Air Asia Business Strategy

This report analyzes Air Asia's business strategy and strategic management, covering challenges, SWOT and PEST analyses, strategy formulation and implementation, and strategy evaluation and control processes.

Business Strategy & Strategic
Management

Table of Contents
1.0 Executive Summary...................................................................................................................3
2.0 Introduction to the Organisation................................................................................................3
3.0 Challenges and issues facing the organisation...........................................................................5
4.0 Strategy Formulation.................................................................................................................6
5.0 Strategy formulation & Implementation....................................................................................9
6.0 Strategy Evaluation & Control Process...................................................................................11
7.0 CONCLUSION........................................................................................................................13
8.0 REFERENCES........................................................................................................................14

1.0 Executive Summary
This assessment has cover the various aspects of strategic management along with design
the business strategic actions. This report has undertaken on Air Asia which is the leading low
cost carrier operating in different regions of entire Asia along with Australia and other countries.
The main purpose of this report is to know the strategic capabilities and potential of the Air-Asia
to expand their business into the another horizon and also action planning to overcome the
challenges, which they have faced in the past. Apart from this, an entire report is based on
identifying the organisational structure along with its functioning level in this low cost carrier.
This report has discussion over challenges & issues which has been resulted in the customer loss
and what strategic formulation they had taken to gain back their customer into the business.
Lastly, the report has also cover the strategic evaluation and control process done by Air Asia to
grade the strategic decision making.
2.0 Introduction to the Organisation
Business strategic management is one of the formal practices which aims at bringing the
success and growth to any organisation. For this, an effective planning is required to undertaken
and decide the strategic vision and goals of the business entities (Lambert, 2013). The selected
organisation is named as Air Asia, which is a Malaysian low-cost air transport carrier which is
headquartered in Kuala Lumpur. This leading airliner has highest fleet size along with multiple
destination. Air Asia operates on both domestic and international flights to more that 165
destination including India, Singapore, Malaysia, Thailand etc.
This leading low cost carrier was founded in Dec, 1993 by Raid As-mat and Tony
Fernandez. Air Asia's parent company is Tune Group. The main hub for the Air Asia is Low-cost
carrier terminal with air transport facilities at the cheapest costs with required amenities and food
facility. This airliner is currently provided different type of services in line with inspired by
Ryanair(Ireland) to benefits all their citizen along with global travellers. There focus is on
providing air transport facility 40 percent minimum lower than other airlines of Asia. Their
subsidiaries are Air-Asia India, Air-Asia Thailand, Air-Asia Tokyo etc.
According to Air Asia, low cost airline has several features that is differentiate from other
traditional carriers. These main features includes ticket-less travel, online ticket sales, no global

office, ease & convenient searching for flights, no free food etc. In other words, cheap means
customer needs to buy the entire food & beverages, but Air-Asia offer basic snacks and welcome
drinks to their customers.
Vision, mission and values
Air Asia's vision is to be established as the leading low-cost carrier in an entire Asia with
higher customer experience of their journey. Mission is to be best company to work and engage
the employee's and resources for safe and comfortable journey of the travellers. Along with their
major focus is on being recognized as ASEAN brand. Also, they are focused towards highest
quality product, perfect technology to cut down the cost.
Their values says that “Give customer till the last breath”, which means response to the
customer until unless they won't satisfied (Spalanzani, 2012). Such values involves sustainable
an loyal business practices with customer as major priority.
The organisational structure of the Air Asia is consists of Adrain Jenkins which is the
head person of board of directors, Tony Fernandez, who is co-founder & CEO along with Riad
Asmat, who is the Managing director and head of operation of an entire Air Asia. Cham yum,
who worked as the general manager. Along with this, hierarchy structure of the Air Asia
comprises of the following charts given above:

