Malaysian Airline Performance Analysis

This assignment requires a comprehensive analysis of Malaysian Airlines' performance. It focuses on evaluating the airline's financial efficiency using the Malmquist index, examining its competitive strategies against low-cost carriers like AirAsia, and exploring employee reactions to implemented HRIS changes. The analysis should consider factors influencing online brand trust, passenger satisfaction, and sustainable growth in the aviation industry.

Running Head: STRATEGIC MANAGEMENT
Strategic Management
Name of the Student
Name of the University
Author note

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Table of Contents
1. Introduction......................................................................................................................3
1.1. Purpose of report.......................................................................................................3
1.2. Overview of the company.........................................................................................3
1.2.3 Key challenges........................................................................................................3
2. Mission and vision...........................................................................................................4
2.1. Vision........................................................................................................................4
2.2. Mission.....................................................................................................................4
2.3. Evaluation of mission and vision- SMART model...................................................4
3. Environmental Analysis...................................................................................................6
3.1. Macro environment analysis.....................................................................................6
3.1.1 Political factors-......................................................................................................7
3.1.2 Economic factors....................................................................................................7
3.1.3 Social factors..........................................................................................................8
3.1.4 Technological factors..............................................................................................8
3.2 Industry Analysis.......................................................................................................9
4. Capability analysis.........................................................................................................11
4.1. Value chain analysis...............................................................................................11
4.2. Strength and weakness of MAS from value chain analysis...................................15
Strength..........................................................................................................................15

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Weakness.......................................................................................................................15
4.3 Barney’s VRIO model.............................................................................................16
5. Proposed strategy-.........................................................................................................19
5.1 TOWS analysis and evaluation................................................................................19
6. Strategy evaluation........................................................................................................21
6.1. SAF strategic evaluation.........................................................................................21
References..........................................................................................................................23
Appendices........................................................................................................................27

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1. Introduction
1.1. Purpose of report
The report aims to develop a strategic plan for the chosen organisation; Malaysian
aviation and focuses on Malaysian airlines using different analysis tools. The industry issues are
highlighted based on the analysis from the external and internal environment.
1.2. Overview of the company
Malaysians airlines system Berhad or Malaysian airlines system or MAS was found in
1947. The government recognises it has the flag carrier. The headquarters is situated, at Sultan
Abdul Aziz Shah Airport (Selangor). The first base from where the flight operates is in
Kuala Lumpur International Airport, and Kota Kinabalu is the secondary base. MAS is the
holding company for the National airlines carrier of Malaysia. Firefly and MASwings are two
subsidiaries. MAS are using A330-200 and A330-300 and boeing 737-400, 800 and 400/400
(malaysiaairlines.com, 2018).
MAS offers cargo transportation services, manufacture aircrafts parts, offers trucking,
laundry and dry cleaning service for the airline industry. The transition from small airline to the
award-winning air service is commendable. Currently, it has more than 1000 aircraft. The service
is available in six continents and 110 destinations. It has received second position in Aviation
Week's Top Performing Companies (malaysiaairlines.com, 2018).
1.2.3 Key challenges
There is a need of continuous operational improvement. It is still a challenge to excel in
commercial effectiveness, cost management and flight operations. The company is yet to provide

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branded customer experience during pre-flight, in-flight, and post-flight. The company is far
from achieving the extensive global network. It must make a simple business structure that can
increase the premium services, alliances and partnerships (Ong and Tan, 2010).
2. Mission and vision
2.1. Vision
The company’s vision is to develop itself as premium carrier and become, “An airline of
excellence”. It aims to gain strong position in the Asian aviation marketplace. In the ASEAN
arena, Malaysia is relatively smaller. Despite this, the organisation aims to harness the
Malaysia’s geo economic centricity. The company has its unique way to go beyond expectations,
work through the cost competiveness (malaysiaairlines.com, 2018).
2.2. Mission
The mission of the organization is explained in three main thrusts. It includes provision
of the best travel and transport service without compromising on punctuality, safety and comfort.
MAS dreams to become a leader in this sector in the areas of quality of service, efficiency and
safety. The third mission is to become a profitable airline (malaysiaairlines.com, 2018).
2.3. Evaluation of mission and vision- SMART model
The SMART model is a tool to evaluate the business process employed to meet its
mission and vision. The acronym stands for, “Specific, Measurable, Attainable, Relevant, and
Time-based” and represents smart goals for business (Shields, et al., 2015). In this section the
mission and vision of MAS will be evaluated using this model.

