1 CHAPTER ONE: INTRODUCTION OVERVIEW OF AIR ASIA AirAsia .. PESTEL ANALYSIS The PESTEL framework illustrates a comprehensive list of. However, it should also be noted that Air Asia’s zealous approach in preaching cost avoidance in every aspect of administration and operations is the key in sustaining a low-cost culture since its operation in2001. A) Low Fare, No Frills Air Asia’s intense focus on providing air travel with no frills leads to substantial costs saving. The first stage is known as the introduction stage... Save Paper; It is the largest airline in Malaysia by fleet size and destinations. As such, these airlines do not directly pose as strong rivalry to AirAsia at this point in time. c)Social-Cultural Surveys revealed that more people were willing to compromise on food and other services in exchange for lower prices. Change in Level of customer’s disposable income and its effect. AirAsia is aware that maintaining its passenger safety is of paramount importance – as indicated in the surveys in the United States and Japan. In addition, to mitigate price risk, AirAsia hedged fuel prices at US$42 a barrel for the first half of 2005, which was substantially lower than the price per barrel of US$70 in the late 2005. For instance, Air Asia’s joint venture with Shin Corporation to launch its new LLC achieved immediate success. AirAsia Group operates scheduled domestic and international flights to more than 165 destinations spanning 25 countries. The business of coffee is highly dependent on international trade. 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. This growth in air travel was also due to the region having geographically dispersed countries with large population, a rapid increase in trade and tourism as well as the respective government investments in their airports, airlines and travel infrastructure. Although MAS had an ambivalent reaction to Air Asia’s entry into the airline industry, it also reacted to the competition by offering fares at 50% discounts on some its domestic routes. PEST Analysis for AirAsia: Political Flying outside Malaysia is difficult. AirAsia was subsequently named as one of the “Best Newly Listed Companies” and Asia’s “Best Managed Company in the Airlines and Aviation Sector by Euro money after its IPO. The former has provided us the financial strength to grow even in less than optimum economic conditions, while the latter underlines our commitment to operating safely, responsibly and with integrity, and has gained us the trust of our stakeholders. AirAsia India is an airline in India headquartered in Bangalore, Karnataka.The airline is a joint venture with Tata Sons holding 51% stake in the airline and AirAsia Investment Limited (Malaysia) holding 49% stake. So far, AirAsia only operates on a single type of aircraft, the Boeing 737-300. The study. The AirAsia Group is based in Malaysia, and AirAsia Malaysia remains the biggest revenue contributor. In summary, with the capability and flexibility provided by above-average returns, AirAsia is able to satisfy multiple stakeholders more easily Marketing ; Customer Segmentation, Although AirAsia invests aggressively in marketing where required, it generally adopts creativity and yet low-cost advertising so as to keep cost low. SOOT analysis, Porter’s five forces Model. Our One AirAsia drive It was originally a government owned business; yet, due to heavy debt, it was bought by former Time Warner executive Tony Fernandes in 2001, and this is where the real story begins. This above average results indicates that the company has been managed well and thus is able to achieve high above-average returns. rate of interest being directly related to the cost of capital. At first, the company operated three Boeing 737s. For instance, when AirAsia purchases insurance any policies to insure against pure risk, it also makes a conscious effort to acquire them at a much lower rate lower than other LCCs. The favorable investment environment for attracting investors, the presence of, business partners such as Thai Airways Asia and Indonesia Airlines Asia, and the rapid, economic growth and development also contributed to the success of AirAsia. The following political external factors determine some of Nike’s strategies: Key Internal Factors Weight Rating Weighted Scored Strengths 1 Low cost for all passenger 0.13 4 0. As such, AirAsia needs to be cognizant with the business cycle so that it can to take full advantage of such effects especially when there are changes in discretionary income and consumer spending patterns. The United Nations’ statistics also show that Asia has an astonishing demographic dividend - where more than 35% of its population is below the age of 25 and more than 55% hovers below the age of 35. Haven’t found the relevant content? In 2001, AirAsia was heavily in debt and was bought by Tony Fernandes for less than one dollar. PhDessay is an educational resource where over 1,000,000 free essays are collected. So far, AirAsia has promoted its company without incurring high sales and marketing expenses. In late 2001, AirAsia was re-launched in Malaysia as a trendy, no-frills operation with three B737 aircraft as a low-fare, low-cost domestic airline. In 2004 and 2005, the company also won several prestigious awards. 5 is the industry average for earnings margin, 11. 