Case Study Analysis: Strategic Management of AirAsia and Tune Group

This case study analyzes the strategic management of AirAsia and the Tune Group, focusing on their operations within the Southeast Asian airline industry. The report begins with an introduction to AirAsia, highlighting its low-cost model and international reach. It then delves into an industry analysis using Porter's Five Forces model, assessing the bargaining power of buyers and suppliers, the threat of new entrants and substitutes, and the intensity of industry rivalry. The analysis reveals the challenges faced by new entrants, including established brand recognition and supplier limitations. A value chain analysis is conducted to identify AirAsia and the Tune Group's core competencies, examining both primary and secondary activities. The VRIO framework is applied to assess the value, rarity, imitability, and organization of the company's resources. Ansoff's product/market matrix is used to understand the growth strategies employed, with a focus on product development. The study concludes with recommendations for future growth, including market development and diversification strategies, and emphasizes the company's strong brand positioning and commitment to low-cost services.

AirAsia and Tune Group 0
Strategic Management
Student’s Name
8/10/2019

AirAsia and Tune Group 1
Introduction
AirAsia is the leading low-cost airline in Malaysia that schedules domestic and
international flights to more than 165 destinations and in 25 countries. The company provides
no-frills airline services to provide low cost traveling in Asia. The company focuses on
valuing customers and satisfy their needs (AirAsia, 2019).
The report will reflect upon the business activities conducted by the company in the
external environment. It will focus on describing the intensity of the competition and the
attractiveness of the industry in terms of profitability. It will cover the industry analysis of
South East Asia and will reflect upon the core competencies of the company through the
application of value chain analysis. The use of value chain analysis will help the reader to
analyze the primary and the secondary activities of the company. It will also enlighten about
the competition that is faced by the company and the barriers that new entrants may face in
entering the airline industry (AirAsia, 2019).
The further paragraphs of the report will also include the application of the Ansoff
product matrix to discover the growth strategy used by the company and recommendations
that will further enhance the growth of the business. This framework allows the company to
diversify its operation and expand its market share.
Porters five force model
Porters five force study is a strategic tool that helps in analyzing the competition in
the business environment that affects the profitability of the business.
Bargaining power of buyers

AirAsia and Tune Group 2
The airline industry comprises of two kinds of buyers .i.e. individual flyers and
intermediaries. The individual flyers buy the ticket for various business and personal reasons
and intermediaries are the middlemen between the airlines and flyers. It is analyzed that the
bargaining power of the consumers is low in the airline industry since the fliers purchase the
ticket from the airline they trust and want to develop loyal relation. High loyalty towards the
brand reduces the bargaining power of the buyers (Buaphiban and Truong, 2017).
Bargaining power of suppliers
It is analyzed that the negotiating power of the suppliers in the South East region is
high because the major market suppliers are Boeing and Airbus. There are only a few
numbers of suppliers which in turn create difficulty for the airline company to switch to other
companies because of involvement of high switching cost and few numbers of suppliers
(Buaphiban and Truong, 2017).
Threat of entry
It is analyzed there is the presence of a high degree of threat in South East Airlines
industry. The new entrants would face a high degree of competition from the already
established brands and will become difficult for the entrants to compete with the explored
goodwill. The competence of the organization is reduced due to to the low switching cost
between the brands (Wang, Tsui, Liang & Fu, 2017).
Threat of substitution
The degree of threat of substitution is moderate because the clients cannot switch to
other means of transport if they have to reach within a short span of time. The customers can
shift for other means of transportation like roadways and railways. However the threat of
substitution is moderate (Babic, Tatalovic & Bajic, 2017).

