AirAsia's Growth & Change Management

This assignment requires you to analyze AirAsia's business strategy. Focus your analysis on their market positioning within the low-cost airline industry, their key competitive advantages, and how they effectively manage change to ensure ongoing success. The analysis should draw upon relevant marketing principles and frameworks.

Running Head: Business strategy 1
Business strategy of Air Asia

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Contents
Introduction......................................................................................................................................3
Company background..................................................................................................................3
Vision and mission statement..........................................................................................................3
Key success factor analysis.............................................................................................................3
Customers’ expectations..............................................................................................................3
SWOT analysis................................................................................................................................4
Porter generic strategy.....................................................................................................................5
Cost leadership strategy...............................................................................................................5
Differentiation..............................................................................................................................6
Cultural web theory.........................................................................................................................7
Example.......................................................................................................................................8
Benchmarking..................................................................................................................................8
Types of changes.............................................................................................................................9
Examples....................................................................................................................................10
References......................................................................................................................................11

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Introduction
Air Asia is a very popular company in airlines industry across the whole Asia and is
obviously the market leader in that industry. The company is famous for its low cost and good
quality services. To maintain its brand, Air Asia must be able to compete with its competitors
and new entrants of the industry. For this it has to adopt some kind of strategies. The company
used to have clear goals which enable the members of the company to work hard and achieve the
short term and long term goals of the company. Air Asia usually adopts planning and new
strategies to overcome the problems related to its operation (Shaw, 2012).
Company background
Internal and external revaluation of Air Asia shows that the company is getting above 2.5
score from both the evaluations. It clarifies that the company doesn’t affected by internal and
external factors and which is really a very good sign for Air Asia. These external and internal
factors also help the company to decide its future plans and strategies. After identification and
evaluation external and internal factors, the company adopts further steps of with matrix
evaluation. Matrix evaluation involves five matrixes namely TOWS, space, Boston Consulting
Group (BCG), Grand, internal- external and competitive profile matrix (Shuk & Waring, 2010).
Vision and mission statement
The vision of Air Asia is that it wants to be the largest low cost airline in Asia as it wants
to serve 3 billion people who are due to bad connectivity and high fares are underserved. The
company desire to provide world class services to its passengers at low cost and at same time it
wants to encourage Malaysian hospitality and local food. The company decides to charge lowest
fares from customers and to keep focus on its customers. The company’s mission is to become
the world’s best employer with lowest cost budget and providing highest quality services to its
customers.

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Key success factor analysis
Customers’ expectations
Due to the advancement of the technology, it is difficult for the Air Asia to get success in
the airline industry. The expectations of the customers are continuously changing. By analyzing
online shopping experience of the customers, airlines can be able to understand the needs and
expectations in the market (Clemes et al, 2008). If the customers do not shop online, then the
airline will be able to meet their expectations. It means the airline will be able to expand its
business anywhere in the world. For example, how long time the airline take to respond the
query of the customers. If the company is able to respond quickly, then company will get high
level of profit (Ze & Ng, 2008).
SWOT analysis
Following are the strength, weakness, opportunity and threat of Air Asia. This analysis
will help to examine the present and future state of the company in global market place.
Strength:
The key strength of Air Asia is that the company has low organizational and upholding
cost due to the low cost fare model adopted by the company to enhance its satisfaction level of
the customers. Online reservation systems, quick check, no frill are some of the elements which
help the company in reducing its operational cost. There is also very strong management team to
manage the business effectively. The operational activities of the business are managed by the
ex-director of Ryanair who has high level of knowledge of cutting the operating cost incurred in
the airlines. Further, the company has good technological environment and infrastructure that is
supportive in operating the business of airline in the market of low prices. The key power of Air
Asia is breakeven load factor of 52% and the low traveling cost in the world (Fifield, 2012).
Weakness:
The main weakness of the Air Asia is that there is the need huge amount of investments
for the implementation of latest technology. Along with this, increased fuel prices are also major
hazard for the airline because it will impact the various cost incurred in the airline. Because of
the low cost approach, company has fewer numbers of employees as compared to other

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companies in the industry. Lesser number of staff generates problems at the peak time in the
airport. The staff has very short time in the job role.
Opportunities:
Opportunities for the Air Asia can be found with the increment of the consumers in the
market of Asia due to the low cost strategy of the company. The low cost fare model of the
company is very useful for the business to attract the customers from all over the world. It is also
helpful in improving the profitability of the company to competitive and sustainable of the airline
in the future.
Threat:
Major threat of the Air Asia is the increased competition in the airline industry especially
in the Asia Pacific Region. The increased number of competitors presents a potential threat for
the Air Asia. This threat can harmfully affect on the development and sustainability practices of
the airline in future.
Porter generic strategy
Porter generic strategy can be described as the category of the strategies including three
types of strategies which are basically used by the many organizations. These strategies are
helpful for the organizations to maintain and achieve competitive advantage in the business. The
strategies in the Porter’s generic strategies include cost leadership, differentiation and focus
strategy. This report focuses only on two strategies for the case of Air Asia (Peñaloza, Toulouse
& Visconti, 2013).
Cost leadership strategy
The cost leadership strategy is all about having low operational cost and the lowest prices
to attract the target market. In this strategy, low cost leader gains competitive advantage by
producing the products at the lowest cost. When an organization implements this strategy then it
gets higher profits as compared to the other organizations in the same industry. Along with this,
this strategy is also beneficial for the price sensitive customers in the market (Tanwar, 2013).
Benefit-

