STRATEGIC

MANAGEMENT
PMGT5023

MASTER OF BUSINESS ADMINISTRATION – SEM 3

(2020)
DR. PUTRI ROZITA TAHIR

Prepared By:
Azman Bin Makmor 310190052
Azmi Bin Adam 306190037
Nurhakim Bin Abdullah 302200061
Shaharruddin Bin Ayob 302200062
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TABLE OF CONTENTS

I. BACKGROUND OF THE COMPANY Page 3

a. AirAsia History Page 3

b. AirAsia Vision Page 3

c. AirAsia Mission Page 3

d. Core Values Page 4

e. Corporate Strategies Page 4

II. ENVIRONMENTAL ANALYSIS Page 5

a. Internal Factors Page 5

i. Strength Page 5

ii. Weaknessess Page 5

b. External Factors Page 6

i. Opportunities Page 6

ii. Threats Page 7

c. PESTEL Analysis Page 8

d. AirAsia Porter’s Five Forces Framework Page 9

III. STRATEGY FORMULATION Page 11

a. STAGE 1 ( The Input Stage ) Page 11

i. External Factor Evaluation ( EFE ) Matrix Page 11

ii. Internal Factor Evaluation ( IFE ) Matrix Page 14

iii. Competitive Profile Matrix ( CPM ) Page 16

b. STAGE 2 ( The Matching Stage ) Page 17

i. Strengths-Weaknesses-

Opportunities-Threats ( S.W.O.T ) Matrix Page 17

ii. Strategic Position and Action

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Evaluation ( S.P.A.C.E ) Matrix Page 22

iii. Boston Consulting Group ( BCG ) Matrix Page 25

iv. Internal-External ( IE ) Matrix Page 26

v. Grand Strategy Matrix Page 27

c. STAGE 3 : The Decision Stage Page 28

i. Quantitative Strategic Planning Matrix (QSPM) Page 28

IV. STRATEGY IMPLEMENTATION Page 31

i. Activities in Strategy Implementation Page 31

ii. AirAsia Strategic Implementation Page 32

V. STRATEGIC CONTROL AND EVALUATION Page 33

i. SAFS Evaluation Framework Page 33

ii. Correction and Actions Discrepancies Page 35

VI. CONCLUSION AND RECOMMENDATION Page 36

VII. REFERENCES Page 40

VIII. APPENDICES Page 42

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I. Background Of The Company

a. AirAsia History

In year 1993, AirAsia was cooperated and started their business operation on 18

Nov’1996. AirAsia was founded by DRB-HICOM Berhad. AirAsia never made much

profit leading due to fluctuate in debts. The reasons behind this fluctuation are the rise of

oil price, high labour cost and 9/11 Twin Tower incident. With all these problems

AirAsia almost to declare bankruptcy.

However, the turnaround of AirAsia was happened in year 2001, when it was sold

and bought by Mr. Tony Fernandes. Immediately, Mr. Connor McCarthy, the former

director of group operation of Ryanair was invited to join the executive team. AirAsia

was rebranded and launched once again as new trendy low cost airliner with 3 aircraft of

B737.

In 2002, AirAsia managed to turnaround the company by produced a profit by the

end of 2002. AirAsia expend by open their second hub at Senai International Airport and

launched it’s first international flight to Bangkok. AirAsia subsequently started its

affiliates company and begin flight to Singapore, Indonesia, Macau, China, Philippines

and many more other countries.

b. AirAsia Vision

“To be the largest low cost airline in Asia and serving the 3 billion people who are

currently underserved with poor connectivity and high fares.” (AirAsia,

www.airasiax.com/mission.html)

c. AirAsia Mission

 “To be best company to work for whereby employees are travelled as part of

a big family.

 Create a globally recognized ASEAN brand.

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 To attain the lowest cost so that everyone can fly with AirAsia.

 Maintain the highest quality product, embracing technology to reduce cost

and enhance service levels.”

(AirAsia, www.airasiax.com/mission.html)

d. Core Values

All AirAsia employees uphold the six core values:

i. Dare to Dream

Progress comes from innovation. Both require change to happen.

ii. People First

Care for our people, care for our guests.

iii. Make it Happen

Learn fast and deliver more with less.

iv. Be Guest-Obsessed

Understand deeply what our guests want. Then give them more than they

expect.

v. One AirAsia

We are one airline, with one vision, and one people.

vi. Safety Always

Safety is everyone's responsibility, it starts with you.

e. Corporate Strategies

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AirAsia Group operations need to be lean, efficient and simple as their business

strategy is on low cost operation business, several key strategies are required to be

executed in order to achieve this effect, which stated as below:

 Low Fare, No Frills

Passengers will have a choice to have their in-flight meal or not.

 High Aircraft Utilisation

Flights will be utilised as frequent as they can (high frequency and high turn

around).

 Point to Point Network

All flights are non-stop flights (short or medium haul flights).