Sources: organizational structures, AirAsia, 2018
The departmental functions of the Air Asia comprises of Marketing, R&D, finance,
project management and human resources. Marketing team has appointed for the major purpose
to do the marketing activities along with promotion. The role of finance is to maintain the crtiical
records and accounts of this company's operation. Lastly, R&D to develop the services to be
offered to their customers.
3.0 Challenges and issues facing the organisation
Issue #1 is all about increasing price of crude oil at the global level, which has resulted in
rise in prices of aviation fuel to operate the jet plane. The effect was noticed that Air Asia has
risen up their air ticket prices by 1. 5 percent, which is completely against their commitment to
the loyal customer. Where, traditional carrier's Such as Malaysia Airlines, Scoot Air has maintain
their prices at the constant level to counter Air Asia (Gunasekaran, 2014). In aviation industry,
Illustration 1: organizational structures, AirAsia

this is unacceptable truth that, customer wants the flight at paying less. But now, prices are
controlled, but aviation fuel preparation cost is increasing continuously. In response, Air Asia
needs to implement the strategic budget & planning to counter such issues or challenges for
enhancing the productivity.
Issue #2 says that despite of all success, Air-Asia is facing major challenge, where it
placed organisation in declining state. Incident of Airbus 320-200 crashed between Surabaya to
Singapore. The Irish times has reported that Air Asia encountered biggest challenges as their jet
goes missing in 2014, carrying 162 people on board. The consequences of incident has dropped
fares by 9 percent to get back their customer's. This incident has increased customer for Malaysia
Airlines and also air carriers of other Asian nations.
Issue #3 says that Air Asia market has shaken up after the entry of Indonesia based air
carrier named Malindo Air, which is the parent company of Lion group. Also, Scoot air is in the
competition to compete in low carrier segment. Such cut throat competition has resulted in
fluctuation in an operation and customer flow for the Air Asia. In India, where prestige carrier's
like Air India, Indigo, Jet airways are operating, it would be difficult to counter such challenges
and need to look for other market to targets (Ageron, 2016). Competitor rivalries are threat for
any business to destroy the operation and effect the brand image and prestige at the global level.
Summary: It is summarised that Air-Asia has suffered with major incident, which has
effected its business and customers both. For this, they has bear the loss of $9 million dollar to
get their customer back. Hence, Air-Asia has done this successfully and with competitive gains.
4.0 Strategy Formulation
It is the process by which any organisation chooses the most appropriate courses of action
along with continuous planning to achieve its defined goals. This process is essential to the
company's success, because it provides the framework for the action that would lead to defined
results. In context with Air Asia, carrier needs to strategic their definite course of actions to
know and overcome challenges and issues discussed previously (Zott, 2012). There are various
strategic tools such as SWOT and PEST which helps to identify the current capabilities &
potential to recover challenges and issues for the Air Asia. Strength & weakness tells about the
internal capabilities and forces, whereas opportunity & threats talks about external regulation and
business growth response. For continuing the business operations and sustainability of this low
cost carrier, the SWOT analysis is as follow:

Strength reveals that Low cost carrier focusing on customer's with middle level income
and affordability. Their tag-line “Everyone can fly” means that Air Asia is giving opportunity to
all people to fly at the lower cost and prices. Air Asia have destination network covering
nations apart from Asia such as Australia, New Zealand, Italy, America etc. This shows that their
reach to the customer are positive and to the productive level. Air Asia has created low cost
airlines mentality among their workforces. This carrier initiative for being as sustainable and
productive has given opportunities at their doorsteps.
Weaknesses shows that Air Asia received lots of complaints from their customer on their
service such as bad nature, arguing, poor in-flight experience, food and beverages quality etc.
Also, because of less manpower, they have limited resource reach and right utilization. They
work on Autocratic leadership, which says that opinion and idea's of top level management has
to be considered for making decision and actions.
Opportunities shows that Air Asia have opportunity to target Asia' middle income people
along with government support. It was noticed that traveller's generally demands for food facility
in the flight, which is somewhere possible for this carrier to provide, but they need to uplift the
price fares of tickets (Amit, 2015). Also, they have chance to provide comfortability by using
advance tech seats and accessories. Along with this, they need to amend their business practices
with change in the lifestyle of customers. They should properly maintain their air-crafts to avoid
mentioned incidents. These necessary adaptation requires cost which is against of Air Asia
commitment for being as Low cost carrier.
Threat says that rise in prices of crude oil would raise jet fuel cost which is necessary to
counter for maintaining it at the customer affordability level. Increased competition from Air
Scoot, Malindo Air etc. who also deals in low cost airlines, would be threat for Air Asia to
operate their business and enhance their reach to the customer (Rothaermel, 2015). Also, the
major threat is increase bargaining power of the buyers along with competition intensity. Certain
rates like airport departure fee, security charges and landing surcharge would cause increase in
costs of flights which will ultimately rise ticket price of the Air Asia.
Apart from the discussed SWOT analysis, it is necessary to understand & analyse the
challenges faced any organisation in an external environment. Such challenges cover political
aspects, technological complication, economic effects along with ineffective manpower policies.
In context with Air Asia, it is pecuniary to understand as well as identify the political, economic,

