Strategic Management of AirAsia

This case study discusses the strategic management of AirAsia, including external and internal analysis, business level and functional level strategies, leadership impact, and more. It also covers a crucial strategic management issue affecting AirAsia and provides practical business goals using SMART methodology.

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ASSESSMENT 3: CASE STUDY
Strategic Management of AirAsia

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Table of Contents
Introduction:....................................................................................................................................3
External and internal Analysis:........................................................................................................3
Business level strategy and Functional-level strategy for AirAsia:.................................................5
The impact and implication of leadership, culture and ethics on organisational strategy:..............7
Research and discuss a crucial strategic management issue affecting AirAsia:............................10
Design a practical business goal for AirAsia using SMART:.......................................................10
The organisation industry environment and justification for AirAsia competitive advantage:.....11
AirAsia use vertical integration, diversification, strategic alliances:............................................13
Motivational Theories:...................................................................................................................15
Measurement and Evaluation of the strategic performance of AirAsia:.......................................17
Change management within AirAsia:............................................................................................18
References list:...............................................................................................................................20

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Introduction:
AirAsia is one of the lowest cost air services, which are not only deal with Malaysia but
also 25 numbers of developed and developing countries all over the world. With maintaining a
margin cost AirAsia tries to provide their service into domestics and international. According to
the journal of “The Ascendance of AirAsia: Building A Successful Budget Airline In Asia”,
nowadays with maintaining this low cost and providing good quality services, if AirAsia tries to
introduce their business into a new country, the management have to encounter into huge loss
preliminary. To overcome this circumstance, a specific strategy is very essential, by which
organisation can reach one of the leading positions.
External and internal Analysis:
External SWOT Analysis:
The external analysis of AirAsia can be made through the application of strategic
management tools like SWOT. It can help to identify the vital issue which can harm the future
profitability of this company.
Strength:
 AirAsia is recognised to be the best
airline throughout the worldwide and
also has a right image. The company
uses eco fuel to minimise the air
pollution, and high technology
equipment has been used throughout
Weakness:
 The duration of the travel compared to
the other international flight is taken a
bit time.
 The company has a secondary airport
which consists of a non-central

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the travel
 The Organization had improved its
low-cost model for airline service.
 The company had its first market
collaboration with ICT
location.
Opportunities:
 The customers frequently earn flight
tickets and categorised gold and silver
class according to their travel.
 Partnership with the various reputed
brand which sponsors the company
well as correctly.
Threats:
 Despite the brand name, its air
accidents have occurred mostly in the
past few years.
 Security is the primary concern from
the plan highjack.
Table: External SWOT Analysis
(Source: Swadesh, 2017)
Internal SWOT Analysis:
Internal analysis compact with rectifying all internal faults such as strength, weakness,
capitalises and resource of an organisation that is going to help the organisation to achieve the
ultimate goals and future growth. To attract the more substantial number of the customer, the
airline company is successfully using the marketing and seals business strategy (Grant, 2016).
Strength:
 The airline has a strong management
Weakness:
 The limited human resource is one of

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team.
 To maintain the fuel cost, it had a
robust strategy and done some great
execution controlling the overall budget
the weaknesses of the organisation
Opportunities:
 Including customer service and
operation different from old technology
model.
 Incising the rate of the fuel cost may
decrease the market competition.
Threats:
 Entrance other low-cost airline
company can be a threat to this
organisation
 Security is the primary concern from
the plan highjack
Table: Internal SWOT Analysis
(Source: Asrah et al. 2018)
Business level strategy and Functional-level strategy for AirAsia:
The Functional level strategy According to the journal, “The ascendance of AirAsia:
building a successful budget airline in Asia”, AirAsia is quite well designed and maintain for
expand in the international market. The business strategy divides into some department, and
those are Human Resource, Financial Resource, Marketing and seals team (Niederwieser &
Baldomero, 2016).
Human Resource: This resource includes a support system which is mainly hiring
personal resource, skill development, and application tanning of benefits to the legal structure

