Company Overview
Strategic management is the formulation and implementation of the major goals and initiatives taken by the top level of the management to achieve the desired goals and objectives. The report examined the strategic plan for the AirAsia, by analyzing the company vision, mission, assessing the micro and macro environment using the pestle and Porter’s five forces model, which led to the identification of near opportunities and threats present in the market (Morden, 2016). Not only the opportunities and weakness are analyzed along with that strengths and weakness are also analyzed and then proposed the strategic changes that should be implemented by the company in order to have the competitive advantage to the company. The report concluded by analyzing the suitability, acceptability, and feasibility in the market (Renz, 2016).
The purpose of this report is to make a strategic plan that:
- Determines and evaluates AirAsia vision and mission statements
- Analyse the macro and microenvironment in which the company is operating its business to know the upcoming opportunities and threats of the market.
- Propose the new strategies using the TOWS matrix and evaluates which is suitable for the organization.
- Evaluating the proposed strategies using SAF
AirAsia is a Malaysia based company involved in providing the services of air transportation. The company is operating the fleet of 90 aircraft and flies to more than 60 destinations from hubs in Malaysia, Thailand, and Indonesia. The company is able to operate more than 3500 flights per week. AirAsia has considered the world leading lowest fare airline in Asia and win awards for the major low carrier in Asia. From the table, it can be analyzed that the AirAsia is showing the upward trend in its revenues and profit too (AirAsia, 2018a).
|
RM MILLION, UNLESS OTHERWISE STATED) |
||||
|
2015 |
2016 |
20171 |
||
|
Revenue |
6,298 |
6,846 |
9,710 |
|
|
Net total expenses |
4,702 |
4,780 |
7,549 |
|
|
Operating profit |
1,596 |
2,066 |
2,161 |
|
|
Profit before taxation |
215 |
1,705 |
2,088 |
|
|
Taxation |
326 |
-86 |
-516 |
|
|
Net profit |
541 |
1,619 |
1,571 |
(Source: AirAsia, 2018a)
AirAsia focuses on the core values, which include:
The company is very much concern about the safety measures used while traveling from one place to another. The company focuses on the theme that a safe and protected airline is a happy airline. The safety of guest is the principal concern of company.
The top level and other levels in the company are working with integrity so that services that are provided should be worth all times. This means that the team is working together to achieve the common organisational goal.
The fun here refers to the celebration in life, laughing louder, a broad smile on their faces and their own uniqueness. They are a friendly bunch and they like sharing thoughts and solution to make the things even improved (AirAsia, 2018b).
AirAsia wishes to be the biggest low-cost provider in Asia and serving the majority of the individuals who are presently underserved with the poor quality and connectivity with high fares
Provide the services with low cost and quality. Building a unique portfolio of tickets rates so that wins over the competitors.
SMART is an acronym for Specific, Measurable, Achievable, Relevant, and time based is an assessing criterion which is used for setting up the goals which are appropriate in nature. While writing the objectives with SMART characteristics certify that they are focused, motivated, and actionable in nature.
|
Criteria |
Evaluation |
|
Specific |
The specific goal must identify the three main elements: what it wants to achieve, how the company will satisfy the customers and how to handle and treat the customer at the time of traveling. These can be seen in the vision and vision statement of Air Asia the company aims to provide the low-cost services to the uncovered people who have not use the services. The company wants to achieve the position in the industry where it has the maximum satisfied customers globally. For this AirAsia is found specific in both carriers provided goods services. The crew provides the information in the good and clear English language to understand the problem of their customers and solve them as early as possible (Lee and Dy, 2015). |
|
Measurable |
AirAsia vision and mission statements are measurable in nature. The company has forecasted the demand by customers and able to manage all the flights properly. |
|
Achievable |
AirAsia mission and vision statements are achievable in nature but need to have more changes to improve the performance in the market. This will also make the company gain more share in the market in terms of revenues. |
|
Result Oriented |
AirAsia tries to achieve the results in the best manner. The company is able to get the competitive advantage in the market over its competitors and become the low-cost provider in the market. |
|
Time Bound |
AirAsia is found to have delayed in their flight’s timing is due to which its customer suffers. However, this will not state in its mission and vision statement and should be included and made the timing accurate and proper as mentioned. |
AirAsia wants to be the biggest low-cost provider of the airline services in Asia by providing services to more than three billion people. The company wants to reach with the lowermost cost and lead to everybody can fly.