II. Environmental Analysis

a. Internal Factors (Strength, Weaknesses)

i. Strength

1. Low and affordable price

2. A lot of choices for destination

3. AirAsia is the cheapest airliner in Asia

4. Utilising latest technologies and facilities

5. Obtained very prestigious and important award namely “World’s Best

Low-Cost Airline” for 11th consecutive time

6. Booking, purchase and manage flight ticket and check-in through

smartphone

7. Superb and intelligent marketing campaign

8. The current ratio is 0.62 (As of Sep’19)

9. Well established management team with a good support from

government and other airlines industry leaders.

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10. Increasing the Revenue by RM12.4 Billion as at end FY2019.

ii. Weaknesses

1. Complaints received from customers on their services

2. Inefficiencies airport facilities

3. Long waiting time from check in until departure

4. Autocratic managing system

5. High debt to equity ratio equivalent to 2.85 ratio by end 2019

(RM1.1Billion)

6. The average collection period is quite high which 76 days

7. AirAsia currently still have no Maintenance, Repair and Overhaul

(MRO) facility

8. AirAsia provide no frill services

b. External Factors (Opportunities, Threats)

i. Opportunities

1. Asia has many middle income growth countries

2. Supports from Malaysia government

3. Applying high-advance technologies and digital platforms i.e.

AirAsia.com, BigPay and in airlines industry. (AirAsia Digital 3.0,

2019)

4. Economic condition is good.

5. The shifting of customer lifestyle.

6. Malaysia political connection between other countries especially in

Southeast Asia.

7. Not many aircrafts for substitution. However, AirAsia is planning to

purchase 78 nos A330Neo from Airbus.

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8. ‘ASEAN Open Skies’ or ASEAN Single Aviation Market (ASEAN

SAM) policy which will allow airlines from ASEAN countries to fly

freely among ASEAN countries which take effect from 1 January

2015. (ASEAN Briefing, 2015)

9. The emerging of Asian middle class population which will open a

wide market with high opportunities for low cost airliners especially

AirAsia.

ii. Threats

1. The increasing of crude oil price.

2. Customers culture diversification.

3. Rejection from other country’s governments.

4. The growth of new budget/ low cost airliners.

5. Imposed airport rate and charges by different countries which caused

an impact to the cost.

6. Bad perception from customer on low cost airliners which may

jeopardise their safety.

7. Aircraft makers are limited which create a supplier power, where the

switching cost on airplanes and their maintenance is high and low

number of substitutes aircraft.

8. Cyber security issues where information and system are exposed to be

hacked.

9. Natural disaster.

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c. PESTEL (external factors)

i. Political Factor

In 2019, due to government change happened in Malaysia, AirAsia has

reshuffles their organisation to shows their supports to the new government.

(The Star, 2019)

ii. Economic Factor

With a new built low cost terminal (KLIA2) completed in 2014 after being

introduced by Malaysia Government policy which is “10 Malaysia Plan” had

help the growth of Malaysia economic. Due to this, AirAsia has contributed

RM837b to Malaysia’s GDP (New Straits Times, 2018).

iii. Socio Cultural Factor

With the multi-racial people live in Asia and specifically in Southeast Asia,

AirAsia has created a workforce from various countries which create a

unique internal strength by having staffs who can speak several languages.

Another opportunity in socio cultural are, most of the countries in Southeast

Asia are rapidly growing with rapid urbanisation which push each countries

government to develop and enhance their infrastructures an open new

airports in order to cater the frequency of people movement between the

countries.

iv. Technological Factor

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AirAsia is popular with buying their flight ticket through their websites or

their mobile application. AirAsia has implement the e-ticketing system, self-

check-in system, integration with Google Cloud learning machine and

Artificial Intelligent which giving them a beneficial through cut unnecessary

cost. In 2018, AirAsia has won ‘Best Use of Technology Loyalty Awards’.

(AirAsia, 2018)

v. Environmental Factor

In August 2019, AirAsia has confirmed their order to purchase new aircraft

from Airbus for 30 single-aisle A321XLR and increase their order on

A330neo aircraft to become 78 airplanes. These aircrafts are equipped with

latest technology which improving the efficiency of fuel usage and reducing

the release of greenhouse gas emission. (Airbus, 2019)

vi. Legal Factor

There are several issues locally and worldwide which impact the airlines

business especially AirAsia such as on local issue AirAsia need to hold

Malaysia Civil Aviation’s Air Service License, on worldwide issue such as

need to comply with EU new policy on greenhouse gas emissions fees and on

Brexit (EU-UK issue) which might impose new regulations for AirAsia to

comply with.

d. Porter’s Five Forces Framework (competitive rivalry)

The nature of competition which currently dealing by AirAsia is formed as below:

i. Threat of new Entrants

 Weak customer loyalty.

 High start-up cost.

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 Diversified in product offered.

 Switching Cost is low.

 Government regulations are strict.

ii. Rivalry among existing firms

 High numbers of Competitor.

 Fixed Cost is high.

 Exit Cost is high.

 Similarity in product offering.

iii. Threat of Substitute product

 Ease to switching.

 Performance of rivalry.

 Relative Price.

iv. Bargaining power of buyers

 Similarity of product.

 Low switching costs.

 Customers have access to market information.