1. Populist Political Constraints. In relation to political factors, Air Asia receives support from the Malaysian government as well as Prime Minister Mohammad. For example, between East and West Malaysia, there is no other viable and efficient mode of transportation other than to commute by air. external forces. For instance, the companies also have their own branded credit card and offers corporate travel services. Byconducting this analysis Air Asia would be able to get a better understanding on the growth anddevelopment of their organization. a)Conducive Environment for Growth. Based on a Report published by Aero Connections in 2004, that particular model was the best selling commercial jet of all times due to its efficiency and cost effectiveness. Also, the analysis of low cost carriers (LCC) industry reveals that it is so concentrated that intense competition is inevitable. Success Factors of AirAsia As AirAsia continues to compete with other LCC (both existing and new) in Asia which also may adopt low-cost strategy, what have to remember and realize that the way customers differentiate them from their competitors will be strictly on “fare” and reputation. AirAsia Case Study Report. Considering the vast regions that many airlines operate, the business environment is often regulated by on the political atmosphere in a particular market. For instance, in 2003, it was named the “Developing Airline of the Year” (by Air finance Journal) and the “Asia Pacific Airline of the Year” (by Centre for Asia Pacific Aviation, CAPA). Political Factor. Airline traffic in Asia is projected to grow at 7. As a matter of fact, in mid-2005, eight budget airlines were operating in Southeast Asia and there were predictions that there would be as many as 20 such airlines by 2012. 1% annually for the next 5 years and more than triple in the next 20 years. As a result, travelers can expert and look forward to more frequent and puncture flights. So far, Air Asia’s holistic approach to risk management effectively is viewed favorably by its stakeholders most of the time, especially the shareholders. ) So far, AirAsia has managed to design its aircraft cabins that can minimize wear and tear, cleaning time and cost. However, amidst the challenges faced, there are still plenty of opportunities for AirAsia to explore and exploit. AirAsia get a good compliment and attract a lot loyalty customer. Operations It processes inputs to provide valuable products/services. Technically, any firm or competitors in ‘quadrant I’ will use their similar resource portfolios to compete against each other. As the saying goes, “the lower the price, the higher the load factor”. Changes in these situation and its effects. To further exploit technologies, AirAsia made it possible for customers to purchase tickets either from post offices or designated bank teller (ATM) machines. AirAsia purchased insurance policies to mitigate pure risk although it is done and operated a bit differently as it adopts an integrated approach risk management that goes beyond the traditional parameters of what is insurable. e)Service AirAsia is one of the few airlines that had the shortest turnaround time, around 25minutes as opposed to 45 to 120 minutes recorded by other airlines. Minimize Personnel Expenses AirAsia implemented flexible work rules and streamlined administrative functions which allowed employees to perform multiple roles. Political FactorThe first factor that I … d) Demographic In 2005, the total population in Asia stands at more than 3. Question 2 The construct of cost leadership strategy emphasizes on lowest costs, though not necessarily the lowest price, in the market. This is based on bilateral agreement affecting the way in which Pan-Asia budget carriers. Generally, less busy airports can be expected to provide higher rates of on-time departures. Here is a Political factor affecting the coffee industry: Trade relationships. Political: Political factors can generally vary between nations. h) Reputational Resources Air Asia’s success has been widely recognized. Many governments have been instrumental in dabbling in the success of airline companies in Asia. AirAsia is one of the airline that provide no frills for the customer, the company will more focus on the low income customer. However, the plan has been cancelled due to the Stated-owned Malaysia Airports had tried to stop to build the new terminal and disagreement with former Prime Minister, Tun Mahathir. With that, based on the competitor analysis framework appended in Diagram 3 , Bangkok Airways and Lion Air fall in ‘quadrant I’ and thus are considered as close competitors of AirAsia. Strategic Audit Report Strategic Management 313 Unit Index No. For instance, although the company operates 737 aircraft that were built by Boeing, it also acquired the new A320 aircraft from Airbus. Hence, it appears that although the travel market will be expanded, in reality AirAsia would also have to operate in a more challenging environment with intense competitions. Consequently, it also develops aircraft advertising by converting its planes into “flying billboards”. — Reuters pic . It has a huge bank and cash balances of US$86. The first factor that I am going to discuss is Political factors. Eurasia needs to also address their threats and delve into new opportunities if it wishes to still remain profitable. So far, it has expanded its network from Malaysia to Thailand to Singapore, Macau and even the Mainland China in 2006. Besides that, AirAsia also strives to build strong relationship with its suppliers. Not only that, its aircraft interiors is also outfitted with signature red carpeting and plush leather seats to enable its guests to travel comfortably. In Thailand, the government attempted to boost incoming tourists by waive the temporary visa fees. Swot Analysis Of Airasia. 