BPMN3023 Strategic Management

COLLEGE OF BUSINESS
SCHOOL OF BUSINESS MANAGEMENT
A152 SEMESTER 2015/2016

BPMN 3023 STRATEGIC MANAGEMENT
(GROUP S)
Submitted by:
NAME
MATRIC NO
POON MAN SIH
226371
WONG GUI RONG
226764
LAI YEE HUI
226777
CHEAH LAI THENG
226873
Submitted to:
Dr. Sami Mohamed Saleh Al-Haderi
Contents
1.0
1.1
Current Situation.................................................................................................3
Organizational Background.............................................................................3
1.2
Current Performance.......................................................................................3
1.3
Strategic Posture..............................................................................................4
1.3.1
Vision and Mission...................................................................................4
1.3.2
Objectives.................................................................................................5
1.3.3
Strategies..................................................................................................5
1.3.4
Policies.....................................................................................................5
2.0
Corporate Governance........................................................................................6
2.1
Board of Directors...........................................................................................6
2.2
Top Management.............................................................................................8
2.3
Shareholders....................................................................................................9
2.4
Corporate Governance (Roles of Board of Directors)...................................13
3.0
External Environment.......................................................................................15
3.1
Natural Environment.....................................................................................15
3.1.1
Climate...................................................................................................15
3.1.2
Physical Resources.................................................................................15
3.2
Societal Environment....................................................................................16
3.2.1
Economic Forces....................................................................................16
3.2.2
Technological Forces.............................................................................16
3.2.3
Political-legal Forces.............................................................................16
3.2.4
Sociocultural Forces..............................................................................17
3.3
Task Environment..........................................................................................17
3.3.1
The Threat of New Entrants...................................................................18
3.3.2
Rivalry among Existing Firms...............................................................19
3.3.3
The Threats of Substitutes Products.......................................................20
3.3.4
Bargaining Power of Buyers..................................................................21
3.3.5
Bargaining Power of Suppliers..............................................................21
3.3.6
Relative Power of the Stakeholders........................................................22
3.4
4.0
External Factor Analysis Summary (EFAS)..................................................23

Internal Environment........................................................................................24
4.1
Corporate Structure.......................................................................................24
4.2
Corporate Culture..........................................................................................24
4.3
Corporate Resources......................................................................................25
4.3.1
Marketing...............................................................................................25
1
4.3.2
Finance...................................................................................................26
4.3.3
Operation...............................................................................................27
4.3.4
Human Resource Management..............................................................28
4.3.5
Information Technology........................................................................28
4.4
5.0
Internal Factor Analysis Summary (IFAS)....................................................30

Analysis of Strategic Factors (SWOT).............................................................31
5.1
Situational Analysis.......................................................................................31
5.2
Review of Direction......................................................................................33
6.0
Strategic Alternatives and Recommended Strategy..........................................36
6.1
TOWS Matrix................................................................................................36
6.2
Recommended Strategy.................................................................................38
7.0
Implementation.................................................................................................41
7.1
Cost Leadership.............................................................................................41
7.2
Introduce New Routes...................................................................................42
7.3
Marketing Strategy........................................................................................43
8.0
Evaluation and Control.....................................................................................44
References....................................................................................................................47
1.0
Current Situation
1.1
Organizational Background
AirAsia Berhad is a Malaysian low-cost airline headquartered near Kuala Lumpur,

Malaysia. AirAsia was originally found by government such as DRB-Hicom which
established in 1993 and began operations on 18 November 1996. The heavilyindebted airline was bought by Tan Sri Dr. Tony Fernandes from company Tune Air
Sdn. Bhd. for MYR 1 with MYR 40 million worth of debts on 2 December 2001.
AirAsia was resurrected, re-branded and re-launched as a low-cost carrier following
the acquisition of the Company by Tune Air Sdn Bhd in December 2001. With a fleet
of 72 aircrafts, AirAsia flies to over 61 domestic and international destinations with
108 routes. AirAsia operates over 400 flights daily from hubs located in Malaysia,
Indonesia, and Thailand. AirAsia believe that keeping costs low requires high
efficiency in every part of the business, they depend on no-frills, hassle-free, low fare
business concept. AirAsia has generated a revolution in air travel with more and more
people around the region selecting AirAsia as their preferred choice of transport by
the corporate philosophy of Now Everyone Can Fly. AirAsia main hub is KLIA2
which was the low-cost carrier terminal at Kuala Lumpur International Airport
(KLIA) in Sepang, Selangor, Malaysia. Today, AirAsia is a leading Low-Cost Carrier
(LCC) in the Association of Southeast Asian Nations (ASEAN) region. Biggest pride
for AirAsia is winning Skytraxs Worlds Best Low-Cost Airline for 7 years running.
1.2
Current Performance
AirAsia revenue has record an increase by 47% which is from RM2, 167.8 million for
the quarter ended 31 December 2015 to RM1, 478.2 million in the quarter ended 31
December 2014. This revenue was supported by growth in number of passengers such
as 10% while the average fare was increases by 4% from RM 171 to RM 177 in 31
December 2014. Besides, ancillary income per passenger increased by 4% to RM49
year-on-year. The seat load factor was 7% points higher than the same period last year
such as 85%. The profit before tax for the period was RM434.5 million compared to
loss before tax of RM392.0 million in the same quarter of 2014 while the profit after
tax for the period was RM554.2 million compared to a loss after tax of RM428.5
million in the same quarter of 2014. The growth in 31 December 2015 net profits is
primarily supported by the revenue growth and a reduction of 21% in the average fuel
3
price which is from USD95 per barrel in 31 December 2014 to USD75 per barrel in
31 December 2015. From the table below, we can see that the total revenue for
AirAsia is RM 3.38 billion, group operating profit is RM 805.54 million, net
operating profit is RM 675.90 million and the profit before tax is RM 332.44 million.
1.3
Strategic Posture
1.3.1
Vision and Mission
The vision of AirAsia is to be the largest low cost airline in Asia and serving
the 3 billion people who are currently underserved with poor connectivity and
high fares. This is because AirAsia aims to be the largest low-cost airline
company in the Asia and wants to delivers the best flying experience to the
customers. AirAsia have confidence in the no-frills, hassle-free, low fare
business concept and feels that keeping costs low requires high efficiency in
very part of the business. AirAsia create values through the mission that they
setup. The mission of AirAsia are to be the best company to work for whereby
employees are treated as part of a big family, create a globally recognized
ASEAN brand, to attain the lowest cost so that everyone can fly with AirAsia
and maintain the highest quality product, embracing technology to reduce cost
and enhance service levels.
1.3.2
Objectives
The objectives of AirAsia are led by its corporate vision and mission which
consist of emphasis on safety, human capital development, customer focus,
and operational excellence. The first objective of AirAsia is to carry 70 million
passengers a year within 6 years started from year 2014. AirAsia also goals to
generate more profit by growing its business to other Asian countries in order
to maximizing shareholders value. Besides that, AirAsia also plans to
introduce more routes, add frequencies and develop the existing ones. AirAsia
was in the progress to add routes and network in a prudent calculated way. As
going through a calculated expansion routes and networks, AirAsia also
promises to diminish the risk of business loss. Last but not least, AirAsia aims
to turn the low-cost carrier terminal at the KL International Airport into the
regional hub for budget travel.
1.3.3
Strategies
According to Joel Ross and Michael Kami, without a strategy the organization
is like a ship without rudder, going around in circles. AirAsia will implement
trough the following key strategies in the values part which are safety, low
fare, no frills, lean distribution system, point to point network, high aircraft
utilization, and streamline operation.
1.3.4
Policies
AirAsia had set many policies as the guidelines for the employer and
employees to make decision that support the corporate mission, objectives,
and strategies. One of the most important policies for AirAsia is privacy
policy. AirAsia is emphasizing about customer right to privacy. Therefore,
AirAsia initiates to be responsible when gathering customer personal
information and to protect customer privacy in every possible way. Although
this Privacy Policy is not a contract and does not create any legal rights, but it
functions as an expression of AirAsia obligation to protecting private personal
information.
2.0
Corporate Governance
AirAsia is operated under corporate governance which shows the relationship

between board of directors, top management, and shareholders who have the rights to
determine or decide the overall direction of the company (Wheelen et al., 2015).
These three parties have their own roles and responsibilities for the company.
2.1
Board of Directors
Board of directors are the members who are elected to oversee and monitor the
performance or activities of the company. The members of the board of directors for
AirAsia are listed below.
Dato Fam Lee Ee is Malaysian who aged 55. He studied BA (Hons) in
University of Malaya and LLB (Hons) in University of Liverpool. He is senior
independent non-executive director of the company and also the non-independent
non-executive director for the AirAsia X Berhad. He is also the Chairman of the
Nomination and Remuneration Committee of the Board, and member of Audit
Committee.
Dato Abdel Aziz@Abdul Aziz bin Abu Bakar is Malaysian who aged 62. He
studied agriculture in Universiti Pertanian Malaysia, Louisiana State University, and
University of Dallas. He is non-independent non-executive director for AirAsia,
director of Yayasan Astro Kasih, executive chairman of Naim Indah Corporation
Berhad. He is also the member of Remuneration Committee, Audit Committee, and
Nomination.
Aireen Omar is a Malaysia who aged 42. She studied economics in New York
University, and London School of Economics and Political Science. She is the
executive director, chief executive officer (CEO), and also the regional head of
corporate finance, treasury and investor relations for AirAsia. At the same time, she is
also the member of board of directors for some companies other than AirAsia, such as
Think BIG Digital Sdn. Bhd., Mlaysia Tourism Promotion Board (Tourism Malaysia),
Ground Team Red Sdn. Bhd., Tune Money Sdn. Bhd., and more.
Tan Sri Dr. Tony Fernandes is a Malaysian who aged 52. He studied
economics in London School of Economics. He is the non-independent executive
director and the group chief executive officer (CEO) for AirAsia. At the same time, he
6
is also non-independent non-executive director of AirAsia X Berhad and Tune Protect

