The changeless changing of external environment has encouraged many companies to guarantee that its ain internal resources and capablenesss are more than sufficient to run into the demands of external environment and competitory environment ( Henry, 2008 ) . Therefore, scheme analysis allows organisation to measure how well it is positioned to work the chances in its external environment.

Value concatenation analysis exposed how Air Air ‘s resource which is cost advantage adds value to its current scheme. The findings found out that the success of Air Asia low cost scheme is aligned with its cost advantage along its value concatenation.

PEST analysis illustrated the consequence of external factors ( macro environment ) that influence Air Asia in several ways in footings chances and menaces. Whilst, Porter ‘s five forces model demonstrated the attraction of the air hose industry and the strength of competition within the air hose industry.

it is found that PEST analysis have influence on the industry attraction identified through Porter ‘s five forces.

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In add-on to transport out the rating, information will be gathered from different beginnings including Air Asia functionary web site, Air Asia one-year study, books, online beginnings and journal articles. To sum it up, recommendation will function strategic pick to be adopted for sustainable competitory advantage in the hereafter.


This study uncovers Air Asia strategic analysis by scanning the impact of micro and macro environment. Macro environment will be analyzed through P.E.S.T analysis and Porter ‘s five forces, while for micro environment will be analyzed through Value Chain Analysis to execute S.W.O.T analysis. Value concatenation analyses will emphasis on the operation of cost effectivity driver as beginning of competitory advantage. Therefore, the aim of this study is to measure Air Asia strategic place or its success scheme by comparing the current scheme with the proposed TOWS matrix scheme.

Scheme is way and range of organisation over the long term which achieves advantage for organisation over its constellation of its resources within a altering environment ( Johnson and Scholes, 2002 ) . Therefore, in the instance of budget carrier- Air Asia, scheme that it needs to see is the scheme than can convey competitory placement in different activities from challengers to accomplish its success.

2.0 History of Air Asia

Air Asia is Asia ‘s largest low-cost bearer which operates scheduled domestic and international flights. It was established on 12 December 2001 and started operation in 2002. Its chief base is at the LCC Terminal-Kuala Lumpur International Airport, Malaysia. Since 2003 boulder clay present, Air Asia received several local and international awards for its service excellence and success in trade name edifice ( see appendix 1 ) .

With its simple slogan “ Now Everyone Can wing ” , Air Asia has successfully adopted cost leading through operational effectivity and cost efficiency. Air Asia ‘s missions are to achieve the lowest cost for everyone to wing with regardless of any via media to flight safety criterions, to make the best company work environment for whereby employees are treated as portion of large household, and to better engineering in order to cut down cost and enhance services ( Air Asia Corporate Profile, 2010 ) .

As at twelvemonth terminal of 2009, Air Asia has flown to over 60 finishs across 3 continents in 16 states with 126 domestic and international paths from and within Malaysia, Thailand and Indonesia ( Air Asia Annual Report, 2009 ) . It has become the part ‘s largest low-cost bearer with 7,500 employees,

In 2010, a sum of 6.48 million riders have been carried by Air Asia ( The star online, 2010 ) .

3.0 Strategic Environment Analysis

3.1 Macro environment analysis ( PEST factors )

Kotler ( 1998 ) claimed that PEST analysis is a utile strategic tool for understanding market growing, concern place, and waies for operations comprise of political, economic, social/cultural, and engineering. All the variables in these environments will give rise to chances and exert menaces ( Johnson and Scholes, 2002 ) . Good analysis of the undermentioned factors is believed to enable Air Asia to observe tendencies in the external environment that will finally happen its manner into competitory environment ( David, 2007 ) .

Political and legal

In the instance of air hose industry, political factors deal with issues such as limitation to air hose travel/ paths, policy from ministry of conveyance, and airport ordinances ( Bowen, 2000 ) . In footings of airdrome ordinance, in Malaysia air travellers are to be required to pay airdrome service charge or security charge depends on which airdrome they leave from ( see appendix 2 ) .

