EXECUTIVE SUMMARY

AirAsia is well known company for airlines industry especially in all over Asia and being
one of the market leaders in that industry. In order to maintain its brand which is famous with
low cost carrier and to be consumers’ preference to choose using its services offered, AirAsia
must be able to complete with competitors and new entrance by doing some sort of strategies.

AirAsia has very clear vision and mission of the company and this enable each members
of the company work hard to fulfill the vision and mission which has been declare and must
achieve in future for both sort term and long term. But, AirAsia never escape from the problems
in term of its operation and this must be solved by come out with new strategies and proper
planning to cope with that problems.

According to internal and external evaluation of the AirAsia show that the company is
getting above 2.5 score for both of evaluation. This explained that AirAsia does not affect by any
external and internal factors which mean it is good sign for the company. By look into external
and internal factors the company would be also able to identify what kind of strategies and
planning that the company should take in future.

Then after identification and evaluation of external and internal factors, the company can
go further steps with doing matrix evaluation. There are five matrix which are TOWS, space,
Boston Consulting Group (BCG), Grand, Internal-External and competitive profile matrix. Most
of the matrix evaluation shows that the company is in aggressive strategy level and further
analysis shows that the AirAsia must do several strategies which connected with the company’s
operation.

The analysis of SWOT and strategic planning come out with the two important strategies
that must be taken by the AirAsia in order to develop its performance of company in future. The
two important strategies are market penetration and market development. These two strategies
classified under aggressive strategies and commonly used to boost or increase sales of
company’s services and automatically increase revenue too. Although both of these strategy have
their own advantages and disadvantages, it is believed that both is the best strategy for the
company to take in future based on analysis done towards the company itself.

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1. BACKGROUND

Airasia as the second Malaysian National Airline, provides a totally different type
of service in line with the nation’s aspirations to benefit all citizens and worldwide
travelers. Such service takes the form of a no frills – low airfares flight offering, 40%-
60% lower than what is currently offered in this part of Asia. Their vision is “Now
Everyone Can Fly” and their mission is to provide ‘Affordable Airfares’ without any
compromise to Flight Safety Standards.
The story of emergence of AirAsia is similar to Ryanair, since both carriers
underwent a remarkable transformation from a money-losing regional operator to a
profitable, low cost airline.
AirAsia was initially launched in 1996 as a full-service regional airline offering
slightly cheaper fares than its main competitor, Malaysia Airlines. Before 2001, Airasia
fail to either sufficiently stimulate the market or attract enough passengers from Malaysia
Airlines to establish its own niche market. The turnaround point of AirAsia is in 2001,
while it was up to sale and bought by Tony Fernandes. Tony Fernandes then enrolled
some of the lending low-cost airline experts to restructure AirAsia’s business model. He
invited Connor McCarthy, the former director of group operation of Ryanair, to join the
executive team.
What is mean by low cost airlines? A low cost airline generally has many features
that differentiate it from the traditional carriers. These features include ticketless travel,
online ticket sales, no international offices, no frequent flyer points, no free food and
beverages, no in flight magazines, no club lounges, use of secondary city airports. Not all
low cost airlines have these features, and not all airlines that have some these features are
low cost airlines. For example, Virgin Express is low cost airline, but still offers
complimentary coffee and in flight magazine, and they are based a Brussels primary
airport. 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.
Asia’s leading airline was established with the dream of making flying possible
for everyone. Since 2001, AirAsia has swiftly broken travel norms around the globe and
has risen to become the world’s best. With a route network that spans through more than
20 countries, AirAsia continues to pave the way for low-cost aviation through our
innovative solutions, efficient processes and a passionate approach to business. Together

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with our associate companies, AirAsia X, Thai AirAsia and Indonesia AirAsia, AirAsia is
set to take low-cost flying to an all new destinations.

AirAsia X
Focusing on the low-cost, long-haul segment – AirAsia X was established in 2007
to provide high-frequency and point-to-point networks to the long-houl business. AirAsia
X’s cost efficiencies are derived from maintaining a simple aircraft fleet and a route
network based on low-cost airports, without complex code-sharing and other legacy
overheads that weigh down traditional airlines without compromising on safety. Guests
continue to enjoy low fares, through cost saving that we pass on to our guests.
AirAsia X’s efficient and reliable operations are fully licensed and monitored by
Malaysian and international regulators, and adhere to full international standards. AirAsia
X is committed in offering X-citing low fares, X-emplary levels of safety and care, and
an X-traordinary in-flight and service experience to all our guests – spreading the
amazing AirAsia experience to X-citing destinations in Australia, New Zealand, China,
Taiwan, Japan, Korea, India, Middle East and Europe.

Vision of the company

Vision of the company is “Now Everyone Can Fly” in term 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.

Mission of the company

1. To be the best company to work for whereby employees are treated as part of a
big family
2. Create a globally recognized ASEAN brand
3. To attain the lowest cost so that everyone can fl y with AirAsia
4. Maintain the highest quality product, embracing technology to reduce cost and
enhance service level
Values
We make the low fare model possible through the implementation of the following key
strategies:

1. Safety First:

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 Partnering with the world’s most renowned maintenance providers and complying
with the with world airline operations.
2. High Aircraft Utilization:
Implementing the regions fastest turnaround time at only 25 minutes, assuring
lower costs and higher productivity.
3. Low Fare, No Frills:
Providing guests with the choice of customizing services without compromising
on quality and services.
4. Streamline Operations:
Making sure that processes are as simple as possible.
5. Lean Distribution System:
Offering a wide and innovative range of distribution channels to make booking
and travelling easier.
6. Point to Point Network:
Applying the point-to-point network keeps operations simple and costs low.

Opportunities faced by AirAsia in light of external development

a. Low fare of Indonesia-Malaysia trip

The fare for Jakarta-Johor Bahru trip cost Rp 100,000 (RM 88.88 one way). And
charge Rp 150,000 for a Bandung-Kuala Lumpur flight, and Rp300,000 for a
Surabaya-Kuala Lumpur trip, whereas a Jakarta-Kuala Lumpur air ticket from
Malaysia Airlines available at travel agents cost Rp 1.4 million. Meanwhile, LionAir
on the same route, charged Rp 1.05 million. The cost fare provided by AirAsia help it
open the Indonesia market.

b. Low fare of Singapore-Bangkok service

AirAsia will increase its services between Singapore and Bangkok by introducing a
second daily flight to its existing schedule. This recent development came barely a
month after Thai AirAsia operations started its first international flight to Singapore

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 in early February this year. AirAsia is offering its guests promotional fares to/from
Singapore-Bangkok from SGD$23.99 (THB 499) one way from the 28 th March to 30th
October 2004. It is much lower than the lowest fare SGD$56 offered by full-services
carrier. This helps it open the Singapore market.

c. Political connection

AirAsia hold 49% of the Thai AirAsia with 1% being held by a Thai individual. The
remaining 50% is held by Shin Corp. which is owned by the family of Thailand’s
Prime Minister, Thaksin Shinawatra. Shin Corp. has financial strength, synergy in
information technology and telecommunications, which support AirAsia internet and
mobile phone bookings. Shin corp. allows subscribers of the Shin mobile phone
flagship, advance information service, being able to reserve tickets through its short-
messaging services (SMS). AirAsiA with its politically powerful backer may well
grow up to bite. This helps it open the Thailand market.

d. Malaysian government support

The Malaysian government supported the establishment of AirAsia in 2001 to help

boost the under-used Kuala Lumpur International Airport. AirAsia’s flights from
Senai are meant to develop Johor into a transport hub to rival Singapore. AirAsia,
therefore can provide an alternative route to travel to Bangkok, by using Senal Airport
in Johor Bahru, in southern Malaysia.

