Market and Business Operation of Air Asia-Free-Samples for Students

Question: Discuss about the market and business operation of Air Asia. Answer: Introduction Marketing plays an important role for the contemporary business organizations in enhancing their effectiveness in the business sector. In the current era of globalization, the role of marketing is more important due to the fact that, with the entry of the global competitors in the particular market, the competition is rapidly increasing. Thus, the contemporary business organizations should have effective marketing strategies in order to cut off the competition and stay ahead in the market (Baker 2014). In the current business scenario, some of the business sectors are more competitive compared to others. This is due to the reason that, these particular sectors are having more customer traffic and number of competitors compared to other sectors. One of the sectors that are witnessing huge competition in the recent years is the airline industry. This industry has seen a steady growth in terms of the generation of the revenue and passenger traffic. Though, there are various barriers being faced by the industry in all these years, but the growth was not affected. However, with the increase in the market, more competitors are entering, which is increasing the rate of competition. Thus, it is important for the airliners to have effective marketing and business strategies in order to gain the maximum market share. This report will discuss about the marketing strategies of Air Asian along with determining their internal and external environments. Moreover, competitor analysis will also be done in order to determine the effectiveness of Air Asia compared to its closest rival. Targeting and segmentation of them will be discussed in order to identify the market segment they are operating. Company profile Air Asia is one of the leading airliners in the Asian regions with having their operation bases in different Asian countries (Jiang 2013). They are one of the forerunners in initiating the concept of low cost carriers in the Asian regions. Air Asia was incorporated in Malaysia in 2001 and within a few years, they have become the leading player in the airline market in Asia. Thus, gaining the leadership position during this period along with maintaining that position requires Air Asia to have effective business strategies. Figure: 1 Growth of the airline industry Source: (Icao.int, 2017) Determination of the macro environment Political Air Asia is having their operational bases in different countries in the Asian regions including Malaysia, Indonesia, India, Sri Lanka and Thailand. Thus, all these countries are having different political scenarios, which should be adhered by them. Moreover, it will be difficult fro to adhere to the differences. Change in the political scenario in one country will have implication on their relationship with another country. Thus, due to the fact that Air Asia is operating their connecting flight in different international routes, they will face the challenge if the relation between the two countries gets negatively impacted (Jeddi et al. 2014). Asian region especially the South Asian regions is one of the most politically instable regions with having adverse relationship between the countries. Thus, operating in these regions will have negative implications on business operation of Air Asia. The adverse relationship between the countries will also have negative impact on the bilateral agreements between the countries (Stehrer 2013). Thus, negative bilateral agreements between the countries will lead to the unfavorable air rights agreement among the countries. Thus, it will be difficult for Air Asia to operate among these countries. The target region of Air Asia is one of the most affected regions from terrorism (Carlton and Schaerf 2015). Thus, due to the increased safety risk being associated with the airline industry, terrorism is one of the key challenges for the Air Asia. However, with the increase in the necessity of the air travels in the recent years, more countries are having effective bilateral air agreements, which will have favorable impact on the business operation of Air Asia. Economical Asian region is having the major developing economies in the world and thus, the economical aspect is favorable for Air Asia in this region. The Asian economy is growing at rapid rate and so is the business opportunity for Air Asia. Due to the fact that, Air Asia offers low cost air travel, the economic opportunity will be more (de Wit and Zuidberg 2012). This is due to the fact that, offering low cost travel will help to cover more number of customers in the market along with enhancing the revenue volume. However, there are various challenges that have to be faced by Air Asia. One of the key threats will be the increase in the price of the jet fuel. In the recent years, the price of the jet fuel is rapidly increasing. Thus, with the increase in the price of the jet fuel, the profitability for Air Asia will be lowers (Ryerson and Hansen 2013). This is due to the reason that, they offer low cost travel, which cannot be possible if the price of the fuel get increased. On the other hand, if they increase their fare, then the target segment will get reduced. Global recession is another economical challenge to be faced by Air Asia. In the current era of globalization, countries are dependent on the economies of others (Kinkel 2012). Thus, emergence of economic crisis will have global impact, which will reduce the inflow of customers for Air Asia. Another economic factor for them will be the increase in the threat of new entrants (Babatunde and Adebisi 2012). Currently, there are various players being operating in the Asian airline industry offering low cost air travel. Thus, the more will be the competition in the market, the less will be the profitability for the individual players. Social Asian region is having the countries with huge population and thus the market opportunity