Since air travel allows people to wing across national boundary lines, political state of affairs in a state will besides impact on air travel. For case, the wake terrorist onslaughts on the USA ( 11 September 2001 ) had earnestly affect on the concern of international air hose industry to supply more safety air travel. Besides that, Indonesia-Bali Bombings in 2005 has created menace for international tourer to see South East Asia therefore airlines that supply paths to Bali will besides be affected automatically ( hypertext transfer protocol: // )


Harmonizing to Ireland, Hoskisson, Hitt ( 2008 ) , economic factors that can hold influence on houses should see in understanding current future economic tendencies are rising prices rates, gross state merchandise, income growing, and currency exchange rates in state across the Earth.

ASEAN economic systems in 2009 which ensuing an norm of USD 1.5 trillion, for illustration, has grabbed air hose attending particularly Air asia to concentrate on ASEAN market ( Annual study 2009 ) .

The world-wide economic downswing has caused people become more cognizant in disbursement power is low. This state of affairs has encourage whole air hose industry to cut downing air hose ticket to entice people to go.

Since oil monetary value were denominated in US dollars,

Since air power was a cyclical concern whatever happens globally would hold impact on the air hoses,


It is of import to cognize that societal environment such as demographic alterations in footings of population, ages and income degree can hold of import attitude demand for travel. In add-on, population wellness besides impacts on air hose industry. For illustration, in 2009, the universe urgently sought to get by with the A ( H1N1 ) influenza pandemic in which keep riders off from winging. International Air Transport Association ( IATA ) which represents 230 bearers besides reported traffic diminution more than 5 % in Europe, North America and the Asia-Pacific part ( Air Asia Annual Report, 2009 ) .


Technological discoveries can make new industries which might turn out a menace to bing organisations whose merchandises or services might be rendered excess ( Hitt et al, 2005 ) . As travellers these yearss have become more tech understanding, it is indispensable for air hose to encompass progress in engineering that provide convenience and easiness to its riders.

The outgrowth of cyberspace as computing machine promotion engineering has brought advantages for air hose industry. Many air hoses have exploited on-line system for clients to buy air tickets ( hypertext transfer protocol: // ? Technology-Drives-the-Airline-Industry & A ; id=4764781 ) . In add-on, societal networking site such as Facebook besides has been used as channel of communicating and selling tactics e.g. publicities, new path launches, competitions, flight agenda updates and guest support service in air hose industry ( see appendix )

Furthermore, engineering for in-flight connectivity service has come of age therefore it is a must-have for air hose looking to stay competitory. Singapore Airlines ( SIA ) , for illustration, has built partnership with OnAir- universe ‘s prima supplier of planetary IT and telecommunication solutions for air conveyance industry for its riders to be able to entree Wi-fi cyberspace and nomadic services on board ( hypertext transfer protocol: // ) .

3.2 Micro environment ( industry analysis )

Industry environment analyzed utilizing Porter ‘s five force ( 1979 ) topographic point more direct consequence on house ‘s strategic fight ( John & A ; Harrison, 1999 ) . Porter ‘s five forces model is used within Air Asia in order to place the beginnings of competition or challenges that impacting upon air hose industry ( Johnson and Scholes, 2002 ) . Wheelen and Hunger ( 2006 ) claimed that “ The stronger each of the Porter ‘s five forces, the more limited companies are in their ability to raise monetary value and gain greater net incomes ” High force can be regarded as a menace because it is likely to cut down net incomes. Low force, in contrast can be viewed as chance because it may let greater net income net incomes. Therefore, challenges that Air Asia faced in the air hose industry are listed as follow:

Menace of New Entrants

Menace of new entrants refers to an extent where new rivals enter into an industry and go a menace to the bing companies. Harmonizing to Lynch ( 2006 ) , new entrants normally come into market topographic point when net income borders which can be achieved from that peculiar market are attractive and the barrier of entry is low.

Besides that, authorities intercession in restricting entry with such control as airdrome licence demand, aircraft enfranchisement, safety ordinance, and so on is besides aid to cut down the menace of new entrant ( Johnson, Scholes, Whittington, 2008 ) .

In air hose industry, menace of new entrants is low, as the barrier of entry in footings of capital demand ( fuel outgo, care cost and cost of purchase aircraft ) to put up an air hose concern is comparatively immense as good.