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Model Description
S- Specific The vision and mission of MAS is specifically
defined. The mission is not too specific when it
mentions providing safe and comfortable service.
The mission to be profitable is too not specific as it
has not mentioned specific number it wants to
achieve. Therefore, MAS must be more specific in
its goals (King, 2013).
M-Measurable The mission is measurable as it was easy to track
the progress and is relevant. Profit earned by the
company and if it has become the leader in the
industry can be measured through graphical
representations and statistical analysis. However,
being excellent service is not measurable as
“excellence is not limited” (Suki, 2014)
A-Achievable Both the mission and vision can be attained
considering the present position of MAS. However,
it is slightly challenging considering the fluctuation
in fuel prices and low cost carriers adding to
competition. Before, 2011, the profits and the
quality of the service were very low (Tarajčáková,
and Rozenberg, 2013).
R-Relevant Both the mission and vision of the MAS are
relevant considering the great demand for Asian

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aviation industry (Mun, 2011).
T-Time-bound Considering present condition that is influenced by
the government regulation, tax and fuel prices and
safety issues, the vision to be an excellent service
in terms of time line is questionable (Serpen,
2014).
The mission and vision of MAS seemed unattainable due to 2011 crisis. However, the
recovery model after crisis has helped the company to work through half of its vision. With the
help of small and profitable network strategy it has dropped seven routes from Kuala Lumpur. It
has increased art passenger amenities in all its aircrafts. The start of new boeing 737-800 in 2012
increased the premium services. A MA has been partially successful in winning back the
customer since 2013. However, with these strategies, the vision is yet to be accomplished as
there is stiff competition in the market, and stringent government regulations due to
environmental impact (Serpen, 2014).
To analyse the market attractiveness and industry issues environmental analysis will be
conducted.
3. Environmental Analysis
3.1. Macro environment analysis
This section deals with the Pest analysis. This tool is used to scan the external business
environment to examine the macro environment in which the MAS is operating. It includes

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analysis of the political, economic, social and technological factors of Asia (Pearson, et al.,
2015).
(Source: http://web24it.com)
3.1.1 Political factors-
During recession the tax policies are an obstacle to the organization. There was an
increase in net loss of tax in 2014 that is RM433 million compared to that of 2013 (RM2.52
billion). Further, there is an increasing operational cost due to changes in the government wage
policy. Government’s influence by announcing official rates and discounts, and enforcement of
the unofficial routes has both positive and negative impact on industry. More wages are
demanded owing to increasing life standard that pose challenges of cost reduction. A negative
impact on tourism industry was observed with the “Khazanah Nasional’s airline” renewal
promise. It acted as threat for employees (Pires and Fernandes, 2012.)