 Concentration of Buyer’s power in many hands.

v. Bargaining Power of Suppliers

 Supplier concentration in a few hands.

 High Switching Cost.

 Relative insignificant influence of buyer to supplier.

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III. STRATEGY FORMULATION

a. STAGE 1 – The Input Stage

i. External Factor Evaluation ( EFE ) Matrix

No. Key External Factors Weight Rating Weighted

Score
Opportunities
1 Asia has many middle income growth 0.06 2 0.12

countries
2 Supports from Malaysia government 0.07 4 0.28
3 Applying high-advance technologies and 0.04 3 0.12

digital platforms i.e. AirAsia.com, BigPay

and in airlines industry. (AirAsia Digital

3.0, 2019)
4 Economic condition is good. 0.06 2 0.12
5 The shifting of customer lifestyle. 0.05 2 0.10
6 Malaysia political connection between 0.06 3 0.18

other countries especially in Southeast

Asia.
7 Not many aircrafts for substitution. 0.10 3 0.30

However, AirAsia is planning to purchase

78 nos A330Neo from Airbus.

8 ‘ASEAN Open Skies’ or ASEAN Single 0.04 3 0.12

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Aviation Market (ASEAN SAM) policy

which will allow airlines from ASEAN

countries to fly freely among ASEAN

countries which take effect from 1

January 2015. (ASEAN Briefing, 2015)

9 The emerging of Asian middle class 0.04 3 0.12

population which will open a wide market

with high opportunities for low cost

airliners especially AirAsia.

Threats
1 The increasing of crude oil price. 0.04 2 0.08
2 Customers culture diversification. 0.03 1 0.03
3 Rejection from other country’s 0.07 3 0.21

governments.
4 The growth of new budget/ low cost 0.04 2 0.08

airliners.
5 Imposed airport rate and charges by 0.10 3 0.30

different countries which caused an

impact to the cost.

6 Bad perception from customer on low 0.04 2 0.08

cost airliners which may jeopardise their

safety.
7 Aircraft makers are limited which create a 0.07 3 0.21

supplier power, where the switching cost

on airplanes and their maintenance is high

and low number of substitutes aircraft.

8 Cyber security issues where information 0.03 3 0.09

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and system are exposed to be hacked.

9 Natural disaster. 0.06 3 0.18
Total 1.00 2.72

Comment:

With high EFE Matrix rating i.e. 2.72 shows a strong business for AirAsia and this new business-

improvement approach will be continued.

The main influence factor is the economy factor (quantity is 10 and key factor value is 6) while

geographic factor bring the less impact to AirAsia business.

ii. Internal Factor Evaluation ( IFE ) Matrix

No. Key Internal Factors Weight Rating Weighted Scored

Strengths
1 Low and affordable price 0.13 4 0.52
2 A lot of choices for destination 0.03 3 0.09
3 AirAsia is the cheapest airliner in 0.05 4 0.20
Asia
4 Utilising latest technologies and 0.05 3 0.15
facilities
5 Obtained very prestigious and 0.03 2 0.06
important award namely “World’s
Best Low-Cost Airline” for 11th
consecutive time
6 Booking, purchase and manage 0.04 3 0.12
flight ticket and check-in through

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smartphone
7 Superb and intelligent marketing 0.03 4 0.12
campaign
8 The current ratio is 0.62 (As of 0.04 3 0.12
Sep’19)
9 Well established management team 0.07 3 0.21
with a good support from
government and other airlines
industry leaders.
10 Increasing the Revenue by RM12.4 0.03 3 0.09
Billion as at end FY2019.
Weaknesses
1 Complaints received from 0.04 4 0.16
customers on their services
2 Inefficiencies airport facilities 0.06 3 0.18
3 Long waiting time from check in 0.06 4 0.24
until departure
4 Autocratic managing system 0.05 2 0.10
5 High debt to equity ratio equivalent 0.03 2 0.06
to 2.85 ratio by end 2019
(RM1.1Billion)
6 The average collection period is 0.06 2 0.12
quite high which 76 days
7 AirAsia currently still have no 0.15 4 0.6
Maintenance, Repair and Overhaul
(MRO) facility
8 AirAsia provide no frill services 0.05 3 0.15
Total 1.00 2.75

Comment:

The rating of 2.75 for IFE shows the AirAsia business is in a good position. They should use their

current strength to mask their shortcomings in exploiting the industry's opportunities

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iii. Competitive Profile Matrix ( CPM )

From the table below we can view that overall best performance goes to AirAsia where the

company gets the best cumulative score as opposed to MAS and Fire Fly.