AirAsia and Tune Group 3
Industry Rivalry
The intensity of competition is high because of low switching cost for the customers
and there are companies that have already secured a dignified position in the environment so
it becomes difficult for the new entrants to fight the competition. The customers do not take
the risk of traveling with the flights that are not safe however they prefer to travel with the
brands that they trust. This reflects that there is a high intensity of competition (Babic,
Tatalovic & Bajic, 2017).
From the above analysis, it is scrutinized that the new entrant may face the issue of
establishing its brand in the market where there is a monopoly of famous airline brands. The
company may also face the challenge of limited resources and few numbers of suppliers. It
will become costlier for the new entrants to occur the operating cost and face the hike in the
fuel prices.
Value chain analysis
The value chain analysis describes the usage of functional activities of the company
in order to attain value to the company. The diagram mentioned below represents the value
chain facilities of AirAsia and the Tune Group. It consists of primary and secondary
activities. It helps in describing the core competencies of the company (Williams, 2016).
Primary activities
Inbound Logistics: It includes the storing and distributing of the raw material used in
the process of production. Under this function, the company analyses the strategic moves of
the competitors and ensures proper scheduling of flights. It includes the activities through
which the company manages its resources and also involves in sustainable business practices
to cut the price of the fuel and purchase goods at lower rates (Williams, 2016).

AirAsia and Tune Group 4
(Source: Williams, 2016)
Operations
It includes the service delivered by the company. Under this function, the company
effectively handles the in-flight services, baggage handling, and check-in-counters to
differentiate itself from the other brands. The company initiated sales through online mode.
Marketing and sales
Under this function, the company effectively manages the resources and is well
recognized for its service delivery. The company has started with a tagline “Now Everyone
Can Fly”. The company focuses on collaborating with the recognized advertising agencies to
promote the brand in an innovative manner and attain the upper hand in the external market
(Bowen Jr, 2016).
Outbound Logistics
It includes the activities of providing the final goods and services to the consumers of
the company. AirAsia uses the online mode as a process of operation so the company sends

AirAsia and Tune Group 5
the boarding passes online and the customers are required to bring the print of it. The
company uses a general electric engine for providing safety to the consumers. It delivers
excellent services in order to meet the expectations of the employees (Pearson, Pitfield &
Ryley, 2015).
Services
Due to increase intensity of competition and low switching cost, the company focuses
on delivering low-cost career services and provides efficient services at cheaper rates. The
company provides waiting for charges for the delay in flights and also provides pre-booking
discount offers to attract and retain the customers (Hapsari, Clemes and Dean, 2017).
Supporting activities
The Company initiates several supporting activities and integrates the primary
activities to increase satisfaction among the customers.
Firm infrastructure
The infrastructure of the firm is appropriately designed to ensure efficient delivery of
services. It helps the company to deliver the services at economical rates.
Human Resource management
It considers human as the most important asset and provides the training to the
employees to supply the best facilities to its clients and create higher levels of satisfaction
(Matsumoto, Domae & O'Connor, 2016).
Technology
Air Asia uses the latest technology to upgrade the operating system and deliver
efficient services. The company uses a yield management system to analyze the operational

AirAsia and Tune Group 6
cost and expected revenue of the company. Further, it uses the computer reservation system
to manage the online sales of the company and eliminates the use of middlemen by providing
tickets to the customers at cheaper rates. It also uses an ERP system to manage all the
business functions (Matsumoto, Domae & O'Connor, 2016).
VRIO framework
This framework is a strategic tool that helps in uncovering the possessions and the
competencies of the company. These capabilities and resources help the company in
sustaining the competitive advantage over the other competitors.
Value
This framework describes whether the resources of the company are valuable and
adds value to the customers. AirAsia provides value to the customers by providing no-frills
low-cost career services which help in adjusting the prices of fuel and allows the company to
increases its market share. It uses a general motor engine to provide safe traveling to the
customers (O’Connell, 2016).
Rarity
The company provides the tickets at cheaper rates and single type fleet reduces the
maintenance cost and delivers efficient services to the customers. It provides the facility of
weekly flights and makes continuous innovations to maintain the rarity of the company (Lin
and Yeoh, 2016).
Imitability
To maintain the consistency in the low price services the company is not able to add
frills which in turn increases the chances of imitation in the long haul. The new entrants in

