flexibility to diverse cultures by participating in

localization operations, marketing communication, plus several managerial operations (Murugan,

2017, p. 190). This localization is necessary for the airline to acquire a base in several local

markets.
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Costly to Imitate

At the moment, most industries are experiencing increasing disturbance threats. As per the data

presented in AirAsia: Flying Low Cost with High Hopes, it seems that the constructs of the

AirAsia Lcc are difficult to replicate (Alsalhi et al., 2020, p. 3160). On a wider scale,

improvisation of AirAsia Lcc products can occur in two ways: fragmentation of the company and

its products as well as competitors developing cheaper alternatives that obstruct the present

industry structure.

Organization capability and competences to make the Most of Resources

It evaluates how well a firm has been able to exploit on a valuable, scarce, plus challenging to-

replicate resource in the marketplace. AirAsia Lcc items can be examined from two angles when

it comes to manipulation level. Is the company able to completely use the resource's possibilities,

or does it still have a lot of room for development? The level of exploitation is regularly resolute

by the company’s execution team as well as operational plan (Aprilia et al., 2020, p. 440).

Hence, the degree of exploitation is an outstanding gauge for evaluating the company’s human

resource quality. Capabilities appear or widen over period as an organization acts to further its

calculated goals.

VRIO Analysis
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Strategic Initiatives

Recommendations

Use of E-Commerce

During the Covid-19 pandemic, AirAsia's present electronic online booking system may be

expanded to accommodate various payment methods such as billing as well as settlement

strategy and computerized reservation system networks after they noticed that sticking to a

direct-sales only platform was a self-destructive tactic. This may be made to make booking

easier for clients. To enhance the firm's IT abilities, AirAsia can employ an IT profession team to

supervise the e- commerce systems, enhance web design, as well as include more payment

options as needed (Wu et al., 2020). Because AirAsia functions in a fast-paced service sector, the

IT team of experts will meet regularly to evaluate the e- commerce systems, collect problems

that arise, as well as provide centralized recommendations and solutions to each challenge.
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Aggressive promotion campaign in developing markets

During this Covid-19 pandemic period, by implementing market campaigns in developing

countries, AirAsia may be able to achieve room for improvement. In contrast to developed

markets where the company has established a name for itself, the company in emerging markets

cannot rely solely on word-of-mouth marketing to establish and consolidate its presence (Reddy

et al., 2021, p. 44). This suggests that, in order for this strategy to succeed, AirAsia's marketing

budget for growth in emerging markets must be increased.

Market segment development strategy

This strategy necessitates the development of market segments for AirAsia's specific markets in

advanced economies. In this scenario, the company will invest in appropriate segment

development, including the single serve and courtesy plus flavored target markets.

International expansion strategy

Every company that wants to grow their business wants to expand internationally, particularly

during the Covid-19 period, and enter a larger market area. In the case of AirAsia, the main

motivation is the desire to gain access to a variety of larger markets. As a company that operates

under high moral and ethical standards in what they provide to their customers, the company can

let go of their fear and know that there are people out there who need such companies to seek

products and services from (Reddy et al., 2021, p. 44). In this tactic, the company must be well

prepared because each country and continent to which they intend to expand will have its own

requirements in terms of culture and practices.

Retrenchment strategy
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AirAsia Company should consider narrowing their banking product and service categories in

order to eliminate non profitable goods and services. As a result, the corporation will free up

additional funding that can be used for profitable as well as currently popular product lines (Wu

et al., 2020). AirAsia should avoid a liquidation strategy for a whole merchandise category in

this strategy because a specific product is still in high consumer demands.

Strategy choice

Based on the current state of the pandemic and a thorough examination of all the alternatives

discussed above, my preferred options for AirAsia are international expansion and expansion of

E-commerce services.

For its internationalization strategy, AirAsia Company can use a multi-domestic design in order

to develop vital ties with the local community in the production of their demands and needs. This

is due to the fact that AirAsia Company's marketing and sales strategies are unique in each

airline market in which it operates, necessitating the adoption of services and products that are in

line with the local preferences of its customers in terms of tastes and likes. As a result, in order to

fully ensure the success of AirAsia Company's international expansion strategy, the company can

take a multi-domestic approach. On the other hand, for e-commerce strategy, the company can

employ more IT experts who can operate the company’s programs which will ensure customers

are fully attended to during this Covid-19 period. Additionally, the company can create a

working website that can allow customers to make flight booking faster instead of visiting their

offices.

Conclusion
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To summarize, no matter how strong an organization is, it is difficult for them to maintain their

business because there will always be a competitor and challenges brought about by pandemics

such as Covid-19 pandemic. In some instances, the organization must assume several other

methods in order to keep its title as well as reputation. As a result, in order for AirAsia to remain

competitive in the market, the company should invest in continuous market research practices in

order to comprehend the constantly changing market conditions of each market as they differ

from one another, as well as the need to be customized to meet the needs of the local market.
 Strategic Management 19

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 Strategic Management 21

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