Financial Performance
AirAsia wants to be the top company to serve and treat their staff people as a part of the family while attaining the low cost of providing their services. The company aims to provide the high-quality product, acceptance the technology to decrease the cost and improve the service levels (AirAsia, 2018c).
Political Factors
The biggest challenge AirAsia Airlines is facing to fly outside the boundaries of Malaysia. This is based on the two-sided agreement, which affects the budgets of Pan Asia carriers. The landing and navigation charges are found to be costly in nature, there are no cheap airports, and some countries are facing the crisis for the airline. This is degraded by the fact that the market of airline is regulated by bilateral air rights arrangements.
AirAsia is considered the low-cost provider in the airline industry. The company is facing the tough competition with Malaysian Airline in the country. AirAsia is offering the flights tickets at a low cost, which attract the clients. This is improved by the fact that the area in which the company is operating its business is wide and densely populated. In addition to this, there will be economic growth in the area in which the business is operating. This leads to increase and improve cost of living, which has empowered many Asians to board flights to different destinations.
Many passengers are reluctant to board no frill flights for long hours. Longer the route, fewer the prices, clients become conscious. AirAsia focuses on to provide their services to those people also who never have the experience of flying. The company also operates in countries, which have different cultural aspects and language (AirAsia, 2018d).
AirAsia offers online services to their clients that are combined with the air tickets and meals, hotel bookings and travel insurance. All these services can be accessed by the consumer and company ensure travel protection ensuring the entire journey. New strategies are adopted by the company, which include the concept of GO holiday in which clients can book for holiday.
There is no set of clearly written policy given by the Malaysian Government, which made the confusion and chaos in the transportation by the airlines industry. More emphasis is given on the domestic flights and approval to operate the cheap airlifts locally and globally in the country (Idris et al., 2014).
AirAsia has various factors that affect the working of organisation and its performance too. These factors include demographic factors, climate change factors etc. All these factors have great impact on the performance a delays in the flights of the company.
In the industry of airlines, the negotiation power of the buyer are found to be high in nature as the success of the business in any industry can be influenced by the buyer only. The companies, which are offering the high-quality services to their customers, will get the competitive advantage in the market. AirAsia offers a lesser price services with improved quality in services than its competitors do so it will be a good choice for the customer.
SMART Criteria
In the airline industry, the negotiation power of suppliers is finding to moderate in the market due to the same services provided by almost all airlines service providers. Moreover, AirAsia has found with a large order from Airbus in order to expand its route to international routes. Bargaining power of buyers influenced the industry profit or loss.
In the airline industry, many close substitutes are available so customers can switch from one airline to another where he is getting the low price services with better quality. Around 59 airlines are operating in the market, which are competent in nature. The performances of these competing airlines are found to be similar to each other and there are no product differentiations.
In all the sectors there are some positive and negative trends in the industry, the airline industry is also facing the same. In the airline industry, there is a limited customer so growth rate is also moderate. AirAsia has tried to be the winner of its competitors and is covering the large share in the market. This is because AirAsia is offering the flights tickets at a low price while offering many discounts and offers to their customers. Companies like Tiger Airways and Firefly are also offering the services at the same price as AirAsia offers so the rivalry among the competitors is quite high to AirAsia (Braun, 2014).
In setting up of the business in the airline, the industry is quite expensive in nature and requires high capital. Due to the huge capital investment in airlines, there are many entry barriers in the airline industry. For example, purchase of aircraft set up services hiring the trained personnel and other expenses too. All this made the entry into this industry restricted to many people. Another reason that the new entrants will not enter this industry is that the customers want the trust and safety in traveling from one place to another. This trust and reliability will only be given by the experienced and past players in the market. Another barrier is in the form of the government legislation in entering the market, as it is too difficult to get the flight route from the government.
AirAsia is providing the valuable services to its customers. In giving the value to its customers, AirAsia uses the primary as well as supportive activity in the organization to satisfy their customer at most.
Inbound Logistics
In this logistics, all the decision and activities related to the scheduling of flights and strategies adopted by the competitors are taken care of and consideration. This will help the company to sustain in the market for a long period. In addition, the decisions related to the purchase of fuel and cutting or high in the price has been planned (Jonathan and Hamidi, 2017).