Furthermore, Air Asia ‘s trade name name as the chief participant of low-cost bearer in the Southeast Asia has served as a menace for new entry to come in.

Dickering Power of Buyers

As the information of air-ticket monetary value is to the full available to be compared through cyberspace, purchasers exercise power through their ability to coerce down monetary values, deals for higher quality or service, and play rivals against officeholders ‘ air hose. As a consequence, monetary value sensitiveness serves as cardinal tool in low cost air hose because little alteration in monetary value whole market can rock into lower pricing state of affairs straight ( Hitt et al, 2005 ) .

Furthermore, there is really low exchanging cost in air hose industry since bulk purchasers ‘ wants are merely to sit on a plane to certain finish therefore they can easy alter their front-runners from one air hose to another after ( hypertext transfer protocol: // ? Technology-Drives-the-Airline-Industry & A ; id=4764781 ) . Therefore, in air hose industry, dickering power of purchaser is considered as medium to high.

Normally leisure travellers are more monetary value medium and would exchange to alternate manner of conveyance if air menus seemed to high.

Dickering Power of Suppliers

For low cost bearer, dickering power of providers is high due to limited figure of providers for low cost bearer which is merely American Boeing and European Airbus. Since Air Asia has a fleet of 90 Airbus aircraft, provider ( airbus maker ) has a high bargaining power over Air Asia ( Air Asia Annual Report, 2009 ) .

However, other providers such as suppliers of on board bite have low bargaining power over Air Asia as they are larger industry which allow Air Asia to hold pick to over which nutrient providers Air Asia is buying from.

Menace of replacement

By and large, menace of replacement for air travel will be sea and land travel. In air travel context, substitutes normally pose a menace as a consequence of technological or low cost discovery ( Lynch, 2006 ) .

In Malaysia itself, for illustration to make East Malaysia, one can go by sea e.g. Penang, Port Klang, Kuching and Kota Kinabalu are some of the ports that offer entry into Malaysia. Thus, for domestic flight served by Air Asia, menace of new replacement is considered to be medium to high.

Furthermore, the promotion of engineering presents has controlled many concern travellers to go less than earlier. Take for illustration, instead than wing over other topographic points to carry on meeting, most concern houses have usage picture conferencing.

Yet, if to see the geographical construction of Asia continent, air travel is much more efficient and convenient as manner of transit, which result in menace from replacement is reasonably low.

Rivalry among bing rivals

The fact that air hose industry is in adulthood phase of industry life circle, many air hoses fight smartly for addition in market portion ( Hill et al, 2007 ) . Furthermore, the air travel is weakly differentiated has caused monetary value is therefore the chief battleground of competition as all these rivals compete on offering lower monetary value to clients. Provided any deceleration in rider traffic air hose tends to put off monetary value war as the lone way to growing is to take gross revenues off from rivals ( Wheelen and Hunger, 2006 ) . For illustration, Air Asia and MAS has competed strongly in their advertisement ( see appendix 3 ) .

Furthermore, many full service air hoses have moved to low cost. For illustration, Malaysia Airlines ( MAS ) has launched Firefly ( hypertext transfer protocol: // ) , Singapore air hoses ( SIA ) besides has come out with Tiger Airways to vie with Air Asia ( ) . Competitive competition in air hose industry is highly high due to the intense competition among incumbent air hoses.

The macro environment will hold impact towards the micro environment

In the instance of economic downswing, people ‘s passing power has been eroded which cause people to seek option to cut down their cost of going. Therefore, Air Asia as low cost bearer with no frills policy has been in a good place. Using Bowman scheme clock, Air Asia strategic place is located in no. 2 which adopts low monetary value scheme ( see appendix 4 ) .

4.0 SWOT analysis

In add-on to the aforesaid five forces analysis, SWOT ( strength, failing, chance and menace ) analysis is besides complemented for industry analysis. SWOT analysis provides overview about Air Asia ‘s strengths and failings in visible radiation of altering environment in footings of chances and menaces ( Lynch, 2006 ) . Air Asia ‘s SWOT analysis in item is provided in appendix.