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Achieving competitive advantage is the primary advantage of the cost leader strategy. By
charging the lower prices but selling that product in the larger volume, the company can be able
to expand the market share and maintain the profit in the operating market. There are some
consumers who like to buy the products that are offering low prices. This strategy makes the
entry difficult for the new companies due to the thin profit margins (Taleghani et al, 2011).
Example-
By implementing the cost leadership strategy, companies will have high level of profit,
productivity and high capacity of the utilization. In case of Air Asia, this is the low cost airline
and has implemented the cost leadership strategy. The Air Asia is popular as the low cost
producer of aircrafts in the airline industry. Air Asia airline has cut off the food and free drinks
for the passenger during the short flights. Along with this, the airline has renewed its plane to
Airbus having more than one thousand seats. This renewed big plane has increased the number
of passengers in the airline (Kapferer, 2012).
Differentiation
This strategy is used by the organizations to differentiate the products or services in the
same industry. This strategy is focused on developing the unique product or service that is valued
by the customers in the market. The differentiation strategy is needed to fulfill the specific
demands of the customers. When the product or service becomes unique, the average will be
increased in the market.
Benefit-
One of the benefits of the differentiation strategy is that this strategy creates value for the
product. When a company focuses on the differentiation strategy then it also focuses on the cost
value of the product as compared to other similar products in the industry. So, this strategy
creates a perceive value among the potential customers and existing customers in the market.
Example-
In case of Air Asia, the airline is using differentiation strategy to develop and
differentiate its products and services from the competitors to gain competitive advantage in the
market. Air Asia is using E-commerce strategy to provide different services as compared to other

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airline companies. Along with this, Air Asia is finding a different way for the application of
information technology in the business of airlines so that it can become low budget airline
having the practices of Business to Commerce (B2C) process in the airline industry (Johnson,
Scholes & Whittington, 2008).
Cultural web theory
The cultural web theory is based on the taken-for-granted assumptions of an organization.
The theory basically helps the management of the company to focus on the key factors of the
culture and the impact of that culture on the strategic issues. By this theory, the management can
be able to identify the blockages and the ideas to improve the performance and competitive
advantage in the market (Armstrong & Cunningham, 2012). There are basically four factors in
this theory and those are described below:
Stories-
This section includes past and present events about which people inside and outside of
the company i.e. who and what the company is choosing to gain competitive advantage in the
market.
Routines-
In this factor of cultural web, the daily behaviors and actions of the people and the theory
decides whether the behavior is acceptable or not. This factor determines the expected behavior
in some situations and that is valued by the management.
Organizational structure-
The organizational structure factor of the cultural web includes the structure defined by
the organization chart. Along with this, this also includes the power and influence to identify the
most valued contributions of the people.
Power structure-

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This can be understood by the real power in the company. This may include one main
senior executive, or the whole groups of executive or even department as these people have high
level of influence on the decisions, strategic directions and operations.
Example
In case of Air Asia, two factors of cultural web theory are focused i.e. organizational
structure and power structure. The examples related to these two factors are given below:
 In the organizational structure, there are main three functional structures of the company
i.e. marketing finance and production. Every department has various activities and
responsibilities in the business operations and company avoids the duplication of task.
The training and development sessions are provided to the employees to improve and
enhance their skills. So, it is very easy to train the employees within the company. By the
effective organizational structure, Air Asia is able to solve the problems efficiently and
the decisions are made quickly. The marketing department is focused on reducing the
costs and management related problems (Chakravarthy & Coughlan, 2011).
 In Air Asia, there is effective team of senior executives. There are 12 departments in the
Air Asia organization. Each department has in charge by the head of department. The
departments in the company are characterized based on the engineering, quality and
safety, commercial, information technology, communication, finance and secretary. In
the company, the employees are encouraged by the values and principles to do the right
things in the tough situations.
Benchmarking
In the case of benchmarking, it is the particular process which can strengthen the
position of the company in the operating market. For the companies, the meaning of
benchmarking is to improve the detached area of business and monitoring the business strategies
of the competitors in the market. In case of Air Asia, the company has also set the benchmark for
the other companies in the airline industry. The benchmarking process of Air Asia can be
understood by the given examples-