AirAsia uses their processes with booking online tickets in their process. Customers can also print their lodging and boarding pass from their homes only. The company makes use of the electric engines for their customer’s safety, as customers are the main first choice of the company to keep them safe, secure, and protected.
Core Values
AirAsia has the strong brand name in the market. The company promoted its product by using sponsored using the theme and campaign like “The Amazing Race.” The company makes its publicity wearing the official red cape and T-shirt in almost all the functions.
Retaining a customer with a company is difficult for a company. AirAsia provides different and unique services to its customer so that they remain satisfied with the services provided by the company (Taneja, 2016).
The value chain analysis has some support activities as well. These support activities include the infrastructure, IT and other related services or activities performed by the AirAsia.
AirAsia is found to have the strong infrastructure that builds its good reputation in front of its customers. They are exploring the new market and the decision-making process gets simpler.
AirAsia hires the staff, which is capable in nature to communicate and to handle their customers. They are skilled and knowledgeable in nature and always remain presentative in front of their customer with a broad smile on their faces.
AirAsia uses the updated technology in its business structure. The company uses the technology which able to curtail the cost and to make their process easy and effective. The company is using the YMS (Yield Management system) which takes into account the operating cost and tries to minimize it (Walulik, 2016).
A vital performance indicator (KPI) is a quantifiable value that proves how well a company is attaining the key business goals. Use of KPI’s is used at the many stages to assess the accomplishment of the business by reaching the targets. High level of KPI is are focusing on the overall performance of the enterprise whereas the low level of KPI’s may focus on the development and training of employees in the departments. The AirAsia has made the high KPI’s to have the high performance and growth in the market (Clear Point strategy, 2018).
KPI’s for # years by AirAsia include:
- Increase in sales revenues by 20%
- Achieving this target will allow the business to become profitable
- The progress and growth will be measured by an increase in revenues
- By hiring additional and trained staffs, promoting the existing customer to buy the more product
- By promoting the staff personnel and developing their skills and knowledge
To achieve this indicator other measures are also taken into consideration, which are:
Air Asia has found with the increase in the profit from the year 2013 to 2015, which made the company profitable, and shareholders satisfied. Both the gross margin and net profit margin are better to understand the organization return.
The cost charged by the Air Asia is finding to nominal and lower as co pared to the other service airline industry. The cost-effectiveness is properly maintained and considered as the best way to manage their clients (Ahmat et al., 2014).
|
(RM MILLION, UNLESS OTHERWISE STATED |
||||
|
2015 |
2016 |
20171 |
||
|
Passengers carried |
24,254,506 |
26,410,922 |
39,092,972 |
|
|
Capacity |
30,079,666 |
30,282,671 |
44,435,006 |
|
|
Load factor (%) |
81 |
87 |
88 |
|
|
RPK (million) |
30,006 |
34,676 |
50,805 |
|
|
ASK (million) |
37,408 |
40,086 |
58,311 |
|
|
Aircraft utilisation (hours per day) |
12.4 |
12.4 |
12.6 |
|
|
Average fare (RM) |
157 |
167 |
176 |
|
|
Ancillary revenue per passenger (RM) |
47 |
48 |
49 |
|
|
Revenue per ASK (sen) |
14.20 |
14.19 |
15.13 |
|
|
Cost per ASK (sen) |
12.21 |
11.27 |
13.13 |
|
|
Cost per ASK – excluding fuel (sen) |
6.86 |
7.22 |
8.29 |
|
|
Revenue per ASK (USc) |
3.60 |
3.43 |
3.53 |
|
|
Cost per ASK (USc) |
3.10 |
2.72 |
3.07 |
|
|
Cost per ASK – excluding fuel (USc) |
1.74 |
1.74 |
1.94 |
|
|
Number of stages |
167,002 |
166,983 |
246,162 |
|
|
Average stage length (km) |
1,247 |
1,316 |
1,290 |
|
|
Size of the fleet at year end (AirAsia Berhad) |
80 |
77 |
116 |
|
|
Size of the fleet at year end (Group) |
171 |
174 |
205 |
|
|
Number of employees at year-end |
6,636 |
7,615 |
12,404 |
|
|
Percentage revenue via internet (%) |
70 |
72 |
70 |
|
|
RM-USD average exchange rate |
3.94 |
4.14 |
4.28 |
|
|
On time performance (%) |
80 |
76 |
73 |
|
|
Fuel consumed (‘000) (barrels) |
6,267 |
6,491 |
9,855 |
|
|
Average fuel price (USD per barrel) |
81 |
58 |
67 |
(Source: AirAsia, 2018a)
Customer Lifetime Value
In this, the company tries to minimize the cost is the only way to optimize the customer acquisition. This will maintain the long-term relationship with the customer and retention of the customer will be possible from this. This will be shown through the performance indicator. If the revenues are showing the increasing trend in AirAsia then the customer is satisfied with the performance of the company (Chang and Yu, 2014).