Group Berhad. He received many awards since he launched AirAsia.
Datuk Kamarudin bin Meranun is a Malaysian who aged 54. He studied
Actuarial Science in University Technology MARA (UiTM). He is non-independent
executive chairman for AirAsia while he was appointed as group chief executive
officer (CEO) and non-independent executive director for AirAsia X Berhad. Besides
that, he is also the director for Yayasan Pendidikan Titiwangsa and non-independent
non-executive director for Tune Protect Group Berhad.
Dato Mohamed Khadar bin Merican is a Malaysian who aged 60. He is
independent non-executive director of AirAsia and also director for some public
companies, such as RHB Bank Berhad, RHB OSK Securities, RHB Investment Bank
Berhad, RHB Capital Berhad, Sona Petroleum Berhad, Astro Malaysia Holdings
Berhad, and Rashid Hussain Berhad. He has more than forty years of experience in
the aspect of financial and general management.
Stuart L Dean is the only American who aged 63. He studied economic and
political science in Duke University and was graduated from Harvard. He is
independent non-executive director for AirAsia. He was ever taking senior positions
in various departments for GE businesses and possesses more than 35 years of
experience regarding GE business.
Amit Bhatia is the only British who aged 35. He studied economics in Cornell
University. He is independent non-executive director of AirAsia and also the chairman
of the Investment Committee. He always involves himself in the charitable
organizations.
Dato Sri Gnanaraja A/L Gnanasundram is a Malaysian who aged 35. He
studied laws at University of Herfordshire (UK) and has strong experience in
investment. He is independent non-executive director of AirAsia and also the member
of Nomination and Remuneration Committee.
2.2
Top Management
Top management is created from chief executive officer (CEO), president, vice
president of functional areas (Wheelen et al., 2015). Top management of AirAsia is
listed below.
Tan Sri Dr. Tony Fernandes is a Malaysian who aged 52. He is nonindependent executive director and group chief executive officer of AirAsia. He is
also a member of the board of directors.
Aireen Omar is a Malaysian who aged 42. She is executive director and chief
executive officer (CEO) of AirAsia. At the same time, she was also appointed as the
regional head of corporate finance, treasury and investor of the company. She is also a
member of the board of directors.
Tassapon Bijleveld is chief executive officer (CEO) of Thai Airasia. He
studied marketing and takes the position as part time lecturer at some universities of
Thailand. He is in charge of overseeing or monitoring the overall operation and
performance of the airline in Thailand. He also possesses strong abilities of teambuilding and leadership which lead to Thai AirAsias success.
Sunu Widyatmoko is chief executive officer (CEO) of Indonesia Airasia. He
studied Business Administration at University of Illinois in USA and Brawijaya
University in Indonesia. He is entrusted with monitoring or overseeing the
performance, development, and operation of the airline in Indonesia.
Joy Caneba is chief executive officer (CEO) of Philippines Airasia. She
possesses skills and knowledge in the aspects of legal and corporate affairs which
improve the delivery of the airline services. She also reviews feedback of customers
and the satisfaction of passengers to develop efficient strategies for the company.
Mittu Chandilya is chief executive officer (CEO) of Airasia India. He
possesses strong problem solving, analytical and leadership skills or knowledge which
led to good performance and excellent result for the company.
Rozman Omar is group chief financial officer (CFO) of AirAsia. Since he has
more than 22 years of experience in aspect of finance, he was entrusted with
overseeing and monitoring the regional corporate finance, treasury, and procurement
of the company.
How Kim Lian is chief financial officer (CFO) of AirAsia. Since he possesses
more than 19 years of experiences in some aspects, such as programme management,
finance function improvement, and enterprise performance management, he is in
charge of various finance projects implementation.
Bo Lingam is president and group chief operating officer (COO) of AirAsia.
He is responsible for security, flight operations, inflight services, information
technology (IT), engineering, customer experience, ground operations, and operations
control centre. He ever took some key positions in AirAsia before, such as regional
director of guest services and senior manager of Supplies and Purchasing.
Siegtraund Teh is group chief commercial officer (CCO) of AirAsia. She
studied Business Administration at Ottawa University in USA and University of
Leicester in UK. She is in charge of sales, group marketing, ancillary income, revenue
management, digital, distribution, network planning, brand management, and
communications.
2.3
Shareholders
According to the latest annual report of AirAsia 2015, the market price for the
ordinary shares is RM0.10 per share while shareholders are given one vote per
ordinary share. The latest distribution of shareholders for the AirAsia is given below.
Shareholdings
No. of
% of
No. of Share
% of
Shareholders
Shareholders
Issued
Share
Less than 100

100-1,000
1,001-10,000
10,001-100,000
100,001 to less
104
7,689
18,284
5,514
0.32
23.57
56.06
16.91
than 5% of issued
shares
5% and above of
issued shares
1,429
6,404,769
85,206,681
167,791,054
Capital
0.00
0.23
3.06
6.03
2,182,470,14
1,024
3.14
78.43
0.00
341,000,000
2,782,874,08
12.25
32,616
100.00
100.00
Table 1.1: Distribution of shareholdings 2015

Substantial shareholders who are holding more than 5% of direct and indirect
shares in AirAsia are listed below.
Name
Direct
No. of Shares
% of
Held
Indirect
No. of Shares
% of
Issued
Held
Shares
Issued
Shares
Tune Air Sdn Bhd

(TASB)
Tan Sri (Dr.) Anthony
528,542,082
18.87
Francis Fernandes
Datuk Kamarudin bin
1,600,000
0.06
528,542,082
18.87
Meranun
Wellington
2,000,000
0.07
528,542,082
18.87
148,858,320
5.35
LLP
Wellington Group
157,599,290
5.66
Holdings LLP
Wellington Investment
157,599,290
5.66
157,599,290
5.66
148,858,320
5.35
Management
International, Ltd
Wellington
Management Group
Advisors Holdings
LLP
Wellington
Management Global
Holdings, Ltd
Table 1.2: Substantial Shareholders of AirAsia for 2015

Besides that, other 30 largest shareholders of AirAsia are listed below.
10
No
.
Name of Shareholders
No. of Shares
% of Issued
Held
Share Capital
HSBC Nominess (Tempatan) Sdn. Bhd. BPMN 3023 STRATEGIC MANAGEMENT
341,000,000
12.25
Credit Suisse HK for Tune Air Sdn. Bhd.

Citigroup Nominees (Tempatan) Sdn. Bhd.
122,905,849
4.42
Employees Provident Fund Board

Citigroup Nominees (Tempatan) Sdn. Bhd.
Exempt An for AIA Bhd.
Cimsec Nominees (Tempatan) Sdn. Bhd.
77,585,500
2.79
75,467,203
2.71
59,695,300
2.15
51,575,964
1.85
45,583,400
1.64
41,005,310
1.47
40,754,500
1.46
40,740,593
1.46
38,801,117
1.39
35,927,900
1.29
13
Dividend Stocks Fund

Citigroup Nominees (Asing) Sdn. Bhd.
30,004,365
1.08
14
UBS AG
Cimsec Nominees (Tempatan) Sdn. Bhd.
29,085,000
1.05
25,891,887
0.93
25,170,500
0.90
Pledgedd Securities Account for Tune Air

5
Sdn. Bhd. (EDG&GCM)

CIMB Group Nominees (Tempatan) Sdn.
Bhd.
Yayasan Hasanah (AUR-VCAM)

HSBC Nominees (Asing) Sdn. Bhd.
BBH and Co Boston for Emerging Markets
Portfolio (WTF CTF)

Cartaban Nominees (Asing) Sdn. Bhd.
SSBT Fund HG05 for The New Economy
Fund
Kenanga Capital Sdn. Bhd.
Pledged Securities Account for Tune Air
Sdn. Bhd.
Exempt An for JPMorgan Chase Bank,
10
National Association (TAIWAN)

Exempt An for The Bank of New York
11
Mellon (Mellon ACCT)

12
National Association (U.K.)

HSBC-FS for Value Partners High-
CIMB Bank for Tune Air Sdn. Bhd.

15
(M1566A)
16
National Association (U.S.A.)

