Assignment Air Asia vs Malaysia Airlines PDF

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Assignment Air Asia vs Malaysia Airlines...

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AIR ASIA VERSUS MALAYSIA AIRLINE

TABLE OF CONTENT NO 1.0

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TITLE

PAGE CHAPTER ONE: INTRODUCTION

1.1 HISTORY OF COMPANY

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1.2 MISSION AND VISION CHAPTER TWO: BUSINESS STRATEGY

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2.1 PORTER’S FIVE MODEL

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2.2 SWOT ANALYSIS

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2.3 CPM

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2.4 IFE

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2.5 EFE

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CHAPTER THREE: BUSINESS MATRIX 3.1 SPACE MATRIX

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3.2 BCG MATRIX

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3.3 IE MATRIX

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3.4 GRAND STRATEGY MATRIX

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3.5 QSPM MATRIX CHAPTER FOUR: AIR ASIA VS MALAYSIA AIRLINE

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4.1 COMPARISON & CONCLUSION REFERENCES

CHAPTER ONE: INTRODUCTION 1.1 HISTORY OF COMPANY AIR ASIA Page 1

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AirAsia Berhad is part of the AirAsia Group, a world-famous low cost airline that operates extensive networks both domestically and internationally. AirAsia pioneered low cost airfares in Asia and is now currently the largest low fare, no-frills airline in Asia. It is also one of the largest airlines in all of Asia in terms of passengers carried. AirAsia has also been voted the World’s Best Low Cost Airline in 2009 and 2010. AirAsia Berhad is currently based in the Low Cost Carrier Terminal (LCCT), Kuala Lumpur International Airport (KLIA), Sepang. Its associate airline - AirAsiaX, is also located at the LCCT and shares operational facilities with AirAsia Berhad. The airline was established by a Malaysian conglomerate in 1993 and commenced operations in 1996. In December 2001, with the airline heavily in debt, AirAsia was purchased by Tony Fernandes of Tune Air Sdn. Bhd. for the price of RM1. As part of the purchase, Tony also took up the RM40million debt. Under the leadership of Tony Fernandes, the airline was flying high in 2002 and launched its new route that year. In 2003, a second hub was opened in Senai International Airport, Johor Bahru, as well as the airline’s maiden international flight to Bangkok. After that the only place AirAsia was heading for is up, as the Thai and Indonesian subsidiaries were set up as well as the commencement of flights to Indonesia, Macau, China, Philippines, Vietnam and Cambodia in 2005. AirAsia now flies to all ASEAN countries,a great portion of Asian countries that include India, Iran, Sri Lanka and Bangladesh; as well as to the United Kingdom, France, Japan, Korea and Australia via AirAsiaX. In 2011, we are setting up another AirAsia hub in the Philippines and are well on the way in setting up other similar operations elsewhere in the region soon after. MALAYSIA AIRLINE Malaysia Airlines is the flag carrier of Malaysia and a member of the oneworld airline alliance. The company, Malaysia Airlines Berhad (MAB) commenced operations as the national carrier on 1 September 2015 when Malaysian Airline System (MAS) was dissolved from Bursa Malaysia in 2014 and subsequently ceased operations on August 31, 2015. The airline began as Malayan Airways Limited, and flew its first commercial flight in 1947. It was then renamed as Malaysian Airways after the formation of the Federation of Malaysia in

