Strategic Management of AirAsia: Industry Analysis, Value Chain Analysis, Ansoff Matrix

This report provides information about the industry analysis of the South East Asia so as to analyse the market capacity of the company to organize its function. The value chain analysis of the company has been discussed to enlighten the reader about the primary and secondary functions of the company. The ansoff matrix framework explains the business strategy used by the company to grow and succeed in the international environment and the practices that they should further use to increase its competence in the external market.

Running Head: Strategic Management
Strategic Management
[Type the document subtitle]
Laptop04011
[Pick the date]

Strategic Management 1
Contents
Introduction......................................................................................................................................2
Porter Five Force Model..................................................................................................................2
Value Chain Analysis......................................................................................................................4
Ansoff Matrix..................................................................................................................................7
Bibliography....................................................................................................................................9

Strategic Management 2
Introduction
The purpose of this report is to enlighten the reader regarding the information about the company
AirAsia and the business activities prevailed by the company in the external environment. The
report provides information about the industry analysis of the South East Asia so as to analyse
the market capacity of the company to organize its function. The value chain analysis of the
company has been discussed to enlighten the reader about the primary and secondary functions
of the company. The ansoff matrix framework explains the business strategy used by the
company to grow and succeed in the international environment and the practices that they should
further use to increase its competence in the external market. The porter five forces model
elaborates details about the airlines industry in which the company AirAsia already exists. The
analysis elaborates the challenges and the benefits that the business receive while working in this
industry. The value chain analysis detail about the ways in which company works and what are
the internal sources that help the business in its primary activities. Thirdly, the ansoff matrix
evaluates the use of business strategy by the company that helped them to grow. More details
about the report are discussed below:
Porter Five Force Model
Bargaining Power of Buyer: It refers to the power present in the hands of the buyer that helps
them to negotiate in the market based on their conditions. The airlines industry is made up of two
groups of buyers that are individual flyers and intermediaries. The individual buyer purchase
ticket for several reasons that might be for personal or business related. Secondly, the
intermediaries are the travel agencies and online portal that works as a middleman between the
airlines and flyers. They provide best possible flight rates to the flyers. Thus, it should be noted
that there is low power in the hands of the buyers because while flying, they wish to fly with
companies whom they are trust. Thus, it should be noted that high loyalty reduces the bargaining
power of buyer1.
Bargaining Power of Supplier: suppliers have immense bargaining power vested in their hands.
The suppliers are the associations that provide spare parts to the companies present in the airlines
1 Bowen Jr, J.T., 2016. “Now everyone can fly”? Scheduled airline services to secondary cities in Southeast
Asia. Journal of Air Transport Management, 53, pp.94-104.

Strategic Management 3
lines. Initially there are only a few numbers of suppliers in the South East Asian airlines industry
whereas there is high number of airlines companies that reduces the competence of the
organizations. The two companies present in the external environment that are Airbus and
Boeing are the major market suppliers present in the Airlines industry. The airlines companies
present in the South East Market face difficulty in switching as there is high switching cost and
secondly there are not enough suppliers present in the environment2.
Threat of Entry: There is presence of high degree of threat in the South East airlines industry.
Initially, it should be noted that there is high degree of competition in the market and the
companies present in the industry have already obtained a significant position in the market. Due
to which, it will become difficult for the organization to compete with such companies have
explored goodwill in the external market. Secondly, there is low switching cost between the
brand in the market that reduces the competence of the organization in the external market3.
Threat of Substitution: There is moderate degree of threat of substitution in the external market
as the customers going through flight can easily switch between the roadways and railways.
However, it should be noted that moderate degree of threat is defined in the market because
customers who wish to travel long distance in short period of time cannot make use of any other
conveyance to reach to their destination. Other conveyance means can take more time than
required, so it should be noted that there is moderate degree of threat of substitution in the
external environment4.
Industry Rivalry: There is high degree of threat in the South East Asian airlines industry in this
case. All the companies present in this industry have already attained a dignified position in the
market, now it is difficult for any other organization to come and disposition the organization
and attain loyalty of their client. Travelling can be scary for the customers, so they wish to fly
with company that they trust, thus it should be noted that attaining trust of such customers
2 Matsumoto, H., Domae, K. and O'Connor, K., 2016. Business connectivity, air transport and the urban hierarchy:
A case study in East Asia. Journal of Transport Geography, 54, pp.132-139.
3 O’Connell, J.F., 2016. Airlines: an inherently turbulent industry. In Air Transport in the 21st Century (pp. 109-
146). Routledge.
4 Wang, K., Tsui, K.W.H., Liang, L. and Fu, X., 2017. Entry patterns of low-cost carriers in Hong Kong and
implications to the regional market. Journal of Air Transport Management, 64, pp.101-112.

