AirAsia Berhad operates in the airlines industry providing air transportation services with a fleet of 90 aircraft by December 31, 2011. Its success is principally related to its cost efficient and effective businesses that have enabled the business to become Asia's leading low fare airline. AirAsia posted a 4. 0% increase in first-quarter net profit ending 31 March at 167. 97 million ringgit compared with 161. 9 million in 2011. This business also posted an archive quarter revenue of 1 1. 17 billion ringgit which is and increase by 11% from 1. 05 billion in the same quarter this past year (TTR Weekly, 2012).
Organization Position and Brand Strategy
AirAsia has observed a high degree of commitment to its core brand positioning as the first choice in low priced carrier in the region through "offering the lowest airfares at a profit" with the tagline that "Now Everyone Can Fly" (AirAsia, 2007). AirAsia's advertisements and promotional activities that are directed toward this initiative is visibly prominent in the increasingly competitive and crowded marketplace which allows the airlines to cut through the clutter and differentiate itself from other leading low cost carriers as well as the national carrier Malaysia Airlines. This plan is encapsulated aptly by Fombrun affirming that "brands closely reflect the true value of a company and it is a source of competitive advantage" (Fombrun, 1996).
Current Environment and Operations
SWOT Analysis of AirAsia
· Comprehensive use of internet technology because of its sales and marketing initiatives. Top features of AirAsia. com include dominant red and white branding, multiple language selection, simplicity, discussion forums, communication centres etc.
· Low operating cost model adopted throughout all services proposed by the airline such as being a no frills airline, online reservation of flight and Go Vacation packages, self check-in etc.
· Strong functions because of their multi country positioning with travel hubs located in Malaysia and Indonesia.
· The relatively flat company structure of AirAsia offers great opportunities for employees to provide feedback to the business.
· Strong and highly capable leaders in general management including industry thought leaders and ex-government officials.
· Business continues to be in its growth phase with increasing variety of purchases of Boeings and Airbus which enables expansion into more destinations and serving more customers since its inception.
· AirAsia's service recovery standards has plenty of room for improvement. There is no set corporate policy for service recovery and staffs often lack the essential skills in working with recovery incidences.
· The airline and its range of services lacks in its customer orientation focus as seen with numerous customer complaints on AirAsia Online Reservation System complaints.
· On Flight Services may have led to some grievance among passengers especially those who also frequently travel via non low cost carriers.
· There exists occasionally no upward communication with the management from the selected strategic partners in relation to customers experience or grievances on the web reservation system.
· Tapping the 'For-the-First-Time-Flying" market segment of travellers. This customer profile is typically younger Generation Y population which have higher propensity and acceptance of online packages and with limited cover travel.
· New markets will be created through distinct customer segmentation i. e. sharper concentrate on customer segment specifically for short haul routes e. g. price conscious customer and quality conscious customer.
· The airline industry sees the emerging of a fresh business design that is focused on the use of digital technology that permits a higher degree of efficiency which leads to an even greater cost advantage (O'Connel and Williams, 2005).
· Increasing price competition from other carriers.
· Increasing quantity of AirAsia Online Reservation complaints lodged up to the Ministry of Domestic Trade and Consumer Affairs and the Ministry of Tourism Malaysia (National Consumer Complaints Channel, 2012).
· Stiffer competition from full carriers such as Malaysia Airlines specifically for non business passengers and short haul passengers.
· Government regulations to guard the National Carrier such as with restricting access to some routes.
A. How do AirAsia Use and keep maintaining its Strengths?
The relatively flat company structure of AirAsia offers great opportunities for employees to provide feedback to the organization. The management should continue steadily to conducts regular team meetings with the employees as a channel to facilitate the upward communication in the organization.
B. How can AirAsia Improve its Weakness?
Lack of training and empowerment by the management leaves a lot of basic service issues that could be resolved easily by front line staff unresolved, escalating into unnecessary situations where service recovery is necessary. Formal processes have to be in place in finding your way through service failures.
As a leading low priced carrier in the region AirAsia has a clear understanding on customers' expectations for quality of service. A lot of emphasis in the business is made to create cost advantages in the value chain often not considering the impact it may have on the perception and expectations of the consumer. By conducting regular focused general market trends the company can achieve a clearer knowledge of customer's expectations and their perception of the services and offers presented.
