Question 2: By using Air Asia as an example, Explain the Porter’s Generic Strategy (15

Marks)

Michael Porter proposed three generic strategies for approaching a product market which
are cost leadership, differentiation and focus strategy. According to Porter, any of these
strategies can give a company a competitive advantage in a given market. It's important to
remember that no single firm can implement every strategy. However, if a company is
capable and follows through on a strategy, it can gain a competitive advantage in the
market. As it is known that the consideration of this model is not achievable since analysing
the comparative benefit and industry trends is not a straightforward task. The value chain
analysis is also included at the other end of the analysis. However, corporations would
choose one of three generic strategies in this examination.

First and foremost is cost leadership is when a company thrives because of its cost
advantage, which can be derived from a variety of factors such as scale economies,
preferential supplies, cheap overheads, and so on. This distinctiveness is unavailable to
other players. For instance, Air Asia Berhad is well known for the largest airline in Malaysia
with lowest cost that offers world class service. This strengthen the position of Air Asia
Berhad as best low-cost airline when the airline, from 2009 to 2019 was named Skytrax
World's Best Low-Cost Airline 11 times, and World Travel Awards World's Leading Low-Cost
Airline for eight years, from 2013 to 2020. This speciality of Air Asia has is the most
important factor that makes Air Asia successful until today. Air Asia’s low-cost fare makes
the firm outstanding from its competitor that boost the firm’s profitability and value in the
market (Detzen, Kahn, Likitapiwat, & Rubin, 2012).

Differentiation is a form of strategic plan in which a company tries to set itself apart from its
competitors' products or services in order to be unique. To make a product stand out, a
company can use creative advertising, unique brand functionalities, improved quality,
improved performance, exceptional service, or new technology. If customers are loyal to a
company's brand, a distinguishing strategy can help reduce competition. As a result,
companies with a diversification strategy rely heavily on customer loyalty. Companies that
use this strategy typically price their products better than competitors due to their
distinctiveness. For example, the success of AirAsia is due to the company's successful
implementation of the Low-Cost Aviation Carrier (LCC) business model. This model includes
features such as reduction flight service, point-to-point travel, high aircraft utilisation, a
solitary fleet type, ticketless passenger booking systems, and significant staff flexibility.
These features of Air Asia plus with a low-cost fee flight tickets makes the firm unique from
the other airlines and make Air Asia are the successful airline company that offers low-cost
fare with a world class service.

The focus strategy, which is divided into two categories, modifies the cost leadership and
differentiation strategies. In either case, the focus strategy entails focusing initiatives on
customers with specific requirements and preferences, also known as niche markets. With
this level of customer focus, a company can either generate a specified cheaper product or
introduce new products and services with distinctive elements and traits that fulfil the
demand or wants of the target market. Either focus strategy subcategory provides a distinct
advantage. For instance, Air Asia keep striving to reach their vision which is to be Asia's
largest low-cost airline, allowing passengers who previously couldn't travel owing to
excessive fares and poor access to do so. They want to make it possible for everyone to
connect at a low cost. So, Air Asia Berhad is mainly focused on cost monitoring, cost control,
and fare distinction in order to maintain the low-cost fare and at the same time increase their
quality in services. Low-cost airline passengers may be charged extra for services and
facilities such as checked baggage, on-board food, assigned seating, early boarding, and
carry-on luggage in order for them to keep focus in serving the best service for the
passengers and can give satisfaction to their employees. Moreover, Air Asia Berhad also
really focus and concerned on customers complaint about their service and aircraft issue.
So, Air Asia Berhad planned to always prepare staff and managers to address and minimise
passenger complaints to show at the passengers that their complaints, Air Asia really
prioritise it and Air Asia want to overcome these issues quickly so the customers satisfaction
can be achieved. As it is known that passengers on low-cost airlines are aware of the
differences in service between low-cost and mainstream airlines. So, Air Asia Berhad’s focus
here is to put an end to these barriers as the company wants to provide a low-cost airline
with a world class service in all over Asia.