In footings of strength, AirAsia ‘s strengths can be categorized in footings of its trade name acknowledgment and market portion. Air Asia has been successfully recognized as low menu and no frills bearer that make winging low-cost and convenient for everyone. This can be seen from when it launched “ 1 million free seats ” run in November 2009, the power of its trade name has proved that merely in 48 hours clip all the seats had been to the full snapped up ( Air Asia Annual study, 2009 ) .

Its market portion besides has been reported

In footings of failing, On the other manus, unlike its rivals MAS that provide superior service quality with higher menu, Air asia focal points on supplying low menu ticket therefore it operates with individual cabin and there is limited in-flight service.

4.3 Opportunities

In December 2008, ” ASEAN Open Skies ” understanding -a the liberalisation of air infinite that allows limitless flights among ASEAN ‘s regional air bearers has been introduced ( http: // ) . This understanding will decidedly increase the competition among the regional air hoses, nevertheless, Air Asia with its strong trade name and “ low-priced ” civilization seen it as more of an chance as it can spread out more paths on the member of ASEAN states.

Besides that, another chance is ASEAN Multilateral Agreement on full liberalisation of rider air services in which air hoses from ASEAN states are allowed to wing to any metropolis in a member state with an international airdrome ( hypertext transfer protocol: // )



Aligned with SWOT analysis aforementioned, TOWS matrix identified by Weihrich ( 1982 ) is derived to bring forth strategic options/ state of affairs on turning possible menaces into chances and failings into strengths

So, ST, WO, and WT.

SO schemes indicates the manner in which Air Asia utilize its strengths to take advantage of chances. ST schemes reflect on Air Asia ‘s abilities to utilize its strengths to get the better of the menaces. WO suggests countries Air Asia ‘s opportunity to take advantage of chances in turn toing failings. Last, WT schemes indicate Air Asia ‘s defence in minimising failing and avoid menaces ( Johnson, Scholes, Whittington, 2008 ) . Strategic options for Air Asia are identified into four internal quarter-circles ( mention to Appendix 7 ) .

However, due to the intense competition in the industry though Air Asia has been proven to be successful in implementing its scheme, the sustainability of its competitory advantage is still unable to be guaranteed. Harmonizing to Johnson et Al ( 2008 ) , prolonging competitory advantage can be achieved in three different ways which is through priced based scheme, distinction and lock-in ( see appendix )

Air Asia scheme

The model of Porter ‘s Generic scheme is applied to pull off Air Asia public presentation

Porter ‘s Generic Strategy

Aligned with its mission “ to achieve low cost so that everyone can wing with Air Asia ” , Air Asia ‘s concern scheme is centered on cost leading. However, its concern scheme particular markets which is monetary value sensitive clients who needed short-haul flights ( Air Asia Annual Report, 2009 ) . Mentioning to Porter ‘s generic scheme, Air Asia ‘s concern scheme can be categorized into focussed cost leading.

Since Air Asia offers merely individual cabin without any concern or economic system place, it entreaties to the mean client. The most of import construct in low cost scheme is the lower monetary value attracts clients ( Hill et al, 2007 )

Value Chain Analysis

Value concatenation considers the function played by different maps of company e.g. production, selling, research and development, service and human resource in the value creative activity procedure towards clients.

The cardinal challenge for Asia Asia in the low monetary value phase is on how costs to be reduced in ways which other can non fit such that low cost scheme might give sustainable advantage ( Johnson and Scholes, 2002 ) .

Harmonizing to Thompson Jr et Al ( 2005 ) , value concatenation analysis explains how competent a house manages its activities relative to challengers which will be a cardinal driver to construct valuable competences and sustainable competitory capablenesss along its primary activities and back uping activities ( see appendix.

Air Asia as biggest low cost bearer creates its competitory advantage by supplying alone service at a monetary value that is merely lower than its rival ‘s monetary value ( Hill et al, 2007 ) . The countries of cost decrease to accomplish bigger cost advantage are provided through its value concatenation analysis.

From Air Asia ‘s value concatenation analysis, the indispensable elements of its cost advantage driver are operation, selling and engineering development. First, in footings of operation it uses a fuel efficiency aircraft and implements no-frills service. Second, the presence of on-line selling scheme has assist cutting cost of confederation with travel agents. Third, engineering development in online-check in system besides has driven cost film editing in engaging land staffs. It is reported that Air Asia web site has been stating to drive norm of over 20 million alone visitants and on-line gross revenues account for 76 % of gross in 2009 with accessory income of 18 % ( Air Asia Annual Report, 2009 ) . In item, beginnings of cost advantage that contributable to low cost concern theoretical account for each activity in Air Asia ‘s value concatenation are summarized in Appendix 6.