C. How do AirAsia Exploit its Opportunities?
Alignment of Demand and Capacity
The organization has a wide range of resources that is deployed during peak travel the perfect time to ensure that customer expectations are met. Flexible strategy is applied to allocate resources and personnel for attaining fluctuation popular as well as expectations of future upsurge in demand.
D. How can AirAsia Mitigate its Threats?
Systematic Online Reservation System Design
AirAsia's Computer Reservation System is designed as a translation of the organizations understanding of customer's expectations however customer driven standards in the service designs is absent. Customers have low involvement in the development process of the system design which sometimes leaves the customer with a significantly less than desirable service. Redefining the service design to a more current framework would go quite a distance in identifying the standards of customers and meeting consumer expectations.
The pricing policy is highly dynamic, with discount and promotions. Aligned with its mission statement, AirAsia's business strategy is centered on cost leadership. Pricing strategies are structured to ensure that price is consistent with its price sensitive target market. AirAsia should continue steadily to build and sustain its competitive advantage by giving services including its simplistic online reservation system at a cost that is simply lower than its competitors' price while keeping customers expectations at a reasonable level.
PESTEL Analysis for AirAsia
· Malaysia continues to see political uncertainty with wavering support to the ruling coalition party (Edwards, 2002)
· Pressure by ASEAN nations to deregulate Indonesia's Rp. 1 million Fiscal charge to all or any Indonesian citizens and expatriates when departing from the Republic of Indonesia. This regulation is implemented for both business and tourism travel (RSM Asia Pacific, 2009)
· Increasing national tension between Indonesia and Malaysia with Malaysia being granted exploration rights to oil rich waters from the coast of Borneo.
· Terrorism attacks in many AirAsia destinations namely Bali and Thailand.
· Government policies and bilateral air travel agreements that have a tendency to favor the national carrier Malaysia Airlines.
· In Malaysia, the pace of growth of the economy in the first quarter of 2012 moderated to 4. 7 per cent (4Q11: 5. 2%, 3Q11: 5. 7%) (Malaysian Institute of Economic Research, 2012). This rise in economic growth and income has changed the spending pattern of customer which includes been encouraging for flights.
· The Malaysian inflation rate registers at 3. 2 percent which really is a 1. 7% increase over 2010 (Index Mundi, 2011)
· Malaysia ranks 20th for its ease of conducting business out of a complete of 181 economies surveyed in the World Ban CONDUCTING BUSINESS 2009 report.
· According to your new research report "Malaysian Tourism Industry Forecast to 2012", international tourist arrivals in Malaysia will grow at a CAGR of around 8% through the forecast period (2011-2013) (Research and Markets, 2010)
· Tourism receipts from overseas tourists are anticipated to go up at a CAGR of around 8% during the same period, thereby, surpassing RM 70 Billion (over US$ 22. 4 Billion) by 2013 (Research and Markets, 2010).
· Inflation of fuel costs has been threatening the airline industry. Upsurge in fuel prices have been translated to the customer with an increase in fuel surcharge on ticket prices.
· AirAsia operates in Southeast Asia primarily and across the world in many countries and spans across various languages and cultures.
· Southeast Asian countries produce an armamentarium of cultures and religions. This means that the comprehension of local laws and rules is very important for example the provision of halal food as in-flight dining service.
· The populace of Asian middle income is estimated to reach greater proportions soon, thus creating a large market and huge chance of AirAsia in the region specifically.
· Greater emphasis and trend toward international travel for vacations, education and business in today's society.
· A globalized economy will further drive the use of technology in business especially in the airlines industry which warrants AirAsia to implement a robust strategic give attention to the use of it.
· AirAsia has excellent utilization of Information Technology and this has been at the forefront of these promotional and brand building activities.
· Airlines are the second most dependent industry on information technologies within the US, the first being the financial industry (Butler, 2002). Because of its dependence, airlines are quick to look at new technologies to improve efficiencies that are anticipated to translate into cost savings.
· Airlines have used a number of ticket distribution channels to increase sales and profitability as seen in the case of AirAsia SMS Booking System.
