M … The effective strategy aimed at achieving cost leadership and differentiation has contributed to the success of AirAsia. The generic strategy that applies to AirAsia is its cost leadership. (2019, June 3). Need a custom Case Study sample written from scratch by The primary benefits include huge popularity of the airline due to its exceptional low fares. The analysis of the main specifics of its strategy, its methods for achieving cost leadership and differentiation, and techniques used to sustain its compatibility reveals the secrets of the success of AirAsia. While for AirAsia, price differentiation strategy is utilised whereby AirAsia is able to provide affordable price for budget flight. The analysis of Porter’s five forces can help to reveal the potential success of AirAsia in the airline industry. IvyPanda. Recognizing that price and convenience are most important to their target audience, Air Asia achieved cost leadership through innovative strategies such as single class services and lower fares without preferable seats, meals, entertainment and other utilities. which have helped the brand grow. In order to succeed in the LCC segment, AirAsia will need to maintain its low cost elements in their business design, as it is critical to the long-term success. Besides, the airline achieves differentiation by being the pioneer in many services in the Asian region. 13(3) : pp. Such situation puts a threat to the company’s compatibility and can affect its leading position in the world of cost-effective air traveling. New Jersey: Pearson International Edition, Collis, D. J.,Montgomery, C. A. Air Asia has adopted a generic strategy of cost leadership by reducing the cost of operations and passing the savings through to customers with very low ticket prices. Striving for employing the best innovations also contributes to the success of the company and attracts more customers. Air Asia X – The only international AirAsia affiliate that operates long-haul routes to Europe and Australia. (September 26, 2006), AirAsia Taked Flights on Low Cost Carriers Business Week (Online) Available from http://www.businessweek.com/globalbiz/content/sep2006/gb20060929_437421.html (assess on December 2, 2009), Shari M. (September 1, 2003) A Discount Carrier Spread its Wings Business Week (Online), Available from: http://www.businessweek.com/magazine/content/03_35/b3847132_mz033.htm (assessed on December 2, 2009), Teece, D.J., Pisano G., Shuen, Amy (1997) Dynamic Capabilities and Strategic Management Strategic Management Journal. until now, it has flown over 55million customers across the region. Murray (1988) disagrees that cost structure is vital in relation to the output performance compared to the price sensitivity. Competitors tend to know how big the market is and how good the opportunity is in Asia. This is SWOT analysis of Air Asia. We will write a custom Case Study on AirAsia Company specifically for you for only $16.05 $11/page. However, AirAsia appears to be rather successful in dealing with the competitors, as it is recognized as one of the best companies offering low-cost flights, and its success is rather difficult to be repeated. Based on the above forces, three strategies are available to choose from. The largest airline in Malaysia the business is known to be highly employee centric. Such approach allowed the company to cut the expenses for fuel and remain competitive. 2nd Edition. Air Asia had been established on 12 december 2001 with Dato Sri TonyFernandez as the CEO. Such developed structure lets the company be able to operate international flights for lower prices, as the airline has its hubs in numerous countries. These are: differentiation, cost leadership, and focus. AirAsia apply differentiation strategy in their operation by rewarding their customers through the “Big Loyalty” program. * AirAsia has flown over 55 million guests across the region and continues to spread its wings to create more extensive route network through its associate companies, Thai AirAsia and Indonesia AirAsia. The company implemented no-frills, low-fare concept by offering prices that were nearly 50% lower than the prices of the competitors. Only after ensuring the success of the discussed operation, AirAsia launched long-haul flights. "AirAsia Company." The following sections describe recommended strategies, along with reasoning and expected results, for AirAsia to move forward with. 9(4): pp. The company stands out from the rest of Asian airlines by offering the most attractive fares. Through this program, members are allowed to earn points for every single cents spent on their products and services. The new low–cost strategy has led to an increase in frequencies and a 60% cut in headline fares on its five domestic services from Kuala Lumpur. Copyright © 2003 - 2021 - UKEssays is a trading name of All Answers Ltd, a company registered in England and Wales. At this stage, the airline offered full services for relatively low prices, if compared with Malaysia Airlines. One of the major pitfalls against attempting to differentiate is by trying to combine low cost and differentiation strategy by starting to add frills in its business model. Most of the competitors have the same concept of no frills and low price strategy and will continuously try to reduce its costs than AirAsia in order to gain sustainability in the market. Every frill or service adds to cost and reduced the strategic cost gap, thus curbing the flexibility to offer innovative price deals. AirAsia Company. With the growth in the LCC, it will create opportunity to others to enter the market. In particular, we apply Porter's (1985 Porter, M.E. In the United States there are clear signs that the well established low cost airlines such as JetBlue and Southwest are adapting the differentiation strategy which is a move to drive out any new low cost entrants to the market. Free resources to assist you with your university studies! Air Asia operates with the world’s lowest unit cost of US$0.023/ASK and a passenger breakeven load factor of 52%. 105-126, Porter M.E. The airline also provides service to Abu Dhabi and London. Lowering the price of that product for a time in order to stimulate sales is a tactic. In August 2011 AirAsia and MAS, Malaysia’s national carrier, announced a partnership called the ‘Comprehensive Collaboration Framework’, whereby a share swap deal was agreed between Tune Air, the owner of AirAsia, and Khazanah Nasional, the government backed investment arm owner of MAS. We draw upon established theory from the fields of strategy and strategic human resource management to explain AirAsia's minimalist approach to human resource management. It was the first in the region to introduce ticketless flights, mobile applications for booking the seats, and online check-in. Around the world, it has been observed that low cost airlines pursuing a generic business design have emerged as the most successful. 18(7): pp. Air Asia’s highest fares are 20% below those offered by MAS, and these fares account for only 10% of its total seat sales. Domestic flights are more susceptible to this risk, as customers are more likely to choose other means of transportation while traveling around the country. Further expand AirAsiaX’s operations. We're here to answer any questions you have about our services. * Low operation cost through flying with one type of aircraft, uses secondary airport locations etc. Staging and Pacing (what will the speed and sequence of moves?). : pp. The firm was founded in 1996 as a low cost domestic airline, and was purchased by Tony Fernandes in 2001. Further expansion to different regions was accompanied by focusing on secondary airports to avoid paying large fees at major airports. An extended route system will most certainly be a key differentiator and to sustain its competitive advantages, resources and capabilities need to be analysed further. (assessed on December 2, 2009), Barney J.B. (1995) Looking Inside for Competitive Advantage Academy of Management Executive. The company implemented no-frills, low-fare concept by offering prices that were nearly 50% lower than the prices of the competitors. * Create new segment in airline travel based on value and service. Customers have the choice of customizing services without compromising on quality and services. Airasia Generic Strategies Business Strategy Air AsiaCompany BackgroundAir Asia is one of the companies that very successful in adopting the cost leadership strategy as one of their competitive advantages. AirAsia applies cost leadership strategy on its operations. We've received widespread press coverage since 2003, Your UKEssays purchase is secure and we're rated 4.4/5 on reviews.co.uk. 3 June. Successful strategy of reducing fuel costs enabled the company to sustain low fares. E-Commerce Air Asia 4563 Words | 19 Pages. The differentiated service also reduces the alternatives available to buyers thus reducing their bargaining power. The second component of the strategy can be identified as a gradual expansion. To show you the future of Air Asia by SWOT analysis. Porter (1996) presented three generic strategies that an organisation could use to overcome the five forces and achieve competitive advantage. Porters 5 Generic Strategies. As what the slogan says now everyone can fly which actually attract thecustomers to buy the … AirAsia apply differentiation strategy in their operation by rewarding their customers through the “Big Loyalty” program. Adopting a suitable strategy depends on the organisation’s industry, customer characteristics and capabilities (Murray ,1988) and (Eng ,1993). In this article we trace the rise of AirAsia's success and the nuances of the low-cost aviation model it has pursued. Air Asia always tries to keep the operations simple and efficient to keep the costs low, for example by simple and efficient online ticket booking. * Main base is located at the Low Cost Carrier Terminal (LCCT) at Kuala Lumpur International Airport (KLIA). The company operates Airbus A320-200 fleets. All work is written to order. 