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3.1.2 Economic factors
Considering the Ukraine crisis, there is a high chance of hike in fuel price. The rapid
growth of the fuel cost may decrease the employees’ wages. Further, the revenue earnings may
be hampered by the fluctuating exchange rate and decrease in the ticket prices. Decreased cost
may be advantageous for domestic and international travellers. The economic challenges come
from the differentiated needs. For, some people the airline services are luxury and for others it is
a necessity. For the travellers, the airline travelling is a luxury, but it is the requirement for the
business travellers. There is a trend of increase in low cost airlines and investment need in
improving the airport infrastructure adds to economic burden (Pearson, Pitfield and Ryley,
2015).
3.1.3 Social factors
Recent incidents related flight hijacks, plane crash, disappearances of flight MH
370 have increased the public fear and anxiety due to safety issues. Only 7% of the
youth consider air travelling as an enjoyable activity. Global pandemic disease
such as H1N1 and rise of terrorism in particular is decreasing the public
travelling. Some people are compromising on the food due to high ticket prices.
This increases the advantage of the low cost carriers. This is having negative
impact on the business thereby increasing demands for innovation and public
security (Shah Alam and Mohd Yasin, 2010).
3.1.4 Technological factors
The business is highly influenced by the online purchasing practice. There is an
increasing practice of using debit and credit cards for purchasing tickets that boost sales. The
partnership of the organisation with the “Agoda.com” has given public with many more options

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such as smart hotel booking, discounts, and rewards. It has become popular website in Asia.
This has made the public life smoother. Other technological innovations that has ensured smooth
running of the services are Interactive Voice Response System, Integrated Communication
System, and use of knowledge portal to decreases the operational cost. Purchasing was found to
increase by the introduction of the social media and on board infotainment system. This has high
level of impact on increasing the business growth (Dharmavaram, et al., 2012).
3.2 Industry Analysis
In this section the industry analysis is conducted using the Porter’s five force model. It
helps in concise analysis of the airline industry and gain the micro perspective.
(Source: toolsformanagement.com)

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The objective of this analysis is to identify the factors of the competition, maintain the
business attractiveness for long term, analyse the attractiveness of the industry and relate the five
dynamic forces with business performance and c competitive advantage. These forces include,
“Competitors, Threat of Entry, Substitutes, Suppliers, and Customers” (Dobbs, 2014).
Industry competition is very high in this business. The local competitors of Malaysian
airlines are Firefly, Air Asia, and others. International competitors are Garuda, Cathy, Singapore,
and Thai international airways. The organization also has threat from low cost airlines such as
Jetstar Asia Airways, Tiger Airways, and Virgin blue airlines. The internal competition has
increased with deregulation and emerging low cost carrier. There is a low profitability and it is
highly volatile (Arakaki, 2015).
The power of suppliers is also high for Malaysian airlines. It is attributed to the ever
increasing fuel prices, which significantly impacts the cost. However, there is growth potential in
the Asian aviation industry. It is very optimistic and is evident from the huge aircraft orders,
which is increasing the bargaining power of the suppliers. The drawback is the requirement of
large capital, so that the leasing companies can come into picture. There is a monopolisation by
the two major manufactures of then aircrafts. There is a high demand for the five star services,
which can be fulfilled by the highly specialised and professional employees. The price reduction
in the airline industry is attributed to recent crisis (Pearson, et al., 2015).
The power of the customer increases with easy switching from one airline to another. The
south east population comprises of Thailand, Singapore, Indonesia and others. Malaysians are
the local buyers. Having low product differentiation is the major drawback. If the customers are
paying the price for superior services, the organisation must serve at either five star levels or

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provide low cost services (Abdullah, et al., 2012). As the travel portals have increased buyers are
competing to get the service at low fares and book it instantly. This has led to ease of purchase
and increase in the bargaining power of the buyers. The customer loyalty can be increased by
initiating the frequent flyer programme. Free purchase duties or services are the other option that
can prevent the switching of the customers to other airlines. The power of the buyers in this
industry decreases with the low buyer concentration (Munusamy and Chelliah, 2011).
The airline industry has many barriers to entry and exit. One of the barriers is licensing
and threat is caused by increasing partnerships. The entry cost is very high that makes the
industry unattractive. In addition, the entry is restricted by the deregulation. However, with the
increasing intensity of the internet user’s new entrant possibility is again high (Rinehart, 2014).
4. Capability analysis
4.1. Value chain analysis
To identify the strategic capabilities in terms of resources and competencies, value chain
analysis is conducted. Value chain analysis helps to identify the strength and weaknesses of
MAS in regards to resources and if the value chain activities are accurate to retain and attract
customers in highly regulated industry. The chain of activities are categorised as primary and
support activities. The primary activities are related with the physical creation, product
maintenance, sales, and support of services. Support activities are related with above mentioned
primary functions for efficiency of company (Pearson, et al., 2015).