Opportunities faced by AirAsia in light of Internal Development

a. Issue of IPO

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 Kamarudin Meranun, AirAsia’s Executive Director announced the appointment of
Credit Suisse First Boston (CSFB) and RHB Sakura Merchant Bankers (RHB) as the
book runners for the company’s upcoming Initial Public Offering (IPO). The IPO
strengthens AirAsia balance sheet, further cuts its existing low costs at 2.5 US cents
per ASK and accelerates our growth plans throughout Asia. The IPO also allows
AirAsia to expand its fleets of 18 Boeing 737-300s.

b. Political connections

Thai AirAsia is a join venture established by AirAsia with Shin Corp. is owned by the
family of Thailand’s Prime Minister, Thaksin Shinawatra, and about 900 million Baht
will be invested in Thai AirAsia over a five-year period. Shin Corp. oversees the
finance and administration of Thai AirAsia while AirAsia shoulders the responsibility
for marketing and operations. Shin Corp. has financial strength and support AirAsia
to grow. AirAsia with its politically powerful backer may well grow up to bite.

Challenges faced by AirAsia in light of external development

a. Indonesia habit

Preferences of Indonesian passengers are quite different from the concept of cheap air
travel without extra service for the passengers (free snacks and drinks), and also their
reluctance to bring light baggage. AirAsia prefers passengers with very light and
minimum baggage. If this is the case, it may not last long. But Indonesian domestic
airline companies are able to provide value-added extras like food and beverages as
part of their service to the passengers, although at a relatively higher cost. The
comparative edge of Indonesian domestic airline companies compared to AirAsia
concern habit (culture). Furthermore, Indonesian domestic airlines were already
trained with the low-cost air travel concept, known as tariff war. They have proved
themselves as immune, and managed to survive. Last but not least, the Indonesian
government or domestic airline companies had never announced the availability of a

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 low-cost airline company of the country. All these affect AirAsia growth in
Indonesian.

b. Singapore government rejection

Initially, AirAsia wanted to start flight from the southern state of Johor, near
Singapore, it hoped to attract passengers by running a convenient bus service to the
city-state. However, Singapore quickly quashed that idea. The Singapore government
said it would not approve a bus link for AirAsia because it was not ‘in her nation
interest’, reflecting fears that Singapore’s Changi airport would lose business to
Johor’s new Senai airport. This makes AirAsia cannot abandon the use of Changi
airport, and therefore suffer from a higher cost.

This is because AirAsia flying to Singapore needs to suffer from flight congestion of
Changi. Changi ha drawbacks of flightcongestion that could prevent the quick
turnaround essential to keeping down costs. AirAsia find it stuck between big planes
and circling to wait for a slot to open up, which means extra fuel costs. Moreover, the
SGD$21 departure and security tah of Changi is too high for AirAsia low-cost
operation. AirAsia had asked the Singapore government to waive the fees, however, a
request that was not only rejected but also criticized.

Beside Singapore – Bangkok, AirAsia now provides an alternative route to travel to

Bangkok, by using Senai airport in Johor Bahru, in southern Malaysia. Seeking to
cater to the different markets, fares for Johor Bahru – Bangkok are generally 20%
lower in comparison to Singapore – Bangkok. AirAsia currently operate daily flight
to Bangkok from Johor Bahru. However, the choice proved unpopular, as the route
failed to attract Singaporeans because of the additional cost and inconvenience of
having to travel in and out of Malaysia by road. All these affect AirAsia external
growth.

c. Minimum air-fare rates

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 AirAsia faces challenges finding open takeoff and landing slots at opportune times,
and Thailand’s regulation that sets minimum air- fare rates. Although Transport
Minister Suriya Jungrungreangkit said the current minimum air-fare regulations will
be scrapped to open up the market, he couldn’t name a date when this will be done.
This seems to be favoritism toward Thai Airways International’s domestic operations,
and affects Thai AirAsia to compete in the Thailand market.

External changes which have impact on AirAsia

a. Asia’s middle class growth

Low-cost airlines are anticipated to have greater potential in Asia as there are many
Asian cities with a population above one million people each as well as a rising
middle class population. This growth of middle class in Asia provides a huge market
potential for AirAsia to grow. However, as the market is becoming larger, more
airlines or new comers would like to get a piece of the action. For example, Budget
airlines, it is estimated, will capture at least 25% of Asia’s air travel market within
next 10 years and a lot of the will be new, not diverted, traffic. Therefore, AirAsia will
face more competitions at the same time. Besides the low-cost airlines, AirAsia still
needs to compete with the conventional carriers. Although extra passengers of the low
cost airlines will be coming from the new demand to be created by the low fares, the
growth may not be entirely ‘stolen’ from big flag carriers.

b. Actions of Changi and nearby airports

The growth of low-cost airlines in south-east Asia has a significant effect on which
airport will dominate the regional aviation market. Low cost airlines are seen as
helping funnel more passengers to airport hubs. Therefore, there is a realization
among regional governments that they need smashing airports and feisty carriers or
they are going to miss out big time. Therefore, these governments are more willing to
support low cost airlines. For example, the Malaysian government supported the

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 establishment of AirAsia in 2001 to help boost the under-used Kuala Lumpur
International Airport, and Thai premier’s Shin Corp. form a join venture with AirAsia
that would benefit Bangkok’s new airport and create a new hub at Chiang Mai.
Therefore, under this situation, it helps AirAsia grow in Asia.

Moreover, as there is a growth of several south-east Asian airports, this poses a

challenge to the status of Singapore’s Changi airport as a regional aviation hub. These
airport include Johor’s new Senai airport in southern Malaysia, Bangkok new
Suvarnabhumi airport which will be able to handle 45 million passengers when it
opens in 2005, Bangkok Don Muang which recently overtook Changi in passenger
number, etc. to maintain Changi’s position as the air hub in the region. Singapore is
proposing a budget airline terminal at Changi by 2005 and lower passenger taxes to
attract low cost airlines. This helps AirAsia grow and lower the cost.

c. Action of existing airlines

The existing airlines in south-east Asia have several actions to compete with AirAsia,
for example, some have launched a low cost airline to flight with AirAsia. Singapore
Airlines launched a low cost airline subsidiary, Tiger Airways, in the second half of
2003, only months after the scheduled launch of ValuAir set up by one of its former
executives. Thai Airways have frequency and capacity to offer to their 13 domesttic
destinations. They also have during the past two years, worked to improve operational
efficiency, slashing unprofitable domestic routes, increasing flights on busy routes,
strengthening yield management and controlling costs. All these make AirAsia face a
huge competition.