Growth Strategy

For growing scheme, forward integrating schemes are besides implemented by Air Asia in farther spread outing its concern in accomplishing sustainable fight. For illustration, Air asia launched Go Holiday website an enlargement of on-line reserve system which offer flight ticket + adjustment bundles ( hotels ) , and activity+ Tourss ( ) .

7.0 Recommendation

Refer to the TOWS matrix, strategic options recommended for sustain competitory advantage is market incursion scheme particularly ASEAN market due to the Open skies Agreement. Besides, it is better if Air asia non to simply concentrate on low cost scheme yet to travel frontward for distinction scheme as clients ‘ presents are more demanding about the quality of service instead than monetary value ( merchandise development scheme ) .

Alliance scheme – hypertext transfer protocol: //

8.0 Decision

From the Porter ‘s five forces industry analysis, air hose industry in Malaysia is considered unattractive. However, Air Asia- effectual cost leaders is capable of get the better ofing all the above mentioned menaces by offering low monetary values and remain profitable as in June 2010, Air Asia group announced a net income of RM 198.93 million, while MAS suffered a net loss of RM 532.73 million ( hypertext transfer protocol: // ) .

The fact that most clients have switched from full service air hose to Air Asia, has caused Air Asia gross to increase radically. However, this advantage merely profit Air Asia in short-run as it might go a menace to Air Asia every bit good because some full cost bearer besides have switched to offer low menu and comes out with ain low cost bearer. Its proven that Air Asia success today is due to its cost advantage scheme in cutting cost every bit low as possible in accomplishing its aim to supply clients low menu air hoses while enjoy favourable return from its every bit good.

Air asia cost leading strategic picks would be reasonably safe every bit long as cost advantage is maintained and every bit long as monetary value is the key for important for figure of purchasers ( Hill et al, 2007 ) . Conversely, the drawback would be easy imitated by rivals and with its mere focal point to cut down cost, alterations in clients ‘ gustatory sensation is seemed to be ignored.



Air Asia ‘s Accomplishments

Year 2010


Masterclass Global CEO of the Year

awarded to YBhg. Dato ‘ Tony Fernandes


World ‘s Best Low Cost Airline

by Skytrax


AirAsia voted the Air Cargo Industry Newcomer Award at the ACW World Air Cargo Awards 2010.

by Air Cargo Week

Year 2009


Airline Of The Year

By Centre for Asia Pacific Aviation ( CAPA )


Tony received the 2009 Frost & A ; Sullivan Excellence in Leadership Award

by Frost & A ; Sullivan


Best Asiatic Low-Cost Carrier

By TTG Travel Awards 2009


World ‘s Best Low Cost Airline

by Skytrax

Year 2008


The Laureate Award for Best Commercial Airport Transport

from Aviation Week


Tony awarded the Malaysia Brand Icon Award

from Deputy Prime Minister YAB Dato ‘ Seri Najib Tun Razak at the Global Brand Forum Malaysia


AirAsia – Malaya ‘s 30 Most Valuable Trade names 2008

By Malaysia ‘s Most Valuable Brands ( MMVB )


PIKOM ICT Organisation Excellence Award 2008

By Association of the computing machine and multimedia industry ( PIKOM )


AirAsia X – Best New Airline Of The Year

By Centre for Asia Pacific Aviation ( CAPA )


Best Asiatic Low-Cost Carrier

By TTG Travel Awards 2008


Top CEO trade name & A ; 3rd Best Corporate Brand in Malaysia

By Pulse Group Survey


World ‘s Best New Airline ( AirAsia X )

