Challenges of Organizational Leadership in Air Asia

This report discusses the major challenges faced by Air Asia in terms of mergers and acquisitions, cultural diversity, organizational policies, rapid changes in technology, crisis management, and staff's ethics and behaviors. It also provides recommendations for addressing these issues.

Running head: ORGANIZATIONAL LEADERSHIP
Organizational leadership
Name of the student
Name of the university
Author note

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Table of Contents
1. Introduction..................................................................................................................................2
2. Discussion....................................................................................................................................2
2.1. Determination of identified issues........................................................................................3
Merger and acquisitions...........................................................................................................3
Cultural diversity.....................................................................................................................3
Organizational policies and cultures........................................................................................4
Rapid changes in technology...................................................................................................5
Crisis management...................................................................................................................5
Staff’s ethics and behaviors.....................................................................................................6
2.2. Impacts of the identified issues.............................................................................................6
2.3. Recommendation......................................................................................................................7
2.4. Case analysis.............................................................................................................................9
2.5 Conclusions..............................................................................................................................10
Reference.......................................................................................................................................11

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1. Introduction
Increasing complexities in the current business scenario are causing the contemporary
entities in facing diverse challenges and issues in their business operations. In addition, with the
evolution in the business state of affairs, it is important for the business organizations in
initiating multiple strategies in managing the business viabilities. One of the major challenges
being faced by the contemporary business entities is the employee management. This is due to
the reason that currently, workforce is more diverse in nature comprising of employees from
different social and cultural backgrounds (Jonsen et al., 2013). Hence, the contemporary business
organizations are facing multiple issues and challenges in respect to the human resource
management as well as and it is affecting their business growth approaches. It is a good approach
Air Asia is one of the leading airliners in the Asian region with having their presence
across different Asian countries. They are also being certified as the airline with the lowest
operating cost in the world. Air Asia is based in Malaysia and they are having their subsidiaries
across different countries such as Thai Air Asia and Air Asia India. However, with the intense
competition in the global airline industry, they are facing the imminent need of initiating
multiple growth practices, which are further posing challenges (Homsombat, Lei & Fu, 2014).
This report will discuss about the major problems being faced by Air Asia in terms of their
mergers and acquisitions, cultural diversity, policies and employee behavior. The major impacts
of the identified issues on the company will also be discussed in this report along with the few
recommended steps. These recommended steps will include motivational and leadership
practices.
2. Discussion

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2.1. Determination of identified issues
Merger and acquisitions
One of the major issues being faced by Air Asia is in the forms of merger and
acquisitions. This is due to the reason that they are having multiple mergers and joint ventures
with different domestic airliners in different countries such as tie up with Tata in operating in the
Indian market. The major challenge that is being faced by them is the alignment of their existing
corporate culture with that of partnered firm. This is due to the reason that different airliners are
following different business strategies and marketing objectives (Duchin & Schmidt, 2013). It is
difficult for Air Asia to match their business objectives and operating approaches with that of the
partnered firm. On the other hand, it should also be noted that human resource management
based issues are also being faced by Air Asia due to the merger and acquisitions. This is due to
the reason that employees of Air Asia are having the difficulty in getting accustomed with the
different organizational culture of the partnered firm. This is leading to the cultural clash
between the employees of the two entities.
Cultural diversity
Cultural diversity is another area where Air Asia is facing issue similar to other
multinational entities. This is due to the fact that in the current time, these entities are having
employees from different countries and cultures and these employees are possessing different
approaches towards organizational challenges, which is causing issues. In the case of Air Asia,
the approach of their home country and host country employees is different, which might take a
toll in their service process quality. For instance, the major challenge of the cultural diversity is
in the form of the decision making process due to the fact that building of consensus is difficult
among the diverse sets of employees. Cultural diversity is not only covering the internal

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stakeholders but also the external stakeholders as well due to the reason that Air Asia is
operating across different regions and catering to different customer segments. For example, the
expectation of the customers from Philippines is different to that of the expectations of the Indian
customers (Nederveen Pieterse, Van Knippenberg & Van Dierendonck, 2013). Thus, it is
challenging for Air Asia to manage these cultural differences. In a Air Asia flight of Air Asia
between Malaysia and India, passengers from both the country will expect different cuisines,
which is another cultural challenge for the airliner. Employees from each of these operating
countries of Air Asia will be motivated by different means and thus the human resource
management approach should also be market adaptable. Hence, it can be concluded that with the
initiation of the cultural diversity, business operation of Air Asia got more complex and difficult.
Organizational policies and cultures
The major challenge for the multinational corporations is the management of the
standardized organizational culture across their foreign operations. In the case of Air Asia, their
home country based organizational culture is not applicable in all their foreign operations due to
the differences in cultural factors (Homsombat, Lei & Fu, 2014). Thus, it is challenging for Air
Asia to initiate the market adaptable approach in designing the organizational culture and
policies. For example, the approach of the employees from Malaysia and India including the
cultural dimensions such as power distance and masculinity are different (Schmiedel, Vom
Brocke & Recker, 2014). Thus, the organizational culture should also be designed accordingly,
which is challenging in ensuring the standardized approach. According to the Hofstede’s cultural
dimensions, India is having higher power distance compared to Malaysia, which states high level
of hierarchy is being followed in the organizational approaches in India and opposite in the case
of Malaysian operation. It is challenging for Air Asia in reviewing and evaluating the

