An In-depth Analysis of Strategic Management and Leadership at AirAsia

This report provides an in-depth analysis of AirAsia's strategic management and leadership, examining the factors contributing to its success, including its cost-effective strategies and the leadership of Tony Fernandes. The report includes an internal analysis using the value chain and VRIN framework, highlighting AirAsia's core competencies such as low-cost short hauls and quick turnaround times. It assesses the company's financial performance, customer satisfaction, and internal processes using a balanced scorecard approach. Furthermore, the report reviews the growth and competitive strategies employed by AirAsia and discusses the challenges faced, such as rising fuel prices and currency devaluation. Finally, it offers recommendations and forecasts for the future of AirAsia, emphasizing the importance of maintaining a dedicated workforce and adapting to market changes. Desklib provides access to this and similar solved assignments for students.

Running head: STRATEGIC MANAGEMENT AND LEADERSHIP
Strategic Management and Leadership
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Table of Contents
Introduction......................................................................................................................................2
1. Definition of success....................................................................................................................3
2. Reasons for success.....................................................................................................................7
3. Internal analysis...........................................................................................................................9
3.1 Value chain analysis..............................................................................................................9
3.2 Core competency of AirAsia...............................................................................................11
3.3 VRIN Analysis.....................................................................................................................13
4. The contribution of the leaders..................................................................................................14
5. Review of the strategy used.......................................................................................................16
5.1 Growth strategy...................................................................................................................16
5.2 Competitive strategy............................................................................................................18
6. Analysis of the future of the company.......................................................................................19
Recommendations and future forecasting of AirAsia...............................................................21
Reference List................................................................................................................................22
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Introduction
Overview of the company
AirAsia is a Malaysian low-cost airline and it has it headquarter in Kuala Lumpur.
AirAsia is the largest airline in Malaysia by destinations and fleet size. AirAsia commenced its
operation in the year 1996. AirAsia reached the revenue of RM5.01 billion in the year 2016 and
net income of the organisation was RM1.57 billion in 2016 (Airasia.com, 2018).
Nature of the business
AirAsia Berhad is in the airline industry and it has been named as the world's best low-
cost career for consecutive nine years. Therefore, AirAsia provides air transport services for
travelling passengers at low cost.
The markets served
AirAsia operates in more than 165 destinations across more than 25 countries. Asia has
its low-cost carrier terminal at Kuala Lumpur and its affiliate airlines are AirAsia India,
Indonesia AirAsia, Thai AirAsia and Philippines AirAsia. Fleet size of the organisation
excluding subsidiaries is 89. AirAsia X mainly focuses on long-haul routes (Airasia.com, 2018).
Challenges faced
Airbus 320-200 went missing with 162 people on board from Indonesia city heading
towards Singapore. It came to the news that Airbus of AirAsia crashed into the Java Sea.
Consequences of this incident led to drop the airfare by almost 9% to bring the passengers back.
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AirAsia faced the issue of declining the value of the domestic currency in Malaysia. In recent
time, AirAsia faces the issue due to rising fuel price and high landing charge.
1. Definition of success
For some of the business leaders, success is monetary rewards and creating a positive
impact on others in the business. According to Dijkhuizenet al., (2017), success in business is the
gradual realisation of worthy goal and success can be defined for accomplishing the goals with
creativity, hard work and passion. In the business world, success can be stated as running a
profitable organisation with integrity and honesty along with making a meaningful contribution
to the communities it serves. It can also be stated that success is something all the leaders
striving to get it and success comes in different shape and size. In the arena of the business,
success is meeting the goals which have been set by the leaders. As stated by Djamasbi et al.,
(2014), success is about comparing the business with others; however, it is about
accomplishment and growth.
Measuring the success of the organisation
Balance scorecard is a strategic planning and management system which organises
organisations utilises to communicate what the organisations are trying to accomplish. Balance
scorecard prioritises the projects, services and products and it helps to measure and monitor
progress towards strategies targets (Fooladyand et al., 2015). Balance scorecard helps to measure
the organisations in four perspectives to develop the KPIs, objectives, initiatives and target.
 Financial elements talk about financial performance and resource use
 Customer and stakeholder element points out the customer value and satisfaction along
with retention
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 Internal process deals with efficiency and quality
 Organisational capacity talks about human capital and infrastructure, technology and
culture
Balance scorecard of AirAsia
Objectives Performance
measure
Initiatives
Financial
perspective
Improve cost
structure and increase
asset utilisation
Plane lease cost Reduced cash
expenses
Improve Yields
Eliminate defects
Expand revenue
opportunities
Market value and
seat revenue
News source revenue
Improve profitability
Market capitalisation of AirAsia
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Figure 1: Market capitalisation has increased with time (2005-2017)
(Source: Ir.airasia.com, 2018)
Objectives Performance
measure
Initiatives
Customer and
stakeholder
perspective
Increasing market
share and customer
retention
Number of repeat
customers
Implementation
CRM and providing
sustainable
promotions
Customer satisfaction
and customer
profitability
Lowest prices and
flights are on time
Implementation of
customer loyalty and
monitoring changes
in consumer trends
Passengers increase table:
2013 2014 2015 2016 2017
Passengers
carried
21,853,036 22,138,796 24,254,506 26,410,922 39,092,972
Table 1: Operating statistics
(Source: Ir.airasia.com, 2018)
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Figure 2: Operating statistics of AirAsia (Indonesia, Malaysia and Philippines)
(Source: Routesonline.com, 2018)
Objectives Performance
measure
Initiatives
Internal business
process
Operation
management
On-ground time and
departure on perfect
time
Develop innovative
marketing and
communication
programme and cycle
time optimisation
Innovative process Growth ancillary and
products and services
Drive organisational
performance
Develop marketing
business intelligence
Objectives Performance Initiatives
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measure
Learning and growth Human capital and
organisational capital
Strategic job
readiness
Ground crew training
and human resource
technology
competence
Information capital Strategic brand
awareness
Communication
programme and
employee stock
ownership
Increase of staffs in AirAsia:
2013 2014 2015 2016 2017
Number of
employees at
the year-end
6.089 6.304 6.654 7,651 12,404
Table 2: Operating statistics of AirAsia
(Source: Ir.airasia.com, 2018)
2. Reasons for success
Use newer planes: Tony Fernandes does not want to spend much on maintenance of the
planes; therefore, average fleet age of AirAsia is just 4.7 years. Therefore, the airplanes are fuel
efficient and customers feel comfortable and safer. The youngest fleet of the US is at least 7
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years old, whereas, AirAsia lowers the cost of their operation and provide passenger satisfaction
through providing newer planes.