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1963. In 1966, the airline was renamed Malaysia Singapore Airlines (MSA) and in 1972 Malaysian Airline System (MAS). Malaysia Airlines has a long and proud history of a product and brand synonymous with outstanding, warm hospitality. The national flag carrier has won numerous awards from the aviation industry, being crowned 'The World's 5-Star Airline' by Skytrax multiple times (2009, 2012 and 2013) and recognition from the World Travel Awards as 'Asia's Leading Airline' (2010, 2011 and 2013). It has an impeccable track record of contributing to national development and has been a talent factory for skilled employees, especially its engineers, pilots and cabin crew. The airline has served as a critical enabler to connect Malaysia to the world, while simultaneously integrating the nation. As a global network, it offers the best way to fly to, from and around Malaysia. Serving more than 50 destinations worldwide and operating over 300 flights a day, Malaysia Airlines is part of the Malaysia Aviation Group (MAG). As a member of oneworld®, Malaysia Airlines offers the best connectivity with seamless journeys to more than 1000 destinations across 150 plus countries and access to over 650 airport lounges worldwide Malaysia Airlines operates flights from its home base, Kuala Lumpur International Airport, and offers connectivity across the globe, including Europe, the Middle East, Australasia, North and South Asia, and Southeast Asia. 1.2 VISION AND MISSION AIR ASIA Air Asia vision is to be the largest low cost airline in Asia so that we can provide a low cost service that will allow the three billion people to fly to more destinations across the region. We aim to be a truly ASEAN airline corporation as we look out for every country’s best interest. While the mission is to be the top company to work in, where employees are treated like family, also to create a globally recognized ASEAN brand, attain the lowest cost of any airline, so that everyone can fly with them, maintain the highest quality, to embrace technology, cost reduction, alleviate service levels and provide our guests with a “WOW” experience. Page 3

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MALAYSIA AIRLINE Malaysia Airline vision is an airline uniquely renowned for its personal touch, warmth and efficiency while the company mission is to provide air travel and transport service that rank among the best in terms of safety, comfort and punctuality.

CHAPTER TWO: BUSINESS STRATEGY 2.1 PORTER’S FIVE MODEL

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Porter's Five Forces is a business analysis model that helps to explain why different industries are able to sustain different levels of profitability. The model was originally published in Michael Porter's book, "Competitive Strategy: Techniques for Analyzing Industries and Competitors" in 1980. The model is widely used to analyze the industry structure of a company as well as its corporate strategy. Porter identified five undeniable forces that play a part in shaping every market and industry in the world. The forces are frequently used to measure competition intensity, attractiveness and profitability of an industry or market. AIR ASIA INTERNAL RIVALRY According to the geographic and product market, Lion Air, Batavia Air, Mandala Air, Sriwijaya Indonesia and even Garuda Indonesia are Air Asia’s competitors. They also provide cheap prices and numerous flight routes in South Asia. All these flight companies compete in price except Garuda Indonesia which has a different strategy. As consumer of Garuda, we will get a valueadded. Air Asia claims that they have no Admin fees but in reality, there are many additional fees which don’t exist in other flight companies. Which is free for some companies is not for other ones. For instance, we can speak about booking seats fees or luggage fees. This is definitely the price dimension which matters on this specific market. Thus the firms struggle on their costs. For instance Air Asia is well-known for the considerable development of its Information Technology. Thanks to the considerable use of the IT, they get low costs and are then able to offer low prices. In Asian developing countries, the middle class is growing up. This creates huge opportunities for the airlines. The companies will have to fight to get some market shares because customers are not loyal and switch easily from one company to another.

ENTRY Brand awareness is quite important in this industry. To enter this industry not only is required high capital but also brand image. Most of the time consumers choose the product or service they really trust. New entrants have to create brand loyalty by making huge investments to establish their reputation.

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The government legislation is one of the barriers for entering airlines industry. Therefore it is very difficult getting a new flight route from the government. If Air Asia doesn’t get any more flight-routes, it may affect their profit because they need to extend their network. Hopefully Air Asia has always been close to the governments in South Asia. For instance in Thailand, Shin Corp formerly owned by the family of former Thai Prime Minister, Thaksin Shinawatra, holds a 50% stake in Thai Air Asia. This helped Air Asia to open up and capture a sizeable market in Thailand. Government policies have limited new entrances, which is a good thing for Air Asia because they are already settled on the market.

Key inputs as technological know-how, raw materials, distribution or locations may also limit the access to the market. But when a company already established creates its own low cost firm, the key inputs are not a problem anymore. Tiger Airways which has been created by Singapore Airlines is one of the most dangerous competitors of Air Asia.