Strategic Management 4
present in the market might become difficult for the organization. Thus, it should be noted that
most of the services of the companies present in the Airlines industry fall under same slab and
there is low switching cost for the customers that increases the competition in the market5.
Value Chain Analysis
The value chain analysis of an organization is used to analyse the value attained to the company
using each functional activity in the external environment. Below mentioned is a diagrammatic
presentation of value chain analysis along with the evaluation of value chain facilities of the
company AirAsia and the Tune Group:
Primary Activities
Inbound Logistics: The inbound logistics involve the process of receiving, distributing and
storing of raw material of the company that is used in the production process. The inbound
logistics of the company involves the process of scheduling the flight and analysing the strategic
moves of the competitors. Along with this, the inbound logistics facility of the company focuses
on ways in which the company supply the raw material to different departments and the
5Williams, A., 2016. Developing strategies for the modern international airport: East Asia and beyond. UK:
Routledge.

Strategic Management 5
management of such resources in the business as well. This process of the company defines the
ways in which fuel is used in the business and managed efficiently. The company focuses on
adopting sustainable practices in the environment so as to cut off the prices internally and
manage fuel efficiency by purchasing goods at low rates6.
Operations: it is the stage in which raw material is turned into final product, however, it should
be noted that AirAsia is a service provider company in which no product is converted from raw
material to finished good. Thus, the operations process of the company only involves the service
delivery from the employees to the flyers of the company. The operation process of the company
involves initiating sales in the environment through online means. Also, training the employees
for service delivery process includes the operation process of the company7.
Outbound Logistics: It refers to the process of distributing the final product or service to the
consumers of the company. As the Company AirAsia makes use of operation process through
online mode so, the boarding passes are printed at the respective places of the customers. The
company initiate sales online due to which the customers need to print the boarding cards
themselves and then show it while flying. The main preference of the company is to ensure
safety of the customers in response to which the company make use of general electric engine for
the customers’ safety as well. The outbound logistics process involves the service delivery in
such a way that safety level of customers is maintained high and services are delivered on time
according to the expectation of the customers8.
Marketing and Sales: The company AirAsia is known for its quality service delivery and brand
value in the external market. The customers present in the South East airlines industry get
attracted towards the services of the company because of their brand recognition in the market.
The company started working with a tagline - ‘Now Everyone Can Fly’ that means that it was
first of the two entrepreneurs launched to run in the airlines industry. The company nowadays
6 Duval, D.T. ed., 2016. Air transport in the Asia pacific. UK: Routledge.
7 Buaphiban, T. and Truong, D., 2017. Evaluation of passengers' buying behaviors toward low cost carriers in
Southeast Asia. Journal of Air Transport Management, 59, pp.124-133.
8 Dai, L., Derudder, B. and Liu, X., 2018. The evolving structure of the Southeast Asian air transport network
through the lens of complex networks, 1979–2012. Journal of Transport Geography, 68, pp.67-77.

