BDB 1303 – PRINCIPLES OF MARKETING
ASSIGNMENT 3
COMPANY CASE
AIRASIA: THE SKY’S THE LIMIT
NAME STUDENT ID PROGRAMME
WONG CHOO YEN SCM 016372 DIPLOMA IN ADVERTISING DESIGN
GEUAN KHIM KOOI SCM 014562 DIPLOMA IN ADVERTISING DESIGN
LEE JIA YAN SCM 015157 DIPLOMA IN GRAPHIC DESIGN
DATE: 10 OCTOBER 2012
LECTURER: MS. MAZLIZA ISMAIL
Table of Contents
Introduction 3
Questions for Discussion
1. What are the micro and macro environmental factors that have contributed to the early success of AirAsia? 4
2. Discuss the micro and macro factors that would affect AirAsia’s performance in the current competitive environment described in the case? 7
3. By focusing on low prices, has Airasia
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People were then concerned about long-distance travel started to look for destinations in nearby countries instead. Therefore, AirAsia gained benefits when it started to fly regional routes.
Cultural Environment
Asians were enjoying the benefits of rising incomes and good economic growth. Although many of them could not afford long-distance holidays, but they were open to the idea of travelling to nearby countries.
Political and Social Environment
In Mid-2003, Fernandes was supported by the former prime minister of Malaysia, Tun Dr. Mahathir Mohamad to network with neighbouring countries for develop an open-skies agreement. From then, AirAsia was able to extend their business opportunities as Indonesia, India, Thailand, and Singapore have the granted landing rights to AirAsia.
2. Discuss the micro and macro factors that would affect AirAsia’s performance in the current competitive environment described in the case?
Microenvironment
Macroenvironment
Economic Environment
The global financial crisis which started in Mid-2008 had affected various industries, which involves the aviation industry as well. In that case, less business and leisure travelers were flying because of the economic recession.
Political Environment
The rising of fuel prices and landing charges are bringing overwhelming forces to AirAsia since the
The airline industry has been a major factor in the globalization of the world economy. It connects the sellers and the buyers as well as transports goods across countries. It also breaks the time and distance barriers. In the past, air travel was considered a luxury but it is now a common necessity.
Air Asia is the founder of low cost airlines in the Asia region since the advent of deregulation by Malaysian Government in late 90’s which in itself is a very important economic factor, without deregulation a low cost Airline cannot enter the market. For the reason that of Air Asia’s lower price, the factors affected are the
People were terrified of flying and thus, the number of passengers flown started to decline. Rather than taking vacations, the vast majority of people were taking “staycation”. It took the airline industry about “three years to start recovering from this terrible disaster” (IATA).
Two elements are working against air travel at present. First, the industry is experiencing a cyclical slowdown that has its origins in the Asian financial crisis. Second, with the days of deeply discounted fares over, fewer first-time travelers are entering the market.
In 2010, views on whether low-fare airlines would continue to flourish in Asia varied. Three factors regulation, population demographics, and socioeconomic trends -drove this calculus. Although the target consumer base for AirAsia was enormous -more than 500 million
AirAsia X’s main strength is the low price that it offers for customers. For most airlines in the industry, it is extremely difficult to keep the price low for long-haul flights as the full services offered in most airlines increase the operating costs. In addition, X also benefited from the expansive network, infrastructure and customers that AirAsia already has that enabled them to grow fast with good financial outcomes. On the other hand, X’s main weakness is the technology. The website always crashes and the company doesn’t have its own database of customers. X also doesn’t enjoy from a strong relationship with the Malaysian Transport Ministry. This can be detrimental to the company as it finds competing with Malaysia Airlines in some profitable routes to be difficult. However, X has some opportunities. For example, in order to keep the low price ticket, cooperating with fuel companies which will offer low fuel price and increasing demand in low cost airlines will bring profits. The major threat for AirAsia X is the protectionist measures taken by the Malaysian government that prevented X from flying planes to some destinations with high demand. This would have been a very
There also could be a decline in leisure time travel due to the terrorism that took place on 9/11. A dejected economy can also have an adverse effect on travel. New government regulations could also make air travel more costly since there are not very many areas that an airline can reduce its costs so they would have to increase prices. Technology is taking a step forward via ticketing and Southwest airlines allows passengers to check in online up to 24 hours in advance.
Air India Limited (Hindi: एअर इंडिया) is the national flag carrier airline of India, flying a worldwide network of passenger and cargo services. Air India is state-owned, and administered as part of the National Aviation Company of India Limited - which was created in 2007 to facilitate Air India's merger with
Next, one of the strengths for AirAsia company would be it has a very strong management team and also significant links with government and airline industry leaders. This can be said so is because the executive management teams are mostly built up by relevant industry experts and ex-top government officials. In addition, without the protection of national airlines brought about by deregulation, building alliances as strategy became necessary for many airlines to stay competitive and gain access to a global market too huge for any existing airline to dominate. There was a case where Shin Corp which is formerly owned by the family of former Thai Prime Minister which named Thaksin Shinawatra holds a 50% stake in Thai AirAsia. This has successfully helped AirAsia to open up and capture a sizeable
Since the airline industry is a direct product of market conditions, it is greatly affected by all externalities. Many people noticed a decline in travel after the September 11th tragedy occurred due to safety concerns. When there is a huge increase in fares that definitely interferes with the demand for travel; it causes the price of tickets to continue to rise since a clear correlation between supply and demand exists. When the economy is doing well in terms of the employment rate, and when the dollar is strong people have the tendency to travel more (Jerram,1998).
Economy airlines suffer during down economies and reduce their orders, and the industry has become dependent on the Middle East and Asia in recent years to offset this (Crooks & Weitzman, 2010).
AirAsia focused on ensuring a competitive cost structure as its main business strategy. It has been able to achieve a cost per average seat kilometer (ASK) of 2.5 cents, half that of Malaysia Airlines and Ryanair and a third that of EasyJet. AirAsia can lease the B737-300s aircraft at a very competitive market rates due to the harsh global market conditions for the second-hand aircrafts because of the September 11th event in 2001.
AirAsia believes in the hassle free, no frills, low fare business concept and feels that keeping costs low needs high efficiency in every part of the business. Efficiency creates savings which are then passed to the customers so that they will able to purchase on the affordable price but still with a high quality of air travel. AirAsia targets people who want to travel around Asia for leisure or business purposes. The fares of Air Asia are relatively known as a lower fares than the other airlines. Selected strategy used by Air Asia targeting to passengers who are willing to travel without frills of meals, airport lounges or frequent flyer miles in exchange for fares which is