SUPPLIERS POWER In airline industry, the power of suppliers is quite high. First there are only two major planes suppliers which are Airbus and Boeing. However both suppliers provide almost the same standard aircrafts, so that the possibility of consumers to switch is low. Moreover Air Asia ordered large amounts from Airbus in order to expand its routes to international routes. They built a strong relationship and Air Asia managed to get big discounts.

Then Air Asia uses the fuel supplier (AVTUR) from Pertamina which prices are very sensitive. It may affect the ticket price. Moreover Air Asia, as Lion Air or Mandala, doesn’t use catering suppliers. They only offer snacks on flight and this is not for free. Lastly, Air Asia doesn’t have its own maintenance, repair and overhaul (MRO) facility. If this was not a problem before when they only started in Malaysia, now with three hubs and an important fleet of aircraft it might be too expensive. Air Asia must pay attention to this, not having its own MRO facility is a competitive disadvantage. BUYERS POWER Nowadays, buyers are much more informed and high-educated. That’s why they are very sensitive to the price not matter the product or the service. Even if Air Asia always provides the Page 6

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lowest price to the costumer, they still will make a comparison between the different airlines. Besides it is very easy and costless for the customer to switch from one company to another one because many are offering the same service. Moreover Air Asia often gives a bad image to the costumers because of their chronic flight delays. People could choose for another company to be sure being on time.

SUBSTITUTES AND COMPLEMENTS Sometimes the consumer is not so much interested in the main product for some reasons. On the low cost market, the main reason will be the price which he judges too expensive. Then he will look for substitutes. In the airline industry, we can meet two types of substitutes, the direct ones and the indirect ones. If the customer is looking for transportation for a short distance, he can look for indirect substitutes such as bus, train or ship. But travelling will take a longer time. He has to make a strategic choice between time and money. In Indonesia, the railroad industry is monopolized by PT.KAI so there is no competition. Regarding the bus and the ship, there are many companies so many choices. Some are the property of the government, some are private. If he is travelling on a longer distance, he will look for a direct substitute, that is to say other airlines. Teleconferencing and other type of business communications may also be substitutes to air travel. Then they would affect the demand for airplanes.

MALAYSIA AIRLINE INDUSTRY COMPETITORS There are many airlines in the airline industries. However, there are a few local competitors to Malaysia Airline such as Air Asia, Firefly, and many mores. As for international competitors for the company are Singapore Airlines, Garuda, Cathay Pacific, Thai International Airways. Also

some other low cost airline such as Compass, Tiger Airways, Cebu Pacific, Jetstar Asia Airways, Impulse, Virgin blue Airlines.

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The number of competitors is very high and with the emergence of low cost carrier and deregulation the internal competition has increased and the only reason that reduces it is the low and highly volatile profitability. SUPPLIERS POWER There are some suppliers factor that can be include in five porter’s model which are fuel prices are ever increasing affecting the cost so the supplier power is high. Also the Asian airline industry is very optimistic about the growth potential of the Asian aviation industry so is placing huge aircraft orders thereby increasing the bargaining power of the suppliers again. The civil aircraft industry is monopolized by two major aircrafts manufacturers. Thus, large capital required so the leasing companies come into picture. Moreover, it is highly specialized and professional employees are required to maintain the status of five star carrier services. The recent crisis in the overall airline industry has to some extend lead to a reduction in the prices of the aircrafts. BUYER’S POWER Demand and supply are simply normal in economic. Demand is refer to buying power of a consumer. Malaysia Airline has a certain demand among local population (Malaysian) and also some of them from southeast population which are from Indonesia, Thailand, and Singapore. There is no switching cost as the buyer can easily switch from one airline to another so the power of the buyers increases. There is a very low product differentiation so to succeed providing either services at very low cost or give a five star experience so that customer pays the price for the superior services offered. The availability of information is really high and with the emergence of travel portals who guarantee that they can search for the lowest fares out of all the options available and book it for the client with just a click which even provides the ease of purchase, the bargaining power of the buyer is increasing. Frequent flyer program and online duty free purchase services can create customer loyalty and reduce the threat of customer switching over to other airlines to some extent. Low buyer concentration can also reduce the power of buyers. POTENTIAL ENTRANTS