Air Asia MAS Fire Fly

Critical Success Factor Weight Rating Score Rating Score Rating Score
1. Financial position 0.12 4 0.48 2 0.24 1 0.12
2. Management 0.17 4 0.68 4 0.68 2 0.34
3. Market share 0.09 4 0.36 3 0.27 1 0.09
4. Price competitiveness 0.12 4 0.48 2 0.24 3 0.36
5. Product quality 0.10 3 0.3 4 0.4 2 0.2
6. Advertising 0.12 4 0.48 3 0.36 1 0.12
7. Customer loyalty 0.13 2 0.26 3 0.39 1 0.13
8. Global expansion 0.15 4 0.6 3 0.45 2 0.3
TOTAL 1.00 29 3.64 24 3.03 13 1.66

The overall performance achieved by AirAsia is higher than his competitors. However, AirAsia still

can improve their product and service quality as MAS stating high score in quality as they already

conquers on the basis of their services is the same as high class services, comparing to Air Asia and

Fire Fly, In addition, based on their price, Air Asia can also compete with MAS. As we learn, Air

Asia provides lower equivalent prices compare to others.

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b. STAGE 2 – The Matching Stage

i. Strengths-Weaknesses-Opportunities-Threats ( S.W.O.T ) Matrix

Strengths Weaknesses
Opportunities S – O Strategies W – O Strategies
Threats S – T Strategies W – T Strategies

Strengths

1. Low and affordable price

In its tagline 'Everybody can fly' it is ideal to

give all people the chance to travel at the very
low ticket price and to allow the people to
travel, even they have not enough money.

2. A lot of choices for destinations

AirAsia currently having 59 international

destinations in 18 countries and 18 domestic
destinations.

3. Utilising latest technologies and facilities

AirAsia in strengthening their business through

digitalising the airline and leveraging their data
to create digital platforms.

4. Superb and intelligent marketing

campaign

By sponsoring one of the most popular football

club in English Premier League i.e. Manchester
United has boost the popularity of AirAsia to

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the world. This sponsorship is a very worthy

full of investment in marketing made by
AirAsia.

5. Well established management team with a

good support from government and other
airlines industry leaders.

With a diversify expertise person who sat in

their board of director, AirAsia has a very
strong executive team who have a good
connection with government and the airlines.

The diversification is contributed the form of

industry experts and ex-top government
officials in their executive team.
Opportunities Strength – Opportunities Strategies

1. Asia has many middle income growth 1. Add new mobile apps and website on
countries vacation facilities to drive people attention in
using AirAsia for their vacation (S1 & S2, O1)
2. Applying high-advance technologies and
digital platforms i.e. AirAsia.com, BigPay 2. Improve new technology for making people
and E-ticketing. more convince using this airplane (S3,O2) -
Market penetration.
3. Economic condition is good.
3. Increase destination all over the world (S2,
The shifting of customer lifestyle.
O3, O4)
4. Malaysia political connection between
4. Improve management for increase marketing
other countries especially in Southeast Asia.
strategies to attract people (S4,S5 & O5)
5. Not many aircrafts for substitution.
5. Increase website service to make people
However, AirAsia is planning to purchase 78
easy to make transaction (S3,O2)
nos A330Neo from Airbus.

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Threats Strength – Threats Strategies

1. The increasing of crude oil price. 1. Do research and development (R&D) to

find other alternative to reducing in use oil
2. Customers culture diversification.
(S1,S6 & T1)
3. Imposed airport rate and charges by
2. Hire new stewardess for different culture to
different countries which caused an impact
make passenger feel comfortable using this
to the cost.
service (S2,T2)
This is a challenge to all airlines , especially
3. Deal with supplier for cheaper in
low-cost airlines, which are trying to keep their
maintenance cost (S1, S6 & T4) -Backward
costs as small as possible
Integrations.
4. Aircraft makers are limited which create a
supplier power, where the switching cost on
airplanes and their maintenance is high and
low number of substitutes aircraft.

5. Natural disaster.

For example is flood, tsunami, and earthquake

at certain place will influence the business of
airlines

Weaknesses
1. Complaints received from customers on

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their services.

Examples of concern are about delays in travel,

being paid with a variety of things, and being
reluctant to adjust travel or get a refund
because the passenger couldn't. Strong
customer support and management are
particularly important when competition is
intensifying

2. Inefficiencies airport facilities.

There has limited chairs at waiting area

3. Long waiting time from check in until

departure

It takes around 2 hours for international

departure

4. Autocratic management system.

They found only top management decisions to

make the decision without asking the other
worker 's opinion

5.AirAsia currently still have no

Maintenance, Repair and Overhaul (MRO)
facility

Thus AirAsia cannot maintain its own planes.

With an increasing fleet this is a competitive
advantage

Opportunities Weakness – Opportunities Strategies

1. Asia has many middle income growth 1. Improve existing facilities in airport
countries (W2,O1 & O2)

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2. Applying high-advance technologies and 2. Target on middle – income customer by

digital platforms i.e. AirAsia.com, BigPay affordable price (W1, O1 & O3) - Market
and in airlines industry. Penetration.

3. Economic condition is good. The change of 3. Improve management in service such as

lifestyle of the customer. prediction in time (W1, O2)

4. Malaysia political connection between

other countries especially in Southeast Asia.