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defined by the airline community. The department is entirely responsible for the business
management strategy formed for any organisation.
Financial Resource: Financial Resource is the essential element for the run the airline
system. Sometimes the funds needed to expand throughout the worldwide.
Marketing and Seals Team: Getting value regarding return on its investment, marketing
indicates the number of actions undertaken to make sure that the airline fulfils all the demands of
its regular customer. Like other airline organisation, AirAsia has also not been left out to
promote its brand on social media (Hambrick, 2014).
Business Level Strategy is in core competencies which should be focused on satisfying
customer needs and preference to gain a beneficial outcome and the whole process done through
the business strategy. Business level plan feature proceedings are taken to provide value to
customers and put on a spirited benefit by exploit core competencies in unambiguous,
personality manufactured goods or service markets. Business-level strategy is worried about a
risk situation in the current industrial market, absolute to the participant and the five forces of
competition. To survive the current industry, knowing a customer is very significant, to obtain
and sustain a competitive advantage. According to the journal, “The ascendance of AirAsia:
building a successful budget airline in Asia”, There are four strategies in for any company to set
up a competitive market, and one should undoubtedly follow all these strategies.
Cost Leadership: Building modern state art facilities to attract the customers. Maintain
tight control over production cost and other expenses.
Porter’s Five Force Model: As stated by, Hogg (2016), cost leadership model helps to
control one's business expenses, but with the help of porter five force model one can quickly set

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up new business. This model includes five rules that are, Rivalry, the Burgeoning power of
customer, Bargaining power of suppliers, Substitutions, Threats. These entire five rules can help
to develop a new company.
Cost Advantage: Identify the unnecessary value cost and control the damage.
Reformation the value chain as the industry needed.
Risks: The wrong intentionally using technology, limitations of companies exposure and
tunnel vision are the riskiest thing in business level strategy nowadays.
The impact and implication of leadership, culture and ethics on organisational strategy:
Concept of Leadership: Leadership is a process by which a person impacts other to achieve the
aim and directs the industry in a particular which make the organisation more consistent and
logical. It is said that the attribute or traits, such as benefits value ethics and character, can
influence the leadership. Knowledge has direct access to process and directs the leader's
mentorship while the other aspect contributes to the leader certain characteristic that makes him
unique from all. The below tables shows the implication in terms of positive impact and negative
impact on the business strategy:
Positive impact Negative impact
i) To improve the moral values of
employee the common leadership
action can be a part to develop an
organisation. Employee moral values
have a huge impact on the current
business market and affect the
i) Poor leadership impacts the overall
team performance of the company
and the employee output is going to
bear without a good leadership
ii) Poor leadership makes the task
incomplete that decreases the

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productivity.
ii) Good leadership can improve
manager-employee relation, building
up a strong foundation and trust
between them.
iii) Developing a better communication
skill between the leaders and the
employees will make the organisation
better in terms of productivity,
infrastructure, and workforce
management.
iv) A genuine leadership helps to clear all
the objectives goals of the company to
the employees. In this way the workers
know the exact work to do to increase
the productivity of the company.
productivity and creates a negative
brand image of the company.
iii) To gather knowledge about the
function of work, specific training
and self-assessment is very
essential. On that aspect a good
leader can play a curtailed role.
Apart from that, the employee
cannot get interested in the
individual working field.
iv) To maintain a good atmosphere in
the internal environment of the
office area, leadership concept is an
important thing. As a pioneer that
leader can change the mind of an
employee. With the corpulence of
the bad mentality leader, the
employee can behave like a beat.
The entire aim of the leadership is to generate a cultural environment in a large and well
set up industry which may be quite difficult for an outsider to cope up with the new culture. In
one way, leadership creates the culture or another way one can say, aesthetic establishes the
leadership opportunities, both indicate the same justification.

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Leadership function on cultural perspective: Companies reflects the image of the
leader who runs the organisation. In the year of company’s set up, the managers ensured to
everyone that it would be a place that accepts diversity and workforce from all over the world.
Thus over the next few years, the ethics of the leader became the focus part of the cultural
society.
The obstructers to cultural change: According to the journal, “The ascendance of
AirAsia: building a successful budget airline in Asia”, the internal issues are the real obstacles to
cultural change. Premature and satisfaction ideas generate a negative environment. Making some
difference in the process leads to some mistake, and it is normal though the changes are positive
for industrial purpose. Thus people learn different coping mechanism to steer clear of the new
changes.
The Impact of Ethics in Organisations:
A code of ethics is significant for business to set up and to make sure that everybody in
the organisation is clear on the ultimate goal, values and guideline principal of the company.
Code of ethics for any organisation is not simple enough initiative from a moral perspective.
Apart from that, code of ethics also helps to construct faith and reliability among the
stakeholders and enhance the overall brand image. Ethical people are those who can decide the
difference between the right and the wrong choice. The required advantages of ethics in business
can act as applying the principal of honesty and fairness to relationships which connect between
the employees and the customers. However the organizational ethics and principled stands on the
business operational, which are best, demonstrated through the acts of responsibilities,
comparison, fairness, and indignity. The main issue for business owners and managers is to make