SBL of Morgan Stanley & Co.
International Plc
11
Table 1.3: List of 30 Largest Shareholders of AirAsia

2.4
Corporate Governance (Roles of Board of Directors)
Three parties that are board of directors, top management and shareholders have their
own roles and responsibilities in corporate governance. Shareholders invest their
funds in the company while top management play roles in executing or implementing
the company affairs and also leading the staffs. On another hand, the board of
directors for AirAsia play the important roles in monitoring and overseeing the
performance and overall operation of the company. They also control over efficiently
the affairs of the company and formulate strategies and policies to make sure that the
company is operated effectively.
According the latest annual report of AirAsia 2015, its board of directors play
important role in monitoring the company. They oversee, monitor, and analyze the
company businesss operation and conduction. They can keep eyes on external
environment of the company to understand the trends, grab the opportunities and
identify the threats to own company and then brings the company move towards a
certain areas. The activities of competitors like MAS and Malindo is always
monitored by the board of directors of AirAsia.
Besides that, AirAsias board of directors also evaluates, adopts and
employees strategy corporate programmes and plans of the company. They have to
make sure that company implements the appropriate succession plan for the board of
directors and top management. This is because they want to retain the benefits or
interests of them and shareholders. Investor relation programs are also carried out and
developed by them.
In addition, board of directors members play roles in evaluation and
influence. They need to oversee and approve any changes of the companys control
structure and management, such as delegated authority limits and key policies. Board
of directors need to do many approving from top managements. They have to decide
in approving the annual budget of the company like capital commitments and
evaluating the business targets achievement every certain period. New projects or
new ventures which are suggested by top management also require the approving
from board of directors. Moreover, they also have to approve the acquisitions of
12
material and disposals of properties and undertakings. All the projects, changes, or
other matters need to be approved in accordance with rules, laws, and regulations.
Besides of approving, the members of the board of directors have to think
about the emerging issues which have possibility to be material for the companys
business affairs. They play role in determining primary risks and making sure that the
mitigation measures and internal control system is carried out properly to manage the
risks. Moreover, they evaluate sufficiency and cohesion of internal control system and
management information of the company. This is because it is able to decide the
success or failure for the company.
13
3.0
External Environment
According to Thomas L. Wheelen, external environment scanning is the monitoring,

evaluating, and disseminating the information from exterior situation which is related
to the strategys development for an organization (Wheelen et al., 2015).
3.1
Natural Environment
Natural environment, is also known as physical environment, consists of three main

areas, which are climate, physical resources and wildlife.
3.1.1
Climate
In Malaysia, the season is considered good because Malaysia do not have four
seasons. The weather is favourable for the plane landing, take-off, and flying.
Besides that, the climate enables AirAsia to take the opportunity to attract the
foreign tourists. This is because foreign tourists especially those who are from
western countries are preferred to the Malaysias weather which is warm.
However, the weather of Malaysia which is hot and humidity has
impact the ships and crews working capabilities. This provides the
opportunity for AirAsia to increase the market. Besides that, Malaysia is
located in the prone area of tsunami and earthquake which will influence all
the industry in the country.
3.1.2
Physical Resources
In addition, Malaysia has a physical location which is also favourable for the
organizations growth. This is because Malaysia has a close contact with the
seas and oceans and to the long-haul regional services. The organization does
not need to arrange the permissions to cross the airfield of other nations.
Hence, AirAsia has the fair opportunities with the physical environment of
Malaysia.
However, there is a threat involved with the nature. Malaysia has a
good connection through oceans and seas to other continents such as
Indonesia, Thailand, and Singapore. This provides the ample opportunities for
the people to travel by ships and also with Cruzes which can indirectly affect
the AirAsias market.
14
3.2
Societal Environment
Societal environment consists of four main areas, which are economic forces,
technological forces, political-legal forces, and sociocultural forces.
3.2.1
Economic Forces
The growth of Malaysia economy plays an important role to the AirAsia. As

the economy grows rapidly enables the people have the ability to buy airline
tickets. AirAsia provides the low-cost carrier by offering cheaper flight fare
and some services. This can help the AirAsia to attract the customers and
compete with the competitors such as Malaysia Airline Systems, Malindo Air,
and etc. However, when the economy slow down, the customers will prefer to
purchase low flight tickets. The high ticket price will make the customers to
reduce the numbers of travel around. Besides, the fuel prices is also an
important factor that affect the operation of AirAsia because it may increase
the cost of AirAsia and hence increase the flight ticket price. Although AirAsia
may maintain the ticket price but it may reduce the profit margin of the
company.
3.2.2
Technological Forces
The development of technology in the Information Technology and

Communication sectors drives to the value-added services and helps the
AirAsia to work efficiently and effectively. Besides that, AirAsia offers the Eservice which enables the customers to purchase the flight ticket via online.
The customers also can combine the flight ticket with the accommodation
while purchasing. In addition, AirAsia introduced an online programme which
the customers can book the holiday package online in actual time.
3.2.3
Political-legal Forces
On the political side, AirAsia found that the flight that outside the Malaysia is
quite difficult. This is because the double-side agreement will be the major
obstacles in the way of cheap flights. Besides that, the charges for landing is
also another major factor that affecting the cost of low-cost airlines. In
addition, the industry of low cost carrier, which is located in Southeast Asia
have quit just due to the flight market is tight coordinated by rights contract of
15
bilateral air. In addition, Malaysia government is very welcome the acquisition

of the corporation in this political situation. This is because there is no conflict
between the AirAsia and the governance of the country until now.
3.2.4
Sociocultural Forces
Malaysia citizens are composed with many different races and each of them
has their own cultures and norms. The diversity between them gives an impact
on the hospitality of the citizens, such as cuisine, costume, arts, and etc. This
makes Malaysia to be a tourist destination for the travellers around the world
who have once again proven the benefits of the AirAsia. Besides that, people
are unwilling to purchase the expensive fares for long-haul carrier. Therefore,
the increasing number of travellers or the students who study abroad as the
population in Asia increasing, have help the flight industry to growth. AirAsia
can provide lower fares for the long-haul carrier due to its cost leadership
strategy compared to others flight companies.
3.3
Task Environment
Porters five forces is an analysis that used to analyse the competitiveness of the
company in an industry and the development of business strategy. It is a simple basis
to assess and evaluate the companys position and strength. The five forces include
the potential for new company to enter the market, competition, customer and supplier
power, and the available of substitutes product.
16
3.3.1
The Threat of New Entrants
When there is a profit, many people will start to enter the market. New
entrants to an industry typically bring to it new capacity. It has a desire to gain
the market share, and potentially substantial resources. The threats of new
entrants for AirAsia is considered in the medium-to-high level because of the
enter barrier for a new company to enter the airline industry is high. Therefore,
is not easy to enter an airline industry. There are some factors that set up the
high barriers for the new company to enter the airline industry.
First and foremost, AirAsia as a cost leadership in airline industry
make the company has economies of scale. Economies of scale refer to the
decreasing in cost as the number of output increasing. The profits gain by
AirAsia prompted a growing number of competitors to enter the market.
However, AirAsia is able to compete with the competitors because of its
lowest unit costs per available seat kilometres (ASK). Therefore, the company
can provide a lowest fare for its customers to travel around the world.
Besides that, the capital requirement needed is limited. When a
company wants to explore a new flight company, it needs a huge capital to
start up the business. For example, the company needs a huge amount of funds
17
to start up the business. They need to rent or purchase the airlines, to set up the
administrative office, to build the airfield, to hire the staff and etc.
In addition, new entrants are prohibited from entering the market due
to the cost disadvantages due to size of the company. It is difficult for a new
company to compete with AirAsia because of the development cost. A new
company needs to spend a lot of cost for the research and development, to
promote their services, to gain customer confidence and etc.
Nowadays, brand awareness acts an important role in the industry.
Customers will trust more with the brand who give them confidence.
3.3.2
Rivalry among Existing Firms
Rivalry among the competitors is the key factor that affecting the
competitiveness of the market in most of the industry. There are a lot of
competitors in the flight industry. The main competitors of AirAsia in
Malaysia include Firefly, Malindo Air, Malaysia Airline Systems, and Tiger
Airways. However, AirAsia has put more effort on cost focus by lowering the
flight fares in order to compete with the competitors. Firefly are focused more
on the regional carrier which serving around Malaysia areas. Malaysia Airlines
Systems (MAS) focused will be on the full service carriers and it does not
directly compete with AirAsia.
The rivalry among AirAsia and its competitors are high. The product or
service characteristics are very important to determine the customer selection.
Customers will choose the company that maximize their satisfaction. For
flight service, the basic requirement is the safety of the flight that gives
confidence and allows customers to be assured to use your services. According
to wikipedia, since AirAsia established, there had only been a serious plane
crash in 2014 which the Indonesia AirAsia Flight 8501 crashed into the Java
Sea and resulting in death of all 162 people on board .
Recently, the rate of growing industry also boosts the flight sector to
grow. Each of the companies is trying to improve their performance in order to
gain customer loyalty. For example, AirAsia has promotion of giving free seat
available for the customers to travel to some selected countries. It helps the
18
company to attract a lot of customers and increases the market share of the
company. It verified the slogan of AirAsia that Now everyone can fly.
Furthermore, the lower amount of fixed costs of AirAsia enables the
company to force the ticket price down and thus be the Asias Best Low Cost
Airline Award in 2014 (AirAsia Annual Report, 2014). AirAsia was
cooperated with the airports to develop the low-cost carrier terminals that
needs lower maintenance cost. The reduction of cost has impacted on the
flights and in turn to the customers.
Besides that, AirAsia does not offer flights from all the airports in
Malaysia. For example, Sultan Azlan Shah Airport in Perak does not have any
AirAsia flight. Therefore, the customers in Perak will choose alternative flight
rather than AirAsia.
3.3.3
The Threats of Substitutes Products
A substitute product or service is a product or service that appears to be