5. Not many aircrafts for substitution.

However, AirAsia is planning to purchase 78
nos A330Neo from Airbus.
Threats
1. The increasing of crude oil price.
2. Customers culture diversification.
Weakness – Threats Strategies
1. Manage wisely the waiting period in order
our passenger come from anywhere (W3, T3)

3. Imposed airport rate and charges by 2. Efficiently manage the compliant from
different countries which caused an impact
passenger to avoid external threat (W1, T2)
to the cost. This is a challenge to all airlines ,
especially low-cost airlines, which are trying to
keep their costs as small as possible
4. Aircraft makers are limited which create a
supplier power, where the switching cost on
airplanes and their maintenance is high and
low number of substitutes aircraft.
5. Natural disaster.
For example is flood, tsunami, and earthquake
at certain place will influence the business of
airlines

ii. Strategic Position and Action Evaluation ( S.P.A.C.E ) Matrix

List set of variables to define industry strength (IS), Environmental stability (ES), Competitive

advantage (CA), and financial strength (FS).

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 Numerical values to all the variables of FS and IS ranging from +1(worst) to +6 (best).

 Numerical values to all the variables of ES and CA ranging from -1(best) to -6 (worst).

FINANCIAL STRENGTH (FS) RATINGS

R.O.I +4

Leverage +4

Liquidity +5

Capital available +3

Cash flow +6

Ease of exit from market +4

Risk to enterprise +2

AVERAGE +4.00

INDUSTRY STRENGTH (IS) RATINGS

Potential Growth +5

Potential Profit +6

Stability of financial +5

Know-how Technology +2

Utilization of Resources +4

Intensity of Capital +2

Market barriers of Entry +4

AVERAGE +4.00
ENVIRONMENTAL STABILITY (ES) RATINGS
Technological shifts -3
Inflation Rate -5
Variability Demand -1
Competing products price range -2
Market barriers of Entry -4
Competitive pressure -4
Priced demand elasticity -2

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AVERAGE -3.00

COMPETETIVE ADVANTAGE (CA) RATINGS

Market share -4
Quality of services -5
Life cycle product -5
Replacement cycle of product -4
Consumer loyalty -6
Capacity utilization - Competitor -4
Know-how technology -2
AVERAGE -4.29

POSITION AVERAGE RATING

Financial Position (FP) +4.00

Industry Position (IP) +4.00

Environmental Stability Position (SP) -3.00

Competitive Position (CP) -4.29

Directional Vector Coordinates:

DIRECTIONAL CALCULATION AVERAGE RATING

X-Axis SP + FP -3.00 + (+4.00) = +1.00
Y-Axis CP + IP -4.29 + (+4.00) = -0.29

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We noticed that Air Asia falls into the SPACE Matrix competitive quadrant according to the graph

above. It shows that fast-growing AirAsia has a strong competitive market position.

iii. Boston Consulting Group ( BCG ) Matrix

iv. BCG matrix (or

growth-share
matrix) is a
corporate planning
tool, which is used
to portray
v. firm’s brand
portfolio or SBUs
on a quadrant
along relative
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market share axis

(horizontal axis)
vi. and speed of
market growth
(vertical axis) axis
Relative Industry
%
Division Revenues(Mil) Profit(Mil) % Profit Market Growth
Revenue
Share Rate %
PT Indonesia Air
1,083,788,000 28.06% 239,957,000 22.61% 0.40 17
Asia
Air Asia Hong
487,952,000 12.63% 98,735,000 9.30% 0.25 10
Kong LTD
AA International
453,206,000 11.73% 68,571,000 6.46% 0.22 -10
LTD
Thai Air Asia Co.
1,119,739,000 28.98% 488,443,000 46.01% 0.55 18
LTD
Air Asia Go
719,774,000 18.63% 165,705,000 15.61% 0.28 15
Holiday Co. LTD
Total 3,864,459,000 100.00% 1,061,411,000 100.00%

RELATIVE MARKET SHARE

High Medium Low
1.0 0.5 0.0

High 20%
Thai Air
MARKET GROWTH RATE

PT Indonesia
Asia
Go Holiday Hong Kong

Low 0%

AA International

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vi. Internal-External ( IE ) Matrix

Division Revenues % Profit % EFE IFE

(Million) Revenue (Million) Profit
PT Indonesia Air Asia 1,083,788,000 28.06% 239,957,000 22.61% 3.10 2.80
Air Asia Hong Kong
LTD 487,952,000 12.63% 98,735,000 9.30% 2.30 2.00
AA International LTD 453,206,000 11.73% 68,571,000 6.46% 2.00 1.55
Thai Air Asia Co.
LTD 1,119,739,000 28.98% 488,443,000 46.01% 3.30 3.20
Air Asia Go Holiday
LTD 719,774,000 18.63% 165,705,000 15.61% 3.00 2.50
Total 3,864,459,000 100.00% 1,061,411,000 100.00%

I II III 42
Thai Air PT Indonesia
Asia Go Holiday
 IV V VI
Hong Kong
STRATEGIC MANAGEMENT PMGT5023
AA International
SEM 3 (2020) VII VIII IX

As the result, Thai Air Asia Co. LTD for i.e. Matrix under (division falls into cell I, ii and iv which
is “grow and build”.

v. Grand Strategy Matrix

Air Asia CO. comes under Quadrant II because AirAsia has accomplished much growth in the

industrial sector. It explained that Air Asia has market expansion capacity due to high competition

for the lowest possible fare to take advantage of the rise of new global markets.