social and technological implication to Air Asia, while operating in Malaysia and global level. In
an aviation industry, where influences of economic and politics is high, it is necessary for Air
Asia to counter any future arrival issues. The PEST analysis of Air Asia is as follows:
Political factors noticed that flying outside Malaysia is hard and critical, because of
southern east sea issues created by China along with Vietnam crisis (Macquet, 2012). Maximum
flights of the Air Asia operates near china, India and nearer Arab countries, where air space is
limited because of improper relation between governments, ineffective navigations and other
geographic region. The low cost carrier needs proper and efficient infrastructure which needs
FDI and other funds into economy and business. As , previously discussed that Air Asia is
basically operates in the countries comprises of India, Thailand, Malaysia, Singapore, whose
political conditions are much stable and balanced to the business. Also, these nations have
control over the resources, which is the major threat or weakness for the Air-Asia. The threats for
Air-Asia is the loss of customer as well as business. On the other side, opportunities is to co-
operate with the political scenario to take the advantage for the operational function of the Air-
Asia.
Economic factors reveals that in spite of strong competition from Malaysia Airlines and
Scoot air, Air Asia low cost-carrier look like they need to work harder to rise their economic
capabilities and gain maximum customer trust. Current recession hits the aviation industry, this
has led more people to enjoy travelling on cheap and less price tickets. Oil price fluctuation is
another regulatory factors which could effect this low cost carrier. It is like that if oil prices will
rise, it will be difficult for Air Asia to control cost of their operations.
Social factors shows that increasing world population has increased tourist involvement
which has rise the growth for an aviation industry. Apart from this, there are human factors such
as Severe Acute Respiratory Syndrome(SARS) has scare people to fly. But, in response to this
Air Asia has committed their customer the slogan of “Safety First”, which comply with policies
and regulatory agencies, set high standards which ensure the security of the staff and guests. The
incidence of Air Asia flight from Jakarta to Singapore, which brought down the trust of customer
on which carrier has decreased their price by 9 percent to bring back the passengers. Such factors
are required to overcome to enhance the business operation of the Air Asia.
Technological factors says that Air Asia provides online ticket booking service to their
customers by developing owns site and applications. To maintain the customer experience, Air