different but can provide the same need as another product. AirAsia is one of
the airline company that providing no-frill airline. Therefore, there are a lot of
substitute products or services for AirAsia. For instance, Tigerair, Malindo Air,
Firefly and etc., are operating as budget airlines in Asia. These companies are
offering a lower fare service compared to the traditional airlines in terms of the
control of operating costs.
Some of the customers think that budget airline is cheap because the
aircraft is made up by cheap materials, or the life jackets or oxygen cylinders
have omissions and etc., they think that the company is cutting on the
production costs. In fact, the reason why the budget airline is cheaper because
it does not force the customer to purchase all the services at one time,
customer receives with only the basic seat fee. As for the customer who needs
meals, movies, games, extra baggage, location selection and etc., are subjected
to additional charge.
Besides that, AirAsia needs to compete with Malindo Air and Tigerair
which are providing the airlines services for short-haul carriers and mediumhaul carriers. While AirAsia X is the only subsidiary of AirAsia Group that
19
provides long-haul flight compared to Malaysia Airline Systems (MAS).

However, the flight ticket of MAS is slightly higher than AirAsia. So, AirAsia
has the competitive advantage compared to MAS.
3.3.4
Bargaining Power of Buyers
Bargaining power of buyers refer to the ability of the buyer to force the price
down. When the products or services are important to the customers, the
bargaining power is low. This is because buyers do not have another
alternatives rather than using airline services especially when emergency
happened or they want to travel with a long haul place. For example, a person
needs to be in a particular place within a short period, taking a flight is the best
and fastest way compared to other transports such as train, bus, or car. Besides
that, if a person wants to travel to long-distant countries, taking a flight will be
faster than the cruise and the customer can save time.
However, the buyers power is high when the product or service
represents a high percentage of buyers disposable income. This is because the
income earned are limited, so their will spend their income with lower cost.
For instance, the short-haul or regional flight, such as travel in Malaysia,
customers who are not in a hurry will tend to choose train, ferry, car and etc.,
if the flight fare is too high.
3.3.5
Bargaining Power of Suppliers
The bargaining power of suppliers refers to the ability of the supplier to

increases the price or reduces the quality of the product or service. The
suppliers of AirAsia include the fuel, food, Boeing, Airbus and etc. The power
of food supplier is low because there are a lot of alternative suppliers for
AirAsia. Therefore, if the prices of the food increase, AirAsia can easily to
change its suppliers from one to another. For the fuel supplier, the bargaining
power also low because the fuel price is controlled by the national oil price.
So, the fuel supplier does not the ability to increase the price by too high. The
bargaining power of the Boeing and Airbus is high because the substitutes are
not readily available. They are considered as duopoly for manufacturing and
supplying the aircrafts for the world.
20
3.3.6
Relative Power of the Stakeholders.
The relative power of the stakeholders includes the governments, unions,

suppliers, providers, and creditors. The power of these AirAsias stakeholders
is high because there are some government policies that affect the operation of
AirAsia. The examples of these policies include flight taxes, the establishment
of the hubs, governments permission for the numbers of flights, and etc. The
next is the loyalty of labor unions. The unions need to make sure each of the
AirAsias branches are operates smoothly. Besides that, all of the suppliers,
provides and creditors are always influenced the quality of service provided to
the passengers.
21
3.4
External Factor Analysis Summary (EFAS)
External Factors Analysis Summary (EFAS Table): AirAsia Berhad

External Factors
Opportunities:
Trend in customer to travel
around.
Increasing the population of
Asians middle-class.
High oil prices crowding out
the competitors who not yet
profitable.
Long-haul aircraft can attempt
to gain undeveloped market
share.
On-going industry explores
new flight routes and airport
trading.
Threats:
Revenues dropped due to high
oil price.
New entrants of other LCCs.
Aviation regulation and
government rules.
Government policies on airport
trading and passenger
claimant.
Crash, terrorist attack, and
tragedy affect the confidence
of customer.
Competition of full service
carriers on cost reduction.
Total Scores
Weigh
t
Ratin
g
Weighted
Score
.21
3.8
.798
Sales increased.
.17
3.0
.510
Sales increased.
.08
4.0
.320
Less
competitive.
.04
2.5
.100
.05
2.0
.100
Increase market
shares.
Smooth
operation.
.15
4.1
.615
.05
3.9
.195
.10
3.2
.320
.10
2.5
.250
.03
1.0
.030
Financial
performance.
High
competitive.
Influenced
operation.
Influenced
operation.
Safety issues.
.02
1.2
.024
Competition.
1.00
Comments
3.262
Table 2: EFAS Table
22
4.0
Internal Environment
Internal environment scanning which is also called as organizational analysis is the

process of identifying the capabilities and competencies of a company in term of
structure, culture and resources and then taking these advantages (Wheelen et al.,
2015).
4.1
Corporate Structure
Figure above shows the corporate structure of AirAsia. The corporate is structured in
a horizontal method which is also called as flat structure. AirAsia which focus on
openness encourages open communication to build a dynamic and vigorous working
environment for employees. With this type of structure, employees from all levels can
be interact or communicate directly with each other despite of different department
and positions. Even staffs from lower level functional team are also given opportunity
to provide useful opinions and suggestions regarding the operation of the company.
4.2
Corporate Culture
Corporate culture is defined as all people in a company are sharing the same values
and beliefs and then the cultures will be inherited to next generation of employees in
the company (Wheelen et al., 2015).
Employees or staffs are the valuable assets for any corporate or companies because
they are needed to solve problems, carry out tasks smoothly and efficiently, make
23
right or appropriate decisions for the corporate. Therefore, AirAsia as a large

company which requires a lot of employees considered this requirement as an
important element that is able to drive to the successful of the company. AirAsia
possesses strong team-oriented corporate culture which every employees of the
company understands the strategies of the company that emphasis on maintaining
high productivity and low costs. To maintain the skilled and knowledgeable
employees, various activities are implemented to motivate its employees. Tony
Fernandes rewards the employees by giving bonuses based on their contribution to the
company and giving non-financial rewards like free flights. Employee Share
Ownership Scheme (ESOS) is also given to all employees to increase their loyalty
towards the company. AirAsia which emphasis on fair and justice provides same
opportunity of promotion or development for all employees without any
discrimination as long as they have abilities in term of leadership, making right
decision, and solving problem efficiently to contribute to the company. Besides that,
Tony Fernandes tries to inspire all employees of AirAsia to be creative and pursue
their dreams and passion in the company. To prompt commitment and passion among
the employees, a friendly working environment is built by sponsoring various social
events.
AirAsia which focus on openness encourages open communication to build a
dynamic and vigorous working environment for employees. Through this culture, all
employees from any positions or departments are given opportunity to make direct
communication with management by providing useful opinions and suggestions
regarding the operation of the company. All the employees from all departments no
matter financial, marketing, pilot or engineering are working in same environment
that means they are working together in an office to provide a more easier and
convenient way for communication among themselves. They whose are working
surrounding by same environment to talk, to greet and to work like a family.
4.3
Corporate Resources
4.3.1
Marketing
Marketing activities are implemented by AirAsia to introduce and promote its

brand and service to the public in order to increase brand awareness. Tony
Fernandes took seven years to develop the brand name of AirAsia into
24
international known. Now, AirAsia becomes the leader among airlines by

