Air Asia's Growth Strategies

This assignment analyzes the growth strategies of Air Asia, a Malaysian low-cost carrier. It explores their successful market entry in 2001, becoming the first low-cost carrier in Asia by 2015. The analysis covers operational development through the Tune Group's formation in 2007 and examines the influence of external environmental factors and Ansoff's model on Air Asia's strategies. Furthermore, it delves into various organizational strategies employed for diversification within the market and suggests future expansion recommendations.

ORGANISATIONAL
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
1) Identification of the company's external environment................................................................1
2) Analyse the company’s diversification strategy..........................................................................2
ANSOFF MATRIX.....................................................................................................................2
3) Company's competitive strategy..................................................................................................3
4) Recommendations for the future expansion strategy of the company.........................................1
RECOMMENDATIONS............................................................................................................1
CONCLUSION................................................................................................................................1
REFERENCES ...............................................................................................................................1

INTRODUCTION
An organisational strategy is the plan of the actions of a firm that intends to take in order
to achieve long term goals in an effective manner (Cserháti and Szabó, 2014). With the help of
this, these actions are made for the company's strategic plan. Whereas, these strategic plans take
1 year to complete an also requires involvement from all organisational levels. This strategy
helps to create larger organization in an appropriate manner. Along with this, case study provide
Air Asia and the Tune group: “diversifying across industries” in regards with there PESTEL,
SWOT, Ansoff Matrix or recommendations for future will be analysed.
1) Identification of the company's external environment.
Air Asia and the tune groups are the world famous fare airline in the Asia, it has been
rapidly growing from 2001, in order to become an award winning to the major low cost carrier in
Asia. This company was grounded by government owned conglomerate DRB Hicom in 1993.
this company believes in the hassle free, no frills and law fare business ideas and feels that
putting cost low require higher efficiency in the every part of an organisation. So that efficiency
create lot of savings which are passed to the customers so that company can give inexpensive air
travel in a reality (Su, Yang and Yang, 2012). By this all customer can afford flight tickets in an
effective manner. There are different type of strategy which is developed by Air Asia like this
company opened 2nd hub in the year of 2003 at Senai international Airport, after that in 2004 air
began their first international services and in the year of 2006 this company was opened their
new budget terminal in Kuala Lumpur international airport. Whereas, tune group also diversified
with this company in order to develop their gr4owth in an effective manner for making world
better (Pasquinelli, 2014). By these environment or changes companies follow different type of
groups or transactions mode so that customer can easily purchase their flight tickets in a perfect
way without any issues. Therefore, there are justification of company's external factors which are
given below:
In the term of political external environment flying outside the Malaysia is very much
difficult. In this environment main reason is that6 there is low cost carriers. Whereas, landing
charges is also affecting factor for low fare in the airline industry. Whereas, economic factor of
this company said that there people want cheap flight tickets in order to do enjoy in flight. In the
technology environment factor, Air Asia provides different types of services like online combine
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with air ticket and hotel booking and so on. Lastly social factor described the increwasing
population of world like lot tourists and huge number of educated people which are helpful for
the development of this industry (Heracleous and Wirtz, 2012). Therefore, these external
environment factor plays a vital role that heavily impact the Air Asia and tune group in an
appropriate manner. Therefore, Air Asia and tune group diversified in the effective manner.
2) Analyse the company’s diversification strategy
ANSOFF MATRIX
This is being considered as one of a crucial approach which could be utilised by a
business organisation like AirAsia and the Tune Group, this may aid in developing company’s
diversification strategy. In present context, this model basically contains four stages which could
be utilised by AirAsia and the Tune Group these are given beneath:
Diversification :-
Under this stage, AirAsia and the Tune Group basically develops activities which majorly
stays connected to the complementary to an organisation’s present activities. Along with this,
AirAsia and the Tune Group has kept its focus on horizontal diversification which helped them
in entering a range of market. This could be understood with a good example, where AirAsia and
the Tune Group entered Indonesian market where they did the partnership with Awair, which is
an Indonesian airline. It is being found that this partnership specifically helped AirAsia and the
Tune Group to enhance there recognition among local business market of this country. Since
Awair is already having a good reputation and has an understanding of the market which may aid
AirAsia in developing a whole new strategy for targeting customers in Indonesia(Aubry and et.
al., 2012). Along side this, it is being found that AirAsia and the Tune Group did vertical
diversification as well, in order to sell flight tickets without taking help agents through its own
website.
