A Comprehensive And Complete Strategic Report On Airasia Marketing Essay

A Comprehensive And Complete Strategic Report On Airasia Marketing EssayThe report includes a detailed description of the social club and highlights the achievements and strategic decisions that the corporate has undertaken since its establishment in 1993.Further much(prenominal) the report depart drivel on a detailed Macro environs analysis to evaluate the external factors which may affect the keep company currently or in the future. afterwards analyzing the external factors and their impacts on the company, the report moves on to analyzing the companys micro environment. The comprehensive SWOT analysis also applied for understanding the companys current situation.The company occupies a inviolable position within Asian civil aviation, according to its successful low-spirited- embody clientele strategy model and financial resources.After great consideration and analyzing incompatible strategic options for the company, this report recommends two possible future strategies fo r AirAsia, which are aligned with its current cost leader strategy.2.0 IntroductionAirAsia was established in 1993 in Malaysia. It was in the first place founded by a government conglomerate DRB-HICOM Holding Berhad. On the second of December 2001, the heavily- indebted air duct was purchased by partners Dato Pahamin Rejab (former chairman of AirAsia), Dato Kamarudin Meranun, and Dato Aziz Bakar, Dato Sri Dr Tony Fernandes1.AirAsia began its operation as a inexpensive carrier with two planes (both ageing Boeing B737 aircraft), serving five destinations (Kota Bahru, Kota Kinabalu, Kuching, Labuan, Langkawi and Penang) and a staff of 250.In 2003 the company commited a second hub at Senai world(a) airport near Singapore and launched its first inter subject field low-cost flight to Bangkok. Since then it started a Thai subsidiary and launched Low-cost flights to Singapore and Ind whizsia. In 2004 flights to Macau were launched and in following form, 2005 flights to China, Philippi nes, Vietnam and Cambodia been launched by the company.AirAsia now is one of the award winning and largest low-cost air hoses in the ASEAN which is expanding rapidly. It started with a simple goal that how to free air travel and guess it so affordable that now everyone can fly. AirAsia Group (including its Thai and Indonesian affiliates) now operates a authorise of 90 aircraft and flies to to a greater extent than 60 destinations from hubs in Malaysia, Thailand and Indonesia.AirAsia operates more than 3,500 flights a week, colouring the blue skies over Asia a b sound red with their striking livery. The Group employs close to 7,500 staff and in its short-change history, has ferried more than 90 million passengers.AirAsia has become recognised as The ASEAN airline. It has achieved this by providing effective route connectivity and launching direct, unique and high-frequency flights linking ASEAN t haves and cities much(prenominal) as Kuala Lumpur- Vientiane, Kuala Lumpur-Bandun g, Phuket-Ho Chi Minh City and Bali-Bangkok.2.1 imaging statementTo be the largest low cost airline in Asia and serving the 3 billion people who are currently underserved with poor connectivity and high fares2.2.2 bang statementTo be the silk hat company to work for whereby employees are treated as part of a big family Create a globally know ASEAN brand to attain the lowest cost so that everyone can fly assert the highest quality product, embarking new(a) technology to reduce cost and enhance return levels3.2.3 Business StrategyThe foundation of the business has been set to deliver a no-frill, low cost, hassle-free and reliable flights and services to its passengers. The company believes in keeping costs consistently low which requires high efficiency and maintaining simplicity in every part of the business.http//www.airasia.com/iwov-resources/my/common/images/AirAsia/aboutus/strategy.gifsourceaurasia.com2.3.1 mainstay strategic implementationsSafety FirstHigh Aircraft util isation quick turnaround of 25 minutesLow Fare, No FrillsStreamlined Operations making the process as simple as possible, single aircraft fleetLean Distribution System bookless servicePoint to Point Network2.4 Highlights of the companyAccording to IATA in 2009 the traffic dropped 3.5% overall in aviation perseverance which included 5% decline in Europe, North the States and the Asia Pacific region. However in 2009 despite of global economic downturn and fear of A(H1N1) influenza pandemic, AirAisa managed to produce an astounding 148% increase in its core operating Profit to RM447 million4. The company ferried around 22 million passengers. It also succeeded in cause its Ancillary services by introducing new lines of the service. It expects deliveries of new Airbus A320 aircraft and the phasing out of its Boeing B737 aircraft in 2010.In amountition despite tight credit lines it was able to secure funding at competitive pricing for all its aircraft deliveries for 2009 and 20105.F ive years financial highlights(RM million, unless otherwise