implementing the strategy of cost leadership. To attract many customers from
all levels despite of status, occupation, and income, AirAsia provides the
lowest price of flight tickets in the industry even though it faces problems
occasionally like inflation of oil price. This strategy is fulfilling its tagline of
Now Everyone Can Fly and tries to increase the satisfaction of customers
towards its service.
AirAsia has good performance on market positioning by carrying out
various promoting activities through media like social media of Facebook. It
even sponsors the world-wide programs like Manchester United Football Club
to introduce its brand globally. In order to expand its market share, AirAsia
expanded its market size to other countries like Thailand, Filipina and
Indonesia.
Besides of the cheap tickets are provided, AirAsia also provides other
services, such as travel insurance, Xpress boarding services, Citibank-AirAsia
Credit Card, mileage programs, and internet check-in services. To increase its
sales, AirAsia tries to develop and expand its service categories by modifying
or adding value added services and special attributes.
4.3.2
Finance
The capital or financial resources of AirAsia which are collected from owners
and shareholders are used to be invested in some planned projects for the
company. Dividend will be distributed to the shareholders who have
contribution to the company. AirAsia invested a lot of financial resource for
operation of the business in term of purchasing flights, managing crew, and
maximizing its model or scale. It obtains many benefits by setting up hubs
within and outside this country with the help of other companies.
AirAsia had been established an objective which expectation of return.
AirAsias smart finance strategies are able to bring maximum economic profits
to the company and expected no less in future. This success in term of return
can be the competitive advantage of AirAsia. AirAsia performs well in the
aspect of financial compared to other airlines. This is because the activity of
25
AirAsia implements its operation in low cost and offers the cheap flight ticket
to customers is able to bring high profit to the company. After the flight
accidents in 2014, the sales of AirAsia had decline. However, its sales and
profit started climb up from year 2015.
Of course, Chief Financial Officer (CFO) who evaluate and analyze
the implemented strategies acceptance and effectiveness will make very
important decisions that will give impacts on the strategy management.
AirAsia has knowledgeable strong accounting and financial team who have
high education level and many years of experiences. Beside of the staffs of
financial department and accountants, most employees from AirAsia possess
basic knowledge or understanding of accounting and finance.
4.3.3
Operation
AirAsia implements the strategy of cost leadership by offering the flight ticket
with the cheapest price among the airlines. It keeps designing the cheapest
flight packages by minimizing the costs to allow all people fly. AirAsia
established Low-Cost-Carrier (LCC) for its business model by preparing
simple products or services like no-frills, hassle-free, low fare business
concept, narrow seating in one only single class and absence of seat
assignment. Customers will be charged extra payment if they require other
extra service other than the flight ticket like meal in airplane. In addition,
AirAsia provides domestic flight service in one country, such as flight from
Penang to Kuala Lumpur and flight from Kuala Lumpur to Johor. Not only
domestic market, AirAsia also develop existing routes and expands its market
size to many countries like Taiwan, China, Australia, and so on by adding
routes in a prudent calculated way and also carrying out lean distribution
system and point-to-point network.
AirAsia had established a cutting-edge airline management system to
improve the operational efficiency of AirAsia. The system is able to touch all
aspects of airline management by optimizing AirAsias daily aircraft,
organizing crew utilization, improving on-time performance, minimizing
costs, serving more routes, and increasing frequency of flight. It can also
ensure the crew fly within hour limits to achieve the regulatory compliance.
26
Moreover, the system is implemented to manage the service information and

real time flight to all social media and global network of AirAsia.
4.3.4
Human Resource Management
AirAsia has skilled, professional, and experienced management team and

staffs that contribute much to the company. They understand deeply the
strategies of the company that emphasis on maintaining high productivity and
low costs. One of the AirAsias objectives is to achieve its own employees
satisfaction as employees or workers are important assets for company. Their
loyalty and commitment will drive the achievement of companys success.
To avoid strike, lay-off and grievance from employees, AirAsia
established an effective human resource management. Tony Fernandes always
show his caring and good treatment to his employees because he sees his
employees as precious and valuable assets for the company and he hopes that
his people can pursue their dreams and passions. He always lends his hands to
the employees who are facing problems. To inspire motivation for employees,
Tony Fernandes also always rewards them by giving gifts and bonuses. For
example, he ever rewarded employees who have been work in the company
for 10 years by giving branded watches. In addition, all employees are given
same opportunities and fair treatments in term of promotion, salary, holiday,
and so on to avoid turnover.
Employees who are hired by AirAsia must fulfil certain requirements,
such as possess at least diploma level of education. AirAsia also provides
training and development activities to the new staffs to enable them to adapt
new working environment.
4.3.5
Information Technology
Tony Fernandes believes that information technology is one of the elements

that affect the successful of AirAsia in this era of IT. Therefore, AirAsia
launches a lot of financial resources into the information technology, such as
hiring IT professors and developing an advanced system.
Managers or top management are able to make decisions speedily with
the help of IT. By using IT, a lot of raw data and information are available to
27
be found and can be used to implement researches and plan alternative

strategies. The database of customers can be saved and assessed easily.
Customers complaints can be also received from its own website or other
social media and be managed immediately to solve the problem efficiently.
Various issues that related to customer care can be solved by making
communication with the customers directly through the dissemination of
information.
The use of IT also aims to provide a more effective way for promotion
and advertising of the AirAsias service as the promotion and advertising can
be done globally and able to reach customers around the world. For example,
AirAsia spreads its advertisement through social media like Facebook which is
the most visitors and it is easy to reach Facebook users around the world.
Various IT added value services like internet check-in service, online booking,
and cancellations provide interface to customers. The rating of five stars on
social media or official website is also one of the added value services that
evaluate the satisfaction of customers.
28
4.4
Internal Factor Analysis Summary (IFAS)
Internal Factors Analysis Summary (IFAS Table): AirAsia Berhad

Internal Factors
Strengths:
Operation costs are
lower.
Strong branding,
marketing approach
and awareness.
Able to penetrate and
inspire to potential
markets.
Conducive information
technology.
Have efficient and

multi-skilled works.
Has high utilization of
aircraft and smooth
operation.
Weaknesses:
Limited service
resources availability.
Limited human
resources.
Website system down.
High dependency on
outsourcing (MRO).
Poor service quality.
Total Scores
Weigh
t
Ratin
g
Weighted
Score
.20
4.8
0.96
.12
3.5
0.42
Comments
Easy to offer low

fares.
Gain market shares.
.06
2.5
0.15
Expand to the market
easily.
.07
2.0
0.14
.10
3.4
0.34
.02
1.5
0.03
.12
2.5
0.30
.06
2.0
0.12
.07
4.0
0.28
.02
3.5
0.07
.16
2.5
0.40
1.00
Provide e-ticket to
reduce distribution
costs.
Efficient and
productivity
workforce.
Point-to-point services
to reduce turnaround
time.
Due to the lowest cost
provided.
Lack of skilled
workers.
Repair online
efficiency.
Increasing operation
cost.
Customer complaints
and loss sales.
3.21
Table 3: IFAS Table
29
5.0
Analysis of Strategic Factors (SWOT)
5.1
Situational Analysis
Long
W2
Limited
service
resources
availability
.
O1 Trend
in
customer
to travel
around.
O2
Increasing
the
population
of Asians
middleclass.
Intermediate
S1
Operation
costs are
lower.
S2 Strong
branding,
marketing
approach
and
awareness
.
W1 Poor
service
quality.
Short
Strategic Factor Analysis Summary (SFAS Table): AirAsia

Berhad
Strategic
Weigh Ratin Weighted
Comments
Factors
t
g
Score
0.19
4.2
0.798
0.07
3.6
0.252
0.22
3.9
0.858
0.15
2.3
0.345
0.14
2.7
0.378
0.10
2.9
0.290
Competitive
advantage.
Strong and need
to maintain.
Train workers to
improve service
to customers.
Provide more
services with
lower costs.
Provide more
services for
customers.
Create new
routes and
airport deals for
customers.
30
T1
Revenues
dropped
due to
high oil
price.
0.08
1.8
0.144
0.05
1.2
0.060
T2 Aviation
regulation
and
governme
nt rules.
Total Scores
1.00
Table 4: SFAS Matrix
Improve aircraft
utilization to
minimize costs
and turnaround
time.
Follow the rules.
3.125
Table 4 shows Strategic Factor Analysis Summary (SFAS Table) for AirAsia Berhad.
The companies which have the total weighted score of more than 3.0 are performing
well in the market (Wheelen et al., 2015). That means AirAsia Berhad has good
performance of its business as its weighted score that is shown on the Table 4 is
totally 3.125 which is more than the average score 3.0. The strategic factors that are
listed in the Table 4 are the vital factors for AsiaAsia Berhad to develop strategic
alternatives.
Two strengths that have highest weight among all strengths of AirAsia are
used as strategic factors for strategic alternatives development. There are lower
operation costs and strong brand. The lower operation costs that have the second
highest weight of 0.19 and the second weighted score of 0.798 among all the strategic
factors of AirAsia have the most effect to the company. This strength provides
competitive advantage for AirAsia. By spending low costs in operation, AirAsia is
able to provide products and services with lower price as it spends low cost to
produce products and services efficiently. This will attracts more customers and also
increases its sales. Besides that, the strength of strong branding, marketing approach
and awareness is one of the strategic factors. AirAsias good brand name and
reputation that will brings investment from others to the company and increases trust
of customers toward the company should be maintained.
31
The weaknesses of poor service quality and limited service resources