Through unrelated diversification (conglomeration), AirAsia might spread risk if
suddenly airline industry is having difficulties and have elevated profit opportunity from the new
business. But, to establish new business, open up a new company, strong management and
financial ability is required to make it successful, but if it is not successful, it might create
unbalanced circumstances for Air Asia because of loss of money and resources.
Market Penetration :-
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Under this, AirAsia and the Tune Group cannot introduce a whole new product or any
sort of service as this type of strategy works with working or operating business with same
products within a business market where AirAsia and the Tune Group is already performing. The
way to gain more market share with the same product is to attract competitor’s customers and get
more loyal customers by marketing. It can be said that, this type of strategy might not cost the
company as diversification strategy could done. In present context, AirAsia and the Tune Group
and the company might keep its focus on developing a marketing budget considering all the
information that they are having already related to the marketing department and all the existing
trends.
Market Development :-
This is being considered as one of a crucial strategy which could be used by AirAsia and
the Tune Group where company would directly offer targeted customers with same products
within the whole new market. Since the AirAsia and the Tune Group is working in countries like
India and many more other countries with low-cost carrier with 100 planes and 8000 employees,
company could effectively focus upon new routes as well. This may aid AirAsia and the Tune
Group in enhancing there profit margins in specified time frame (Cacciolatti and Lee, 2016).
This type of strategy might cost much to AirAsia and the Tune Group because company would
require to work basically with all the aircrafts and employees that they already are having.
Product development :-
This type of strategy is not as much as useful for AirAsia and the Tune Group then
diversification based strategy because, this would require for the company to make alterations
among existing plans and procedures for building a whole new product or the service. Here, it
can be said that, AirAsia and the Tune Group is already consist with a number of services and
with reasonable prices.
Henceforth, it can easily be said that AirAsia and the Tune Group diversification strategy
which they are already following in much effective and efficient enough that will aid in hitting
targets in specified time frame.
3) Company's competitive strategy
SWOT ANALYSIS OF Air Asia
The main purpose of this analysis is to identifying the external factors such as
opportunity and threats and internal factors (strengths or weaknesses) that Air Asia required to
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consider in order to reaching its goals and targets to be low cost carrier within the airline
industry. In below, Air-Asia strengths, weakness, opportunity and threats are described as under:
Strengths:
 Single aircraft type – AirAsia regulated and operated in a single type of aircraft, the
Airbus model. They are offer single aircraft which is economic in purchasing, pilot
training, maintenance and aircraft utilisation.
 Direct sales – AirAsia is mainly engaged with direct sales with the help of websites and
call centre. As a result, it is play an important role in avoiding paying commission to
middlemen (Watson, 2013). A direct sale has reduced Air Asia's dependency on external
resources related to its income or revenue. The direct contact with their customers that
are provide an opportunity in order to keep up to date regarding their expectations and
also solve major issues or problems in given time period.
 Strong management team – The respective company has strong management team
which are handle and manage their all work related to business operations and its
functions. It is consider as major strength of AirAsia which has very strong management
team which consist of industry experts and ex-government officials. For instance, Shin
Corporation holds a 50% stake in Thai AirAsia. They are acquire and facilitate AirAsia to
beginning the business and gain important market share in Thailand.
Weaknesses:
 Sustaining costs – AirAsia is a low cost airline and it is critical that airline keep its
operating costs as low as possible. The fluctuation in fuel costs and enhancement in
services costs, airline find out immensely issues which keep their cost minimum.
 Low profits – For maintaining their positioning of low cost carrier. Air Asia keeps their
pricing as low as possible and this is completely on volumes for their income and profits.
This resultants in lowering the profits and reduce continuous revenue inflows.
Opportunities:
 Increasing in oil price – In this, increasing in oil price may become an opportunity for
AirAsia which being as a lower cost carried. AirAsia has popular and its costs will be still
lowest among others. Thus, it has provide great opportunities which help them in
capturing current customers and offer them reasonable rate tickets.
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 Population – Population of Asian middle class is increasing. There are around 700
million by the end of 2010. it will create an excellent opportunity and huge market of all
low cost carriers in this region including AirAsia.
