AirAsia and Tune Group: A Diversification Strategy Analysis

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ORGANIZATIONAL STRATEGY
“AirAsia and the Tune Group: diversifying across industries”

Table of Contents
INTRODUCTION............................................................................................................................. 2
ANALYZING COMPANY’S EXTERNAL ENVIRONMENT.....................................................................3
ANALYZING COMPANY’S DIVERSIFICATION STRATEGY..................................................................5
DISCUSS COMPANY’S COMPETITIVE STRATEGY AND HOW IT CAN SUSTAIN COMPETITIVENESS..8
RECOMMENDATIONS FOR THE FUTURE EXPANSION STRATEGY OF THE COMPANY...................10
CONCLUSION............................................................................................................................... 11
REFERENCES.................................................................................................................................12

INTRODUCTION
Tune Group is leisure and Entertainment Corporation founded by the Malaysian entrepreneurs
Tony Fernandes and Kamarudin Meranun (Wangari, 2016). The main aim of this group is to
provide entertainment and leisure services to the customers at affordable prices. Headquarter
of the company is situated in Wisma Tune, Jalan Dungun, Bukit Damansara, Kuala Lumpur,
Malaysia. The organization is also dealing in airline, hotel, telecommunication, and sports
industry as subsidiaries in order to earn more profit. In 2001 Tony Fernandes and Kamarudin
Meranun launch a new venture with two aircraft and lot of debt which is known as AirAsia. This
assignment will be discussing the different factors which have impacted the business of AirAsia
and Tune Group. The study will demonstrate the competitive strategies, diversification and
environmental aspects of the organization (Narikae et al., 2017).

ANALYZING COMPANY’S EXTERNAL ENVIRONMENT
There are different external factors which have impacted the business activities of the
organization (Park, 2015). Tune group has launched different projects for gaining the attention
of people and enhancing their growth in the industry. Tune group promote their services so
that they can develop their brand image in the industry. The organization also organizes
encouragement programs and seminars in order to attract new talent. Air Asia is a subpart of
Tune group which provide airline services to the customers. As per the case study the external
factors highly impacts the business functions and growth of Tune group. Company’s external
environment analysis can be done with the help of Pestle Analysis (Namada, 2018). This is the
most effective tool for analyzing the external factors which are impacting the business
operations of the organization.
PESTLE Analysis for AirAsia and the Tune Group is presented below:
Figure- PESTLE Analysis
Source- West et al., 2015

There are mainly six critical external environmental factors which can impact the organization
and its functions (Fozer et al., 2017). The economic development of the nation highly impacts
the performance and profit ratio of the organization. The low- cost airline industry in south-
east Asia is facing a lot of challenges in operating their business because of the terrorist attacks.
People are not comfortable flying outside Malaysia.
Political
It has been found that Flying outside Malaysia is really difficult. The bilateral agreement is one
of the main difficulties in the way of low-cost carriers (Wicker et al., 2015). The company has
faced a lot of problems because of political issues which have negatively impacted the profit of
the organization.
Economic
AirAsia is the only organization which provides affordable tickets to the customers as compared
to the other airline organizations (Mungai and Ogot, 2017). Their cheap prices and satisfactory
services are the only reason by which the customers are getting attracted to the company.
Social
The choices of the customers are getting change after the digitalization and advancement of
technology. The increasing population can be helpful for the organization (Schawel and Billing,
2018). As per the evaluation, it has been found that the educated peoples choose the airline
services for traveling which can be beneficial for the AirAsia and Tune Group.
Technological
AirAsia and Tune group provide the facility of inline ticket bookings and hiring the car for
traveling. Apart from this, the company has launched GO holiday which is an online program to
guide the travelers to choose their desired destination easily. It can be said that the
advancement of technology is really beneficial for the company. It has enhanced their current
capacity by which they are able to provide satisfactory services to travelers (Namada, 2018).

Legal
There are different legal policies which have been made by the justice law commission of
Malaysia and their central government (Mungai and Ogot, 2017). AirAsia needs to follow all the
legal policies in order to manage their business activities successfully. It has been observed that
by following all the legal policies the company has enhanced its current capacity.
ANALYZING COMPANY’S DIVERSIFICATION STRATEGY
AirAsia mainly adopts the corporate vision for making the strategies for the business. The
company is enhancing its low margin and growth by providing satisfactory services to the
customers in low and affordable prices (Schawel and Billing, 2018). There are mainly four
elements of corporate strategy like safety, low fares, service, and simplicity. This is helpful in
improving the current performance of the business organization. The company has adopted a
diversification strategy which is helpful in expanding the business in different areas and earning
profit from different types of customers.
The diversification is a corporate strategy which is helpful in entering into a new market and
maintaining an effective position in the market (Chiang et al., 2016). The strategy of
diversification is a little risky for the business because entering into the new market is not easy.
There are many elements which need to be faced by the organization. It has been identified by
the given case study that AirAsia has faced a lot of challenges in entering into the new market.
The existence of competitors and market trends highly impacted the business activities of
AirAsia.
The company has launched Asia X which is an affordable service for the customers to book
tickets on the lowest and cheap prices (Muhammad et al., 2016). There are some international
destinations on which this project of AirAsia is working. It was a successful start of the company
where they have not to think about their profit rather than that they aimed to develop their
brand image in the industry by managing healthy relations with the customers. This project was
really helpful for the growth of the organization (Beck et al., 2017).