· Airline reservation centre's need to be sufficiently competent to cater to the needs of the rapidly expanding global airlines industry.
· The growing propensity of individuals embracing technology and internet utilization in their purchase decisions and buy transactions encourages further research and development in this avenue.
· The global revolution in new internet and mobile platform technologies has been creating new distribution and promotion channels for the airline.
· Aviation is the front type of growing public knowing of the impact of man's activity on the climate and concern over the measures that will need to be taken to avoid irreversible change to the climate.
· Market based options for combating climate change include charges, taxes and trading.
· Upsurge in awareness and regulations pertaining to carbon emission which threaten the airlines with hefty fines for violations.
· Carbon offsetting is a service proposed by certain airlines in order to permit passengers to compensate for the carbon emissions produced by their flight thereby cancelling out negative impacts on climate (Polonsky et al, 2010).
· Air transport liberalization initiatives and Open Skies Agreements have significant positive financial effects on the economies of the nations involved and on the airline industry itself.
· By 2015, Southeast Asia will have open skies that offer an opportunity for AirAsia to increase it routes and destinations (Polonsky et al, 2010).
· Policy stances of the countries vary. Some countries are very liberal, inserting few limitations on international aviation.
The volatile macro environment of the airline industry both weights some challenges and merits some opportunities for AirAsia. To be able to warrant success in this setting it is crucial that AirAsia responds judiciously to key challenges facing the business and embraces any opportunities that can arise in the market (Viseras, 2005). It's important for organization to investigate how these factors are changing and how they will probably change in the foreseeable future (Johnson, 2009). Soaring fuel costs, unfavorable and tightly regulated bilateral air rights agreements and legal stances of global environmental laws are a few of the challenges that exhort strain on the airline. AirAsia approaches these challenges by constantly innovating to meet up with the rising challenges while still managing to keep its cost down across its value chain. AirAsia has been the front runner in embracing technology in its functions as a means to surmount the challenges the industry faces. Operational systems are designed to also take advantage of opportunities that presents itself. An evident example is the persistent revolution of its online booking system with the introduction of the first online booking system using the SMS platform to meet up with the current demands of the market.
It is natural for a commercial organization such as AirAsia to obtain such a diverse selection of groups having vested interest in the organizations decision and activities. Policies and legislations from specialists involving employees, funding, foreign investment, taxes, diplomatic relations just to name a few have a great influence on the organizations business processes and activities. Hence government agencies such as the Employees Provident Fund, Inland Revenue Board, National Bank, Ministry of Foreign Trade, and Ministry of Tourism have the same influence on the organization as shareholder. Travellers interest are relatively low in comparison to other stakeholders as their main concerns are low fares, safety, high quality service and expansive network of coverage. Slew of competition in the market and price competitiveness of supplies compels a great amount of influence on business and operational decision for AirAsia.
AirAsia has progressively launched value added services into its airline one which includes the online Computer Reservation System (CRS) and a key challenge for AirAsia in the context of the CRS is at managing service quality which has a direct relationship with customer satisfaction. This service represents the purchase of a seat on the airline through its official website AirAsia. com and combines the problem and delivery of the ticket into a single seamless operation that provides the capability of a faster and even more practical option for consumers. Several reports in mainstream media have seen that the level of acceptance for AirAsia's CRS has increased however the statistics will not indicate the amount of service quality having improved, for instance the malfunction, repeated error message during high traffic and promotional campaigns The e-ticket service quality in Malaysia as perceived by AirAsia customers is an problem of concern and for that reason it is imperative for the organization to revisit its quality dimensions in conditions if technology to ensure it meets the customers' expectations. (Ahmad, 2011). Functionality, efficiency, convenience and simplicity are strong indicators of customer satisfaction with online ticketing which the organization should absorb. (Ho, 2008). The service blueprint for AirAsia's CRS is illustrated in Appendix 1.