is more for Air Asia (Lo and Salih 2013). Middle class population constitutes the major section of the population from this region. Thus, it is also one of the key opportunities for Air Asia due to the reason that, the low cost travel being offered by them is being targeted for the middle class segments. With the increase in the growth of the international and domestic passenger traffic, air travel offers an effective and time saving mode of transport for the customers. Thus, the preference for the air travel is increasing rapidly (Chang and Hung 2013). The low cost travel being offered by Air Asia helps them to directly compete with other mode of transport. Thus, customers prefer more travel by air compared to other conventional mode of transportation. With the growth in the economy of the countries in the Asian region, air travel is being seen as class and status symbol by the major section of the society (Graham 2013). Thus, bandwagon effect is being applied on the business operation of Air Asia, which helps them to attract more customers. Technological In the current business scenario, technology plays an important role in enhancing the effectiveness and productivity of the business organizations (Yu 2012). Air Asia involves various technologies in their service offerings in order to enhance the convenience of their customers (Suki 2014). However, the rapid change and development in the technology is posing challenges for Air Asia to adapt. Due to the fact that, they are operating in the airline industry, thus, it is important for them to initiate the use of technologies in providing effective service to customers along with marinating the safety of the passengers and crew members. Legal Airline industry is prone to various legal implications due to the reason that, safety is one of the key primary considerations for the airliner industry. Moreover, the safety regulations regarding the airline industry is different in different countries. Thus, it will be difficult for Air Asia to adhere with the different legal regulations (Borenstein and Rose 2014). Moreover, the legal implication is also relevant in the case of the passenger safety. However, Air Asia complies with all the safety standards in proving the service to their passengers. Environmental Airline industry is having huge impact on the environment due to the consumption of fossil fuel by the aircrafts. Thus, operating and running the aircrafts is increasing the pollutions along with using up the non renewable source of energy. Accordingly, governments in various countries are coming up with environmental regulations to reduce the impact of the impact on the climate. Air Asia has also initiated various programs to reduce the impact. One of the key initiatives being taken by them is replacing their old aircraft with new and fuel efficient ones (Langelaan et al. 2013). Determination of the micro environment Value chain analysis Primary activities Inbound activities One of the key competencies for Air Asia is no frill travel. Thus, they design their inbound logistics in such a way that, scheduling of the flights will be proper and there will no delay (Nagar 2013). Moreover, the routes are being designed effectively in order to operate in the shortest route between the two ports. Thus, it helps them to reduce their fuel cost. Outbound activities Outbound logistics of Air Asia includes the ticketing system for the passengers. Customers can book their tickets online and from through different mediums (Guritno and Siringoringo 2013). Thus, the convenience of the customers will be more. Moreover, Air Asia involves rigorous checking of their aircrafts in order to ensure the safety for their passengers. Added facilities are being provided to the passengers in board and out board in order to offer them holistic experience. Sales and marketing Air Asia involves extensive branding and promotional activities including sponsoring the Manchester United football club. They are also the key sponsors of various sporting events such as the Amazing race (Stockport 2013). Officials and employees always wear the official t shirts of Air Asia in order to promote their brands. Services There are various customer loyalty programs being initiated by Air Asia in order to retain their existing customers. One of their customer retention programs include offering gift voucher to the customers of the particular flight get delayed by more than 3 hours. Offering added services such as holiday packages and car rental service from the airports. Support activities Firm infrastructure Currently Air Asia is having fleet size of 86 and more in order. Thus, the fleet size is huge and it helps them to effectively operate in different countries. They are having partnership with different hotels in various countries to offer their customers easy access in different locations. Human resource management Employees in Air Asia are being given for different skill sets. This enables them to have employees able to perform different jobs. Thus, it helps them to reduce the cost. Rewards and recognition is being initiated by Air Asia in order to motivate and engage their employees (Beardwell and Thompson 2014). Recruitment is being done according to the organizational requirement and job roles. Thus, they are having perfect fit in the organization. Technology development Air Asia involves the use of digital ticketing system, which enables them to eliminate the intermediaries from the middle and reduce the fare price. They also offer online checking and baggage moving facilities, which enable the customers to perform all the added activities from their convenience. Competitor analysis Two of the closest rivals for Air Asia are India based Indigo airlines and Australia based JetStar. Both these airliners are operating across different cities in the Asian regions and offering low cost facilities similar to what Air Asia is offering (Guo 2015). The following sections will discuss about the differences between the businesses operations of Air Asia