Marketing

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AirAsia, Asia’s leading low cost carrier, recently partnered with Yahoo! Mobile for its
very first mobile campaign. The goal was to encourage interaction with users and
increase the overall awareness of AirAsia and its promotions throughout Asia. Aimed at
generating and maintaining top-of-mind awareness with their reach, Yahoo’s mobile
marketing and advertising solutions provided a key advantage for AirAsia. The campaign
saw tremendous success across seven target markets including Malaysia, Singapore,
Thailand, Indonesia, Philippines, Taiwan, and Hong Kong, AirAsia became the first
company on Yahoo Mobile in Malaysia and the success of the campaign showed how
mobile marketing could help brands successfully communicate with the rapidly growing
mobile consumer base.

1.1 IDENTIFY THE FIRM’S EXISTING MISSION

Item Criteria Criteria Stated Criteria Not Stated

1 Customers 
2 Product/Services 
3 Markets 
4 Technology 
5 Concern for survival, growth and 
profitability
6 Philosophy 
7 Self-concept 
8 Concern for public image 
9 Concern for employees 

Existing mission statement of AirAsia:

 To be the best company to work for whereby employees are treated as part
of a big family. (9)
 Create a globally recognized ASEAN brand. (3)
 To attain the lowest cost so that everyone can fl y with AirAsia. (1,8)
 Maintain the highest quality product, embracing technology to reduce cost
and enhance service level. (2,4,5)

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1.2 IDENTIFY THE FIRM’S EXISTING OBJECTIVES

1.2.1 Provide full fledge training and development to AirAsia pilot, aircraft engineers,
cabin crew and guest service staffs

1.2.2 Develop the academy as an aviation training ground towards fulfilling AirAsia’s
aspiration in becoming a regional aviation training hub

1.2.3 Serves as a platform to keep AirAsia on track with the latest industry development
and to incorporate best practice into their operations

1.3 IDENTIFY THE FIRM EXISTING STRATEGIES

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 1.3.1 Safety First: Partnering with the world’s most renowned maintenance provider
and complying with the world airlines operation

1.3.2 High Aircraft Utilization: Implementing the region fastest turnaround time at only
25 minutes, assuring lower cost and higher productivity

1.3.3 Low fare, no frills: Providing guest with the choice of customizing services
without compromising on quality and services

1.3.4 Streamline Operation: Making sure the process are as simple as possible

1.3.5 Lean Distribution System: Offering a wide and innovation range of distribution
channels to make booking and travelling easier

1.3.6 Point to point Network: Applying the point to point network to keep operation
simple and lower cost
Key Result Objectives

Key Areas Objectives Measure of performance

1 Marketing Ticket order by online 1

2 Innovation Keep with the latest industry 2

development

3 Human Training to all employees 3

Organization

4 Financial Allocate financial resources 4

Resources efficiently

5 Physical Resources Search the best physical 5

resources for operation

6 Productivity Provide best service in airline 6

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7 Social Responsible Low cost carrier 7

8 Profit Low cost operation 8

2. DEVELOP NEW MISSION STATEMENT FOR THE ORGANIZATION

(COMPRISING AL NINE ELEMENTS)

Customer - Provide low cost carrier for customers

Products/Service - High quality and safety products and services

Markets - To be the first choice in ASEAN airlines

Technology - Posses high technology in its operation

Concern for survival - Low cost in its operation and maintain financial stability

Philosophy - All company’s activities carry out in ethically

Self-Concept - To be leader in ASEAN airline industry

Concern for public - Concern for public benefit and affordable to fly with AirAsia

Concern for employees - Give rewards to employees who did the best work

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2.1 Evaluation of New Mission Statement on Nine Criteria

Item Criteria Criteria Stated Criteria Not Stated

1 Customers 

2 Products/Services 

3 Markets 

4 Technology 

5 Concern for survival 

6 Philosophy 

7 Self – Concept 

8 Concern for Public Image 

9 Concern for Employees 

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 3. PROBLEM IDENTIFICATION

No Problem Identification Major Problem/Minor Priorities Of The

Problem Problem

1. Increasing Minor 2

2. Competition Major 1(need immediate

attention)
3. Customer decrease Minor
3
Rising fuel prices

4. SWOT FRAMEWORK

4.1 IDENTIFICATION THE ORGANIZATION EXTERNAL OPPORTUNITIES /

THREATS

4.1.1. OPPORTUNITIES

4.1.1.1. Asia’s middle income growth (soc)

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 4.1.1.2. The home government support (pol)

4.1.1.3. Applying technology advances in airlines industry (techno)

For example e-ticketing, it is easy for people who are busy with their work
and no time to walk in to the counter for booking ticket

4.1.1.4. Economic in good condition (econ)

4.1.1.5. The change of lifestyle of the customer (soc)

4.1.1.6. Political connection between home countries with other country (pol)

4.1.1.7. Limited substitutes for airplanes (substitutes)

Although there are several substitutes (i.e. trains and ships) the
geographical structure of Asia has made air travel an efficient, viable, and
convenient mode of transportation

4.1.1.8. “ASEAN Open Skies” agreement (econ)

It will allow unlimited flight among ASEAN’s regional air carriers

beginning December 2008

4.1.1.9. The population of Asian middle class will be reaching almost 700 million

by 2010(soc). This create a large market and a hug opportunity for all
low cost airlines in this regional

4.1.2. THREATS

4.1.2.1. Price of oil increasing (econ)

4.1.2.2. The culture of passengers is different (soc)

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 4.1.2.3. Other government countries rejection (pol)

4.1.2.4. Many budget airlines growth (competitor)

4.1.2.5. Certain rate like airport departure, security charges and landing charges

are beyond the control of airlines operator (pol). This is a threat to all
airlines especially low cost airlines that tries to keep their cost as lower as
possible

4.1.2.6. Users perception that budget airlines may compromise safety to keep cost

low (consumer). Consumer feels not safe to use budget airlines since their
price is very low

4.1.2.7. Supplier of airlines is limited (supplier)

Power of supplier is high as there are limited (availability of) supplier

(only Boeing and Airbus), the switching cost is high (i.e. airplanes and
their maintenance are costly) and there are few substitutes airplanes