By Budgie World Low Cost Airline Awards 2008


Friends Of Thailand Award 2008

By Tourism Authority of Thailand


Asia Pacific ‘s Top 1000 Brands 2008 Survey ( AirAsia- Top 5 Airline )

by Taylor Nelson Sofres


Asia ‘s Best Budget Airline under Best In Travel Poll 2008



AirAsia wins Airline Strategy Award in the Finance Category

by Airline Business


AirAsia recognized as one of the 50 Most Advanced Companies In The World



Airline Market Penetration Leadership of the Year

by Frost & A ; Sullivan


Rising Leaders – The Following 10 Old ages

by Singapore Institute of International Affairs ( SIIA ) in coaction with AXN Asia


Citations of Prestige Award for outstanding part in Macau

by Macau Special Administrative Region

Year 2007


Airline Of The Year 2007

by Centre for Asia Pacific Aviation ( CAPA )

Click here for Press Release


Asia ‘s Best Budget Airline under Best In Travel Poll 2007



Airline Human Capital Development Strategy Award

by Frost & A ; Sullivan


Asia ‘s Best Emerging Companies with respects to Corporate Governance

by The Asset


Best Low Cost Airline in Asia

by Skytrax


The Brand Laureate 2006-07

for trade name excellence in the Airlines-Low Cost Carrier Category

Year 2006


Malaysia ‘s Ernst & A ; Young Entrepreneur of the Year 2006

awarded to YBhg. Dato ‘ Tony Fernandes


Low Cost Airline of the Year in KLIA Awards 2006

by Malaysia Airports Holdings Berhad


Merit Award for CAPA Airline of the Year 2006

by Centre for Asia Pacific Aviation ( CAPA )


Asia ‘s Best Budget Airline under Best In Travel 2006



Best Managed Company, Best Corporate Governance, Best Investor Relations, and Most Committed to Strong Dividend Policy under The Annual Investor Poll


Year 2005


The CAPA Aviation Executive of the Year 2005

awarded to YBhg. Dato ‘ Tony Fernandes


Regional/ Low Cost Leadership Award in Airline Business Startegy Awards 2005

by Airline Business – awarded to YBhg. Dato ‘ Tony Fernandes


Airline Market Leadership Award

by Air Transport World ( ATW )


Transport Company of Excellence Award

by Ports World Sdn. Bhd


Asia ‘s Top 200 “ Best Under A Billion ” Companies

by Forbes Asia


RHB AirAsia Credit Card by Superbrands


Best Bit Program for MasterCard Marketing Leadership Award 2005 by MasterCard

Year 2004


Asia Pacific Low Cost Airline of the Year 2004

by Centre for Asia Pacific Aviation ( CAPA )


Asia Pacific Aviation Executive of the Year 2004

awarded to Tony Fernandes, Group CEO

by Centre for Asia Pacific Aviation ( CAPA )


Asia Pacific Low Cost Advertising Award for Best Asia Pacific / Middle East Low Cost Airline Print Advertisement 2004 by Centre for Asia Pacific Aviation ( CAPA )


Asia ‘s Best Managed Company in the Airlines and Aviation Sector by Euromoney


Best Newly Listed Company ( 3rd topographic point )

by Euromoney


Triple A Regional Award for Best Airline IPO for 2004

by The Asset Magazine


Best IPO of the Year by The Edge Singapore


25 Stars of Asia honoree listing ( Tony Fernandes )

by Business Week


‘Best Uniform ‘ for Miss Airlines International Contest 2004

fifth China Air Show, Zhuhai


Market Leadership Award, 2005 Airline Achievement Awards

by Air Transport World Magazine

Year 2003


Developing Airline of the Year 2003

by Airfinance Journal


Chief executive officer of the Year ( Tony Fernandes )

by Business Times and American Express


CIO Top 100 Honoree for excellence in strategic IT deployment


Obtained Malayan Superbrands position

by Superbrands International

aˆ? voted as the most popular web site for online shopping in the 11th Malaysia Internet User Survey conducted by AC Nielsen Consult

Beginning: hypertext transfer protocol: //

Appendix 2

KLIA / other airdromes

LCCT, KLIA and LCCT, Kota Kinabalu

PSC ( RM )

SC ( RM )


PSC ( RM )











PSC- rider service charge ; SC- security charge

Beginning: hypertext transfer protocol: // option=com_content & A ; task=view & A ; id=83 & A ; Itemid=118

Appendix 3

Intense competition between Air Asia and MAS

Appendix 4



4. Focused

Hybrid 3. 5. Differentiation


Value Low monetary value 2. 6.