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C) STAGE 3 – The Decision Stage

i. Quantitative Strategic Planning Matrix (QSPM)

Key Factors Weight Market Market

Development Penetration
OPPORTUNITIES AS TS AS TS
1 Middle Earnings growth in Asia 0.06 3 0.18 3 0.18
2 Government support 0.07 2 0.14 - -
3 Applying technological advances in 0.04 - - - -
airlines industry. For example e-ticketing.
4 Economic in good condition 0.06 3 0.18 3 0.18
5 Customer’s lifestyle change 0.05 3 0.18 - -
6 Political linkage between home country 0.06 - - 2 0.10
and other.
7 Limited substitutes for airplanes 0.10 4 0.40 - -
8 ‘ASEAN Open Skies’ agreement 0.04 - - - -
9 Population increasing of Asian middle 0.04 2 0.08 4 0.16
class.
THREATS
1 Increasing of Oil price 0.04 2 0.08 1 0.08
2 Passengers culture are different 0.03 2 0.06 - -
3 Rejection from other policy nations. 0.07 3 0.21 - -
4 Growth of others budget airline. 0.04 1 0.04 3 0.12
5 Certain rates beyond the control of airline 0.10 3 0.30 - -
operator.
6 Consumer perception that budget airlines 0.04 - - - -
can sacrifice safety in order to keep costs
low
7 Supplier of airplanes is limited 0.07 - - - -

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8 Technology issues 0.03 - - - -

9 Natural disaster 0.06 3 0.18 2 0.36
TOTAL 2.03 1.18
STRENGTH
1 Cost budget for all passenger 0.13 4 0.52 4 0.52
2 Has many destination route 0.03 3 0.09 4 0.12
3 Low cost leader in Asia 0.05 4 0.20 - -
4 Technology up to date 0.05 - - 3 0.15
5 Gain numerous awards – good image and 0.04 2 0.08 3 0.12
performance.
6 Consumers can pay for their reservation 0.03 - - 2 0.06
by on line
7 Good marketing campaign 0.04 2 0.08 3 0.12
8 The current ratio is increase - make the 0.07 3 0.21 3 0.21
company less risk.
9 Solid management team and have 0.03 2 0.06 2 0.06
government support.
WEAKNESSESS
1 AirAsia is receiving a lot of customer 0.04 3 0.12 3 0.12
concern about its operation.
2 Airport services-few seats in waiting room 0.06 2 0.12 - -
3 The period of waiting between check in 0.06 3 0.18 3 0.18
and departure is too long.
4 Apply autocratic management 0.05 - - - -
5 Rely on debt too much. 0.03 2 0.06 2 0.06
6 The average collection period is quite 0.06 - - - -
high.
7 No MRO facilities 0.15 3 0.45 - -
8 No frill 0.05 4 0.20 4 0.20

TOTAL 2.29 1.92

*AS: Attractiveness Score TS: Total Attractiveness Score

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The QSPM Sum Total Attractiveness Scores reveal which is the most attractive strategy. Higher

scores point to a more attractive strategy, taking into account all the relevant critical external and

internal factors which could affect the strategic decision.

IV. STRATEGY IMPLEMENTATION

Implementation strategy is a mechanism that turns goals and plans into actions to achieve strategic

objectives and objectives. In order to implement the strategy, AirAsia needs to assess all their

resources, because if the resources are inadequate, the execution will not be maximized and the plan

may fail.

i. Activities in Strategy Implementation

Activities in implementation consist of;

1) Establish annual objectives

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- Basis management control to enable coordination across organizational units.

2) Devise policies

- Major instrument to monitor progress towards achieving long term goals and

establish organizational priorities.

3) Motivate employees

- Empowerment staff in an organization by gives authority, trust, and

encouragement to accomplish a task.

4) Allocate resources

- Allocating resources according to priorities departments related to formulation

strategy.

In this globalization era, AirAsia has been facing rapidly evolving external environments

and must ensure that its own internal resources and capabilities are adequate enough to meet

the needs of the external changes environment. It is not just how to cut costs and effectively

run operational activities. But, also come up with the plan to strengthen the company's

competitive position by performing multiple innovative activities and carry out similar

objective but in different ways to successfully achieve their business goal.

ii. AirAsia Strategic Implementation

The AirAsia's strategy implementations to make them a profitable low cost carrier and to be

able to compete with other competitors in this business field are;

1) Maximized Information Technology (IT) in AirAsia Management System

AirAsia has increased and explore more its application of IT to make their company

efficient and effective. When business strategy as well as IT framework evolve

together and converge, the IT infrastructure will constantly sense the growing

business needs and respond by providing or redeploying resources to meet the

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demands of the business. For an example, by maximized IT in their management

system it makes AirAsia recognizes, anticipates and responds effectively to the

customer behavior and maximizes the company's income. Through this integrated

framework, AirAsia has utilized it to take the operating costs into account and

enables AirAsia to manage ticket prices (based on seat and route pricing adjustment)

and assign resources to increase expected revenues.