AirAsia competes in an extremely competitive market. Competition exist both domestically and internationally. At the moment there's a high degree of competition in flights catering to the ASEAN region. Some of AirAsia's rivals include Jetstar and Tiger Airways. These airlines share some similarities in their offerings and their operational processes and earnings generation from coverage in the ASEAN region makes up a substantial amount of their gross annual revenue. Secondly pricing structure of its offering is centered around the price leader, AirAsia and thirdly these competitors are purely budget airlines rather than national carriers. Service offered by these carriers are similar and almost undifferentiated resulting in competitive parity. In order to produce a competitive advantage AirAsia must continually finds ways to innovate the basic offering of the reduced cost carrier, a good example would be the development of an individual friendly online booking service using the mobile platform and reforme the undifferentiated online booking system.
Organization Vision, Mission and Values
AirAsia's corporate vision is to be the cheapest cost short haul airline atlanta divorce attorneys market it serves in Asia, delivering strong organic growth through offering the cheapest airfares at a profit and its own strategy is made after 6 pillars i. e. leanest cost structure, maximizing shareholders value, safety, passion for guests satisfaction, transparency and human capital development (AirAsia Berhad, 2006). Closely aligned to its corporate vision is AirAsia's mission statement which is usually to be the best company to work, to create a globally recognized ASEAN brand, to achieve the most reasonably priced so that Everybody Can Fly with AirAsia and also to maintain the finest quality product, embracing technology to lessen cost and enhance service levels (AirAsia Berhad, 2007). The organization values that AirAsia holds should be efficient and prudent, maintain simplicity, safety and transparency (AirAsia, 2008). Therefore
AirAsia's Computer Reservation Service
In tandem using its corporate vision, mission and values, AirAsia offers a host of value added services including the Computer Reservation System with the purpose of improving the AirAsia experience at the point of booking by offering a convenient and efficient online reservation service. The efficiency of this system obviously supports and further drives a lean cost structure for the airline.
AirAsia Business Objectives
AirAsia's business objectives if focused firmly on boosting earnings and on the efficient management of the cost base. This creation of value for its shareholders flows directly from the worthiness it provides to customers (AirAsia, 2006)
AirAsia Business Goals
AirAsia has a firm commitment to be always a truly Asian airline that operates an intensive route network, fosters monetary prosperity, stimulates tourism and promotes more powerful cultural integration thereby is poised to be the greatest and youngest airline in your community.
AirAsia Business Model
AirAsia's business model is focused on an inexpensive principle for the reason that it operates in a lean, simple and efficient structure. The airline has employed a competent use of Internet technology in a magnanimous method for its operational management of ticketing through the use of online ticket booking services. The airlines success is driven by passenger confidence and satisfaction with the no frills, hassle free and convenient way of travel and a key strategy to support this driver is its 'Easy to Book, Simple to Pay, An easy task to Fly' approach adopted through its online ticket booking service. At present, AirAsia employs a pc Reservation System (CRS) which can be an integrated online reservation and inventory system for this purpose. The CRS components include online bookings, schedules, payment systems, call centers, self check in and airport departure control amongst others that allows a seamless process for passengers from ticket booking to flight check in. It really is imperative to remember that AirAsia CRS satisfies the unique strategic position of the airline which is implementation an inexpensive business design which transforms the business enterprise process to proficiently streamline functions while keeping cost down. AirAsia's online ticketing booking process is elaborated further in Appendix 2.
Conclusion and Recommendations
Referencing the above data that have been analyzed, the following recommendations are created for consideration in the context of AirAsia's Online Computer Reservation System and encompass two aspects i. e. the outcome dimensions of efficiency and convenience as well as the procedure dimensions of technological functionality.
1. Alignment of Demand and Capacity
Improving the technical tools and system quality during peak booking time that will enhance the customer experience in conditions of ease of use and response time.
2. Technical Assistance and Service Recovery
Ensuring competent and efficient technical assistance with staff that are equip and empowered to resolve basic service issues and failures.
3. Systematic Online Reservation Design
Due to having less customer driven standards in the service design, it'll be crucial for AirAsia to constantly improve its framework to ensure the standards meet customer expectations.
4. Narrowing the Customer Gap
A clear understanding of customer expectations on the quality of service is imperative in assuring AirAsia is kept abreast of evolving customer expectation to its online reservation service therefore, regular focused market research to comprehend consumer perception and ensure a close alignment of service standards to meet these expectations.
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