4.1.2.8. Technology problem (techno)

For example, overload of information of hackers, hacked the airlines

website and it will give bad impact to airlines

4.1.2.9. Natural disaster (demo)

For example is flood, tsunami, and earthquake at certain place will

influence the business of airlines

4.1.3. EFE MATRIX (EXTERNAL FACTOR EVALUATION MATRIX)

No. Key External Factors Weight Rating Weighted Score

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 Opportunities

1 Asia’s middle income growth 0.06 2 0.12

2 The home government support 0.07 4 0.28

3 Applying technological advances in airlines 0.04 3 0.12

industry

4 Economic in good condition 0.06 2 0.12

5 The changes of lifestyle of the customer 0.05 2 0.10

6 Political connection between home country 0.06 3 0.18

with other country

7 Limited substitutes for airplanes 0.10 3 0.30

8 “ASEAN Open Skies” agreement 0.04 3 0.12

9 The population of Asian middle class will be 0.04 3 0.12

reach almost 700 million by 2010

Threats

1 Price of oil increasing 0.04 2 0.08

2 The culture of passenger are different 0.03 1 0.03

3 Other government country rejection 0.07 3 0.21

4 Many budget airlines growth 0.04 2 0.08

5 Certain rate like airport departure, security 0.10 3 0.30

charges and landing charges are beyond the
control of airlines operators

6 Users perception that budget airlines may 0.04 2 0.08

compromise safety to keep low cost

7 Supplier of airlines is limited 0.07 3 0.21

8 Technology is limited 0.03 3 0.09

9 Natural disaster 0.06 3 0.18

Total 1.00 2.72

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ENVIRONMENTAL THREAT AND OPPORTUNITY PROFILE (ETOP)

Factors Impact of factors Important of factors Environmental treat

1 Economic 10 10 

2 Political 5 7 

3 Social 7 6 

4 Technology 4 5 

5 Competitive 5 6 

6 Geographic 3 4 

7 Natural Environment 8 5 

 Impact from 10 (strong positive) to 0 (strong negative)

 Importance of factor ranked from 0 (unimportant) to 10 (very important)

Comment:

The company is good since the total of EFE Matrix is 2.72. They can continue their current
strategy for improving their business. For the major impact of factors is economic where the
amount is 10 while, for importance of their major factor is 6, which mean quiet important.
Geographic factor give less impact towards AirAsia business.

4.2 IDENTIFYING THE ORGANIZATION EXTERNAL STRENGTH /

WEAKNESSES

4.2.1 STRENGHTS

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4.2.1.1. Low cost for all passenger (mgt)

It is suitable with their tagline ‘Everyone can fly’ mean to giving

opportunity to all people to flight with the lowest possible fare and making
them can flight even they only have less money

4.2.1.2. Has many destinations (operation)

Route network of AirAsia has more than 20 countries, for example United
Kingdom, Iran, China, New Zealand and France

4.2.1.3. AirAsia is the lowest leader in Asia (Operation)

With the help of AirAsia Academy, AirAsia has successfully created a

“low cost airlines mentality” among their workforce. The workforce is
very flexible and high committed and very critical in making AirAsia the
lowest cost airlines in Asia

4.2.1.4. High Technologies (mgt)

The excellent utilization of IT have directly contributed to their

promotional activities (email alert and desktop widget which was jointly
develop with Microsoft for new promotion), brand building exercise (with
over 3 million hits per month and the most widely surfed booking engine
in the world) as well keep the cost low by enabling direct purchase of
ticket by consumer thus saving on airlines agent fees

4.2.1.5. Get mane awards such as “World’s Best Airlines” for the second year,

Asia Pacific’s Best Marketing Campaign (mktg). It shows AirAsia have

good image and performance since it got so many awards

4.2.1.6. The customer can pay their booking ticket by credit card over phone

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 (operation)

4.2.1.7. Good marketing campaign such as making a year deal with Manchester

United, one of the English Football Club and recently had programmed at
television “Travelog Asia”. This is one of the examples of good marketing
strategy (mktg)

4.2.1.8. The current ratio is increase from 1.3 times to 1.47 times (fin)

From 1 unit current liabilities can be covered by 1.47 unit of asset. It will
make the company less risk

4.2.1.9. AirAsia has very strong management team with strong links with

government and airlines industry leader (mgt)

This is partly contributed by the diverse background of the executive

management team that consist of industry expert and ex-top government
officials

4.2.1.10. Increasing the profit 1061 million on year 2010 (fin)

4.1.2.2. WEAKNESSES

4.2.2.1. AirAsia receive a lot complaint from customer on their service (mgt)

Examples of complaint are around flight delays, being charged for a lot
of things and not able to change flight or get a refund if customer could

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 not make it. Good customer service and management is critical
especially when competition is getting intense

4.2.2.2. The facilities at the airport (mgt)

There has limited chairs at waiting area
4.2.2.3. The waiting period between check in and depart is too long (operation)
It takes around 2 hours for international departure
4.2.2.4. Apply autocratic management (mgt)

They only considered opinion from top management to make the

decision without asking from the other worker opinion

4.2.2.5. Rely on debt to much since ratio for year 2010 is 73.15% (fin)
It is more than half its capital gets from borrower. It will risk the
company
4.2.2.6. The average collection period is quite high which 76 days (fin)
It means the companies have to wait until 76 days to collect their debt
from borrower
4.2.2.7. No MRO (maintenance, repair, overhaul) facility (operation)
Thus AirAsia cannot maintain its own planes. With an increasing fleet
this is a competitive advantage
4.2.2.8. No frills (operation)

They only provide the transportations services. The customer has to

make pre-order for their heavy meal such as nasi lemak during booking
their tickets. If not, they only can buy the chip and beverages

4.1.1. IFE (INTERNAL FACTOR EVALUATION)

No. Key Internal Factors Weight Rating Weighted Scored

Strengths

1 Low cost for all passenger 0.13 4 0.52

2 Has many destination 0.03 3 0.09

3 AirAsia is the lowest leader in Asia 0.05 4 0.20

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4 High Technologies 0.05 3 0.15

5 Get mane awards such as “World’s 0.03 2 0.06

Best Airlines” for the second year,
Asia Pacific’s Best Marketing
Campaign

6 The customer can pay their booking 0.04 3 0.12

ticket by credit card over phone

7 Good marketing campaign 0.03 4 0.12

8 The current ratio is increase from 0.04 3 0.12

1.3 times to 1.47 times

9 AirAsia has very strong 0.07 3 0.21

management team with strong links
with government and airlines
industry leader

10 Increasing the profit 1061 million on 0.03 3 0.09

year 2010

Weaknesses

1 AirAsia receive a lot complaint from 0.04 4 0.16

customer on their service

2 The facilities at the airport 0.06 3 0.18

3 The waiting period between check in 0.06 4 0.24

and depart is too long

4 Apply autocratic management 0.05 2 0.10

5 Rely on debt to much since ratio for 0.03 2 0.06

year 2010 is 73.15%

6 The average collection period is 0.06 2 0.12

quite high which 76 days

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 7 No MRO (maintenance, repair, 0.15 4 0.6
overhaul) facility