AirAsia and Tune Group 7
the airline industry also focus on providing the services at affordable prices which in turn
increases the chances of imitability of services (Saragih & Sinaga, 2019).
Organized
AirAsia effectively integrates its operations to deliver efficient services to the
customers. The company has developed a strong brand name by fully realizing its potential
and coordinating the efforts of all the departments towards the common goals. This
framework showcases that AirAsia has the resources and the capabilities for sustaining its
competitive advantage and the company makes consistent innovations in order to deliver
value to the customers (Saragih & Sinaga, 2019).
Ansoff Matrix
This is a deliberate marketing planning instrument that aids in analyzing the
opportunities for the company and helps the company is growing in the external market. It
focuses on the present and the potential products and market of the company. It includes four
strategies that allow the business to capture and expand the market (Adler et al, 2017). The
strategies are discussed below:
Under market penetration strategy the corporation retails its current products to the
existing customer base. The second strategy is a market development strategy under which
the business focuses on expanding the target market for its current products. Another strategy
is product development strategy under which the business emphases on evolving the new
produces for the existing customer base to turn them into loyal customers. The last strategy is
diversification under which the company focuses on tapping the new markets through the

AirAsia and Tune Group 8
development of the new products. This strategy is the most risky because it involves high
cost (Adler et al, 2017).
From the analysis of the case study, it is recorded that AirAsia and Tune Group uses a
product development strategy to initiate sales and capture the market share. The company
launched its low-cost career services to attract the customers and provided airline services at
the lowest cost. This strategy allowed the customers to fly at zero rates in the market to their
respective places. In the initial stages, the company charged high prices for their service
delivery which in turn decreased the demand because the consumers were not able to afford
it. Considering the issue faced by the company it launched low fare career services that
allowed the business to increase its sales and expand the market share in the external
environment (Grant, 2016).
Recommendations
From the above case, it is recommended that the company must use market
development strategy through the creation of new airways channel all over the world and
must make the investment in the company to develop innovative products for targeting the
new group of customers. The company must focus on using online platform for selling the
tickets online and covering the different areas of the world. This strategy will allow the
company to initiate its sales and increase the profitability of the business by expanding the
target market. The company should also adopt a diversification strategy and must develop
new products for the new market to become the market leader and expand its airline routes all
over the world (Dostaler & Fiset, 2015).

AirAsia and Tune Group 9
Conclusion
From the above discussion, it is critical to note that AirAsia and Tune Group has
strong brand positioning in the market that provides no-frills low-cost career services to
retain the customers. The core competencies of the company include excellence in services
and satisfying the travelling needs at affordable prices. The company ensures the safety of the
customers and uses general motor electric to provide safe travel experience.
It is analyzed that the power of competition is high and the negotiating power of the
buyers is low because of less availability of suppliers and involves high switching cost. It
becomes difficult for the new entrants to match the goodwill of the recognized brand and
manage the operational cost of the company.
The company focuses on the adoption of the latest technology to drive innovation and
attract the target market. It uses the product development strategy to appeal new consumers
and satisfy the need of the existing consumers. The focus of the company is to develop loyal
customers towards the brand by providing the airline facilities at low cost. However, it
recommended that the company must adopt the market development strategy to expand its
market share and become the market leader in South East Asia.

AirAsia and Tune Group 10
References
Adler, R., Stringer, C., Shantripriyan, P., Birch, M. G., & Tohmatsu, D. T. (2017). AirAsia:
Towards a ‘new world’carrier strategy and implications for performance management
system design. In The Routledge Companion to Performance Management and
Control (pp. 319-333). Routledge.
AirAsia. (2019). About Us. Retrieved from: https://www.airasiafoundation.com/
Babic, R. S., Tatalovic, M., & Bajic, J. (2017). Air transport competition
challenges. International Journal for Traffic and Transport Engineering
(IJTTE), 7(2), 144.
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.
Dostaler, I., & Fiset, J. (2015). 3 Airline companies: strategies and trends. The Global
Commercial Aviation Industry (pp. 103-130). London: Routledge.
Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley &
Sons.
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.

AirAsia and Tune Group 11
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. & 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.
Pearson, J., Pitfield, D., & Ryley, T. (2015). Intangible resources of competitive advantage:
Analysis of 49 Asian airlines across three business models. Journal of Air Transport
Management, 47, 179-189.
Saragih, H., & Sinaga, F. (2019). GMF Aero Asia: aiming for the Middle-East base. Emerald
Emerging Markets Case Studies, 9(1), 1-24.
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. London: Routledge.