Bargaining power of Supplier– Analysis of the bargaining power of suppliers is crucial

for any organization, as with the help of this, an organization manages the capital and
makes decisions regarding financial management (Thomas and Housden, 2017). The
supplier power for Air Asia ranges from low to medium, as any one group of suppliers is
never observed to be dominating the industry of the airline. Although the two major
suppliers of aeroplane structures are Airbus and Boeing, the suppliers of other facilities
required in an aeroplane, for hospitality services including food and merchandise, are
available in adequate amount in the market. Thus, the bargaining power of suppliers is
analyzed to be low (Man and Justine, 2005).

Bargaining power of Buyers– The buyer power for Air Asia is analyzed to be high as
with increasing options in the international market and decreasing prices of air tickets,
people of every category of society can afford flying, and hence, the bargaining power of
buyers is also high. Increasing globalization has led to an increase in the lifestyle and
financial condition of people. This increases the probability of people to avail of airline
services frequently. In accordance with the increased demands, the options available for
flying has also increased, and hence, the bargaining power for buyers is examined to be
high for Air Asia.

The Threat of Substitution– The international airline market has sufficient low-priced
airline options available for passengers to travel. This is because of increased
globalization among industries and travelling, and the tourism industry has been severely
affected by it. This has raised the threat of substitution for Air Asia, as in any case of
customer dissatisfaction or unavailability of service, it will be easy for the passengers to
shift to some other airline company. Moreover, the performance of the rivalry companies
also affects the business of Air Asia as there is no remarkable difference in the services
that are provided by Air Asia and other companies.

The Threat of New Entrants– In the business of airlines, the loyalty of the customers is
found to be weak. In the context of this fact, the loyalty of the customers of Air Asia has
been decreased because of the increasing competitors of Air Asia in the airlines, such as
Jet Star and Tiger Airways. However, there is also a barrier to the establishment of the
new entrant in the airlines, which is the high start-up cost that is required for the airline
services. In order to establish a new airlines company, high amount of capital along with
risk-bearing capabilities and monetary funds to cope up with the challenges faced while
sustaining in the airline industry are required. This reduces the chances of small or
medium enterprises to enter this industry, and hence, the threat of new entrants for Air
Asia is very low. Another reason for the threat of new entrants being low is government
laws and regulations which pose restrictions on applying for permissions and license for
operating an airline company.

Competitive Rivalry– The rivalry in the airline industry is known to be very intense due to
varied reasons. The major reason is that the number and type of competitors remain the
same for a long time, and this reduces the chance of an airline company at a lower level
coming higher in the market. Different airline brands are known for various services, for
instance, JetBlue is known for the quality of services and amenities and Air Asia is known
for its low cost. The major competitors for Air Asia as per the market analysis are Jet Star
Airways, Tiger Airways, JAL Express, and Air Arabia. Brands, such as Jet Star Airways
and Tiger Airways, are sustaining in the competition as they also provide air
transportation at cheap costs to people along with enhanced in-flight services and varied
options for passengers. This directly affects the customer strength of Air Asia, and these
companies pose a threat to the company. In the similar context, Air Arabia provides the
facility of carrying extra baggage for passengers, and this makes Air Arabia a preferred
choice over Air Asia. Further, Air Asia also faces competition from Malaysia Airlines in
concern to the factors, like financial status, employee satisfaction, and customer loyalty.