8 No frills 0.05 3 0.15

Total 1.00 2.75

Comment:

The company is a good since total of IFE matrix is 2.75. They can continue their current strength
to cover their weaknesses to grab the opportunities on the industry

Assessment of culture elements

Score (0-9) for each

Importance Compatibility with
of culture Strategic
Management

1 Founder's beliefs and values 7

2 Key executive's style 7

3 Maturity of organization 8

4 Cohesiveness and collaboration 8

5 Openness and trust 6

6 Climate and organization 6

7 Recognition of individual 4

8 Rewards for performance 5

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9 Support of individual 6

10 Participation in decisions 8

11 Consistent communication 8

12 Enforcement policies 8

13 Degree of social interaction 7

14 Opportunity for growth 10

15 Level of job security 6

16 Level of technology 7

17 Degree of innovation 9

18 Sense of belonging 5

19 Latitude in job execution 6

20 Sense of urgency 5

Company capability profile – Managerial factors

Neutral
0% Weak Strong 100%

1 Corporate image responsibility

2 Use of strategic plan and strategic analysis

3 Environmental assessment and forecasting

4 Speed of response to changing condition

5 Flexibility of organizational structure

6 Management communication and control

7 Entrepreneurial orientation

8 Ability to attract and retain highly creative people

9 Ability to meet changing technology

25
10 Ability to handle inflation

11 Aggressiveness in meeting competition

12 Others:

26
27
28
29
30
Financial ratio profile

Profitability

Very Low Average Very high

Liquidity

Very Low Average Very high

Leverage

Very Low Average Very high

Activity

Very Low Average Very high

Comment:

Overall the company has strong financial position. Besides, the company has relied more on debt
but they still can generate net profit to shareholders and others. They should decrease the number
of debt towards reducing the risk.

31
Company capability profile – Financial factor

Neutral

0% Weak 50% Strong 100%

1 Accessed to capital when required

2 Degree of capacity utilization

3 Ease of exit from market

4 Profitability, return on investment

5 Liquidity availability internal funds

6 Degree of leverage , financial stability

7 Ability to compete on prices

8 Capital investment, capacity to meet demand

9 Stability of costs

10 Ability to sustain effort in cyclic demand

11 Price elasticity of demand

12 Others:

5. MATRIXES

5.1. TOWS MATRIX

32
Strengths

33
1. Low cost for all passengers

It is suitable with their tagline ‘Everyone can

fly’ mean to giving opportunity to all people to
flight with the lowest possible fare and making
them can flight even they only have less money

2. Has many destinations

Route network of AirAsia has more than 20

countries, for example United Kingdom, Iran,
China, New Zealand and France

3. High Technologies

The excellent utilization of IT have directly

contributed to their promotional activities
(email alert and desktop widget which was
jointly develop with Microsoft for new
promotion), brand building exercise (with over
3 million hits per month and the most widely
surfed booking engine in the world) as well
keep the cost low by enabling direct purchase
of ticket by consumer thus saving on airlines
agent fees

4. Good marketing campaign such as making a

year deal with Manchester United, one of the
English Football Club and recently had
programmed at television “Travelog Asia”.
This is one of the examples of good marketing
strategy

5. AirAsia has very strong management team

with strong links with government and airlines
industry leaders
34
Opportunities SO

1. Asia’s middle income growth (soc) 1. Add new facilities to attract people for using
AirAsia for going to vacation (S1 & S2, O1)
2. Applying technology advances in airlines
industry (techno) For example e-ticketing, it is 2. Improve new technology for making people
easy for people who are busy with their work more convince using this airplane (S3,O2)
and no time to walk in to the counter for (Market penetration)
booking ticket
3. Increase destination all over the world (S2,
3. Economic in good condition (econ) O3, O4)

The change of lifestyle of the customer (soc) 4. Improve management for increase marketing
strategies to attract people (S4,S5 & O5)
4.Political connection between home countries
with other country (pol) 5. Increase website service to make people easy
to make transaction (S3,O2)
5.Limited substitutes for airplanes (substitutes)

Threats ST

1.Price of oil increasing (econ) 1. Do research and development (R&D) to find

other alternative to reducing in use oil (S1,S6
2. The culture of passengers is different (soc)
& T1)
3. Certain rate like airport departure, security
2. Hire new stewardess for different culture to
charges and landing charges are beyond the
make passenger feel comfortable using this
control of airlines operator (pol)
service (S2,T2)
This is a threat to all airlines especially low
3. Deal with supplier for cheaper in
cost airlines that tries to keep their cost as
maintenance cost (S1, S6 & T4) (Backward
lower as possible
Integrations)
4. Supplier of airlines is limited (supplier)

Power of supplier is high as there are limited

(availability of) supplier (only Boeing and

35
Airbus), the switching cost is high (i.e.
airplanes and their maintenance are costly) and
there are few substitutes airplanes

5. Natural disaster (demo)

For example is flood, tsunami, and earthquake

at certain place will influence the business of
airlines

Weaknesses

36
 1. AirAsia receive a lot complaint from
customer on their service (mgt)

Examples of complaint are around flight

delays, being charged for a lot of things and not
able to change flight or get a refund if customer
could not make it. Good customer service and
management is critical especially when
competition is getting intense

2. The facilities at the airport (mgt)

There has limited chairs at waiting area

3. The waiting period between check in and

depart is too long (operation)

It takes around 2 hours for international

departure

4. Apply autocratic management (mgt)

They only considered opinion from top

management to make the decision without
asking from the other worker opinion

5. No MRO (maintenance, repair, overhaul)

facility (operation)

Thus AirAsian cannot maintain its own planes.

With an increasing fleet this is a competitive
advantage

Opportunities WO

1. Asia’s middle income growth (soc) 1. Improve existing facilities in airport (W2,O1

37
 & O2)

2. Applying technology advances in airlines 2. Target on middle – income customer by

industry (techno) For example e-ticketing, it is affordable price (W1, O1 & O3) (Market
easy for people who are busy with their work Penetration)
and no time to walk in to the counter for
3. Improve management in service such as
booking ticket
prediction in time (W1, O2)
3. Economic in good condition (econ)

4.Political connection between home countries

with other country (pol)

5.Limited substitutes for airplanes (substitutes)

Threats WT

1. Price of oil increasing (econ) 1. Manage wisely the waiting period in order
our passenger come from anywhere (W3, T3)
2. The culture of passengers is different (soc)
2. Efficiently manage the compliant from
3.Certain rate like airport departure, security
passenger to avoid external threat (W1, T2)
charges and landing charges are beyond the (Retrenchment)

control of airlines operator (pol)