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Value chain activity How MAS create value for
customers
Does this create value?
Primary Activities
Inbound logistics Flexibility of online booking and
self service kiosk
Enter into code sharing with
qantas, Cathyway,
Online time table or accurate
flight information (Pires and
Fernandes, 2012)
Yes
Operations MAS has split its operations into
different departments such as “air
craft maintenance team”
(Pearson, et al., 2015)
Yes
Outbound logistics Gives services in 100
destinations
Increased passengers with better
planning and scheduling team
Increased frequency of existing
routes (Jumadi and Zailani,
2010)
Yes

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Marketing and sales Has competitive pricing strategy,
There many point of purchases,
ticket counters, online purchase,
discounts, offers, online
promotions,
Launch of “Enrich
Frequent Flyer Program”
(Vrontis, et al., 2010)
Yes
Services Catering, lost luggage,
unloading, delivery to terminal,
special services for infants,
special meals to Muslims and
physically challenged people,
five start services (Nambiar,
2012)
Yes
Support activities
Procurement MAS purchases various airlines
equipments and machinery.
There is a need of better
procurement department.
Successful with Airbus A380,
A330 Boeing 747, 777, 737
Lease agreement with new 4 new
Airbus
(Hussein and Yaacob, 2012)
Yes

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Technology development MAS was found to invest highly
in the R&D activities on different
airlines as well as marketing and
testing,
new mobile booking facility
Cabin crew scheduling is
computerised
(Abdullah, 2010)
Yes
Human resource management High skilled workers are
recruited and are motivated with
rewards and recognitions,
enforce avoidance of conflict of
interest, open door policy,
rightsizing of workforce (Razali
and Vrontis, 2010)
Yes
Infrastructure and management
style
The organisational structure is
flat. It has planning and
controlling system. There are
different departments apart from
the finance and legal
Special team of booking
management, after sales
communications, Gate
management (Marmaya, et al.,
Yes

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2011)
According to Serpen (2014) the primary income of the organisation is based on the
maintenance of the aircraft, technological development, and logistic services (Primary activities).
The structure is of low cost, and there is increase in the outcome product values. MAS can
sustain the market competition by increasing the end product value. It can reduce the
unnecessary cost by better collaborating with the suppliers and customers. Ensuring the public
security by ensuring the performance will help it gain high profit. It needs to focus more on the
technology and development and efficiency of the aircraft maintenance (Support actvities). It
needs to be more cognizant with the business cycle to gain customer loyalty. The threat to the
business continues due to the tragedy of MH370 and MH17, which implies for branded customer
experience.
4.2. Strength and weakness of MAS from value chain analysis
Strength Weakness
Extensive operations in global destinations are
increasing the brand image.
The organisational structure is well designed
After 2011 crisis it is again gaining the premium
brand image with intense marketing and sales and
high quality service
Increase in modern facilities and covering more
than 60 routes both domestic and international
Multiple meal facilities (Tan and Yap, 2015)
High operational cost due to tax
Low growth prospects
High demand and price insensitivity
Domestic traffic limited
Less technology innovation (Graham 2013)

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4.3 Barney’s VRIO model
The VRIO model is the framework that examines each type of resources and capabilities
of the organisation. The acronym stands for value, rareness, imitable, and organisation. It is an
internal analysis that considers the set of evaluation dimensions (Njoya and Niemeier, 2011).