 New destinations – AirAsia has gain strong presence in Asian location. In current time
period, they are regulating and operating from three nations Malaysia, Thailand,
Indonesia and cover various destinations in the China, India and many more.
Threats:
 Uncontrollable costs – There are certain charges such as landing charges, safety and
security are beyond the power of airline functions and operators (Wilkins and Huisman,
2012). It is the threat to all airlines especially to the low cost airlines which are tries to
keep their cost at lower rate.
 New entry – This is the major issue which are create threat to an organisation. AirAsia
profit margin has attracted towards major competitors. There are number of full service
airline which are planning to create low cost subsidiary to compete with AirAsia at lower
cost.
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4) Recommendations for the future expansion strategy of the company
RECOMMENDATIONS
AirAsia is having very strong position in the market of Asia. In today's life the low cost
carrier of Asians is becoming very competitive (Lin and Liu, 2012). Thus, this is to recommend
that to keep their business and to stay in the market for longer period, AirAsia needs to maintain
their strong position in the Asian Market and for that they have to adopt the combination of the
marketing strategy such as market penetration and market development. The management team
of AirAsia will surely make these strategies successful.
The firm AirAsia is also having some of the drawbacks but they are not as much
dangerous as it seems, thus the increment in the pricing strategy of fuel have raised the
operational costs for the entire industry. Thus, this rise in operational cost will not have much
profits so to maximise their profit margins in the fut7ure and to expand their business, they need
to enhance their customer base and should enhance the business globally so that they can be able
to gain the attention of more customers (Karami, 2016). On the other hand, Middle income
earners are increasing specially in India and China, so there is much talent for AirAsia to expand
their routes. The industry can also engage inn direct sale by the call center and website. Along
with this, they must take care of the problem occur with the internet can seriously damage their
business. Also they will continue looks to expand their footprint in China, while looking at
enhancing flight frequency across the country despite the collapsed deal to establish a low-cost
carrier terminal. In addition with this, AirAsia can expand and enhance their business by using
the above strategy such as marketing penetration, market development, etc.
CONCLUSION
According to the above representative case study it has been concluded that in the year of
2001 Air Asia launched their new ventures at low cost in Malaysian carrier, after fifteen years
Air Asia was the first low cost carrier in the Asian region. Air Asia also operated their functions
until 2007 when the tune group was officially developed with their investors in a effective way.
Along with this the external environment factors and Ansoff model has been discussed above.
There is also different type of organizational strategies in relation with diversification market of
Air Asia and the tune group had been explained above. Apart from this future expansion and
recommendation for this company has been justified above in a perfect manner.

REFERENCES
Books and Journals
Aubry, M. and et. al., 2012. Organisational project management as a function within the
organisation. International Journal of Managing Projects in Business. 5(2). pp.180-194.
Cacciolatti, L. and Lee, S. H., 2016. Revisiting the relationship between marketing capabilities
and firm performance: The moderating role of market orientation, marketing strategy
and organisational power. Journal of Business Research. 69(12). pp.5597-5610.
Cserháti, G. and Szabó, L., 2014. The relationship between success criteria and success factors in
organisational event projects. International Journal of Project Management. 32(4).
pp.613-624.
Heracleous, L. and Wirtz, J., 2012. Strategy and organisation at Singapore Airlines: achieving
sustainable advantage through dual strategy. In Energy, Transport, & the
Environment(pp. 479-493). Springer, London.
Karami, A., 2016. Strategy formulation in entrepreneurial firms. Routledge.
Lin, W. T. and Liu, Y., 2012. Successor characteristics, organisational slack, and change in the
degree of firm internationalisation. International Business Review. 21(1). pp.89-101.
Pasquinelli, C., 2014. Branding as urban collective strategy-making: The formation of
NewcastleGateshead’s organisational identity. Urban Studies. 51(4). pp.727-743.
Su, Z., Yang, D. and Yang, J., 2012. The match between efficiency/flexibility strategy and
organisational culture. International Journal of Production Research. 50(19). pp.5317-
5329.
Watson, T., 2013. Management Organization and Employment Strategy (RLE: Organizations):
New Directions in Theory and Practice. Routledge.
Wilkins, S. and Huisman, J., 2012. The international branch campus as transnational strategy in
higher education. Higher Education. 64(5). pp.627-645.
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