This is a threat to all airlines especially low

cost airlines that tries to keep their cost as
lower as possible

4. Supplier of airlines is limited (supplier)

Power of supplier is high as there are limited

(availability of) supplier (only Boeing and
Airbus), the switching cost is high (i.e.
airplanes and their maintenance are costly) and

38
there are few substitutes airplanes

5. Natural disaster (demo)

For example is flood, tsunami, and earthquake

at certain place will influence the business of
airlines

5.2 SPACE (STRATEGIC POSITION AND ACTION EVALUATION) MATRIX

Factors Determining Environmental Stability

39
Technological changes Many 1 2 3 4 5 6 Few
Rate of inflation High 1 2 3 4 5 6 Low
Demand variability Large 1 2 3 4 5 6 Small
Price range of competing products Wide 1 2 3 4 5 6 Narrow
Barriers into entry to market Few 1 2 3 4 5 6 Many
Competitive pressure High 1 2 3 4 5 6 Low
Price elasticity of demand Elastic 1 2 3 4 5 6 Inelastic
Others 1 2 3 4 5 6
Strategic Position and Action Evaluation (continued)

Average= (-3.00)

Critical factors:

The most factors effect this environmental stability is demand variables. This is because the
low cost leader in Air Asia. This could make them get many passengers over the world.

Factors Determining Industry Strengths

Growth potential Low 1 2 3 4 5 6 High
Profit potential Low 1 2 3 4 5 6 High
Financial stability Low 1 2 3 4 5 6 High
Technological know-how Simple 1 2 3 4 5 6 Complex
Resource utilization Inefficient 1 2 3 4 5 6 Efficient
Capital intensity High 1 2 3 4 5 6 Low
Barriers of entry into market Easy 1 2 3 4 5 6 Difficult
Others Low 1 2 3 4 5 6 High
Strategic position and Action (SPACE) (continued)

Average = (-4.00)

Critical factors:

The most factors effect industry strength is profit potential. This is because Air Asia is a low cost
flight for all passengers and they have a good link for their marketing so can attract many
peoples to use it’s as second alternative to go everywhere.

40
Strategic Position and Action Evaluation (continued)

Factors Determining Competitive Advantage

Market share Small 1 2 3 4 5 6 Large
Service quality Inferior 1 2 3 4 5 6 Superior
Product life cycle Late 1 2 3 4 5 6 Early
Product replacement cycle Variable 1 2 3 4 5 6 Fixed
Customer loyalty Low 1 2 3 4 5 6 High
Competitor's capacity utilization Low 1 2 3 4 5 6 High
Technological know-how low 1 2 3 4 5 6 High
Others Low 1 2 3 4 5 6 High

Average = (-4.29)

Critical factors:

The most factors effect competitive advantages are product life cycle. This is because this
organization tries to maintain their service with give lower cost for all passengers. Air Asia also
build good relationship with their supplier of oil to make sure the cost not increase due to
increasing price of oil now.

Strategic Position and Action Evaluation (continued)

Factors Determining Financial Strength

Return on investment Low 1 2 3 4 5 6 High
Leverage Imbalanced 1 2 3 4 5 6 Balanced
Liquidity Imbalanced 1 2 3 4 5 6 Balanced
Capital required/capital available High 1 2 3 4 5 6 Low
Cash flow Low 1 2 3 4 5 6 High
Ease of exit from market Difficult 1 2 3 4 5 6 Easy
Risk involved in business Much 1 2 3 4 5 6 Late
Others: Slow 1 2 3 4 5 6 Fast

41
Average= (-4.00)

Critical factors:

The most factors effect financial strength is return on investment. This is because in previous
year Air Asia has bought new airbus and from that investment Air Asia get good in return. Other
than that, Air Asia may expand their business also.

Conclusion

CP Average is -30 / 7 = -4.29 IP Average is +28 / 7 = 4.00

SP Average is -21 / 7 =-3.00 FP Average is +28 / 7 = 4.00

Directional Vector Coordinates: x – axis:-3.00 + (+4.00) = 1.00

Y – axis: -4.29 + (+4.00) = -0.29

FP

42
 CP IP

Competitive Profile X= 1.00 Y=-0.29

SP

5.3 BCG MATRIX

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 Kong
487,952,000 12.63% 98,735,000 9.30% 0.25 10
LTD
AA International
453,206,000 11.73% 68,571,000 6.46% 0.22 -10
LTD

43
 Thai Air Asia Co.
1,119,739,000 28.98% 488,443,000 46.01% 0.55 18
LTD
Air Asia Go Holiday
719,774,000 18.63% 165,705,000 15.61% 0.28 15
Co. LTD
Total 3,864,459,000 100.00% 1,061,411,000 100.00%

RELATIVE MARKET SHARE POSITION IN THE INDUSTRY

High Medium Low

1.0 0.5 0.0

High +20
Go Holiday
Hong Kong

Thai Air Asia PT Indonesia

Medium 0

AA International
Low -20

44
For BCG Matrix, we can use above table and figure that Thai Air Asia Co. LTD contributes
highest percentage in revenue market share followed by other association under Air Asia which
is PT Indonesia Air Asia, Air Asia Go Holiday Co. LTD, Air Asia Hong Kong LTD, AA
international LTD. Association for Thai Air Asia Co. Ltd is fall under Stars. It means this
association for Air Asia should do backward, forward and horizontal integration also. In
additional, this association will have opportunities to make more profit in the future by doing
more aggressive strategies such as market penetration, product development and market
development. For PT Indonesia Air AsiaAir Asia Go Holiday LTD, Air Asia Hong Kong, LTD it
falls in under Question Marks which it shows that the division which is also doing aggressive
strategies to promote products. This is because this four association for Air Asia are new in the
industry so should do market penetration, market development, product development and
divestiture. For AA International LTD falls under Dogs. It is shown that this division should do
retrenchment, divestiture and liquidation.

5.4 GRAND STRATEGY MATRIX

Rapid Market Growth

Quadrant I
Quadrant II
Market Development
Market Development Market penetration
Market Penetration Product Development
Product Development Forward Integration
Horizontal Integration Backward Integration
Divestiture Horizontal integration
Liquidation Related Diversification
Strong
Weak
Competitive
Competitive
Position
Position
Quadrant III
Retrenchment Quadrant IV
Related Diversification Related diversification 45
Unrelated diversification Unrelated diversification
Divestiture Joint ventures
Liquidation
 Slow market growth

Air Asia CO. falls under Quadrant II because AirAsia have done many market development in
industry such as launch its first routes to India to Tiruchirapali (Trichy) in the Southern India
state of Tamil Nadu means Air Asia make market development with open new destination for
attract passengers. In quadrant I also explained that Air Asia has strength in market penetration to
take advantage on growth in new global markets because of high demand for lowest possible
fare. Air Asia has now has Route network of Asia within more than 20 countries for example
United Kingdom, Iran, China, New Zealand, and France. In addition, this company has the
strength to launch related diversified products into more promising growth areas. So this
quadrant is suitable for Air Asia because they already diversified many services. Furthermore,
Air Asia also high cash-flow levels and limited internal growth needs.