stated)For the year ended JuneFor the 6 months ended 31 DecemberFor the yearended 31 December20062007 Restated2007 Restated2008 RestatedRevenue1,0711,6031,0942,855Operating expenses9971,3418753,207Operating arrive at/(loss)74262219(352)Associates contributions(0.5)(3.9)Profit/(loss) before tax86278277(869)Tax116220149373Net profit/(loss)202498426(496)BALANCE SHEETDeposits, cash and bank balances426595425154Total assets2,5744,7796,4309,406Net debt6271,9593,2726,453Shareholders equity1,1481,6622,0991,606CASH FLOW STATEMENTSCash flow from operating activities282595256(416)Cash flow from spend activities(1,249)(1,943)(1,581)(2,602)Cash flow from financing activities1,0671,5091,1412,749Net Cash Flow100161(184)(269)CONSOLIDATED FINANCIAL PERFORMANCE (%)Return on total assets7.810.46.6Return on shareholders equity17.630.020.3Return on capital employed4.27.24.1Operating profit margin6.916.320.0Net profit margin18.831.138.9CONSOL IDATED OPERATING STATISTICSPassengers carried5,719,4118,737,9395,197,56711,808,058Capacity7,378,07511,140,7646,621,27615,660,228 extend factor (%)78787875RPK (million)6,7029,8635,93014,439 hire (million)8,64612,3917,91919,217Aircraft utilisation (hours per day)12.012.011.911.8Average fare (RM)174171195204Revenue per ASK (sen)12.412.913.813.9Cost per ASK (sen)11.510.811.011.4Cost per ASK excluding fuel (sen)6.65.25.44.2Revenue per ASK (USc)3.353.654.064.22Cost per ASK (USc)3.123.063.253.49Cost per ASK excluding fuel (USc)1.791.461.601.27Number of stages48,33968,19538,50789,118Average stage length (km)1,1631,0881,1831,207Average fleet coat (Malaysia)20.527.131.636.6Size of fleet at year end (Malaysia)26343944Size of fleet at year end (Group)42546578Number of employees at year end2,2242,9243,4743,799Percentage sales via net profit (%)60656570 originairasia.com2.4.2 Ancillary functionThe company offers contrasting narkary services, such as AirAsia cargo, insurance, holiday packa ges and credit cards. Since 2010 it offers a non flight ticket booking service called AirAsia RedTix which offers ticket booking for concerts, musicals, theatres, sports and other events. It also offers some loyalty programs. Furthermore it is focusing on building its own sum chain for ancillary services to volunteer better pricing for its passengers. The company mainly use its website as a distribution channel to offer its services.The company achieved 34% ripening in its ancillary income in 2008 and it expect around 50% growth in 2010.2.5 Company descriptionIts subsidiaries are Crunchtime Culinary Services Sdn Bhd AA outside(a) Ltd, which is an investment holding company AirAsia Go Holiday Sdn Bhd, which is engaged in tour operating business AirAsia (Mauritius) exceptional, which is engaged in providing aircraft leasing facilities to Thai AirAsia Co. Ltd Indonesia AirAsia VietJet AirAsia AirAsia RedTix Airspace Communications Sdn Bhd AirAsia (B) Sdn Bhd AirAsia Corporate Services Limited Aras Sejagat Sdn Bhd, which is a special purpose vehicle for financing arrangements required by the Company, and Asia Air Limited, which is engaged in the provision and promotion of AirAsia Berhads in-flight food to the European food market6.2.6 AirAsia organizational structureThe following chart shows the corporate structure and principal operating companies for AirAsia.http//www.airasia.com/iwov-resources/my/common/images/AirAsia/aboutus/chart_organization.gifSource aiasia.com2.7AirAsia route NetworkOne of the key strengths for its business is to continuously expand its route network and the frequency of flights, which provides the advantage of more connectivity for the passengers.AirAsia operates from nine regional hubs. AirAsia flies to over 60 cities in 16 countries with 126 domestic and international routes7.When the company attempts to launch its low cost long draw play flights (AirAsiaX) most of the airlines assumed that such attempts will fail due to the more cost and complicity in long draw play flights. However the company were quiet successful since it has launched its long haul flights trope as AirAsiaX and has earned numerous application awards, including Asia Pacifics best New Airline in 2008 for its low cost long haul business model. Now there is huge market to expand its long haul flights to different countries. Currently AirAsiaX flies to China, India and Indonesia. The company uses the brand likening agreement which allows it to use the AirAsia brand and a shared services agreement which will benefit the company by sharing resources such as marketing team, distribution channel, cabin crew and pilots. The combined short-haul and long-haul networks feed each other.In the six short years since its inception, Thai AirAsia has become Thailands largest low cost carrier with a market share of 67.81% by passengers and of 67.80% by aircraft movement. It has ferried over 19 million passengers to motley destinations. In 2009 the c ompany expanded its rous in Thailand from 19 to 26 destinations.AirAsia now has two Airbus A320 aircraft based in Phuket, and achieved a load factor of 76% (79% domestic and 