AirAsia and Tune Group: Strategic Management Analysis

AirAsia and Tune Group 0
Strategic
Management
Student’s Name
8/10/2019

AirAsia and Tune Group 1
Introduction
AirAsia is the leading low-cost airline in Malaysia that schedules domestic and
international flights to more than 165 destinations and in 25 countries. The company provides
no-frills airline services to provide low cost traveling in Asia. The company focuses on
valuing customers and satisfy their needs (AirAsia, 2019).
The report will reflect upon the business activities conducted by the company in the
external environment. It will focus on describing the intensity of the competition and the
attractiveness of the industry in terms of profitability. It will cover the industry analysis of
South East Asia and will reflect upon the core competencies of the company through the
application of value chain analysis. The use of value chain analysis will help the reader to
analyze the primary and the secondary activities of the company. It will also enlighten about
the competition that is faced by the company and the barriers that new entrants may face in
entering the airline industry (AirAsia, 2019).
The further paragraphs of the report will also include the application of the Ansoff
product matrix to discover the growth strategy used by the company and recommendations
that will further enhance the growth of the business. This framework allows the company to
diversify its operation and expand its market share.
Porters five force model
Porters five force study is a strategic tool that helps in analyzing the competition in
the business environment that affects the profitability of the business.
Bargaining power of buyers

AirAsia and Tune Group 2
The airline industry comprises of two kinds of buyers .i.e. individual flyers and
intermediaries. The individual flyers buy the ticket for various business and personal reasons
and intermediaries are the middlemen between the airlines and flyers. It is analyzed that the
bargaining power of the consumers is low in the airline industry since the fliers purchase the
ticket from the airline they trust and want to develop loyal relation. High loyalty towards the
brand reduces the bargaining power of the buyers (Buaphiban and Truong, 2017).
Bargaining power of suppliers
It is analyzed that the negotiating power of the suppliers in the South East region is
high because the major market suppliers are Boeing and Airbus. There are only a few
numbers of suppliers which in turn create difficulty for the airline company to switch to other
companies because of involvement of high switching cost and few numbers of suppliers
(Buaphiban and Truong, 2017).
Threat of entry
It is analyzed there is the presence of a high degree of threat in South East Airlines
industry. The new entrants would face a high degree of competition from the already
established brands and will become difficult for the entrants to compete with the explored
goodwill. The competence of the organization is reduced due to to the low switching cost
between the brands (Wang, Tsui, Liang & Fu, 2017).
Threat of substitution
The degree of threat of substitution is moderate because the clients cannot switch to
other means of transport if they have to reach within a short span of time. The customers can
shift for other means of transportation like roadways and railways. However the threat of
substitution is moderate (Babic, Tatalovic & Bajic, 2017).

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Industry Rivalry
The intensity of competition is high because of low switching cost for the customers
and there are companies that have already secured a dignified position in the environment so
it becomes difficult for the new entrants to fight the competition. The customers do not take
the risk of traveling with the flights that are not safe however they prefer to travel with the
brands that they trust. This reflects that there is a high intensity of competition (Babic,
Tatalovic & Bajic, 2017).
From the above analysis, it is scrutinized that the new entrant may face the issue of
establishing its brand in the market where there is a monopoly of famous airline brands. The
company may also face the challenge of limited resources and few numbers of suppliers. It
will become costlier for the new entrants to occur the operating cost and face the hike in the
fuel prices.
Value chain analysis
The value chain analysis describes the usage of functional activities of the company
in order to attain value to the company. The diagram mentioned below represents the value
chain facilities of AirAsia and the Tune Group. It consists of primary and secondary
activities. It helps in describing the core competencies of the company (Williams, 2016).
Primary activities
Inbound Logistics: It includes the storing and distributing of the raw material used in
the process of production. Under this function, the company analyses the strategic moves of
the competitors and ensures proper scheduling of flights. It includes the activities through
which the company manages its resources and also involves in sustainable business practices
to cut the price of the fuel and purchase goods at lower rates (Williams, 2016).