5.5 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%

46
 The IFE Total Weighted Scores

Strong Average Weak

3.0 to 4.0 3.0 2.0 to 2.99 2.0 1.0 to 1.99 1.0
4.0
High
The EFE Total Weighted Scores

3.0 to 4.0
I II III
3.0

. Medium IV V VI
2.0 to 3.0
2.0
Low VII VIII IX
1.0 to 1.99 1.0

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”. Intensive (backward, forward, and horizontal integration, market
penetration, market development, product development) strategies can be more appropriate for
this area. Thai Air Asia Co. LTD can improve the intensive strategy for market penetration b
create interesting marketing or events to attract people know well about this Thai Air Asia Co.
Ltd service and the company can also do market development and product development strategy
since Air Asia is one of company who give lowest cost airline in Asia. It means that the company
can increase their advertising and marketing strategies in order to compete with their other
associate company. Other than that, Thai Air Asia Co.LTD can explore to new market in order to
boost their sales.

5.6 COMPETITIVE PROFILE MATRIX

47
 Air Asia MAS Fire Fly
Critical Success Factor Weight Rating Score Rating Score Rating Score
1. Advertising 0.12 3 0.36 4 0.48 2 0.24
2. Product quality 0.10 3 0.30 2 0.20 2 0.20
3. Price competitiveness 0.12 2 0.24 3 0.36 1 0.12
4. Management 0.17 3 0.51 4 0.68 2 0.34
5. Financial position 0.12 2 0.24 4 0.48 1 0.12
6. Customer loyalty 0.13 2 0.26 3 0.39 1 0.13
7. Global expansion 0.15 2 0.30 3 0.45 2 0.30
8. Market share 0.09 2 0.18 3 0.27 1 0.09
TOTAL 1.00 14 2.39 26 3.31 12 1.54

From the CPM table,, it shows that overall performance goes to MAS where the company get a
total highest score compare with Air Asia and Fire Fly. The overall performance made by MAS
achieved is better than competitiveness. The larger different for MAS comparing others is quality
and services. This is because MAS already conquer based on their services is same like high
class services comparing Air Asia and Fire Fly. In additional, Air Asia also can compare with
MAS based on their price. As we know, Air Asia gives lower rate comparing others.

Company Capability Profile – Competitive Factors

Neutral
0% Weak Strong 100%
(50%)

1. Product strength, quality, uniqueness

2. Customer loyalty

3. Market share

4. Low selling and distribution costs

5. Use of experience curve for pricing

6. Use of life cycle of products and replacement

cycle

48
7. Investment in new product development by
R&D
8. High barriers to entry into the company's
markets.

9. Advantage taken of market growth potential

10. Supplier strength and material availability

11. Customer concentration

12.Others:

49
7. QUANTITATIVE STRATEGIC PLANNING (QSPM)

Key Factors Weight Market Market

Development Penetration

OPPORTUNITIES AS TS AS TS

1 Asia’s middle income growth (So) 0.06 3 0.18 3 0.18

2 The home government support (P) 0.07 2 0.14 - -

3 Applying technological advances in 0.04 - - - -

airlines industry (T)
-For example e-ticketing. It is easy for
people who are busy with their work and
no time to talk in to the counter for
booking ticket

4 Economic in good condition (E) 0.06 3 0.18 3 0.18

5 The changes of lifestyle of the customers 0.05 3 0.18 - -

50
 (So)

6 Political connection between home 0.06 - - 2 0.10

country with other countries (P)

7 Limited substitutes for airplanes (SU) 0.10 4 0.40 - -

-Although there are several substitutes
(trains and ships), the geographical
structure of Asia has made air travel an
efficient, viable, and convenient mode of
transportation

8 ‘ASEAN Open Skies’ agreement 0.04 - - - -

- It will allow unlimited flight among
ASEAN’s regional air carriers beginning
December 2008

9 The population of Asian middle class 0.04 2 0.08 4 0.16

will be reaching almost 700 million by
2010. This creates a larger market and a
huge opportunity for all low cost airlines
in this region

THREATS

1 Price of oil was increasing (E) 0.04 2 0.08 1 0.08

2 The cultural of passengers are different 0.03 2 0.06 - -

(S)

3 Other government countries rejection. (P) 0.07 3 0.21 - -

4 Many Budget airlines growth (C) 0.04 1 0.04 3 0.12

5 Certain rates like airport departure, 0.10 3 0.30 - -

security charges and landing charges are
beyond the control of airline operator.
This is a threat to all airlines especially
low cost airlines that tries to keep their

51
 cost as low as possible

6 User’s perception that budget airlines 0.04 - - - -

may compromise safety to keep costs
low (C)

7 Supplier of airplanes is limited (S) 0.07 - - - -

-Power of supplier is high as there are
limited suppliers (only Boeing and
Airbus), the switching cost is high
(airplanes and maintenance are costly),
and there are few substitutes for airplanes

8 Technology problem (T) 0.03 - - - -

-overload of information or hackers

hacked the airlines website and it will
give bad impact to airlines

9 Natural disaster – flood, tsunami and 0.06 3 0.18 2 0.36

earthquake at certain place will influence
the business of airlines

TOTAL 2.03 1.18

STRENGTH

1 Low cost for all passenger 0.13 4 0.52 4 0.52

-it is suitable with their tagline ‘Everyone
Can Fly’, means to giving an opportunity
to all the people to flight with the lowest
possible fare and making them can flight
even they only have less money

2 Has many destination 0.03 3 0.09 4 0.12

-Route network of AirAsia has more than
20 countries. For example, UK, Iran,
China, New Zealand and France

52
3 AirAsia is the low cost leader in Asia 0.05 4 0.20 - -
-With the help of AirAsia Academy,
AirAsia has successfully created a “low
cost airline mentality” among their
workforce. The workforce is very
flexible and high committed and very
critical in making AirAsia the lowest cost
airline in Asia.

4 High technologies 0.05 - - 3 0.15

-The excellent utilization of IT have
directly contributed to their promotional
activities (email alerts and desktop
widget which was jointly developed with
Microsoft for new promotions), brand
building exercise (with over 3 million
hits per month and on the most widely
surfed booking engines in the world) as
well keep the cost low by enabling direct
purchase of tickets by consumer thus
saving on airline agent fees

5 Get many award 0.04 2 0.08 3 0.12

-Such as the “World Best Airlines” for
the second year, Asia Pacific’s Best
Marketing Campaign. It shows AirAsia
has a good image and performance since
it get so many awards

6 The consumer can pay their booking by 0.03 - - 2 0.06

credit card over phone

7 Good marketing campaign 0.04 2 0.08 3 0.12

-Such as making a year deal with
Manchester United

53
8 The current ratio is increase from 1.3 0.07 3 0.21 3 0.21
times to 1.47 times (fin)
From 1 unit or current liabilities can be
covered by 1.47 unit of asset. It will
make the company less risk.