Strategic Management 6
advertise their brand in an innovative manner that helps the business to attain an upper hand in
the external market9.
Service: retaining the customers in the airlines industry has become a difficult task for the
companies because of high degree of competition and low switching cost as well. The airlines
companies need to implement efficient and effective service delivery so as to attract and retain
the customers in the business environment. In response to which, the business deliver low cost
carrier services to the customer so as to provide them efficient services at cheap rates in the
external market. Further, apart from low cost carrier services, the company also provide several
discount offers to maintain the satisfaction level of the customers in the target market. The
company serve waiting charges to the customers if they delay the flight more than a fixed
number of hours. They are provide pre-booking discounts etc. to attract the customers in the
business and increase sales in the market10.
Supporting Activities: the company initiate several supporting activities in the business
environment that are integrated with the primary activities to increase the sales and satisfaction
of the customers in the business environment.
Firm Infrastructure: the firm infrastructure of the company is efficient and effective that helps the
business to deliver the primary activities to the customers in an appropriate manner. Strong
infrastructure helps the organization integrate the services of the company and efficiently deliver
them in the business environment. The firm infrastructure process helps the organization to
deliver services to customers at economic rates in the market11.
Human Resource Management: the human resource of the business is the most important asset
that helps the organization to deliver services to the customers and attain profitability in the
market as well. In a service delivery organization like AirAsia, it is important for the
organization to train employees in an appropriate manner to deliver services in the external
9 Saranga, H. and Nagpal, R., 2016. Drivers of operational efficiency and its impact on market performance in the
Indian Airline industry. Journal of Air Transport Management, 53, pp.165-176.
10 Adas, M., 2018. State, market and peasant in colonial South and Southeast Asia (Vol. 30). UK: Routledge.
11 Pearson, J., O'Connell, J.F., Pitfield, D. and Ryley, T., 2015. The strategic capability of Asian network airlines to
compete with low-cost carriers. Journal of air transport management, 47, pp.1-10.

Strategic Management 7
environment. Thus, the human resource management of the company plays the role of training
the employees and making them efficient in delivering the right type of services to customers in
the airlines industry12.
Procurement: this process involves the ways in which raw material is obtained by the
organization, however service delivery industry does not involve in this process because as such
there is no product to deliver so raw material is also not required by the business.
Technology: The company AirAsia make use of diverse technology in the environment to reduce
the costing of their product and increase the operational efficiency as well. The technology used
by the organization helps the organisation in developing Yield Management System (YMS) that
analyse the operational cost and expected revenue of the company. Further, the Computer
Reservation System (CRS) process helps the organization to manage the online sales and
eliminate the use of middleman in the system so that tickets are available to the customers at
lower rates in the market. The ERP system of the company also helps the business to keep a
record of accomplishment of all the functions of the company13.
Ansoff Matrix
This framework is a strategic marketing planning tool that analyse the opportunities for the
company and tap these opportunities to grow in the external market. There are four types of
strategies through which the business capture the market and grow, these strategies of Ansoff
matrix are discussed below:
Market Penetration: It refers to the strategy under which business sell more of the existing
product or service to the existing customers market base14.
Product Development: it refers to the business strategy under which the organization aims to
develop the product category and introduce a new product in the existing target market.
12 Hapsari, R., Clemes, M.D. and Dean, D., 2017. The impact of service quality, customer engagement and selected
marketing constructs on airline passenger loyalty. International Journal of Quality and Service Sciences, 9(1),
pp.21-40.
13 Taneja, N.K., 2017. Simpli-Flying: optimizing the airline business model. UK: Routledge.
14 Lin, W. and Yeoh, B.S., 2016. Moving in relations to Asia: The politics and practices of mobility. Environment
and Planning A: Economy and Space, 48(6), pp.1004-1011.