Asia has pushed internet booking service to save cost using the traditional booking centre. Along
with this, Air Asia has brought A320 aircraft in priority to Boing-737 to improve the fuel
efficiency and extra capacity which would lead to better performance and reliability. But, the
negative impact is that A-320 aircraft are not much capable to fly on longer duration, but B-737
are fully capable for so (Miemczyk, 2012). Such technological transformation would cause
financial burden along with operation ineffectiveness to the Air Asia.
Summary: This part summarized about the strategic formulation by the Air-Asia, which
includes SWOT analysis along with PEST factors, which is basically used for understanding the
external forces to this low cost carrier. This has been taken to overcome the challenges & issues
faced by the Air-Asia.
5.0 Strategy formulation & Implementation
After the complete analysis of SWOT and PEST, now its a stage to formulate planning
into the corrective action to ensure growth to the business along with maximum profitability. In
context with Air Asia, this low cost carrier has taken several actions to ensure the productivity &
profitability of the business. In response to this, Air Asia has taken strategic actions on corporate,
business unit and functional level that will be discussed further. Along with this, discussion
would suggest additional strategies in each of the concern which is as follows:
Corporate level strategy is a type of strategy which pertains to the organisation's mix of
Strategic Business Units(SBU) and product lines that fit together in such a way as to provide the
corporation with synergy and competitive advantage. In context with Air Asia, Corporate level
strategies deals with “What business are we in” which reveals the organisation as whole along
with combination of business units and product lines (Abraham, 2013). As, this company is
continuously working in low cost air transportation, which has lots of negative impacts such as
loss of customer, competition intensity and profit fluctuation.
On the corporate level, Air Asia has taken steps to get the maximum market share by the
business growth through extending air routes to different other nation such as Australia, New
Zealand, South Africa etc. Extending current services into new market may be helpful to ensure
the future growth of the company. It is suitable to achieve this strategy by launching existing
services into the new geographical area or diversify business by launching new services to
complete new region.

For expansion, Air Asia added new routes and destination, especially there focus is on
targeting Malaysia and East side areas such as USA, Australia, New Zealand etc. To achieve this
, several activities such as marketing research, feasibility study, contracts with recognized hotels
along with compliance with strategic partner.
Business unit level is a type of strategy which concerned with question of “How do we
compete” which pertains to each business units or product line within an organisation. It is the
strategy formulation within the strategic business unit in which the concern is how to compete. In
context with Air Asia, company has taken corrective actions to raise the business expectancy for
the future term (Swayne, 2018). For the purpose of safety, this carrier has decided to replace
their partial planes to A-320 aircraft from Boing 737. This strategic action needs to investment of
300 million dollar along with time duration 1-2 years at least. To remain competitive, Air Asia
needs to focus on the core competencies, synergy and value creation. Apart from this,Air Asia
has taken corrective actions such as computer reservation system(CRS), Enterprise resource
planning(ERP) , self check in, Air Asia credit card and Go holiday services to compete with
rivalries such as Malindo Air etc. All these steps are taken to provide the travelling convenience
& experiences to the customer's along with optimum utilization of resources. Such course of
action has been taken for long term relationship with traveller's and strategic partner's of the
business.
Functional level is the strategy which is concerned with the question “How do we
support the business-level strategy”, which pertains to all of the company's major Dept. To work
on the business strategic level, Air Asia has decided to focus on their human resource,
operational etc. Air Asia has decided to recruit new employee's, arranging training &
development along with offices in new decided destination etc. Also, Air Asia has decided to
take use of total quality management to right utilize the existing and new resources and conduct
an effective promotional and other activities (Duncan, 2016). Also, they are currently working on
their own performance appraisal system to enhance the motivation and moral of the workforce.
Summary: It is summarised that Air-Asia has implemented their strategies with proper
and complete action plan. Along with this, they have made the strategic formulation on the
different level of an organisation to get the business advantage for the future.