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sure that all employees should understand and follow these ethics. Based on this, an organisation
can develop its business strategies in a proper way.
Research and discuss a crucial strategic management issue affecting AirAsia:
Workforce Diversity: Many companies feel privileged on having a diverse workforce. A
diverse workforce does not always indicate for an international corporation, many domestic
corporations have a diverse workforce. Workforce diversity is a type of employee unit which
includes a mix of workers from different cultural and ethnic background of different ages and
genders.
Lack of Resource: Before starting a new organization, one should confirm about the
required source of materials which provides the products in future. Having a proper resource can
run a company for a long time, so it is very important for any business organization.
Hyper-competition: It is a situation in which a lot of competition is faced by the various
organization. Market changes in no time so in this process it is very easy to enter a new market
for another company.
Design a practical business goal for AirAsia using SMART:
In specific, SMART short term of five aspects of comprehensive, actionable goal settings
which help to create such organisation goal to improve industrial exposure. SMART consists of
five terminologies, using these terminologies, business goals are described below (Porter, 2014):
Specific: Divided long terms goals into short terms goal to work efficiently, so everyone
in the organisation knows where they stand.
Measurable: The organizational task so one can easily quantify for answerability and

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investigation for implementation of the work.
Attainable: Asking too little or too much for the team members of that organisation.
Relevant: All projects are aligned with the corporate mission to increases the number of
stakeholders for the organisation.
Time Bound: Appropriate time goal for all projects, one should avoid all mission crap and
motivated other employees.
Using SMART methodology, business goals should be designed for AirAsia Company.
The organisation industry environment and justification for AirAsia competitive
advantage:
The industry environment and competitive advantage will depend on some external
factor.
Political Factor: For the future grown prospect of any organisation, the political issue
has a significant impact. In the growth and the success of every airline business, the government
of New Zealand has played a vital role. The most significant number of airline shares is known
to behold by the government which is near about 82% (Holloway, 2017). The political scenario
of New Zealand is also stable unlike other nations. According to Hambrick (2014), a stable
political situation helps a business to flourish rapidly. The main reason is that if politics is stable,
the economy starts to grow. Infrastructure starts to improve. Marketing activities are possible to
carry out properly to acquire more customers. In this context, it can be said that the political
scenario of New Zealand is supportive of the growth of the company.

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Economic Factors: Large business organisations greatly depend on the financial
condition of the country. The financial situation of New Zealand, Australia, other Gulf country
and European country is right, and hence the airline business seems to be complimentary for the
future enlargement of the industry (Gordon, 2018). For example, New Zealand’s GDP is growing
at a rate of 0.6% and the total GDP is around $185 billion. This positive economic growth is
beneficial for the growth of Air Asia in this country in the coming years.
Social Factor: Social factors are highly depended on the growth and development of the
company through preference of people, lifestyle, cultural and many more. New Zealand is home
to a diverse people, but most are culturally emotional. Being originated in Asia, the company
needs to understand the cultural difference between New Zealand and Asian countries and
thereby need to develop strategies that can help to minimize the social factor challenge.
Technological Factor: The whole airline business stands with the help of modern
technologies. Airline's business organisations are always trying to gain and learn new innovative
techniques to achieve the competitive position in the market. New Zealand is considered as one
of the developed and first world countries where new innovations come first. Therefore, the
technological aspect also seems to be in favour of Air Asia's growth in the country.
Environmental Factors: As stated by, Carlton (2015), from the airline's activities and
any adverse effects, the airline industry needs to protect the environment. To maintain the
ecological factors, AirAsia has brought in carbon offset program to minimise the air pollution.
Legal Factors: All the airline company in New Zealand needs to follow the ‘New
Zealand Civil Aviation Act 1990'. Apart from the airline rules, the organisation have to maintain
all the customer services related rule mentioned in their handbook.

