Air Asia

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1. Threat of new Entrants
The extent of barriers to entry depends on the strength of-
i) Customer has little brand loyalty. If consumers of Airasia do not have brand loyalty, then the strength of the threat of new entrants is very high. The high numbers of competitors in the industry also decrease Airasia’s customer loyalty. Most of the travelers prefer low cost. New competitors which want to come in the industry have to spend little to compete with Airasia.

ii) High capital requirement. The industry of airline needs large volume of start-up capital. The cost of setting up of offices, buying or leasing aircraft, hiring pilots and other staffs like air stewardess and etc incur a high start-up cost. Thus, the threat is low for Airasia.
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There are about 59 low cost airlines competing in the industry. The airlines serve over one hundred cities and islands across the sub-continental regions of South Asia, Southeast Asia and Northeast Asia. Although some of the budget carriers only fly domestic routes within the country of origin, while only a few operates international routes connecting nearby countries, customers will always look for alternatives.

ii) Performance of substitutes. Performance of other airlines are quite similar with Airasia’s given there is no obvious product differentiation. Performance of airlines normally consists of the accuracy of take off time, aircraft performance and staff services. So far, Airasia had constantly reviewed its performance and improve its services.

iii) Relative price. The price of substitutes are about the same with Airasia’s. Some of the airlines offers cheaper price to achieve profitable passenger loads. The price offered depends on the time gap between the booking date and flight date. The longer the date, the cheaper will be the price. If the tickets are purchased last minutes, the price will be about the same with premium airlines like MAS and Singapore Airlines. Thus, in this situation customers would switch to the premium airlines.

4. Bargaining power of buyers

i) No significant product differentiation. The only difference Airasia’s product with others airlines is the holiday packages offered. Most of the low cost airlines

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