74% international)8.AirAsia currently operates four hubs in Indonesia. As the main hub, Jakarta connects Indonesian passengers to many cities across ASEAN.In 2009, it expanded its routes to Australia, Bangladesh, Sri Lanka and Taiwan. The company key focus in 2010 is India. Apart from Tiruchipillai, the company has added Kolkata, Kochi and Trivandrum to their network. Furthermore the company will focus into six new India routes in 20109.2.8 Joint venture and strategic compact highlightsThe company business strategy is cantered on cost leadership, which is focused on price-sensitive guests on long-haul and short-haul flights. The company is mainly focused on joint venture alliance to expand its long-haul flights globally. As AirAsia chief executive Tony Fernandes said With joint purchase power it means that we can potencyly work with airline manufacturers on the right configuration and design of an aircraft specifically forAirAsia and that the best suits our operational needs for the future10Airaisa recently (09/04/2010) singed a strategic partnership agreement with VietJet Aviation Joint caudex Company. The company earlier had acquired a 30 percent equity stake in VietJet Air( Vietnam Airlines) which was the first step to lunch of a Vietnam-based, low-cost subsidiary. The trade name is VietJet AirAsia which will be operating both in domestic and international market. The governments of respective companies were fully supportive to the lunch of VietJet AirAsia which will be offering low fares to promote the travel and tourism in Vietnam and the rest of ASEAN region11.http//www.asianewsnet.net/home/images/space.gifAirAsia recently (06/01/2010) signed an airline alliance agreement with Australias Jetstar to pool recourses and expertise, procure new aircraft and revenue-sharing deals wh ich could lead to cost savings of $200m and $300m annually. The next step for the partners would be to look at joint venture on routes and other commercial activities including joint procurance of hotel inventory for holiday packages. Plans include saving on costs including aircraft purchasing, maintenance and design, since both airlines operate with similar fleets12.The Virgin Group became an investor inAirAsiaX to the song of a 16% stake. The majority stake with 48% is a Malaysian group that includes Fernandes, whileAirAsiaitself has 16% Japanese aircraft lessor Orix Corporation has 10% and Bahrains Manara Consortium has 10%. AirAsiaX began operations in late 2007 to Australias Gold Coast and now flies to three destinations in that country and two points in China, as wellhead as the UK. It is seeking more A340-300s for longer-haul routes and has 23 A330-300s on order.3.0External analysis3.1 PESTEL analysisPOLITICALECONOMICSOCIALPolitical uncertainly in Malaysia and ThailandIncr eased tightness between Malaysia and IndonesiaSevere Security Measures and RestrictionsTerrorism attacks mostly in Malaysia and ThailandIncrease in route charge by the GovernmentGovernment support for national carriersEstablishment of Climate Protection Charge, so the aviation industry has to compensate further taxes for carbon emission..Currency fluctuationGPD growth rateThe low-cost airline industry is in the growth rate of the life cycleHigh price ceiling of petroleum products and fuelsRecessionChanging economy leads to change in lifestyle which includes frequent flying for vacationsOperating in ASEAN with different cultures and languagesOperations increased in grey marketIncreasing PopulationRising in middle classTECHNOLOGICALENVIRONMENTALLEGALFuel efficient engines and air framesTeleconferencing for businessTechnology expansion in terms of internet salesOnline check inUse of technology for ancillary servicesWireless technology expansionUse of new Airbus A330-300Use of informat ion and intercourse Technology(ICT)Yield management transcriptionComputer reservation dodgingEnterprise resource planning systemStrict checks on Green house and global warming issues due to pressure from eco-friendly friends.Emission trading schemeEnergy consumption and noise pollution controlsLand for growing airportsNo food and drink service inside the flights so reduce leftover wasteRestrictions on mergersPreferential airport rights for some carriersASEN RegulationsHealth and safetyOther landing charges earningsPoliticalPolitical uncertainly in Indonesia and Thailand is not in Airasias favour as it operates mainly in both countries. Since 2006, Thailand has been facing many political issues. In April 2009, Red shirt protestors, who were angry that Thaksins government was forced out of office, caused the cancellation of ASEAN summit and their latest antigovernment protestors went on March 2010 which caused the closure of some airports in Thailand. Moreover as a result of grant ed exploration rights in oil rich waters off the coast of Borneo have increased tension between Malaysia and Indonesia13.As mentioned earlier, AirAisa offers long haul flights through strategic alliance with different airlines and willing to expand it further. The main political issue