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performance of the strategic business units without having standardized approach. It should also
be noted that Air Asia is having centralized approach of managing their worldwide operations
and having different organizational culture is posing issues for the centralized management also.
This is due to the reason that the upper level management should have to consider the cultural
differences in different regional operations.
Rapid changes in technology
Airline sector is highly depended on the technological advancements and frequent and
rapid changes in the technology are incurring more cost for Air Asia in coping up with. For
instance, the aircraft technology is rapidly evolving and latest batch of the aircrafts are the most
fuel efficient that ever. In this case, Air Asia should have to update their fleet in order to have the
fuel efficient aircrafts and this will involve more cost for then. However, on the other hand, if the
existing fleets of Air Asia are not getting up graded, then they will trail behind their competitors
in terms of the high fuel costs. It should also be noted that change in the technology also covers
the service delivery elements, which keeps on changing with time and it is important for Air Asia
to cope up with these changes (Nakamura, Kajikawa, & Suzuki, 2013). Airline sector is the
rapidly developing and evolving sector and thus Air Asia should always be updated with the
changes to maintain their competitive advantages. The cost of in-house development process of
the technology is also affecting the net profitability of Air Asia and it will increase in the long
term with the continuous process of changes.
Crisis management
Probability of facing crisis is more for the airline sector as the associated risks and costs
are more. In the case of Air Asia, crisis can be faced in the forms of the financial as well as any
physical losses. However, the major challenge in dealing with the crisis for Air Asia is the

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different business conditions in different countries. For instance, not all the countries of
operation for Air Asia are having the same level of probability of the emergence of financial
crisis (Alexander, 2014). Thus, the future uncertainties are involved in the process along with the
risks of loss of capital. This is due to the reason that airline sector is high investment sector and
any crises will cause huge loss for Air Asia only. For instance, accidents will not cause the
financial damage to Air Asia but also affect the long term brand value among the target
customers.
Staff’s ethics and behaviors
Managing the ethical behavior of the employees is also challenging for Air Asia due to
the reason of differences among them. Air Asia is operating in the services sector and thus
service quality determines the extent to which the customers of them will be satisfied. Behavior
of the employees will determine the service process quality. With having the diverse workforce
in place, it is challenging for Air Asia to manage their employees in ensuring the ethical behavior
of them. However, the behavior and the ethical principles of Air Asia will be determined by the
extent to which they will be well managed (Sirianni et al., 2013). In this case also, the cultural
and social differences between the employees will pose challenges for Air Asia. The training and
development process for the employees should be different in line to the different cultural
differences in the workforce in order to have the most favorable return from the employees.
Thus, the entire process of managing the employee behavior will get complex for Air Asia in the
long term and standardized employee behavior cannot be ensured.
2.2. Impacts of the identified issues

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One of the major impacts of the above identified issues for Air Asia is the increase in the
operating cost. As discussed in the previous section that Air Asia is having the lowest operating
cost and these issues will increase that. This is due to the reasons that increase in the
complexities in managing the employees, market adaptable organizational culture and rapid
changes in the technology will cause increase in the operating cost. The more will be the
operating cost; the lower will be the profitability. On the other hand, it is also identified that
management of the employees will also be affected due to the involved complexities in the
process (Vangen & Winchester, 2014). This is due to the reason that the more will be the
diversity in the workforce, the more will be the complexities involved in the employee
management. Hence, the probability of negative employee behavior will be more. The
competitive advantages of Air Asia in terms of the service quality will be affected. Issues in
terms of the merger and acquisitions will also affect the growth strategies of Air Asia. This is due
to the reason that newer issues in the mergers and acquisitions will restrict Air Asia in entering in
the foreign countries (Schmiedel, Vom Brocke & Recker, 2014). Thus, the long term growth
strategies of Air Asia will be affected. Moreover, it should also be noted that initiation of the
joint venture between Air Asia and the other domestic firms. With the issues in merger and
acquisitions in the existing countries are emerging, the same strategies in the new countries will
have a few limitations.
2.3. Recommendation
For solving the issues of cultural diversity and organizational culture, one of the effective
motivational theories of Maslow Hierarchy of needs should be used. It was first proposed by
Abraham Maslow in the year 1943 (Ozguner & Ozguner, 2014). It is five tier model of the needs
of human and is often demonstrated as the hierarchical levels within a pyramidal figure. The