Strategic Management 8
Market Development: It refers to the business strategy under which the organization aims to
enter in the new market so as to increase the customer base of the organization.
Diversification Strategy: This strategy refers to the process under which the business aims to
either develop the new product or service or enter in new market or both15.
Talking about the company AirAsia and Tune Group, it should be noted that the company
utilized the product development strategy in the external market to grow and initiate its sales
accordingly. The company introduced low cost carrier services in the external market so as to
help all categories of people to fly to their respective places. This strategy of the business also
helped the customer to fly at nearly zero rates in the market. The airlines industry was initially
charging high prices for the service delivery from the customers resulting in which not all people
were able to afford travelling through airways. Thus, it should be noted that this type of market
development strategy helped the organization to capture wider market base and increase the sales
of the company as well16.
Lastly, it is recommended to the organization that they should make use of market development
strategy in the external market. The company should invest in the business so as to capture more
units geographically. The company should focus of creating airways channels at all parts of the
world. This will help the business to initiate sales by capturing more number of customers in the
market. Thus, market development strategy will help the organization to initiate sales from
different parts of the world. Online sales mode will easily implement online ticket booking as
well which help the customers to book a flight of AirAsia while sitting in different part of the
world.
15 Oum, T.H. and Yu, C., 2019. Shaping air transport in Asia Pacific. UK: Routledge.
16 De Brauwer, M., Harvey, E.S., McIlwain, J.L., Hobbs, J.P.A., Jompa, J. and Burton, M., 2017. The economic
contribution of the muck dive industry to tourism in Southeast Asia. Marine Policy, 83, pp.92-99.

Strategic Management 9
Bibliography
Adas, M., 2018. State, market and peasant in colonial South and Southeast Asia (Vol. 30). UK:
Routledge.
Bowen Jr, J.T., 2016. “Now everyone can fly”? Scheduled airline services to secondary cities in
Southeast Asia. Journal of Air Transport Management, 53, pp.94-104.
Buaphiban, T. and Truong, D., 2017. Evaluation of passengers' buying behaviors toward low
cost carriers in Southeast Asia. Journal of Air Transport Management, 59, pp.124-133.
Dai, L., Derudder, B. and Liu, X., 2018. The evolving structure of the Southeast Asian air
transport network through the lens of complex networks, 1979–2012. Journal of Transport
Geography, 68, pp.67-77.
De Brauwer, M., Harvey, E.S., McIlwain, J.L., Hobbs, J.P.A., Jompa, J. and Burton, M., 2017.
The economic contribution of the muck dive industry to tourism in Southeast Asia. Marine
Policy, 83, pp.92-99.
Duval, D.T. ed., 2016. Air transport in the Asia pacific. UK: Routledge.
Hapsari, R., Clemes, M.D. and Dean, D., 2017. The impact of service quality, customer
engagement and selected marketing constructs on airline passenger loyalty. International
Journal of Quality and Service Sciences, 9(1), pp.21-40.
Lin, W. and Yeoh, B.S., 2016. Moving in relations to Asia: The politics and practices of
mobility. Environment and Planning A: Economy and Space, 48(6), pp.1004-1011.
Matsumoto, H., Domae, K. and O'Connor, K., 2016. Business connectivity, air transport and the
urban hierarchy: A case study in East Asia. Journal of Transport Geography, 54, pp.132-139.
O’Connell, J.F., 2016. Airlines: an inherently turbulent industry. In Air Transport in the 21st
Century (pp. 109-146). Routledge.
Oum, T.H. and Yu, C., 2019. Shaping air transport in Asia Pacific. UK: Routledge.

Strategic Management 10
Pearson, J., O'Connell, J.F., Pitfield, D. and Ryley, T., 2015. The strategic capability of Asian
network airlines to compete with low-cost carriers. Journal of air transport management, 47,
pp.1-10.
Saranga, H. and Nagpal, R., 2016. Drivers of operational efficiency and its impact on market
performance in the Indian Airline industry. Journal of Air Transport Management, 53, pp.165-
176.
Taneja, N.K., 2017. Simpli-Flying: optimizing the airline business model. UK: Routledge.
Wang, K., Tsui, K.W.H., Liang, L. and Fu, X., 2017. Entry patterns of low-cost carriers in Hong
Kong and implications to the regional market. Journal of Air Transport Management, 64,
pp.101-112.
Williams, A., 2016. Developing strategies for the modern international airport: East Asia and
beyond. UK: Routledge.