which the company may face in the future is the political relationships with the respective countries which may affect the operation of the company.EconomicFluctuating fuel prices It has increased turbulence in aviation industry. According to the International Energy Agency the world aviation fuel demand will grow through 2010 led by Asia14. This current technique of global supply chain incurs large-scale costs to AirAsia who is unable to secure low-cost fuel. This is not good for this no-frills airline ait wants to stay in the market as a low-cost airline and to deliver customers what they want without added costs.Malaysia GDP Growth Rate The Gross Domestic Product in Malaysia is in companys favour as GPD contract at an annual rate of 2.60 percent in the last quarter. Malaysia Gross Domestic Product is worth 192 billion dollars or 0.31% of the world economy, according to the ball Bank. Malaysia is a rapidly developing economy in Asia. Malaysia, a middle-income country, has transformed itself since the 1970s from a producer of raw materials into an emerging multi-sector economy. The Government of Malaysia is continuing efforts to boost domestic demand to wean the economy off of its dependence on exports15.CountryInterest RateGrowth RateInflation Rate unwarrantedRateCurrent AccountExchange RateMalaysia2.75%-2.60%1.70%3.70%304493.1820Economic Forecast 2009 2010Malaysia GDP Growth RateSources ASEAN Finance and Macro-economic Surveillance Unit Database national statistical offices.SocialAirAsia operates in a region with diverse culture, language, origin and religion. As a result the company operates in a market where consumer preferences and demographics are different and uncontrol lable. Consumer behaviours are becoming increasingly difficult to predict as contemporary consumers tend to shift loyalties from one brand to some other due to price differences or even lack of basic consumer consistency. The competition in low-cost airlines within Asia region is increasing, giving consumers vast choices to choose an airline. Thus in order to fully utilise a market, bring repute, increase its consumer generated revenue and relate to the diverse consumer needs, AirAsia must completely understand the market.TechnologicalAirAsia uses the latest information and technology system which allows it to reduce its operating costs. The company has adopted variety of information technologies such as Yield management system, Computer reservation system (CRS), Enterprise vision Planning System (ERP). Furthermore the company operates with youngest fleet, Airbus 300-330 which again allows the company to operate more efficiently.EnvironmentalIn the Asia Pacific region, rapid econ omic and population growth creates serious social consequences from environmental problems ofglobal warming and air pollution. The air travel is constantly increasing in that region as consumers are more driven with better technology this has however increased issues related to global warming and green house effects. AirAsia is always expanding which spells disaster for the planet as more flights mean busier airports, bad sound quality for people living and working near the airports, more noise and air pollution. The company however says its airplanes are more efficient, quieter and thus have less environmental impact.CO2Emissions from MalaysiaTotal Fossil Fuel CO2 Emissions from Malaysia graphSource http//cdiac.ornl.gov/trends/emis/mys.htmlLegalAs mentioned earlier, AirAisa offers long haul flights through strategic alliance with different airlines and willing to expand it further through more partnerships all over the world. The main legal concern for the company is to sort out th e legal issues and obtain clearance from the respective countries. As AirAsia Group CEO Fernandes has said that the budget airline would fly to North America once it sorted out the legal issues and obtained clearance from the respective countries16. Also the company has signed sponsorship deals with different companies, such as its sponsorship deals with National Football Leagues (NFL) Oakland Raiders, which brings its own legal issues. Furthermore the company should pay more attention to health and safety regulations as well.Overall it can be said that the external environment (PESTEL) for AirAsia is relatively stable, however the companys biggest problem involves the legal obligations. It should try to keep the Legal environment as steady as possible. Furthermore the perception of consumer behaviour is another issue for the company and it should develop strategic tools to improve total consumer investment and sales performances.4.0 The industry environmentAirAsia is engaged in the civil aviation industry where it provides low fare, long haul, short haul, point-to-point scheduled passenger airline services. In 2009 AirAisa managed to produce an astounding 148% increase in its core operating Profit to RM447 million17. The company ferried around 22 million passengers. It also succeeded in driving its Ancillary services by introducing new lines of the service.4.1 