The customer retention can be possible only when they are happy with the services received by them. AirAsia tries to provide the maximum satisfaction to their customer by offering those offers and discounts. The CSR activities are also done by the company to satisfy their consumer satisfaction scores and the percentage of customers repeats the purchase (Nugraha, 2016).
Political Factors
Similar to profits, the performance indicator is upfront. By forecasting the demand and number of customers, performance in the near future will be predicted or determined.
Employee turnover Rate
Air Asia is considered the customer-centric organization and prefers to0 offer the best services to their customer but lack in offering the proper facilities and development to the employee and staff working there. Due to this, the rate of employee turnover is found more in the case of AirAsia. This can be calculated by the number of employees who have left the company and divide it by the average number of employees working in the company (PNM Soft, 2016).
The process metrics include customer support tickets in which exploration of the new tickets, the number of resolved tickets and resolution time. This help to have the good customer base in service department by providing them quality services in the industry. The company also focus on improving the cycle time in the process.
|
Strengths · AirAsia has found to have strong brand recognition, as it is the oldest brand in the market, which makes the brand loyalty of customers. · AirAsia has been positioned itself as a low-cost provider in the airline’s industry. · Availability of weekly flights AirAsia flights covers the majority of the region of India (CAPA, 2018). · Providing the edge over using the technologies by replacing human efforts with technology through online services |
Weakness · In order to keep the positioned it low-cost carrier and keep their prices low but due to this, their revenues inflows and profits will be lowered. · The USP of AirAsia is the low carrier image. The customer is not willing to compromise on quality just because they are charged low and satisfaction is based on the quality of services provided by them. · Survival in the low cost for a long time is next to impossible for any company. With the fluctuations in the fuel cost and increase in service cost, the AirAsia find the low cost as a challenge. |
|
Opportunities · The biggest opportunity available to the AirAsia is that they can explore their business in the world. There has been a big surge in the overseas travel. · AirAsia can build up a strong niche in the premium end of the market. · Strategic Alliance with Star and joint venture with Tata Sons |
Threats · AirAsia faces lots of competition from brands such as Air India, Virgin Airlines, and Singapore Airlines etc. · AirAsia is finding intensely difficult to manage the fluctuations in the prices of cost and to maintain the vast fleet of aircraft. Managing the cost is a threat for AirAsia (CAPA, 2014). |
The proposed strategy can be drawn with SWOT analysis. AirAsia can diversify their activities by using the strengths and opportunities in their market.
|
Strength · Brand Image · Size · Low cost carrier · Quality |
Weakness · High cost for short haul carrier |
|
|
Opportunities · Strategic Alliance with Star · Joint venture with Tata Sons |
SO strategies · Use the alliance with the Star to increase in size · Become the first mover advantage in developing countries by making the joint venture. |
WO Strategies · Develop the cost leadership strategy in the market to grab the large market share · Enter into the joint venture |
|
Threats · Rapid growth of several low cost airlines in Middle east · New competitor as arise with new strategies |
ST Strategies · Adopt the strategic of acquisition and merger · First mover advantage strategy to overcome the competitors threats |
WT strategies · Use of internal factors to overcome threat · Adoption of new technology to reduce the cost |
Conclusion
From the above discussion, it can be concluded that the AirAsia is the top performing company in the airline industry by providing services at low cost to its customers. The services provided by the company are of good quality in less cost, which satisfies customers the most.