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Airline industry has a high barrier to entry and exit as once an airline is operative then exist from the industry would amount to huge amount of loss. Licensing is one of the major barriers for the industry. Joint venture and partnership is the most recent trend in the industry which has increased the threat to this industry. High unit cost makes the entry to the industry unattractive. There are no economies of scale and scope available. Deregulation has to some extend reduced the restriction to the entry in the industry. Internet has again increased the new entrant possibility in the industry. THE SUBSTITUTE The surface transport can be substitute. With the advancement in technology for many things travelling personally is not important as with the help of web conferencing and services like online counselling the need for travel is reduced. The customer can switch to modes which are reasonable in terms of fare as air travel to some extend is expensive as compared to other modes of travel. The factor which alone reduces the attractiveness of the substitutes in the minds of the travelers is the fastness and reliability of air travel. 2.2 SWOT ANALYSIS SWOT Analysis is a useful technique for understanding company strengths and weaknesses, and for identifying both the opportunities open to the company and the threats the company face. Used in a business context, it helps the company carve a sustainable niche in your market. Used in a personal context, it helps the company develop their career in a way that takes best advantage of their talents, abilities and opportunities. AIR ASIA STRENGTH The first phase of the SWOT analysis is the strengths analysis for Air Asia. There are some unique strengths of Air Asia that others company could not defeat them. First and foremost, Air Asia has a very cooperative and strong management team with strong connections with the government and the airline industry leaders. This is because Air Asia consists of different background of executive management member’s team from different kinds of industry Page 9

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professionals and ex-top government officials. For an example, Shin Corp in the past which owned by the family of former Thai Prime minister which name Thaksin Shinawatra have hold around a fifty percent of shares in the Air Asia branch which situated in the Thailand. Due to this reason, it has help to create and explore up yet attract a sizeable market in Thailand. Besides that, Air Asia have a strong working relationship with Air bus which help them to purchase aircraft for discount and this air craft can save more fuel which is fuel efficient compared to Boeing 737 planes that many airlines company are using currently.

Besides that, Air Asia management team is also famous in strategy formulation and execution. The strategy that they have created at the beginnings was a brilliant blend of strategies that have proven by other low cost airlines which situated in US and Europe. Those strategies include Ryanair's operational strategy which is mean no frills or landing in secondary airport, second is the Southwest's people strategy which also named as employee come first strategy, third is the Easy jet's branding strategy which means a link between other service providers such as hotels, car rental and so on. On the other hand AirAsia's brand name is well established in Asia Pacific. Ignoring the common print media advertising and promotions, Air Asia's top executives also expert in making promotions through news with their slogan of 'media friendly' and provide free sharing and advertisement of the latest updated information of Air Asia which include current packages, fees, discounts and the others. On the other hand, Air Asia have a good partnership relationship with the other service industry such as hotels, hostels, car rental firms, medical tourism such as hospitals, buses, taxis and others. Meanwhile, Air Asia also have partner with Citibank to create an Air Asia Citibank Card and have master and visa card. This have really convenient the tourism and hence create a very special image among the travelers. Air Asia also have alliance with Galileo Global Distribution System that convenient the travel and tourism agents internationally to check the flight information such as the flight fees and schedule and make booking which also consequence strengthen Air Asia string brand name. Moreover, Air Asia has some strong branch in other country such as Indonesia Air Asia and Thailand Air Asia have successfully improve the brand to become a regional brand and can compete with Malaysia branch of Air Asia. Air Asia also has invited one of the world's famous football team Manchester

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United and the AT&T Williams Formula One team to advertise and increase the quality reorganization image to a greater extend.

Meanwhile, AirAsia is the low cost leader in Asia. Through Air Asia Academy, Air Asia has successfully produced a low cost airline mentality and image among their working environment and workforce. This workforce is very important, flexible and high competence and promises in letting Air Asia become the leadership of low cost airlines in Asia. This low cost leadership can let all various in...