149-164, Local Company Profile: AirAsia Sdn Bhd-Travel and Tourism-Malaysia (October 2009) Euromonitor International. Looking for a flexible role? 3 Air Asia Current Business Strategies Air Asia wants to be the lowest short-haul airline in every market it goes in. If the manufacturer is free to increase the prices for its products at any time, as the airline has no choice but to agree to the new price policy, as it heavily depends on the cooperation with the manufacturer. The strategy that they have formulated at the beginnings was a clever blend of proven strategies by other low cost airlines in US and Europe. The company quickly reacts to any changes on the market and takes appropriate actions that help the company to remove the threats put to its compatibility by the competitors successfully. Bargaining power of customers has a low threat to AirAsia, as the airline provides unique cost opportunities at the market. The primary method for achieving differentiation employed by AirAsia is providing the lowest possible prices. 1105-1121, Eng, L.G. Business Strategy: SWOT Analysis Of Airasia 3305 Words | 14 Pages. Let's see if we can help you! Strategy Our ir-vision To continue to be the lowest cost short-haul airline in every market we serve, delivering strong organic growth through offering the lowest airfares at a profit. You can use them for inspiration, an insight into a particular topic, a handy source of reference, or even just as a template of a certain type of paper. 509-533, www.airasia.com (assess on November 12, 2009). It achieved low costs by organizing subsidiary companies in these countries. Then it employed a systematic strategy to expand its services outside Malaysia. The chief executive of the airline, Fernandes, has also contributed a lot to the differentiation of the company by being open to journalists and providing instant access to all news of the company for mass media. TABLES OF CONTENTS 1.0 Introduction 2.0 Importance of e-Commerce and m-Commerce 3.0 Corporate Appraisal 4.0 Competitive Advantages 5.0 m–Commerce 5.1 Differences of m-Commerce & e-Commerce 6.0 Recommendations 6.1 Benefit of Microsoft Vista and m-Commerce to AirAsia 6.2 Benefit of Microsoft Vista and m-Commerce to Customers 7.0 … To know the business strategies and operations of AirAsia by using different strategy models. To achieve the goal, it has some strategies such as lean cost structure, different ways of promotion, keeping safety, satisfying guests, and developing human resources (AirAsia… Marketing Mix of AirAsia analyses the brand/company which covers 4Ps (Product, Price, Place, Promotion) and explains the AirAsia marketing strategy. The threat of new entrants can be considered a low threat, as airline industry require big investments to keep new companies sustainable and long-term authority of the airline to attract the customers. In this case study, AirAsia’s business plan and strategy, sustainability, cost and competitive advantage it has and its management style has been discussed in details. New York: McGraw-Hill Irwin. The brand name is a major strength to AirAsia wherein a lot of effort is being done. (1988) A Contingency View of Porter’s “Generic Strategies” The Academy of Management Review. (2006) Carriers within Carriers: A Strategic Response to Low-Cost Airline Competition Transport Reviews. Indonesia AirAsia offers relatively low-price tickets and it becomes interesting advertisements to promote their services so that they are easily accepted by public. 15(2) : pp. There are only two aircraft manufacturers – Boeing and Airbus. King Faisal Specialist Hospital and Research Center (KFSH&RC) in Riyadh, Saudi Arabia, “The Effects of Clown Intervention on Worries and Emotional Responses in Children Undergoing Surgery” by Fernandes and Arriaga, The Emirates Airlines Marketing Strategies, Analyzing Emirates Airlines’ Business Excellence and Quality Management Strategy, Strategic Analysis of the UK Low-cost Airline with Focus on Ryanair, Social, Technical and Financial Aspects of Google Company. … Five Forces - an industry-level analysis to determine attractiveness of an industry Threat of New Entrants AirAsias low cost carrier strategy is to maintain efficiencies to sustain the lowest fares, thus being a barrier to new entrants Threat of Substitute As one of the most profitable low cost carriers, it is difficult for competitors to find enough efficiencies to become a substitute for AirAsias niche markets AirAsia also seek to create excitement amongst their customers with the range of innovative and personalized service such as self check-in. In the beginning, the company focused on improving the system of providing local low-fare flights and achieved great success. The Internet plays a vital part in the Air Asia business and has proved to be critical to the success of the business. A successful differentiation strategy lets a company to charge a higher price for its product or service and to get customer loyalty since consumers may become strongly close to the different features. 