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 The management team of the Air Asia has changed the operations of the company and
restructured its old business strategy to the new low cost operating model. This new
model is based on the operational model of the Southwest Airline.
 Air Asia is now the market leader in the ASEAN low cost airline industry. For setting the
benchmark in the industry, the factors high load capacity, cargo services, low fare
charges, operating on high profit margin, check-in facilities are online booking are
responsible. The strategy of the Air Asia includes these criteria’s (Wyndham & Battles,
2015).
Types of changes
The types of organizational changes are various factors which may force companies to
adopt for these organizational changes. Organizations should also strive to grow and to grow,
changes are must. There are many factors which affects the need for change. These factors may
vary from nature, technology, social trends and may even from political reasons. Following is
the list of four types of organizational change which usually occurs when an organization
undergoes such a transition:
Transformational change-
It is very important for companies to regularly analyses the organization’s underlying
strategies. A company should keep in touch with the environment in which it is surviving. It
includes knowledge of cultural trends, social climate and technological advances.
Personal change-
Personal changes occur when a company undergoes mass hiring. This may lead to shift in
company’s culture and processes. Sometimes when a company quickly hires the people then it
has to face the challenge with the new employees that they will fit into their new job role. This
transformation if not manage well then it can cause to inefficiency and chaos in the organization.
Unplanned change-
An organization has to face a number of unplanned changes instead of planned strategies
and data analysis. These changes may be introduced in an unplanned manner in terms of change

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in demographic transition like lack of social equality or diversity. Some external factors also lead
to unplanned change in any organization like change in government policies, economic
uncertainties etc. Natural disasters can also results in unplanned change in any organization.
Companies generally have to adopt these changes in very limited time and lead to chaotic and
expensive (David, 2009).
Remedial change-
Remedial changes are adopted by any company when company has to response to any
kind of deficit or company’s poor performance. Financial deficiency always leads to poor
performance of any company. These remedial changes are adopted by companies to overcome
the problems and for the betterment of company’s performance. All this leads to replanting of
strategies that seem to be detrimental for the organization structure of the company.
Examples
In the organization Air Asia, there are major change implemented i.e. introduction of new
CEO with the fresh vision, target market and the objective low budget airline. Further, new
change in the organization is changing the recruitment strategy to hire employees who can shared
the vision of the company and demonstrated the values and encouraging the team and employees
to focus on the culture and empowering the employees. To manage the change in the Air Asia,
there is the need of effective change management strategies to manage the change in the business
operations. It is important for the Air Asia to do the review on quarterly basis with all the
employees. The senior management should assist his employees in the company (Peck et al,
2013). Further, the performance appraisal is the effective way to manage the change in terms of
employees’ retention. The continuous training allows enables the employees to do their job
effectively.

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References
Armstrong, G., & Cunningham, M. H., (2012), Principles of marketing, Australia: Pearson
publication
Chakravarthy, B., & Coughlan, S.. (2011), Emerging market strategy: innovating both products
and delivery systems, 40(1), 27-32
Clemes, M. D., Gan, C., Kao, T. H., & Choong, M., (2008), An empirical analysis of customer
satisfaction in international air travel. Innovative Marketing, 4(2), 50-62
David, F.D., (2009), Strategic Management: Concept and Cases, (12th), Pearson International
Edition
Fifield, P., (2012), Marketing strategy (2nd edition), Berlin: Reed educational & publishing Pvt
Ltd
Johnson, G., Scholes, K., & Whittington, R., (2008), Exploring Corporate Strategy: Text &
Cases, (8th), London: FT Prentice Hal
Kapferer, J. N., (2012),The new strategic brand management: Advanced insights and strategic
thinking, Kogan Page Publishers
Peck, H., Christopher, M., Clark, M., & Payne, A., (2013), Relationship Marketing, Burlington:
Linacre house, Jordon hill
Peñaloza, L., Toulouse, N., & Visconti, L. M., (2013), Marketing management: A cultural
perspective, USA: Routledge
Shaw, S., (2012), Airline Marketing and Management, Ashgate Publishing, Ltd
Shuk, C.P., & Waring, P., (2010), The lowest of low-cost carriers: the case of AirAsia: The
International Journal of Human Resource Management, 21:2, 197 – 213
Taleghani, M., Biabani, S., Gilaninia, S., Rahbarinia, S. A., & Mousavian, S. J., (2011), Arabian
Journal of Business and Management Review :The Relationship between Customer Satisfaction
and Relationship Marketing Benefits, 1(3), 78-86

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Tanwar, R., (2013), Porter’s Generic Competitive Strategies: IOSR Journal of Business and
Management, 5(1), 11-17
Wyndham, D., & Battles, B., (2015), Benchmarking & Metrics, Costs for Business Aviation,
accessed on 16th August 2017 from file:///C:/Users/Guest/Downloads/Benchmarking-Metrics-
2015-NBAA-Battles-Wyndham.pdf
Ze, S. & Ng, J., (2008), The Air Asia Story: How A Young Airline Made It Possible for Everyone
to Fly and Became a Runaway Success Practically Overnight, Revised Edition, Malaysia:
Kanyin Publications