9 AirAsia has a very strong management 0.03 2 0.06 2 0.06

team with strong links with governments
and airline industry leaders
-This is partly contribute by the diverse
background of the executive
management team that consist of industry
experts and ex-top government officials

WEAKNESSESS

1 AirAsia receives a lot complaint from 0.04 3 0.12 3 0.12

customers on their services
-Examples of complaints are around
flight delay, being charged for a lot of
things and not able to change flight or get
a refund if customer service and
management is critical especially when
competition is getting intense

2 The facilities at the airport 0.06 2 0.12 - -

-There are limited chairs at waiting area

3 The waiting period between check in and 0.06 3 0.18 3 0.18

depart is too long
-It takes around 2 hours for international
departure

4 Apply autocratic management 0.05 - - - -

-They only considered opinion from top
management to make the decision
without asking opinion from the other
workers

54
 5 Rely on debt too much since the debt 0.03 2 0.06 2 0.06
ratio for year 2010 is 73.15%. It is more
than half of the capital get from borrower

6 The average collection period is quite 0.06 - - - -

high which 76 days. It means the
company has to wait until 76 day to
collect their debt form borrower

7 No MRO (maintenance, repair, overhaul) 0.15 3 0.45 - -

facilities
-Thus, AirAsia cannot maintain its own
planes. With an increasing fleet this is a
competitive disadvantage

8 No frill 0.05 4 0.20 4 0.20

TOTAL 2.29 1.92

8. LONG TERM OBJECTIVES AND ALTERNATIVES STRATEGY

8.1 LONG TERM OBJECTIVES OF MARKET DEVELOPMENT

8.1.1 To increase net profit and sales of AirAsia for the future
8.1.2 To conquer the airline market share in the world

8.2 ALTERNATIVE STRATEGIES

8.2.1 STRATEGY 1: Enter the new geographical area such as Africa, United Arab
Emirates (UAE)

8.2.1.1 ADVANTAGES

8.2.1.1.1 It will increase the number of sales of AirAsia and also makes
more profit for the company
8.2.1.1.2 It also can build the customer preference to use AirAsia services
for reach their destination

8.2.1.2 DISADVANTAGES

55
 8.2.1.2.1 It has high risk whether the AirAsia airline will be accepted or not
at the new places
8.2.1.2.2 Uncertainty of demand of consumers towards the company new
location since the other airline company offered to that location
before AirAsia enter

8.2.2 STRATEGY 2: offer new destination that hardly to reach

8.2.2.1 ADVANTAGES

8.2.2.1.1 Offer an additional location that hard to reach to the customer to

need to go there in fast, indirectly can increase the AirAsia profit
and sales
8.2.2.1.2 Increase customer loyalty towards AirAsia for providing them
chance to go hard reach location with low cost rate

8.2.2.2 DISADVANTAGES

8.2.2.2.1 AirAsia incurred higher risk in case if there has no demand

towards the service and it will affect the number of sales and profit
of the company
8.2.2.2.2 AirAsia has high expenses due to buy the new airplane such as
Fokker, hire additional employees to fulfill the service

56
9. STRATEGY IMPLEMENTATION (POLICIES & ALLOCATE RESOURCES)

9.1. MICKINSEY 7’s IMPLEMENTATION FRAMEWORK

9.1.1. STRATEGY
The strategy of market development and market penetration must be implemented
in the company in term of its operation. The market development strategy means
such as opening the new routes for airlines in new location to attract more
customers. The market penetration strategy is such as do mass marketing via
many sources especially media to attract customer using airline services offered
by the company.

9.1.2. STRUCTURE
The company must be the divisional structure based on geographic area such as
Indonesia, Filipina, Thailand, and other destinations of airlines because this will
make the company more focus on its geographical area of airlines performance.

9.1.3. SYSTEM
The company must be come out with new management information system within
company for effectively disseminate any important information to staff and top
management of the company. Any complaint or problems could be managing
efficiently by doing this system.

9.1.4. STYLE
Maintaining its current style of promotion must be based on its present current
tagline “Low Cost Carrier”. For that can the company can obtain loyalty from
their customer and maintaining high revenue.

57
 9.1.5. SHARED VALUE
Concern more towards its shareholders by increase of dividend payments to them
to get full support and loyalty towards the company. They will feel it is worth it to
invest in the company and definitely drag others investors to invest.

9.1.6. STAFF
Provide development training to all staff for always maintain its services that have
been provided to customers. Staff should always know the current development
and changes which are the company made.

9.1.7. SKILL
The company should look out more to employ expertise in term of develop its
operational system and also marketing strategies. This is because nowadays
customers tend to be attracted with implementation of mass marketing by using
latest technology devices.

10. CONCLUSION AND RECOMMENDATION

58
 In conclusion, the AirAsia Company has a good performance after it launches the
new strategy which is the cost carrier in Asia for airline industry. Nowadays AirAsia is
such a well known and establish company in airlines industry and conquer the Asia
market. Clearly state vision and mission of the company helps the company to set a
proper conduct and action to achieve the two important things.
Based on the external and internal evaluation factors shows us that the AirAsia
Company can cover or face any barrier come from the both factors. This is because both
of the external and internal factors evaluation is above 2.5 and made us realized that the
company is not really affected with both factors. Next is the company formulation of
strategies, in strategic management do has five ways in order to determine the appropriate
strategies for the AirAsia Company. The five ways are TOWS matrix, SPACE matrix,
BCG matrix, Grand Strategy matrix, and lastly Competitive Profile matrix.
According to the five matrix ways, there are two strategies who get the first and
second highest scores and for that the two strategies have been chosen as the most
appropriate strategies that the company must implemented and take action regarding on
that. The two strategies are market development and market penetration. These two
strategies is important for the company in future development because they can help the
company to maintain its current perfectly performance and the most important can help
company to obtain higher revenue and sales.
For example, the AirAsia opened its route of airlines services to India which is not
ever implemented before. This is one of example market development strategy. Whenever
the company feels worth it to open operation in India and quite high in demand, the
company will open the same thing but different area in India is called market penetration.

In our recommendation, we actually based on these two strategies which are

market development and market penetration. We recommend that AirAsia should open
new operation in the new geographical area that have never been reached before by the
AirAsia company such as the Africa and United Arab Emirates in order to enlarge its
current market share in airlines industry. By doing this hopefully can increase the
company’s revenue or sales by attracting more consumers using AirAsia services.

59
 Besides that, we also recommend that AirAsia Company should open new
operation or make an additional route to the company’s airlines at place which the
companies already open the operation before. Basically this has been done to increase the
market share of the company and also as one of the mass marketing ways to increase
revenue of the company. For example currently the company had opened its operation in
India and the company should open the new operation in the other part of India and this is
what market penetration strategy will be implemented.

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