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Internal Factors:
Staff: Companies run on the basis of staff and the power of employees as the employees
are the major part of company's internal environment. Employees have to good at their own jobs
to achieve the target of the company along with the increment of the productivity. The
authorizations have to able at handling lower-level employees and observing the other internal
parts of the company. The manager also able to control internal politics and conflicts as it can
harm a good company.
Money: Company's survival entirely depends on the economic condition of the company.
Money is considered as an internal factor because it is built the whole infrastructure and increase
the productivity by expanding the workforce. If a company reddens with cash, then the
companies have a lot more flexibility to grow and expand the business. In a bad economy, a
well-run business may not be able to carry on into the current market. However if the customer
loses all their jobs or takes another job, it can hardly support the organisation. Understanding the
economy can help to spot threats and opportunities towards the business perspective.
Company’s Culture: The internal culture includes the values, flexibilities, priorities, that
the employees live by. The customer will conclude all such values based on the type of
employees are hired by the company.
Competitive advantages: It is a procedure which allows a company to produce good
product or service at a lower price that offers more desirable among the customers. This module
allows a good productive entity to make more seals compared to its market competitors.
Competitive advantage creates greater values for an organisation, like AirAsia, and company's
shareholders because of its certain strength. It is difficult for other companies to neutralize the

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advantage if the competitive advantage is more sustainable of that organisation. Competitive
advantage is divided into two parts i.e. comparative advantage and differential advantage.
Comparative advantage is a procedure to generate a good service than other competitors
that leads more profitable business for that company. Comparative advantage also depends on
the economic scale of the company, geographical location and efficiency in the internal system.
It shows that the organisation offer a service of the same value at a lower price as comparative
advantage does not promise the customer a better service.
Differential advantage can be applied in a particular situation such as when a particular
organisation offers a different service compared to the other company that is also a cheaper price
then the whole situation started as a differential advantage.
Using these two business strategies, AirAsia builds a strong foundation in the airline
business. The company offers a well-designed package at a much cheaper price in the market
which attracts most of the new customer as well as maintain customer retention.
AirAsia uses vertical integration, diversification, strategic alliances:
Vertical Integration: it is described that a company is creating its inputs or producing its
outputs. Forward integration includes association into distribution. Vertical integration consists
of a choice about which comprises the raw material to complete the customer chain. In addition
to finish the forward and backward integration, it is mandatory to identify the difference between
full integration and taper integration. However the vertical integration occurs based upon the
assumption of the company to control several production or distribution which is involved of its
product or the service provided by the company in a particular market. Vertical integration can
be divided into two ways that are vertical background integration and another one is forward

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vertical integration. For example, AirAsia expands backward on the production path into
manufacturing is identified as a backward integration on the other hand the forward expands on
the production path into distribution is concluded as forwarding integration. Apart from this, as
AirAsia mainly deals with 25 developing and developed countries, management of this
organisation have taken so many decisions related to vertical integration most of the time.
According to the journal report AirAsia launched Fintech products to provide more satisfaction
to the customers within the aspect of vertical integrity process.
Diversification: diversification is a kind of assist strategies which used to expand
organisational operations by adding together products, service, strategies and stages of
production to exiting the business. Basically the diversification is the main key to allow the
company to enter the new market strategies that are different than current operations. It indicates
towards a unique market strategy where the company generate its revenue creating a new product
in the market. This is the riskiest section as the business has no experience with the new market
strategies and does not know if the product of the company is going to be successful. Various
types of diversification are related to diversification and unrelated diversification.
Related Diversification: This diversification indicates into a new activity which is
connected by company existence activities by a value chain.
Unrelated Diversification: This diversification indicates into a new activity that has no
connection to other companies' existence.
Creating Value Through Diversification: In three ways, any diversify company can
build its value by acquiring poorly run management system, by realising the economic condition
of the business and last but not the least by transferring competencies among the industry.

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Strategic Alliances: Strategic Alliance is basically an agreement between two or more
than two companies to set up a new business motive and agreed upon the needed objectives. It
often falls short of the legal partnership entity, agency or the affiliated corporate agency.
Strategic Alliance possesses one or multiple business aspect which will help the other by
enhancing others business. It can build up the outsourcing relationship where the organisation
longing to accomplish long-term payback and modernism based on an equally desire conclusion.
Under the satisfied condition, the companies have to realise the giant associated with vertical
association without having to tolerate the associated external material cost. Such long-term
relations between two or more than two company are often known as strategic alliances (Blair &
Kaserman, 2014). As per the journal report about AirAsia, with using this business strategy in
2012 AirAsia started a joint venture project with Zest Air in Philippine to provide better quality
service with a cheap rate for the customers. On the other hand, Malaysia AirAsia and Australia
Jetstar merged with Alliance and started a new project from September 2013 for achieving the
satisfaction of Australian customers.
Motivational Theories:
Extrinsic Motivation: it happens when one goaded to execute a behavior or take part in
an activity to gain reward or avoid from punishment. Some examples of extrinsic motivation are
shown below:
1. One studying to secure good marks.
2. Cleaning the room to stay away from being told off by parents
3. To win awards participate to a sport.