024 million / US$41. The new aircraft allow AirAsia to enjoy substantial lower fuel cost as these modern airplanes had lower fuel usage by as much as 12%. In addition, e-commence and internet-based activities (such as online holiday and hotel reservations)are other areas where AirAsia can derived ancillary revenues from. AirAsia crews are also required to help clean the aircraft so as to shorten turnaround times to achieve higher aircraft utilization. 6million. NIKE, Inc. is operating in Textile - Apparel Footwear & Accessories in more than dozen countries and expose itself to different types of political environment and political system risks. AirAsia group CEO Tony Fernandes (pictured) has copped flak for openly showing his support for politics on a professional level. 2. 3 AirAsia is the lowest leader in Asia 0.05 4 0. This deal involved global sponsorship and advertising. Besides that, AirAsia emphasizes lot on maintaining a high quality service to all its passengers such as punctuality rate and excellent baggage-handling performance t o determine whether AirAsia has any core competencies (sustainable competitive advantages), the company’s capabilities are assessed based on the four criteria - valuable, rare, difficult to imitate and non-substitutable. PEST FACTORS: POLITICAL: Next political elections and changes that will happen in the country due to these elections; Strong and powerful political person, his point of view on business policies and their effect on the organization. A firm pursuing a cost-leadership strategy needs to gain a competitive advantage primarily by reducing its economic costs below its competitors. Political Factors Affecting Airline Industry. (2017, Jan 15). Political factors affecting airline industry refer to a variety of government interventions that may hinder or enhance the operations of air transport. Analysis of the Industry In 2004, the airline industry flew 1. billion passengers, of which about 30% were in Asia. c) Reliability AirAsia also chose more consistently secondary and regional airport destinations instead of busy and congested main airports. This study examines the extensive strategic analysis of AirAsia Berhad that has enabled it to sustain its competitive advantage as Asia’s leading low cost carrier (LCC). Pestle Analysis of Air AsiaPESTLE analysis consists of Political, Economic, Technology and Social Culture. Similarly, the company’s CEO, Tony Fernandez has also won several recognitions. These airports were also less busy and had shorter runways, thus helped reduce fuel consumption while aircraft queue for takeoff or taxi on the ground. The regulatory reduction of the, aviation industry in Southeast Asia also made a positive contribution to the, development of the aviation industry, providing new opportunities for the expansion, and niche markets in the aviation industry, Through this factor, business will examine the economic issues that are bound to have. Political factors play a significant role in determining the factors that can impact NIKE, Inc.'s long term profitability in a certain country or market. 9% respectively. The first one is machine. Like it or not, the political interference has to be present everywhere. The essential difference between the above mentioned matrices lies in the type of factors incorporated in the model; whilst the latter is engaged in internal factors, the former deals exceptionally with external factors – those exposed to social, political, economic, legal, etc. This probably explains why AirAsia has always enjoyed strong support from banks and venture capitalists when the CEO took the company public in November 2004. b)Political/ Legal Government policies are important drives for the success of Asia. AirAsia satisfies its customers by offering low fares without having to compromise to quality and service. Exchange rates fluctuations and its relation with company. Fuel accounted for almost 50% of the total operating costs and thus it is an important component of cost saving for AirAsia. As such, Air Asia’s success is based on the following key factors: )Cost Effectiveness AirAsia … The world’s biggest coffee producers are located in Asia, South America, and Africa, and yet, the drink is especially popular in Europe and North America. As of now, AirAsia will have to compete with Bangkok Airways and Lion Air which have entered the market since 2000/2001. 2.1) Introduction Industries usually progress through various stages from birth until death. It is certainly Air Asia’s strength. Investment in kitchens and equipment for storing, heating and serving of meals can be avoided all together. AirAsia had a holding of49% of Thai AirAsia while the remainder was held by Shin Corp., owned by the former Thailand Prime MinisterThaksin Shinawatra (2001 -2006).ThreatsAirAsia and its competitors can also be negatively affected by government decisions. Threat of new entrants is moderately low as the entry into the industry requires high capital. 60 (US$230. Political factors In an attempt to operate beyond Malaysia, AirAsia faces bilateral agreement challenges and as such, its expansion and development are inhibited. 