Suitability
The evaluation of the strategy can be done by using the SAF (suitability, Acceptability and Feasibility model. The suitability evaluation can be understood by using the PESTLE analysis of AirAsia. From this analysis, the external environment suitability can be predicted and options for internationalisation and market situation can be understood to opt for the new strategies or choices. The opportunity and threats present in the market can be understood and decision will be made according to opportunities present in market. AirAsia uses the strategic alliance with the local companies to have large market share in the existing market. The company using the merger and acquisition strategy is found to be most suitable to combat with the threat of competitors. From this alliance, company can make use of the other company resource to have the cost leadership in the market (AirAsia, 2018d).
Acceptability focuses on the stakeholders and the financial aspects of the strategy. This strategy examines the risk and return company is facing in the market towards the stakeholders. The reaction of the stakeholders can be examined by the prices of the share of company and value of company. Stakeholders are satisfied in AirAsia due to the high return given by company (Ong and Tan, 2010).
Feasibility focuses on whether the company has resources to continue with strategic choices. From feasibility analysis, the internal capabilities of the AirAsia can be evaluated. The strength and weakness of the Singapore airlines helps to do the feasibility analysis by setting the company as benchmark. The most feasible strategy available to the AirAsia is the strategic alliance with the local company (AirAsia, 2016).
References
Ahmat, N.C., Abas, R., Ahmad-Ridzuan, A.H., Radzi, S.M. and Zahari, M.S.M. (2014) Blue Ocean strategies in hotel industry. Theory and Practice in Hospitality and Tourism Research, 43.
AirAsia. (2016) Annual Report [Online] Available from: https://www.airasia.com/cdn/docs/common-docs/investor-relations/airasia-annual-report-2016.pdf [Accessed on: 2nd August 2018]
AirAsia. (2018a) 5 Year Financials & Key Operating Statistics [Online] Available from: https://ir.airasia.com/5_year_financials.html [Accessed on: 2nd August 2018]
AirAsia. (2018b) AirAsia Mission, Vision & Values [Online] Available from: https://www.airasia.com/in/en/about-us/airasia-mission-vision-values.page [Accessed on: 2nd August 2018]
AirAsia. (2018c) Strategy [Online] Available from: https://ir.airasia.com/strategy.html [Accessed on: 2nd August 2018]
AirAsia. (2018d) Code of conduct [Online] Available from: https://www.airasia.com/in/en/about-us/airasia-code-of-conduct.page [Accessed on: 2nd August 2018]
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Braun, L. (2014) Liberalization or Bust: A Double Step Approach to Relaxing the Foreign Ownership and Control Restrictions in the Brazilian Aviation Industry. Air and Space Law, 39(6), pp.341-363.
CAPA. (2014) AirAsia X SWOT: challenging times but first mover advantage and fleet flexibility are huge strengths [Online] Available from: https://centreforaviation.com/analysis/reports/airasia-x-swot-challenging-times-but-first-mover-advantage-and-fleet-flexibility-are-huge-strengths-188591 [Accessed on: 2nd August 2018]
CAPA. (2018) AirAsia SWOT Analysis: Tough second quarter ahead, but fundamentals solid [Online] Available from: https://centreforaviation.com/analysis/reports/airasia-swot-analysis-tough-second-quarter-ahead-but-fundamentals-solid-7559 [Accessed on: 2nd August 2018]
Chang, Y.C. and Yu, M.M. (2014) Measuring production and consumption efficiencies using the slack?based measure network data envelopment analysis approach: the case of low?cost carriers. Journal of advanced transportation, 48(1), pp.15-31.
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Clear Point strategy. (2018) 18 Key Performance Indicator (KPI) Examples Defined
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Lee, J.W. and Dy, M. (2015) Mitigating ‘Effective Control’Restriction on Joint Venture Airlines in Asia: Philippine AirAsia Case. Air and Space Law, 40(3), pp.231-253.
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Nugraha, R.A. (2016) AirAsia: Flying Cabotage Under Cloak in Indonesia and ASEAN. Jurnal Hukum & Pembangunan, 45(2), pp.163-183.
Ong, W.L. and Tan, A.K. (2010) A note on the determinants of airline choice: The case of Air Asia and Malaysia Airlines. Journal of Air Transport Management, 16(4), pp.209-212.
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