availability are listed in Table 4 as the strategic factors as these two weaknesses have
the highest weight among all weaknesses of AirAsia. Poor service quality of AirAsia
gives the most impact to the company as there are a lot of customers complaints that
will destroy the image of AirAsia and lost confidents from customers. Therefore, the
company should provide training to workers to improve the service quality. Moreover,
limited service resources availability can also affects the companys sales. To
minimize the flight ticket, AirAsia prepares simple products or services like narrow
seating in one only single class and absence of seat assignment. Customers will be
charged extra payment if they require other extra service other than the flight ticket
like meal in airplane. To avoid dissatisfaction from customers, AirAsia should provide
more services with lower costs.
The opportunities of trend of customers who like to travel around and the
increasing of the ASEAN population which have the highest weight among all
opportunities of AirAsia are listed as strategic factors. Since many people like to go to
travel around nowadays, AirAsia should grabs this opportunity to target and attract
more customers by doing more attractive promotion and providing more services for
customers. In addition, the increasing of the ASEAN population also provides the
opportunity for AirAsia to develop strategic alternatives to increase sales. AirAsia
should create new routes and airport deals for customers to reach more people.
On other hand, AirAsia is affected by the threat of the decline of revenues due
to high oil price and also the aviation regulation and government rules which have the
highest weight among all threats for AirAsia. The condition of the high oil price will
increase expenses and then reduce AirAsias profit margin and revenues as it requires
large amount of oil to operate the flight. Therefore, costs and turnaround time should
be minimized by improving aircraft utilization in order to prevent the company from
loss of profit. Besides that, the treat of aviation regulation and government rules is
able to give effects to AirAsia. This is because its activities and operation are always
restricted, so that it is unable to develop its strategies arbitrary. It has to keep research
and observation to the law and government regulation before it starts to carry out its
strategies. Moreover, AirAsia has to ensure that it is always following the rules to
avoid the prohibition of doing business from government.
32
All the strategic factors which are listed in Table 4 are the important factors
and able to give the most impact to AirAsia. Therefore, these strategic factors will be
considered and be analyzed to develop strategic alternatives that will be implemented
to drive successful to the company.
5.2
Review of Direction
The regulation of vision, mission and objectives play important role in providing
overall direction for a company as all the strategies, policies, activities, and tactics
will be developed based on the vision, mission, and objectives. Unclearness of the
overall direction will lead ambiguous explanation from leader, hesitation of
employees towards their tasks, employees mistakes on works, and conflict among
departments. The vision, mission, and objectives of a company will be the vital
factors that decide success of the company as inappropriate direction for the company
will drive failure of any implemented programs.
The mission and objectives of AirAsia emphasises on safety, human capital
development, customer focus, and operational excellence. AirAsia purposes to carry
more passengers to provide opportunity to more people to go to other countries by
plane besides of increasing sales and profits. In our opinion, the mission that set by
AirAsia is suitable for the overall direction and it is able to meet its purpose for its
business existence. One of its missions thats to attain the lowest cost so that everyone
can fly with AirAsia is supported by its vision thats to be the largest low cost airline
in Asia and serving three billion people who are currently underserved with poor
connectivity and high fares. It meets AirAsias business strategy of cost leadership
that had been done including no-frills, hassle-free, and low fare business concept. All
functional departments are carrying out their own tasks regarding reduction of
operation cost to achieve the mission of attaining low costs. Finally, AirAsia is
famous of its low operation cost and low price of products and services provided so
this vision and mission should be maintained.
In addition, AirAsias mission of create a globally recognized ASEAN brand
also provides right direction for AirAsia and it supported by its objective of introduce
more routes and develop the existing ones. This is because the objective of expanding
routes and networks to other countries is able to increase the brand name in many
countries. By growing its business to other Asian countries, AirAsia can achieve its
33
objective of generating more profit in order to maximize shareholders value. AirAsia

is implementing its strategies including adding routes in a prudent calculated way and
also carrying out lean distribution system and point-to-point network. Besides of
creating globally recognized ASEAN brand, these strategies are also implemented in
order to achieve the objective of carry 70 million passengers a year within 6 years
started from year 2014 by attracting more customers with the strong brand name.
AirAsia that focus on human capital development had set a mission thats to
be the best company to work for whereby employees are treated as part of a big
family. This mission is meeting the strategies that AirAsia had done. Employees are
rewarded by giving bonuses based on their contribution to the company and giving
non-financial rewards like free flights. Employee Share Ownership Scheme (ESOS) is
also given to all employees to increase their loyalty towards the company. AirAsia
which emphasis on fair and justice also provides same opportunity of promotion or
development for all employees without any discrimination as long as they have
abilities in term of leadership, making right decision, and solving problem efficiently
to contribute to the company. A dynamic and vigorous working environment is built
for employees by establishing open communication. This mission is very suitable as
employees or staffs who are the valuable assets for the company is consider as an
important element that is able to drive to the successful of the company.
A mission of AirAsia thats maintaining the highest quality products and
services is necessary to be set to be achieved because products and services quality
give high impact to the company. Since AirAsia always receives customers
complaints regarding poor service quality, so this mission should be set in order to
improve the quality of products and services for increasing customers trust and
confident towards the company. To achieve this mission, some strategies are
implemented such as improving safety, high aircraft utilization, streamline operation,
embracing technology and so on. This may enhance service levels and deliver the best
flying experience to passenger.
We think that vision, mission and objectives of AirAsia are good and regulated
appropriately. Its missions which are not too broad and are not too narrow enable
employees clear about what they want to do without any ambiguous and blurring. For
example, the mission of maintaining the highest quality products, embracing
34
technology to reduce cost and enhance service level is clearly stated to maintain and
improve the quality in term of products and services. In addition, the vision and
mission are focus on long term goals so that it will not be changed or replaced in short
time after it was accomplished. For example, its vision to be the largest low cost
airline in Asia provides guidance for employees in order to maintain low operation
costs continuously. Besides that, there are no gaps between planned and achieved
objectives because the planned mission and objectives are realistic and possible to be
achieved. Lastly, we suggest that the vision, mission, and objectives of AirAsia should
be maintained as it clearly meets its purpose and provides the right overall direction to
the company.
35
6.0
Strategic Alternatives and Recommended Strategy
6.1
TOWS Matrix
Strengths (S)
S1 Lowest cost.
S2 Strong brand image.
S3 Penetrate and inspire to
potential market.
S4 Information technology.
S5 Efficient workers.
S6 High utilization of
External Factors
aircraft.
Opportunities (O) S-O
O1 Trend to travel.
S1O3 Cost leadership enable
O2 Increasing
AirAsia to squeeze out the
middle-class of
competitors when the fuel
Asians population.
price is high.
O3 High oil prices.
S3, S6O1, O2 Used excellent
O4 On-going
marketing strategies to
industry.
analyse and expand the
market, maximize the
utilization of aircraft.
Threats (T)
S-T
T1 High fuel prices. S1T1 Cost leadership causes
T2 New entrants of
AirAsias revenues decrease
LCCs.
due to the high oil prices.
T3 Aviation
S1T2, T6 AirAsia is able to
regulation and
compete with the competitors
government rules.
since it has a lowest operation
T4 Airport trading
costs and as a barrier to
policies and
prevent the new entrants to
passenger claimant. enter the airline industry.
T5 Accident and
S5T5 Efficient and effective
tragedy.
workers to make sure the
T6 Rivalry among
safety of flight and customer.
competitors.
Table 5: The TOWS Matrix
Internal Factors
Weaknesses (W)
W1 Limited service
availability.
W2 Limited human
resources.
W3 Website system down.
W4 High dependency on
outsourcing (MRO).
W5 Poor quality service.
W-O
W1O1, O2 Provides more
service to customers.
W2O4 Hires more multiskilled staffs to handle the
services in the airlines and
airport for the on-going
airlines market due to the
increasing of new flight
routes and airport deals.
W-T
W3, W5T4, T6 Improves
the technology system such
as system update and
recovery to handle the
claimant and provide the
best service quality.
W4T1 Reduces the fuel
costs and reduces
outsourcing of aviation
support service by using the
MRO services.
AirAsia could apply the concentration strategy of vertical growth strategy by