Porter five forces mogul of the providerSupplier power is clean high. Airbus is AirAsias main aircraft supplier, which means they have high supplier power. Also the switching cost from one supplier to another one is high as it involves lots of hidden costs, e.g. retraining pilots and mechanics. Airports also plays a crucial role as suppliers, the charges for main airports are very high as they are dominant player in supply chain, but the secondary airports have lesser bargaining power.Power of the buyerBuyer power is moderately high due to no switching cost from one airline to other one and it can be e asily achieved. Also the easy access to the internet will allow customers to gain information on the prices which are charged by other airlines.RivalryRivalry power is in the companys favour. The low-cost operation of the company allows it to offer the cheapest price in the market. However there is a threat that, the profitability of LLC will attract full service airline to lunch its LLC version which will increase the degree of rivalry in the industry.Power of substituteFortunately, the geographic structure of Asia which is so vast and the large remoteness between countries has made the air travel the most efficient and convenient way to travel, which makes the power of substitution such as trains or ferries low to the company.Power of new entrantThe threat of new entrants is moderately in AirAsias favour at present. The high capital requirements to enter the market and high exit barricade prevent many entrants to the market. In addition, AirAsias current leading role and favoura ble brand awareness make it a first choice amongst the current competition. However, potential new entrants from full service carriers could be threats in the future and long term.Based on the industrial scanning, the demand for low-cost airlines in Asia is expanding. The profitability of LLC will attract full service airline to lunch its LLC version which will increase the degree of rivalry in the industry.However AirAsia is the market leader in Malaysia, Thailand and Indonesia and in order to overcome the future rivalry it should focus to add apprise to its services in order to keep its position in the market.4.2 value chainThe value chain logic is that every company occupies a position in the chain which is then passed downstream to the customer. Inbound Logistics is the start of the value chain which includes airport agreements, low cost suppliers and so on. AirAsia serves through secondary airports (significant savings) in various locations where it is able to get good contrac ts with the airport authorities. It even attempts to act discounted fees by delivering an annual increase in passenger traffic where practical. So it has good relations with its contractors, Airbus being its main supplier of aircrafts provides on-time delivery, gives discounts so it is able to maintain common fleet which reduces costs and saves time. It also does outsourcing in the form of its online web check-in for its passengers.Support activitiesFirm infrastructureFinanceAccountingQuality assumptionHR managementProviding recruitment and staff trainingProviding pilot trainingProviding Yield analyst trainingProviding In-flight trainingTechnologyAdopting information technology such as CRS, FSS, YMSbaggage tracking systemIn-flight systemProcurementTechnology acquisitionPrimary activitiesInbound logisticsAircraft purchasing or leasingAircraft fuel and parts purchasingLanding slot acquisitionFlight and crew schedulingOperationsTransporting passengersFlight schedulingCourier operatio nOn-board servicesOutbound logisticsProviding transportationBaggage claimingMarketing and salesAdvertising and promotion the most important activity to create more brand awareness.Direct salesSelected travel agentServicesCall centre system to tackle problems with customer enquiriesLost and found servicesAirAsias value network is a combination of players which comprises of its external network of its customers, stakeholders, complementors, open innovation networks, intermediaries and suppliers, and its internal network focusing on key activities, processes and relationships such as order fulfilment, innovation, customer support and so on. In order to add value it is necessary to position all parties in the value network business model so they can then deliver value to customer supply. Based on the information collected, value can be analyzed, and within this network a companys value share position can be determined.5.0 innate analysis5.1 Current strategic implementationsAirAsia has currently adopted information technologies strategically to integrate the operations and coordinate all the business and management functions. The followings are a couple of(prenominal) system implementations that AirAsia has done in its marketing and sales activities as well as operation activity in the value chain.Yield management systemComputer reservation system(CRS)Enterprise Resource Planning System(ERP)IT implementation and strategic alignment5.2 PositioningThe company has p