2) Implementation of E-commerce in AirAsia business

Through introducing e-commerce and optimizing information technology (IT) in

their business, AirAsia successfully transform from conventional business to modern

business. The implementation of E-commerce can reduce the cost of travel agents,

and ticketing paper cost. It helps AirAsia to achieve its goals and their target to

become the lowest public passenger airliner in the world.

3) Implemented outsourcing in their business

In this 21st century, the information technology has grows significantly makes the

businesses are become more competitive and challenging. It makes AirAsia

implementing outsource strategy in their system, where by implementing

outsourcing strategy will provide:

 Cost savings for AirAsia, as more their resources use can be reduced.

 AirAsia can also minimize costs in IT system operations by outsourcing in

the field of IT, which will make more savings as possible in their business

(AirAsia expertise is not in IT).

 AirAsia can easily monitor all of the system outsourced to a specific vendor

or company. The control in this strategy also offers advantages, since AirAsia

only controlled a system that is AirAsia used.

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 AirAsia can also reduce risk by minimize financial resources on covering the

risk factor in this strategy.

 It gives AirAsia a competitive advantage, since the strategy can be broader

than AirAsia itself has created.

V. STRATEGIC CONTROL AND EVALUATION

i. SAFS Evaluation Framework

Suitability

AirAsia increase the flight frequencies from Bangkok to Chiang Mai (Ross,2017), Manila to

Kuala Lumpur (AirAsia Annual Report, 2016) and Kuala Lumpur to Kaohsiung (Malaymail

Online,2017) due to the increasing demand and tentatively growth of load factor in 2016.

This can minimize strategic intent while at the same time contributing to economic growth

and retaining their role as market leader in the low-cost airline market.

Acceptability

As of “Return” criteria, AirAsia achieved 9% growth in revenues on 2016 and increased in

net profit from RM83 millions in 2014 to RM541 millions in 2015 (AirAsia Annual Report,

2015). Besides that, AirAsia successfully reduce their total debt from RM 12.61 billions in

2015 to RM10.58 billion in 2016 with their high net profit (AirAsia Annual Report, 2016).

Besides that, in “Risks” criteria, AirAsia India scaled up to larger workforce from 650 to

1050 peoples and will increase from 8 planes to 14 planes by October hold a certain risk

because of their small market share of 2 to 3% (The Economic Times,2017). However, by

developing good financial performances, they forecasted to make profit by 2019.

Furthermore, AirAsia successfully gained satisfactory reactions of stakeholders with the

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rising of stock price at RM3.25 in August 2016 from RM1.44 in January (AirAsia Annual

Report, 2016). AirAsia had signed a shareholders’ agreement and a share subscription

agreement with Gumin, Tran Trong Kien and Hai Au Aviation to establish a LCC in Vietnam

which are positively reviewed (The Star Online, 2017)

Feasibility

AirAsia owned strong cash recourses at RM2.43 billion in 2015 and RM1.74 billion in

2016. Besides that, their total debt has dropped from RM12.6 billion in 2015 to RM10.58

billion (AirAsia Annual Report, 2016). Furthermore, AirAsia practiced flat organization

structure which help in cost saving on labor cost, adaptability in market change, promotes

coherence among the staffs (Deal Street Asia, 2017).

Sustainability

AirAsia has been voted as the world’ best LCC for subsequently 11 years. To maintain as

market leader, AirAsia has increased their flight frequencies, adding routes and boosting

capital investment while other airlines are cutting down due to the raising of fuel price.

ii. Correction and Actions Discrepancies

In order to evaluating current performance for established strategies and implementation it

must to reviewing back for the latest internal and external factors implication and simplify

through SWOT analysis.

Strengths Weaknesses

S1:High operating performance W1:Lack of maintenance, report and

S2: Vigorous network and well- overhaul facility

positioned market W2:High operating costs

S3:Grwoth in traffic volume W3:Customers complaints

Opportunity Threats

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O1: Third parties Development Plan T1:Intense competition

O2:Positive growth prospect from T2:Inconsistent in fuel prices

aviation industry T3:Sales drop due to seasonal demand,

O3:Network expansion political unrest, and economic

downturn

Strengths-Opportunity Strategy

1) Establish new routes in both existing and potential markets.

2) Extend brand equity through expanding product offerings.

Strengths-Threats Strategy

1) Increase advertising and brand-building activities.

2) Launch low-fare promotion to generate sales in low demand seasonal.

Weaknesses-Opportunity Strategy

1) Embrace digitalization in airlines operation.

2) Coordinate with business partners to better meet customer needs.

Weaknesses-Threats Strategy

1) Grow ancillary businesses to improve customer satisfaction.

2) Adopt hedging strategy by entering into derivative financial instruments.

VI. Conclusion and Recommendation

a. Conclusion

In our conclusion, the AirAsia Business has a strong performance following the introduction of

the new cost carrier strategy for the airline industry in Asia, and today AirAsia is such a well-known

and successful airline business and is dominating the Asian market. The goal and mission of the

organization clearly allows the company to establish a correct code of conduct and action to achieve

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these two essential things. It also shows us that through evaluation factors AirAsia Company can

face any barriers that arise from both external and internal factors. As a result of the evaluation

above 2.5, it has been shown that both factors have not affected the company.