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4. To win the scholarship, compete for an entrance exam.
Intrinsic Motivation: This motivation includes a different presentation as it is individual
satisfying essential and performing an activity for someone owns sake rather than the want for
some peripheral rewards such as:
1. Participate in sports as the activities include the sports quite enjoyable.
2. Solving a puzzle trick as it includes challenges and fun elements.
Maslow’s hierarchy of needs:
Figure: Maslow’s hierarchy of needs
(Source: Niederwieser et al. 2016)
Maslow's hierarchy is mainly comprised of Human motivation and Psychology. To
survive a human being, the psychological need is very essential. There are so many different
subparts in the context of Psychological essential, likely, Breathing, Food, Water, Shelter, Cloth

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and Sex. Safety needs are mainly included in Health, Personal Security and Financial Security.
In the context of Social Belongings, the basic requirement of every human being is to protect
their Family and Friends. Self-respect and self-confidence are most important factors of every
human being which is mainly included with esteem and Self-actualization. As the main object of
AirAsia organisation is to provide air service to the customers, the management should maintain
Maslow hierarchy to acquire customer retention as well as new customers.
Measurement and Evaluation of the strategic performance of AirAsia:
According to Swadesh (2017), a number of frameworks are present which can help in
measuring and evaluating the strategic performance of a company. Some of them are as follows-
SMART-Strategic measurement analysis and reporting technique is a tool by which it
will be possible to collect data on the organization’s mission, vision and objectives and the
strategies that are implemented. Then, by analyzing the performance in accordance with the
mission and vision, the strategic performance can be measured and evaluated (Aracıoğlu,
Zalluhoğlu & Candemir, 2013).
The Balanced Scorecard is another tool that can be used in this context to measure and
evaluate the performance of AirAsia. Some other important tools are performance measurements
questionnaire, performance measurement system and integrated performance measurement
reference model. These frameworks take into consideration the achievement of an organisation
in terms of financial performance and non-financial performances and then calculate them
against the organizational objectives set (Aracıoğlu, Zalluhoğlu & Candemir, 2013).

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However, before the late 1980’s performance measurement and evaluation was done only
based on few financial metrics like as Return on Investment as well as Return on Equity. These
can also be used to measure and evaluate AirAsia’s strategic performance.
Change management within AirAsia:
One of the most severe issues within an organisation is to manage employee attitude. AirAsia is
also no exception from it. As the company operates in many countries, there are obvious reasons
for maintaining a proper culture within the organisation which can ensure good employee
attitude towards the customers. In many cases, the onboard staffs misbehave with the customers.
This can lead to potential loss of customers and subsequent reduction of revenue for the
company. AirAsia needs to bring in a new policy for managing employee attitude and behavior.
This is an important change management procedure. In order to manage this change, the top
management of the company can follow the Lewin’s Change Management Model.
Lewin’s change management model has three elements-unfreeze, change and refreeze. At first
the company needs to identify what needs to be changed. For example, the organisation culture
needs to change to improve customer service and performance of the company (Manchester et al.
2014). After the identification of the required change, there is a requirement to create a need for
change. The support of the top management is essential in this part. However, it is important that
the company also includes the employees and listen to their concerns as the change is based on
employee behavior and organizational culture as a whole.
The second phase is to change. In this phase, the change objectives need to be communicated not
only in the top management, but also among the low-level employees so that they can understand

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the reason behind the change. The opinion of low-level employees, managers as well as
stakeholders can be beneficial in this change process (Hussain et al. 2016).
The third step is to refreeze the change. In this process, AirAsia needs to ensure that the change
procedure is implemented properly. For this purpose, regular inspection, measurement of the
success of implemented change and training to sustain the change is required. Once success is
visible, the company can follow the same steps to manage any other change for improved
organizational performance.

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