Ansoff Matrix will be the most effective strategic tool for analysis of the diversification strategy
of the organization.
Figure- Ansoff Matrix
Source- Beck et al., 2017
Market development
The market development can be done by selecting different customers segment. Air Asia, Tune
Hotels, Caterham Group, Queens Park Rangers, ASEAN Basketball League, and other projects
are subsidiaries of the Tune group (Gumanti et al., 2018). It is a big and popular organization
which has developed its business in a different market segment to earn a profit.
Market penetration
This is one of the most effective strategies of Ansoff Matrix which is helpful in enhancing the
market size of the organization. In simple words increasing market share within an existing

market segment is known as market penetration (Ardiansyah and Ahyudanari, 2017). Tune
group and AirAsia is continuously developing its market share in the market by providing
satisfying services to the customer. As per the given case study, there are different new projects
and business has launched by Tune group which is helpful in improving the current growth of
the company (Adler et al., 2017).
Product development
AirAsia which is a subgroup of Tune group provide satisfactory services to the customer in
affordable prices that is an effective way of developing the products in the market. Adopting
innovation and creation in the products can be an effective and easy way to enhance the value
of the product (Abdul Malak et al., 2019). As per the case study both the organization are
working to provide entertainment and leisure services to the customers. The development of
the product will be really helpful in enhancing the profit of the organizations.
Diversification
AirAsia can enter into agreements whereby main resources and or aptitudes are shared. The
company has enhanced its business by checking the economic scope of the organization.
Diversification is helpful in enhancing the business successfully (Razal, 2016). AirAsia can adopt
the strategy of diversification with the corporate vision to attain the goals of the organization.
AirAsia can choose unrelated diversification by which the company can present their business in
different areas in a different way to attract the customers. They could use franchise, hotel,
store, chain or another type of business pattern to enhance their business by using unrelated
diversification (Adler et al., 2017).

DISCUSS COMPANY’S COMPETITIVE STRATEGY AND HOW IT CAN
SUSTAIN COMPETITIVENESS
There are different competitive strategies which can be used by the Tune group and AirAsia in
order to attain the competitive advantages from the market. There are many competitors of
Tune group like Virgin group, Thomas Cook, British Airways and other organizations which
provide similar tourism facilities to the travelers (West et al., 2015). Porter's generic strategies
analysis will be the most suitable competitive strategy for Tune group and Air Asia to
understand the situation of the market and gaining competitive opportunities for the business.
Tune Group is enhancing the area of their business for which they need to analyze the market
accurately. It is really important to the level of competition and current trends of the market
before launching a new product or service in the market (Park, 2015). This model will be really
helpful for managing the level of completion in the market.
PORTER'S GENERIC STRATEGIES
Figure- Porter's generic strategies

Source- Marika et al., 2017
This model is helpful in managing the competitive growth of the organization (Wangari, 2016).
The future scope and competitive advantages in the chosen market can be analyzed with the
help of this strategy.
Cost leadership strategy
The main aim of this strategy is to gain the attention of the customers by providing them
satisfactory services in affordable and cheap prices (West et al., 2015). Tune group and AirAsia
is adopting the cost leadership strategy because they are providing services to the customers in
affordable prices in order to maintain their brand image and healthy relations with the
customers in a new market segment. By using this strategy AirAsia can attain profitability by
offering the lowest price for the services as compared to other competitors.
Differentiation strategy
According to the Differentiation strategy the company should provide different and innovative
products to the customers as compared to the other competitors (Fozer et al., 2017). As per the
given case study, it has been identified that Tune group provide different and innovative
services to the customers that are really helpful in gaining the attention of the customer in a
new market segment. The company works in a creative industry where they know the needs
and requirements of customers change according to the time. The differentiation strategy is
helpful in gaining competitive advantage from the market and managing the level of
competition easily (Chiang et al., 2016).
Focus strategy
According to this strategy, Tune Group and AirAsia need to focus on the market conditions and
level of the competition before entering or launching the new product in the market
(Muhammad et al., 2016). The focus strategy will be helpful in focusing on the goals and targets
of the organization by which the profit of the company can be enhanced easily. This can be an

effective competitive strategy for Tune group and AirAsia which can be adopted by the
company.

RECOMMENDATIONS FOR THE FUTURE EXPANSION STRATEGY OF THE
COMPANY
AirAsia and Tune's group are continuously enhancing their work by expanding the area of their
business in different markets (Wangari, 2016). There are different strategies and plans are used
by the organizations in order to gain competitive advantages from the market. This is also
helpful in managing the external factors which highly impacts the business functioning of the
organization.
 For the future expansion of the business, it is recommended that AirAsia need to check
and evaluate their current strategies for the betterment of the business (Mungai and
Ogot, 2017).
 The organization working in the airline industry where the trends and requirements of
the customers got to change very frequently. It is really important to check the aircraft
at each location to avoid delays.
 It is recommended that the Tune Group and AirAsia should maintain healthy relations
with the customers in the future in order to gain profit and competitive advantages
easily.
 Providing satisfactory services in the affordable process will be really helpful for the
organization (Schawel and Billing, 2018).
 The regular market analysis can be really helpful for the organization to manage the
business functions and marketing plans effectively.
Thus, these recommendations can be really helpful in for Tune group and AirAsia in order to
enhance there are of the business. It will be helpful in managing their business growth by
increasing profit.
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