taking over the function provided by the outsourcing of the maintenance, repair and
operation (MRO) services. As the TOWS matrix shows that AirAsia needs to reduce
the heavy dependency on the outsourcing of aviation support services. AirAsia can
36
actually do the MRO services by itself in order to lower its operational costs.
Therefore, AirAsia could apply the backward integration which it takes over the MRO
Company and hence it could provide the maintenance or repair services for its
aircrafts.
Besides that, the horizontal growth strategy is considered by AirAsia to
achieve it companys goal through internal development. AirAsia can expand the
market by open new routes or new airports in the under-developed countries in order
to increase its market share in the airline industry. As the TOWS matrix shows that
AirAsia needs to expand market to meet the demand of increasingly Asian population
of middle-class people and the trend to travel around. For example, AirAsia do not
have any branch office in the Sultan Azlan Shah Airport at Ipoh, Perak. So, AirAsia
has the opportunity to expand its market at there.
In addition, AirAsia should improve its current services to increase its market
shares. As the TOWS matrix shows that AirAsia needs to increase the customer
satisfaction especially for the customer services of the company. AirAsia received a
lot of complaints about the poor communication and unprofessional staffs who do not
served the customer properly. For example, when the flight delayed, the staffs do not
explained clearly to the customers and this has made the customers feel not
comfortable and unsatisfied about AirAsias service. Therefore, AirAsia needs to
reduce the customer complaints by providing more professional and multi-skilled
workers in order to provide the best service to the customers.
According to the AirAsia Annual Report (2014), AirAsia has been rewarded
for the Worlds Best Low-Cost Airline and Asias Best Low Cost Airline Award for
the sixth consecutive year. It proved the AirAsia be the cost leadership in this airline
industry and it enables the AirAsia to gain the competitive advantage towards its
competitors such as Malaysia Airline, Malindo Air, and so forth. Since AirAsia has
low operation costs so it can offer a very low ticket price for the flight. The
competitors are not able to reduce their price because of the high fuel price. Besides
that, the lowest operation costs as a barrier for the new Low Cost Carriers (LCCs) to
enter the airline market. This advantage may help the AirAsia to compete with more
airline company.
37
Furthermore, as the TOWS matrix shows that AirAsia need to improve its
technology systems by using the information technology conducive. The advantage of
this option is that AirAsia can reduce the website system down problem and hence
reduce the downtime costs. For instance, the company providing online booking and
purchasing of e-ticket can help the company to reduce its distribution costs. But, when
the system is down, AirAsia may loss its customers. With the good technology
system, the customers can easily to print out their boarding pass and ticket from the
website before they travel. It can improve the efficiency of the service and AirAsia
can save the cost for printing physical flight tickets. This can also help to smooth the
operation of AirAsia. Besides that, a continuous review system such as periodic
system update and recovery can help the AirAsia to improve its technology system in
order to handle the claimant and provide the best quality for its customers.
Human resource strategy will be another alternative that identified by the
TOWS matrix. From the research study, AirAsia is facing a number of complaints
about the service provided by the staffs. For instance, unfriendly staffs which include
the flight attendants and ground staff, bad attitude of staffs service failure and etc.
AirAsia faced the issue of lack of empathy among their staff who do not provide
personal attention and care to the customers. However, this is due to the situation
where there is not every problem that can be solved by the service personnel such as
the flight delay problem and so forth. Besides that, due to the low cost operation,
AirAsia is forced to reduce the number of flight attendants who serve the customers
during the flights. This brings a problem to AirAsia which there is an insufficient
number of flight attendants to handle the customers requests and direct affect the
customer satisfaction level. Therefore, AirAsia should hire more multi-skilled workers
in order to handle the services and reduce the customer dissatisfaction. On the other
hand, AirAsia need to provide training for their existing workers to improve their
customer service and to help them handle and cope with the customers requests or
problems. Besides that, AirAsia also need to hire more staffs due to the increasingly
number of new routes and airport trading in the on-going industry.
6.2
Recommended Strategy
AirAsia can pursue a competitive strategy to compete its competitive position within
the aircraft industry. AirAsia can improve its services by using not only the cost
38
leadership strategy, but also the differentiation strategy. With the cost leadership
strategy, AirAsia is able to offer the lowest ticket fare to its customer although the
national fuel price is high. Besides that, it can help the company to squeeze out the
competitors who do not yet profitable. This is because the fuel price will increase the
companys operation costs. However, the fuel price had reduced the revenues of
AirAsia but still profitable. AirAsia can apply differentiation strategy by providing
some special services for their customers. For example, the company can provide
some transportation such as shuttle buses or taxi services for their customers.
Therefore, the customers are easily to reach the airport from the nearest bus station or
taxi station especially for the foreign tourists. This is because they are not familiar
with the travel place and they may face difficult to find transport from the airport.
Besides that, AirAsia could differentiate itself from their competitors by providing the
food services for economy class flight. This is because for the economy class flight,
AirAsia is currently charging an additional charge for the customers who need food
and even drinks during the flight. Actually, with the cost leadership strategy, AirAsia
could provide food and drink with reduction of price. Customers will feel more
enjoyable and comfortable during the flight journey with those services.
In addition, the strong brand image enables AirAsia to target newly developed
countries to expand market globally, which could help AirAsia to increase its market
share in the airline industry. AirAsia could also use their strong branding and
marketing strategy to target the rise in the middle-class customers in Asia. Besides
that, AirAsia also can use its strong brand image and reputation to convince its
customers from the accidents and tragedies happened such as terrorist attack, hijack,
crash, and etc. The efficiency and effectiveness of the staffs are also important in
order to make sure the safety of the flight and customers.
Besides that, AirAsia could also use its strong branding and reputation to
improve the current services and customer perceptions. This may help the AirAsia to
increase its sales and expand the market. Besides that, AirAsia could use the excellent
marketing strategy to disseminate their products or services to the public through
promotions such as offers flight tickets from Malaysia to Taiwan with a lowest price
of RM1. In addition, AirAsia could improve its online system to help the customers to
enjoy their services, for instance, AirAsiaGo as an online booking system could be
promoted in order to help the customers to plan their travelling schedules well and
39
smooth. The customers could book or purchase the flight tickets at the AirAsiaGo
with the accommodation provided.
Besides that, AirAsia could open more direct flights from one destination to
another destination inside and outside the Malaysia. Currently, all the AirAsias flights
are need to turn the flight at Kuala Lumpur International Airport in order to travel to
other places. Turning the flight will make the customers feel tired and bored and
hence will reduce their satisfaction on the services. Moreover, direct flight may help
to reduce the travel time of the customers and also the operational costs of the
AirAsia. This is because when the flight is stop-over, the company needs to pay the
landing charge.
40
7.0
Implementation
7.1
Cost Leadership
AirAsia is implement cost leadership as their strategy. AirAsia uphold to become the
low cost carrier in airline industry. According to Datuk Tony Fernandez, it needs to
have its costs under control before a business can grow. It must be cost-efficient and
profitable, and it must create value. They must spend their cost efficiency and
reliability. A cost cutting strategy is implementing by AirAsia to keep their cost low
and to have cost advantages. AirAsia must reduce or eliminate anything that will
inefficiencies occur. AirAsia can be possibly competing with their competitors if they
can reduce cost efficiency and then make the lowest flight fare compare to their
competitors.
Untrained staff may cause inefficiency and ineffectiveness in the operation,
this may increase cost for the company to solve problems. Therefore, human
resources department should provide training to the staff for every department. For
example, train their staff under customer service department in order to give the best
service to the customers. Besides that, marketing department can create
advertisements using social media strategy such as Facebook, Line, Instagram,
webpages and so on in order to reduce marketing costs.
Furthermore, AirAsia was applying E-commerce and exploited their
information technology usage to create the efficiency, effectively and keep possible
low cost carrier in their business. AirAsia implemented current information
technology such as yield management system (YMS), customer reservation system
(CRS), and enterprise resource planning (ERP) system in order to exploit their
information technology. In order to exploits their information technology, human
resources department must give support to information technology department, which
is hire professional and experience employees and give training to existing employees
under information technology department. Marketing department must support human
resource department by advertise the job description in newspaper or website like job
street. Then, human resources department can make interviews for the interviewee
using Skype or walk-in interview. After that, they can make selection among the
interviewee.
41
Information technology department itself much buys new software to install

this system. Firstly, AirAsia used yield management system to takes into account the
operating costs and supports AirAsia to optimizes price and allocate capacity in order
to exploit expected revenues. Secondly, AirAsia used customer reservation system to
reduce the cost and eliminates the intermediaries such as travel agents in order to cut
the cost which is the sales commission to pay them. Thirdly, enterprise resource
planning is an overall software approach to support decisions simultaneous with
business planning and business controlling. AirAsia is considering effectively
maintaining process integrity, reducing financial month-end closing processing times,
and accelerate reporting and data retrieval processes by implementing enterprise
resource planning. Moreover, enterprise resource planning is a system that focused on
capturing the transactions in daily operations and help AirAsia to save operating costs
and also improve the efficiency and integrity in its operations. Operation department
can using this information technology to run the operation.
7.2
Introduce New Routes
Research and development department need to implies a new market segment, new
users of the company's products and services, or to explore new geographic areas in
order to attract new customers. Before introduce something new, research and
development department should scan the external and internal environment to check
whether it is able to earn profit. When the result from research and development
department is positive, then operation department should start to work. For example,
AirAsia introduced new routes pairing the national capital, Kuala Lumpur with a
number of destinations in East Malaysia, which were previously served (and still are)
by Malaysia Airlines through the major airports at the two East Malaysian state
capitals. Operation department need to plan how to operate the new routes. Human
resources department should support operation department by hiring new staff in
order to operate the new routes. Marketing department must support human resource
department by advertise the job description in newspaper or website like job street.
Then, human resources department can make interviews for the interviewee using
skype or walk-in interview. After that, they can make selection among the
interviewee. After selection, they can provide training to the new staff. Lastly, human
resources department can assign them to the appropriate department.
42
Besides that, marketing department should do advertising about the new routes
in order to disseminate these new routes to the public. They can advertise these new
routes through flyer, newspaper, magazine, social media, AirAsias mobile
application, AirAsias website, and so on.
7.3
Marketing Strategy
Branding is a marketing strategy that disseminates a product to the public. It is