Charge only for value added items: The customers get disgruntled when they have to
pay extra for anything. Budget airlines take money from the customers by providing extra
facilities. AirAsia charges only extra when they provide something value-added services to the
passengers like priority boarding and extra leg-room.
Direction: The organisations need direction from the leaders with vision and in difficult
times; the leaders show the direction with clear idea and mission. Business leader Tony
Fernandes has been showing the direction to AirAsia and he keeps the long-term plan for the
immediate needs of AirAsia.
Speed of the market: The organisations need to understand the rate of technology
development as the organisations should produce the service or product for better deliverables to
the customers. Airline industry is vibrant and the firms need to take the acceleration to
understand the market. When the business is young; it is hard to compete with established
companies. The reason behind the success of AirAsia is to reach the customers first through low-
pricing.
Dedication: In the early stage of the business, the organisations need the leaders and
employees who can work hard to reach the goals. The leadership of the business, Tony
Fernandes inspires the commit the work-ethic and dedicated workforce (Mackie, 2018). AirAsia
has its own mission and the employees must be committed to working for reaching the
objectives.
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Perseverance: In the early stage; when the journey gets tough and the road of success
has blockage and bumps; the organisations need to persevere to gain the success. The majority of
the organisations face disagreements when the management tries to find successful strategies
(Tahseen & Ramayah, 2015). AirAsia becomes successful when it sticks to the turbulent with
their end goal during the difficult times. AirAsia uses ‘cheap flying buses’ and it has started
long-haul flights as well to earn money.
Complete on experience and service: AirAsia learns fast to adopt changes as it is the
key to bring success for the organisations in a comfortable ay. Tony Fernandes knows the
process of making fast decisions with a clear roadmap which can bring the advantage of
opportunities. In the turmoil condition, the organisations must know the process of quick
adaption what the companies should not miss. Good services are always the touch-points for the
customers and Tony Fernandes always asks the staffs to be smiling always.
3. Internal analysis
3.1 Value chain analysis
Primary Activities
Inbound logistics Landing slots were fewer resources and it possessed a critical factor in the
airline industry. AirAsia should ensure that landing slots must support its
schedule of the flights. Aircraft leasing and purchasing promise growth to
the organisation.
In aircraft parts and fuels purchasing, it is very important to maintain the
budget as it affected AirAsia around 30% of the overall cost (Man, 2016).
Outbound logistics AirAsia provides transportation services and it has no such significant
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outbound logistics process.
Operations In transporting the passengers, this is the main resource for AirAsia to
create profit. In maintaining the aircraft ground; AirAsia took the method
of driving down the cost for the activity in suppressing the low cost. In-
flight scheduling; AirAsia has a well-planned schedule and it keeps on time
which enables time and it also adds more value on time to deliver the air
carrier.
Sales and
Marketing
AirAsia does intensive advertising and they have brought approximately 5
million customers to use the service of AirAsia. AirAsia uses online sales
more than 50 percent of their seats and by optimising the online computer
reservation system; they make their sales (Man, 2016). CRM and E-
Business are helpful for AirAsia.
Services AirAsia has call centre system to tackle the problems of the customers and
they provide services inside the flights. The management solves the issue
through social media and website chats.
Support Activities
Firm infrastructure AirAsia has evolved into a classic integrated service provider and the
organisation is focusing on their strategic goals. Headquarter is located in
Kuala Lumpur. The organisation is providing the cheapest airfare and
decision-making process is simple.
Human resource
management
At present, AirAsia has more than 15,000 employees and the employees
are assigned to work for multi-purposes. The organisation maintains the
company mission and the employees work hard to achieve the mission.
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AirAsia provides compensation to the employees. The HR department
recruits and trains the employees to keep the team highly skilled.
Technology AirAsia develops a method in maintaining and operating best technologies
to suppress the cost. It uses Yield Management System (YMS) and
Computer Reservation System (CRS) to sell the tickets through the web-
based platform. Resource Planning System is very helpful to save the time
and speed up the reporting of data.
Procurement AirAsia searches the best quality aircraft and fuel among the suppliers so
that it cannot drive the cost high.
3.2 Core competency of AirAsia
Significant resources
1. AirAsia is very responsive and supportive management that listens to the issues of the
management which can reduce the operation cost. This supporting mentality makes the
employees productive and creative.
2. The employees are highly skilled and educated. The knowledge and experience of the
employees make the organisation better than the competitors. AirAsia compensates well to
reduce the probability for the competitors to hijack the ideas.
3. AirAsia has the capability and technological support to reduce the cost. The effect of reducing
the cost is used as a competitive weapon (Picard et al., 2018).
4. The reputation and brand image of AirAsia plays the role of intangible resources for the
organisation.
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