No frill 1. 7. Schemes designed for

8. ultimate failure


Low PRICE High

Appendix 5

Porter ‘s five force framework-LCC Industry in Asia

Potential new LCCs and LCCs

Set up by the full service air hoses

Menace of new Entrants

Aircraft industries Price medium

Rivalry amongst bing rivals Boeing andAirbus clients

Power of Customers

Power of Suppliers

Menaces of Substitute

Other manner of transit & A ;

Promotion in communicating


Adapted from Porter, M.E ( 1979 ) “ how competency forces shape scheme ” Harvard concern reappraisal ; Source: Henry ( 2008 ) p.71

Appendix 6

Beginnings of Air Asia ‘s cost advantage along its value concatenation



Beginnings of cost advantage

Inbound Logisticss

Use one type of aircraft ( airbus ) which result in decrease of care cost and trim parts stock list, simplify undertaking of scheduling planes for peculiar flights.

Use secondary airdrome as its base alternatively of international airdrome which cut down cost of set downing and queue clip for set downing


Operation and outbound logistics

High use of aircraft and fast turnaround ( 25 proceedingss ) with point-to-point path system that minimized connexions and holds

no frills ( offer no in-flight repast, no assigned seating ) , individual cabin aircraft

Marketing & A ; gross revenues

direct merchandising through Air Asia web site ( on-line engagement system ) , walk-in airdrome gross revenues, and gross revenues offices.

most grosss are earned from accessory income e.g. luggage supersize, in-flight F & A ; B, in-flight merchandize and responsibility free, pick a place, and travel insurance ( Air Asia Annual Report, 2009 ) .

Service / Customer Support

Customer questions and ailments managing through call centres and official web sites

Firm substructure

Air asia implements leanest cost construction, maximise stockholders ‘ value, safety, passion for invitee ‘s satisfaction, transparence, and human capital development ( hypertext transfer protocol: // )


Human resource

There is a sum of 7,500 staffs ( Malaysia, Thailand, Indonesia ) whom show regard, togetherness, and shared value in constructing Air Asia ( Air Asia one-year study 2009 ) .

Workplace is meritocracy where staff are hired and promoted based on their ability and capablenesss irrespective of gender, credo, age or ethnicity. Yet for air stewards and air hostess there is an age bound ( Annual study 2009 ) .

Air Asia assigned multi-skilled cabin crews, cost effectual preparation, public presentation based wages and inducements system

Employees enjoy 5-day work hebdomad, staff flight voucher, grant travel where price reduction up to 90 % , nutrient and drink subsidy, and public presentation fillip ( Air Asia, 2010 )

Technology development

Air Asia ‘s nucleus competence is driven by cost effectual engineering, for illustration:

-Air Asia introduced series of on-line service through its website e.g. pull off my engagement which enable rider to recover most updated position, edit personal information, and look into on the updated flight position for confirmed or wait-listed flight engagements.

– online self-check in system and self-service machines ( self-check in booth ) that enable riders to self cheque luggage and acquire their embarkation base on balls by their ain ( Air Asia Annual Report, 2009 ) .


Good relationship with providers ( aircraft makers ) to acquire sensible monetary value and on clip bringing of aircraft

Appendix 7


External FACTORS


Low Price Tickets with good Selling Strategy Formulation

Strong Brand Name


Uncomfortable Seat & A ; No Free Food or Beverage, No amusement

Limited Flight Availability for Long Distance


Untapped Market ( New Routes )

Economic Downturn

ASEAN Open Skies Agreement


Alliance Strategy:

Joint venture with other state ‘s Airline

( S1, O3 )

Market Penetration Strategy:

Penetrate Asia market

( S1, S2, O1, O3 )


Market Expansion Strategy:

Open new paths for long distance

( W2, O1 )



Government Restrictions ( Airport Departure, Security Charges & A ; Landing Charges )


1.Product Development Scheme:

Privilege Membership

( S1, S2, T1 )


Merchandise Development Strategy:

Supply different categories for AirAsia and free simple drink

( W2, T1 )


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