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needs that are in the lower down in the hierarchy are to be satisfied prior to attending the needs
that are higher up. The bottom level of the hierarchy towards upwards are the physiological
needs, safety needs, belongingness and love needs, esteem needs and self-actualization.
a) For solving the issue of cultural diversity: Maslow’s hierarchy of needs gives a better
approach for improving organizational diversity systematically (Doherty, Home &
Wootton, 2014). Every level of the Maslow’s hierarchy of needs are required to be met
before the employee can start to address the needs of the next level of the hierarchy. With
the same, it is also to note that for ensuring open source communities for improving the
level of diversity, it is also required to address all the needs of the underrepresented
contributors in systematic way. For instance, it is to be ensured that the main focus of the
entire process if focused on the need for the employees’ esteem and their recognition and
this can be ensured by escalating the different voices in the workplace as well as
rewarding their hard work and achievements. “However, all these will fail if employees
spend their mental energy in dealing with harassment, micro aggressions and related
threats to their mental and physical safety.”
b) In order to have a productive and positive influence on the employee behavior at
workplace that will result in better organizational culture, it is very important to ensure
that there is a clear understanding of two aspects- a) understanding the variables of the
employee behavior within a given time and, b) the elements that influence the employee
behavioral change (Shah, Irani & Sharif, 2017). There must be a platform for managing,
monitoring, coordinating and facilitating change in their behavior. Maslow’s hierarchy of
needs clearly explains how human beings experience the needs as per the five levels.
These needs play a very significant part in the individual motivation at workplace and

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this could be done when there is a presence of a comprehensive reward and recognition
program in place. This will ensure that all the needs of the employee are met and at the
same time, the culture of the organization thrives better.
2.4. Case analysis
While applying the above mentioned recommendation in place, i.e., using Maslow’s
hierarchy of needs in order to assess the needs of the employees, the issue of cultural diversity
and poor organizational policies and culture within Air Asia could be solved. With the evolution
in the business state of affairs, it is important for the business organizations in initiating multiple
strategies in managing the business viabilities. As Air Asia is an international entity, its
employees belong from different countries and cultures and these employees are possessing
different approaches towards organizational challenges (Hanaoka et al., 2014). This is something
that is causing issues related to cultural diversity in place. The major issue of cultural diversity is
in the form of the decision making process. By making use of Maslow’s hierarchy of needs, if
every level of the hierarchy could be met. The primary focus of the whole process if focused on
the need for the employees’ esteem and their recognition, it could result in positive outcome and
this can be ensured by escalating the different voices in the workplace as well as rewarding their
hard work and achievements. Secondly, in order to resolve the issue of poor organizational
policies and culture, Maslow Hierarchy of needs assessment and working on it could go a long
way for Air Asia. Air Asia has home country based organizational culture and as it is
international, it is not applicable in all their foreign operations due to the differences in cultural
factors. It will ensure that all the needs of the employee are met and at the same time, the culture
of the organization thrives better. I w j kl k

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2.5 Conclusions
Hence, from the above analysis, it is to be concluded that Air Asia is facing some serious
issues while conducting its business operations globally. Due to the increase in intense
competition in the airline industry all around the world, the company is facing an imminent need
for initiating multiple growth practices. However, these are further posing more challenges for
the company to address. These issues are in terms of its mergers and acquisitions, cultural
diversity, policies and employee behavior. These increase in the complexities in managing the
employees, market adaptable organizational culture and rapid changes in the technology are
likely to cause increase in the operating cost of this leading company and this in turn will lower
down the organizational profitability. Air Asia is operating in the services sector and thus service
quality determines the extent to which the customers of them will be satisfied. With the same, the
likelihood of the negative employee behavior within the company is also increasing rapidly and
all these are ultimately affecting the long term growth and development of the company and its
business. It is also challenging for Air Asia in reviewing and evaluating the performance of the
strategic business units without having standardized approach. However, Maslow’s hierarchy of
needs is an effective motivational theory that could be applied in order to address these issues as
it gives a better approach for improving organizational diversity and issues of poor
organizational policies and culture in systematic manner. I

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