2) The religious zeal to cost-avoidance coupled with tacit knowledge to build extremely efficient processes to enable it to execute its business model (low cost). This is because they have to abide to the aviation acts and regulation. The company also strives to maintain good relationship with other suppliers that provide aircraft maintenance and airport services. The extreme drive to achieve high efficiency in operations allows AirAsia to clock the fastest turnaround time of 25 minutes. As the saying goes, “the lower the price, the higher the load factor”. All these inevitably increase the value of investments significantly. The Asean super app for booking flights, hotels, activities, food, unlimited deals and so much more! Hence, this allows AirAsia to benefit from conducting more flights a day. Starting from 2 aircraft till now AirAsia owns 28 and has carried more than 223 millions guest through its low fares travel. In short, the use of secondary airports can increase sales and help to keep operating costs low The ability to lower cost and at the same time widen profit margin (through increase productivity) augurs well with AirAsia’s cost leadership strategy. This lead to the conclusion that Bangkok Airways and Lion Air modeled in ‘quadrant I’ are direct competitors of AirAsia. AA (Ahsan Ali) Shaw May 5, 2018. The first one is machine. AirAsia also has1382 employees and they received proper on-the-job training workshops so that they can perform multiple roles effectively within a simple and flat organization structure. ) AirAsia Berhad is starting its operation in November 2004, which is listed. The end of June 2005 financial summary showed that Air Asia, the leading low cost airline in Asia, had a huge reserve (bank and cash balances) of US$86. This presents an opportunity for all LCCs to increase their revenues by offering travelling at a much lower fare. For instance, its CEO Tony Fernandez always wears a red AirAsia baseball cap in any of his interviews. Airasia Opportunity . d)Effective in Implementing Cost Reduction Measures Even though most low cost carrier had implemented the various cost reduction measures, it was AirAsia that had implemented them most effectively. Beijing is the capital of China. Analysis of External Environmental In analyzing the macro-environment, it is important to identify the factors that might affect the AirAsia’s supply and demand levels and its cost. How does the company face the competition? 5 Get mane awards such as “World’s Best Airlines” for … Like all other LCCs, AirAsia also positions itself as an airline that provides short-route ferry for non-business and price-conscious business passengers as shown in Diagram 2 . It was founded by a government-owned conglomerate, DRB-Hicom. 13 U. S. cents, the lowest for any airline in the world. Political Factors Affecting Nike’s Business. c)Power of Suppliers The supplier has an upper hand (high power) due to limited number of suppliers(only Boeing and Airbus). In 2004, it was reported that AirAsia had the lowest staff-to-per aircraft ratio (106 staff per aircraft as compared to 110employees per aircraft registered by other low cost carriers) and this helps lower staff cost. Strength of property rights and law rules. Indeed, in many countries, the strength of the environmental movement has led to strong legislation affecting organizational production system and products (Media 2008). Hence, this eliminates credit risk totally. AirAsia use one type of aircraft and have good aircraft design. f)Use of Secondary Airports Typically, AirAsia operates out of secondary airports, which involve lower landing, parking and ground handling fees. Landing and navigation charges are expensive in major destinations including Beijing, Hong Kong, Singapore and Bangkok. As a result, AirAsia achieved cost per average seat kilometre of 2. This provides AirAsia the options to either lower its prices and gain market share and sales from rivals or keep its prices at present market level and make more profit for every unit sold. c) Outbound Logistics This involves delivering products/services into a distribution channel or to the final destination. This speaks well of Air Asia’s ability to meet (or even exceed) the expectations of its customers. The company is also able to achieve higher plane utilization due to short turnaround time and as mentioned point-to-point routes. Political Factors In India, one can never over-look the political factors which influence each and every industry existing in the country. Starting with two planes bought from a Malaysian conglomerate in late 2001, the company had expanded it to 32 by the end of 2005. AirAsia’s high standards of security and maintenance allow AirAsia to earn a profitable rate on its insurance policy, increasing customer confidence. The Communist Party of China is the founding and ruling political party of the People’s Republic of China. For sure, the large, untapped market and Air Asia’s model would ensure its future success. By continuing we’ll assume you’re on board with our cookie policy. In addition, the company was also able to achieve good operating benchmarks in terms of flights on time (88%) and baggage handling efficiency (99. In addition, it was also reported in prominent journals and magazines such as ABJ and AWM that many customers felt that Air Asia’s cabin crew demonstrated professionalism when carrying out their duties on air. Political Factor. And its ratio with corruption and organized crimes. Scholars Landing and navigation charges are expensive in major destinations including Beijing, Hong Kong, Singapore and Bangkok. 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