22(1) : pp. AirAsia can be possibly competing with other airplane industries if they can make efficiencies to reduce cost and make the low possible fare than other airplane industries. As of 2020, there are several marketing strategies like product/service innovation, marketing investment, customer experience etc. For example, while entering the Asia-Pacific region the company explored partnerships with such low-cost airlines as Australia’s Virgin Blue, Singapore’s Tiger Airways, and Indonesia’s Lion Air. Cost Leadership b. Differentiation c. Cost Focus d. Differentiation Focus 4. The company can be considered as an innovator in the sphere of air traveling in Asia. It provides financial services (e.g. It employs staff with low wages (most of the secondary important staffs are from Indonesia, Bangladesh, Nepal, and … Unfortunately, your browser is too old to work on this site. 61-78, Shameem A. At the moment, they also collaborated with a giant American football club, Oakland Riders to create brand awareness for the local public in order for them to enter the USA market in the future. The company has a current fleet of ninety-two aircraft that include Airbus A321neo, Airbus A320neo and Airbus A320-200. Gaining 40 percent market share for a product in order to boost profits is a strategy. June 3, 2019. https://ivypanda.com/essays/airasia-company/. By applying this strategy, carriers have lost their source of competitive advantage by narrowing the strategic cost gap. Meranun had bought over Air asia for RM 1.00 with a RM 40 million debt. travel insurance) and holiday products. pp. (2019) 'AirAsia Company'. IvyPanda, 3 June 2019, ivypanda.com/essays/airasia-company/. Such situation enables Airbus to put pressure on the airline. Air Asia is a low-cost airline headquartered in Malaysia. AirAsia’s success is based on the no-frills, low fare, simple and convenient option air travel. * AirAsia flies to over 60 domestic and international destinations with 50 routes, and operates over 400 flights daily from hubs located in Malaysia, Thailand and Indonesia. Besides, the company strives for gaining the reputation of the provider of high-quality services. 2019. Copyright © 2021 - IvyPanda is a trading name of Edustream To maintain its competitiveness, AirAsia focuses on promoting its reputation of the company that offers the lowest fares. Its affiliate airlines, Thai AirAsia and Indonesia AirAsia fly from Suvarnabhumi Airport, Thailand and Soekarno-Hatta International Airport, Indonesia, respectively. In the airline industry, it is difficult, if not impossible to achieve product differentiation because the services being rendered are the same. Airasia flies to more than 61 places with 108 routes and operates 400 flitghts daily from hubs located in Malaysia, thailand and Indonesia. AirAsia, being a world class leading low cost airline firm has developed a wide range of strategies and plans to help its customers benefit from quality services. Michael Porter, believed that the basis for this advantage falls under 3 base strategies of Cost leadership, Differentiation and Focus. Moreover, AirAsia is not the only one who provides airline service. The main hub of the airline is the international airport Kuala-Lumpur. You are free to use it for research and reference purposes in order to write your own paper; however, you must. 43-48, Flouris T., Walker T.J., (2005) The Financial Performance of Low Cost and Full Service Airlines in Times of Crisis Canadian Journal Administrative Sciences. 3-20, Hanan M.T., Freeman J. IvyPanda. The airline used joint ventures to ensure the cost leadership in international short-haul flights. Competitive Advantage of AirAsia a. How is it similar to and different from the strategies of those carriers? (2003) Using Generic Strategies: Some Caveats Singapore Management Review. The airline launched its sister company AirAsia X and attracted new investors to ensure the cost leadership in long-haul international flights. AirAsia was founded as a government-controlled airline in Malaysia in 1994. 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