6.0 Strategy Evaluation & Control Process
Strategic evaluation and collective control always conduct after the implementation of
those relevant strategies and action planning. In order to evaluate implemented strategies, Air
Asia Dept. needs to follow corrective series of steps for controlling such results whether positive
or negative is as follow:
Fixing benchmark of the performance says that while fixing the benchmark, strategists
encounter various question such as what benchmark to set, how to set them and how to express
them. In order to decide the benchmark performance to be set, it is essential task to discover the
special requirements for performing the main task (Ginter, 2014). Air Asia can use both
qualitative and quantitative criteria for comprehensive assessment of the performance. Such
criteria has ROI, earning per share, cost of production, rate of an employee, turnover of the Air
Asia.
Measurement of the performance says that the standard performance is the benchmarks
which is set to be compared with an actual performance. For measuring performance, reporting
and communication system will be used by management of the Air Asia. If an appropriate means
are available for measuring the performance and if the standards are set into the right manner, in
that case, strategic evaluation would become easier and convenient (Wolf, 2014). For measuring
performance, financial statement such as balance sheet, profit & loss has been prepared by Air
Asia.
Analysing variance reveals that while measuring the actual performance with standard
performance, there might be critical variance that could be found. The management of Air Asia
needs to mention the degree of tolerance limits between which the critical fluctuation or variance
between actual and standard may be accepted. The positive deviation indicated about the better
performance, but it is quite unusual exceeding the target always, whereas negative deviation is an
issue of concern because it indicates the shortfall of performance.
Taking corrective action says that once the deviation for the performance is satisfied, it
is essential to plan for the corrective action. If the performance is consistently less than standard
performance, the management of the Air Asia must carry the detailed analysis of the factors
responsible for such performance (Jonkers, 2012). This carrier should take rare and drastic
corrective action min reformulating the strategies which requires going back to the process of

strategic management, re framing of plans according to the new resources allocation and
beginning with strategic process of management.
Summary: After the strategic evaluation and control process, it was noticed Air Asia has
gained the primary step for future development of their low cost carrier business along with
infrastructure made with advance technology and resources (Arend, 2013I). Yet, they are
continuously working on maximum customer acquisition with online ticket system, e-boarding,
flight information through SMS mode along with Air Asia personal payment gateway etc.

7.0 CONCLUSION
From the current assessment, it is concluded that strategic management is necessary to
encourage the company to grow and amend their business at the optimized level. It has to be
revealed that challenges and threats are necessary to overcome in order to get the business
sustainability and future expansion of the business. Especially in an aviation industry, where
customer ups and down are increasing, airlines are required to formulate an appropriate strategies
and action plans to counter such issues. Along with this, developing product as per the customer
needs will be suitable for any business entity to be productive and effective. Lastly, it is
concluded that business strategies needs to be initiated after the complete analysis of
competencies and weaknesses to enables the business growth as well as sustainability.

8.0 REFERENCES
Books & Journals
Rothaermel, F. T., 2015. Strategic management. McGraw-Hill Education,.
Amit, R. and Zott, C., 2012. Creating value through business model innovation. MIT Sloan
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enterprise success, innovation and classification: An analysis of empirical research from
1996 to 2010. European management journal. 31(6). pp.668-681.
Ginter, P. M., Duncan, W. J. and Swayne, L. E., 2018. The strategic management of health care
organizations. John Wiley & Sons.
Abraham, S., 2013. Will business model innovation replace strategic analysis?. Strategy &
Leadership. 41(2). pp.31-38.
Miemczyk, J., Johnsen, T. E. and Macquet, M., 2012. Sustainable purchasing and supply
management: a structured literature review of definitions and measures at the dyad,
chain and network levels. Supply Chain Management: An International Journal. 17(5).
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Arend, R. J., 2013. The business model: Present and future—beyond a skeuomorph. Strategic
Organization. 11(4). pp.390-402.
Iacob, M. E., and Jonkers, H., 2012, September. Capturing business strategy and value in
enterprise architecture to support portfolio valuation. In Enterprise Distributed Object
Computing Conference (EDOC), 2012 IEEE 16th International (pp. 11-20). IEEE.
Wolf, J., 2014. The relationship between sustainable supply chain management, stakeholder
pressure and corporate sustainability performance. Journal of business ethics. 119(3).
pp.317-328.
Massa, L. and Tucci, C.L., 2013. Business model innovation. The Oxford handbook of
innovation management. 20(18). pp.420-441.
Foss, N. J. and Saebi, T., 2017. Fifteen years of research on business model innovation: How far
have we come, and where should we go. Journal of Management. 43(1). pp.200-227.
Online
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