difficult for AirAsia to differentiate their products from their competitors as the basic
product is similar such as aircraft. Therefore, branding and building good image or
reputation is an alternative for marketing their products to the public. Marketing
department brand their products internally to their employees prior then brand it
externally to the public. This is to allow AirAsia employees acquainted the function
and attractive of products in which they can sell it better externally to the public.
Then, marketing department also can implement forward integration strategy with
online booking system such as AirAsiaGo, Go Holiday, and Get A Room
allows the carrier to earn a service fee through incorporate with the hotel.
43
8.0
Evaluation and Control
The final stage of formulation strategic is to evaluate the result of the implementation
strategic and control the strategic. When undergoing evaluation and control process,
AirAsia needs to specify implementation process (as we see in 7.0 Strategic
Implementation). AirAsia then establishes standards of performance and measure
actual performance and compares actual performance with standard. Corrective action
will take part in this phase in order to get better performance.
Firstly, AirAsia remain no change strategy for the cost leadership. AirAsia
set low cost flight for everyone can fly with slogan of Now everyone can fly This
had increase market share in airline industry and increase performance. In addition,
seems AirAsia apply enterprise resource planning to support decisions simultaneous
with business planning and business controlling. AirAsia might able to save operating
costs and also improve the efficiency and integrity in its operations. Branding is also a
good strategy in order to build product and services image in customers perception.
However, AirAsia can use the method of output control. In this method,
AirAsia must specify what is to be accomplished by focusing on the end result. For an
instance, AirAsia will analyse whatever approach to be done in order to get maximum
customer satisfaction from their services. AirAsia might be give good quality of good
customer services with the approach of 3S (salam, senyum, sopan) in another meaning
is greetings, smile, and speak politely. Then, AirAsia will conduct a customer surveys
to measure their performance towards their services.
AirAsia also can implement behaviour control. Since there are many bad
complaints towards customers service, thus AirAsia must set up guidelines,
procedure the behaviour of staff to make sure performance of the company in well
conditions. For example, ISO 9000 quality management or SOP Standard of
Procedure is used. It means that whole the organization will follow the SOP of
company in their work so their performance is standardized and not under or over the
limit.
In measuring the performance of company, AirAsia can use steering controls
in measuring variables that influence future profitability. For example, cost per
passenger mile, or revenue passenger mile (RPM). It is an airline industry metric that
44
reflect the number of miles travelled by paying customers. RPM is the result of
multiplication of number paying customers by the distances travelled. The highest
RPM result in higher possible outcome.
AirAsia can use the benchmarking method to evaluate their company activities
and performance. AirAsia can analyse their companys performance and services level
through benchmarking. Therefore, they can identify existing and potential problem,
modify policies and procedures and create enhancements. Besides, benchmarking
known as an essential tool for AirAsia to ensure that their company is able to provide
superior customer service and continue to serve and meet their customers distinct
needs. Moreover, seems that AirAsia offer new routes, AirAsia can benchmark
Malaysia Airline (MAS) with many routes offers in order to compare, compete them
and reached them. As we can see, AirAsia just offer flight to South East Asia while
MAS provide more than that which is Oceania, Africa, Europe and Middle East.
AirAsia needs to create a suitable measurement and evaluation system to
ensure conformance to the recommended strategic plan. In additional, AirAsia must
be ensuring that the evaluation system that will be taken is suitable to their company
strategy and not to change the strategic to suit to the evaluation system. Two main
focus need to be taken such as company performance and employee performance. An
appropriate training will be given for those workers perform under expectation. In
contrast, worker who doing excellent ad achieve the target of company will be given a
rewards based on their performance level. For example, AirAsia top management can
reward them in either in term of financial award or non-financial award which
depends on the situation. This kind of approach will increase employees motivation
then increase productivity to meet the expectation and thus increase company
performance indirectly.
Evaluation performance can be held by using the observation method. There
are two types of the observation method used in community development evaluation
which is Direct Observation and Participant Observation. Direct observation is an
evaluation method where the observer is an unidentified 'fly on the wall' which
generally with permission of those being observed whereas Participant Observation is
the data collection method use in qualitative experiment. It is an evaluation method
where the observer takes part in the activity with the participants and asks questions.
45
Employee performance appraisal can help AirAsia to improve workforce spirit,

services quality, productivity as well as company performance.
46
References
How AirAsia Can Be A Leader in the Lowest Cost Carrier in the Airplane Industry.
(31 August, 2009). Retrieved 5 May, 2016, from Management of Technology:
https://itsaboutmymot.wordpress.com/2009/08/31/the-airasia-companystrategic-management-%E2%80%9C-how-airasia-can-be-a-leader-in-thelowest-cost-carrier-in-the-airplane-industry%E2%80%9D/
The AirAsia Company strategic management: How AirAsia can be a leader in the
lowest cost carrier in the airplane industry. (31 Aug, 2009). Retrieved 18
May, 2016, from Management Of Technology:
https://itsaboutmymot.wordpress.com/2009/08/31/the-airasia-companystrategic-management-%E2%80%9C-how-airasia-can-be-a-leader-in-thelowest-cost-carrier-in-the-airplane-industry%E2%80%9D/
AirAsia. (n.d.). Retrieved 11 April, 2016, from Wikipedia:
https://en.wikipedia.org/wiki/AirAsia
AirAsia. (14 July, 2008). Press Release: AirAsia wins Airline Strategy Award:
Finance Category Real 5 Star carrier gets Real 5 Star honor! Retrieved 16
May, 2016, from http://www.airasia.com/site/my/en/pressRelease.jsp?
id=2104df98-7f000010-19360e70-88061f55
AirAsia. (2014). Annual Report (Corporate). 1-212.
David, F. (2009). Strategic Management: Concept and Cases (12th ed.). Francis
Marion University: Pearson International Edition.
Justine, M. K. (Dec., 2005). AirAsia in the Malaysian domestic airline market:
Empirical Analysis Of Strategy. International Business & Economics
Research Journal, 4(12), 53-64.
Participant Observation. (n.d.). Retrieved 16 May, 2016, from Wikipedia:
https://en.wikipedia.org/wiki/Participant_observation
Pearce, J. &. (2009). Formulation, Implementation & Control of Competitive Strategy
(11th ed.). Mexico: McGraw-Hill International Edition.
Wheelen, T. L., Hunger, J. D., Hoffman, A. N., & Bamford, C. E. (2015). Strategic
Management and Business Policy. United State: Pearson Education.
Yashodha, Y. (2012). AirAsia Berhad: Strategic analysis of a leading low cost carrier
in the Asian region. Elixir International Journal, 11164-11171.
Zakaria, A. F. (2014). AirAsia Board Charter. 1-14.
47

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COLLEGE OF BUSINESS

SCHOOL OF BUSINESS MANAGEMENT

A152 SEMESTER 2015/2016

POON MAN SIH

WONG GUI RONG

LAI YEE HUI

CHEAH LAI THENG

BPMN 3023 STRATEGIC MANAGEMENT

Vision and Mission...................................................................................4

Corporate Governance (Roles of Board of Directors)...................................13

The Threat of New Entrants...................................................................18

Rivalry among Existing Firms...............................................................19

The Threats of Substitutes Products.......................................................20

Bargaining Power of Buyers..................................................................21

Bargaining Power of Suppliers..............................................................21

Relative Power of the Stakeholders........................................................22

External Factor Analysis Summary (EFAS)..................................................23

BPMN 3023 STRATEGIC MANAGEMENT

Human Resource Management..............................................................28

Internal Factor Analysis Summary (IFAS)....................................................30

Strategic Alternatives and Recommended Strategy..........................................36

Introduce New Routes...................................................................................42

Evaluation and Control.....................................................................................44

BPMN 3023 STRATEGIC MANAGEMENT

AirAsia Berhad is a Malaysian low-cost airline headquartered near Kuala Lumpur,

BPMN 3023 STRATEGIC MANAGEMENT

Vision and Mission

BPMN 3023 STRATEGIC MANAGEMENT

BPMN 3023 STRATEGIC MANAGEMENT

AirAsia is operated under corporate governance which shows the relationship

BPMN 3023 STRATEGIC MANAGEMENT

is also non-independent non-executive director of AirAsia X Berhad and Tune Protect

BPMN 3023 STRATEGIC MANAGEMENT

BPMN 3023 STRATEGIC MANAGEMENT

Less than 100

BPMN 3023 STRATEGIC MANAGEMENT

Table 1.1: Distribution of shareholdings 2015

Tune Air Sdn Bhd

Table 1.2: Substantial Shareholders of AirAsia for 2015

Credit Suisse HK for Tune Air Sdn. Bhd.

Employees Provident Fund Board

Dividend Stocks Fund

Pledgedd Securities Account for Tune Air

Sdn. Bhd. (EDG&GCM)

Yayasan Hasanah (AUR-VCAM)

Portfolio (WTF CTF)

National Association (TAIWAN)

Mellon (Mellon ACCT)

National Association (U.K.)

CIMB Bank for Tune Air Sdn. Bhd.

National Association (U.S.A.)

BPMN 3023 STRATEGIC MANAGEMENT

Table 1.3: List of 30 Largest Shareholders of AirAsia

Corporate Governance (Roles of Board of Directors)

BPMN 3023 STRATEGIC MANAGEMENT

BPMN 3023 STRATEGIC MANAGEMENT

According to Thomas L. Wheelen, external environment scanning is the monitoring,

Natural environment, is also known as physical environment, consists of three main

BPMN 3023 STRATEGIC MANAGEMENT

The growth of Malaysia economy plays an important role to the AirAsia. As

The development of technology in the Information Technology and

BPMN 3023 STRATEGIC MANAGEMENT

bilateral air. In addition, Malaysia government is very welcome the acquisition

BPMN 3023 STRATEGIC MANAGEMENT