compared to other two identified rivals. Strategic group analysis and perpetual mapping will be used to compare these airliners. Strategic group analysis From the above strategic group analysis of Air Asia, Indigo and JetStar, it is being seen that. Air Asia is way ahead than their closest competitors. It is being seen in the above figure that, the market coverage of Air Asia is spanning across different cities in Asia. Air Asia flights can be availed from any major cities across Asia. Thus, they are covering more area and market than their competitors. On the other hand, Indigo covers the domestic market of India along with international flights to Bangkok and Dubai. Thus, the international market coverage for Indigo is limited. JetStar is also serving in the countries like Japan, Indonesia, China and Singapore. Thus, Air Asia is having more market coverage compared to their competitors. From the above analysis, it is also been seen that, Indigo is offering similar set of value to their customers like Air Asia. Thus, the gap between Air Asia and Indigo is negligible in terms of value for money. Moreover, JetStar is having some differences with rest of two in terms of providing value for money. Perceptual mapping Te above perpetual mapping of Air Asia denotes that, Air Asia is offering more variety of service compared to their competitors. They offer various options for their customers in terms of booking their flights and checking their luggage. Moreover, Air Asia also offers holiday packages in different destinations, which are being added facilities for the passengers. Thus, Air Asia is offering more variety of services at lower prices compared to their competitors. SWOT analysis Strengths One of the key strengths of Air Asia is their brand value in the market. This is due to the reason that, Air Asia is having the status of market leader in the Asian region and thus they are having the opportunity to leverage their reputation and goodwill in the market. On the other hand, Indigo and JetStar are also having positive reputation and goodwill. However, they are limited to their operating market, rather than spanned across Asia. Huge market being covered by them helps them to increase the volume of the generation of revenue. They operate in domestic market in different countries also, which further enhance their market potentiality. Other competitors are also operating in their domestic market. However, in the Indian market, market establishment is more for Indigo than any other players. Economy of scale is being gained by Air Asia due to having the single type of aircrafts. This helps them to reduce the cost of operation and maintenance for them. Indigo also operates single type of aircrafts and they also offer single type of service. Indigo offers only economic class. Thus, the maintenance cost for Indigo is much lower. Being a low cost carrier, Air Asia is having more market coverage and attracts more number of customers (Wu and Hayashi 2014). Weaknesses Replacement of the aircrafts involves huge cost. It is applicable for all the players in the market. Air Asia mainly offers flights within the time range of 2.5 hours and accordingly their operational strategy is being designed. Thus, it is not possible for them to offer long duration flights even if their competitors are doing so. However, JetStar offers longer duration flights, which is their advantage compared to Air Asia. Not having the market coverage outside the Asian regions. Thus, customers searching more long distance flights including intercontinental flights will not targeted by Air Asia. Offering low cost air travel reduces their proportion of profitability. Opportunities More people are opting for air travel due to time saving and low cost of low cost carriers. Growth of the economy in the Asian regions will help to enhance the purchasing power of the customers, which will further increase the market potentiality of Air Asia. Entering in new countries will further enhance the market potential for Air Asia. Threats Emergence of new entrants is one of the key threats due to the reason that, entry of the new competitors in the market will reduce the profitability. Moreover, increase in the price of the jet fuel will further have negative impact on the business operation. Increase in the terrorism and adverse inter-country relationship will have negative impact on the business operation of Air Asia. Future strategic priorities One of the key future priorities for Air Asia will be entering the market outside of Asia. They are already having the position of market leader in the Asian region. Hence, in order to enhance their revenue, they have to enter in the market outside their existing ones. It will help them to generate global brand image and identity. Offering premium service along with the existing service will be beneficial for them. This is due to the reason that, premium customers are not being attracted towards Air Asia due to its low cost carrier tag. Thus, initiating a sub brand for the premium customers will help to tap the higher end customers also. Another strategic priority will be to introduce the RFID tracking system for their passengers. This will enable their passengers to track the movement of their baggage from the departure to arrival port in real time from their mobile devices. Conclusion Thus, from the above discussion, it can be concluded that, Air Asia is having the market leadership position due to their effective business and market strategies. This report discussed about the external and internal factors being faced by them in their business operations. In addition, the competitor analysis done in this report helped to determine the areas where Air Asia is ahead of its competitors. It is been seen that, Air Asia offers more service varieties compared to their competitors. This report also discussed about the future strategic objectives for Air Asia, which will help them to enhance their business potentiality. 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