The strategy of company formulation through strategic management has 5 ways to determine

the appropriate strategies which are the matrix of TOWS, the matrix of SPACE, the matrix of BCG,

the matrix of Grand Strategy, and lastly the matrix of Competitive Profiles.

There are two strategies that have obtained the highest scores through market development and

market penetration that have been chosen as the most appropriate strategies to implement and act

for the company in future development to help a company maintain the current performance to

achieve higher revenue and profit.

For example, the AirAsia has opened its route of airline services to Africa that has not been

implemented before and this is the way to implement market development strategy. AirAsia will

open up the same thing when the demand is quite high and sustained, and it is known as market

penetration in various areas of Africa.

As a result, Air Asia Airline Industry has learned to use SWOT and PESTLE to assess the

benefits and risks of the industry.

AirAsia's PESTLE analysis examines how political, economic, social, technological, legal and

environmental forces affect their business by focusing on planning and monitoring how company

meet their objectives.

This SWOT analysis is intended to identify AirAsia Company's internal (strength and weakness)

and external (opportunities and threats) factor for achieving its goals and objectives. A company

needs to consider the company ability and how to integrate it with the as well as the main factor in

the internal and external factors that can only be identified with SWOT analysis in order to be

successful in the management of the company. In this section, it will identify one by one AirAsia

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Company's strength, weakness, opportunities and threats in order to identify the internal and

external factor that AirAsia needs to consider as low cost carrier in the airline industry. AirAsia's

SWOT analysis is one of the key components to enhance AirAsia’s strength in its business and

enable it to compete with the same low-cost airline industry.

b. Recommendation

We split into two phases in our recommendation where the first is based on two strategies

consisting of market development and market penetration. In order to increase its current market

share in the airline industry, we recommend that AirAsia open new operations in a new geographic

area that AirAsia has never reached before. We also recommend that AirAsia Company open a new

operation or make an additional route to the airline, where the operation has already been opened by

the company and that will unexpected the company will open a new operation in the other part and

indirectly will meet the market penetration strategy. This was essentially done to increase the

market share of the company, and also as one of the means of mass marketing to increase the

company's revenue.

In the second phase, Air Asia needs to strengthen its design of a market strategy consisting

of product, pricing, promotion and distribution strategies. Air Asia is recommended to provide more

flights on certain 'high traffic' routes in the product strategy to allow customers to travel at low cost

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and at the same time without losing profit for Air Asia. This is also important for businessmen to fly

frequently in and out of some countries to make them feel comfortable, allowing them to fly

immediately without wasting time waiting for a few hours. Air Asia needs to design a bigger space

and a comfortable seat so that customers can enjoy themselves better on the plane instead of the

small seats that exist, tight and very uncomfortable, and it seems that they are trying to install more

to make more profits. In terms of flight time or delay information, it is recommended that Air Asia

do a directory of information on gate numbers for flight departures as it would be useful for

customers to check which gate they need to go and whether or not their flights have delays.

As far as the pricing strategy is concerned, Air Asia is recommended to use psychological

pricing strategies to use Odd-Even pricing, which sets prices at odd numbers to show a lower price

or is a good deal. It's also recommended that Air Asia use segmented pricing. Some customers may

be charged more on the basis of their willingness to pay more for certain flights. Apart from the

recommendation on pricing strategy, the use of differentiated pricing means that different prices

have been provided to different customers based on a number of variables, including customer type,

volume and terms of delivery and payment.

In terms of promotional strategy, Air Asia recommended that more sales promotions be

used, such as TV commercials. It can promote sales on TV-commercial and allow customers to

make short-term purchases. It is also recommended that Air Asia do some promotion, such as

buying 10 tickets can get one free ticket and can also promote university students who buy a ticket

with a certain level discount and promote a 20 percent or more lifetime discount for senior citizens.

Finally, Air Asia should also look at the distribution strategy which for them is one of the

contributory factors. For a comfortable aspect, the recommendation of Air Asia is that they should

provide more space and more pleasant seat to make consumers have a more comfortable flight

experience, so that Air Asia can become the cheapest and most comfortable airline company, which

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can increase Air Asia's reputation. However, the image of Air Asia is not as good as its check-in

service is very bad that it shows that Air Asia staffs have not properly packed the customer's

luggage, thrown the customer's luggage rudely and aggressively, and that there needs to be a

dramatic improvement in the check-in service. Air Asia's suggestion is to provide these staff with

professional training, so if there are some changes to the check-in baggage service, customers will

be more willing to pay extra for the check-in baggage service and increase the reliability of Air

Asia. Air Asia also needs to be more considerate towards customers in its distribution strategy. For

example, they must provide all the flight, including short duration, with a free beverage similar to

those premiums Air Line. Other than that, Air Asia will suggest providing a USB plug-in point for

each seat. For instant, some customers they forget along with their portable charger, and when they

run out of their phone battery, because contacting people around the phone is very important.

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APPENDICES

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