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(Source: created by author)
Below given is the implementation of the VRIO model-
Value chain
activities
Characteristics of resources
Competitive
outcomesValuable? Rare? Difficult to
imitate?
Organisation
capable?
Inbound
logistics
 X X  Short term
competitive
advantage
Operations     Long term
competitive
advantage
Outbound
logistics
 X X  Temporary
competitive

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advantage
Marketing and
sales
 X X X competitive
parity
Services   X  Long term
competitive
advantage
Procurement  X X  Short term
competitive
advantage
Technology
development
    Long term
competitive
advantage
Human
resource
management
 X X X competitive
advantage
Infrastructure
and
management
style
    Long term
competitive
advantage
5. Proposed strategy-
5.1 TOWS analysis and evaluation
TOWS analysis is the tool to study the possibility of the organization to exploit its
opportunities and use the strength to diminish the weakness and threats. This analysis is based on

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the strength and weakness obtained from the PEST analysis, porter’s value chain and VRIO
model (Jasiulewicz-Kaczmarek, 2016).
Figure: TOWS analysis of MAS
Strength Weakness Opportunities Threats
Have won plenty of
awards,
Strong brand image,
High skilled team for
cabin crew and flight
schedule management
High operational cost,
Plenty of routes are not
revenue making,
Trust issue persisting,
Frequent changes in
business model
Low profitability
Increase in Demand for
airlines
Increase in customer’s
interest for travelling,
Excel in global market
with the low price
strategy – low end
segment
Increase in new
entrants,
Price competition due to
low cost carriers,
Competition from
leading airlines,
Increase in fuel costs,
Government regulations
Threats from substitutes
TOWS analysis Market penetration Market development
Product development Diversification
Market penetration would be effective strategy for MAS as it has opportunity to excel in
global market. Winning awards have created unique brand image. In order to fulfil its mission to
be a leader in this industry, MS need to enter new market and take advantage of the
opportunities. By further improving its services and quality, it can gain the rivals’ customer
(Pearson, et al., 2015). As there is an increasing threat from the low cost carriers, MAS can come

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up with innovative products. It will help counter the competitive entry, and cost issues with new
revenue streams (Gurcaylilar-yenidogan, T.u.g.b.a. and Aksoy, 2018). Therefore, MAS can be
suggested to exploit new technology for product development in the existing market. Using its
expertise and experience MAS can expand to new markets to attract new customers with existing
product. Such strategy of market development will help in exceeding the low cost carriers. Using
the diversification strategy the organisation can extend its operations towards growth of ancillary
products. To minimise the risk of diversification MAS can start with related markets. Existing
products gives competitive advantage (Yashodha, 2012).
(Source: www.marketing91.com)

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As per Ansoff’s matrix, all the strategies are well applicable for MAS. It is a guiding tool
to future growth of an organisation. MAS is already using some of this strategies, such as
extensive marketing and promotion, online booking, social media, investing R&D for new
products, starting new routes and others. Product development will add to competitive advantage
by strengthening the existing markets (Bocken, Fil and Prabhu, 2016.).
6. Strategy evaluation
6.1. SAF strategic evaluation
SAF is a tool to scrutinise the company’s effectiveness, on implementing the chosen
strategy. This model has three aspects
Suitability- All the four strategies are suitable based on the threats and available
opportunities. The strategies are suitable in regards to fighting the entrants, gaining advantage
over low cost carriers, and excel in global market with low price strategy. New products such as
multiple meal options for Muslim patients will satisfy the customers with high interest in
travelling. It is easy for MAS to excel in the international market as it well established in the
existing market and has gained its brand image. Thus, product development is most suitable for
attracting new customers (Pearson, et al., 2015).
Acceptability- As MAS has tried its best to recover from the loss due to 2011 crisis and
is growth period; it is acceptable to target the international market. Product development will
strengthen exiting customer base and attract new customers by increasing the excellence of
services, which is the vision of MAS (Tarajčáková and Rozenberg, 2013).

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Feasibility- As the company is already investing in R&D, product development would be
cost effective. It can be well financed owing to present resource and profitability, so, the
feasibility is strong (Serpen, 2014).

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