Airasia Case Study 9

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AirAsia was initially launched in 1996 as a full-service regional airline offering slightly cheaper fares than its main competitors. Unable to stimulate the market or attract enough passengers, the company was beset with major financial troubles. In 2001, Tony Fernandes reinvented the airline to model Southwestern’s no-frills/low cost design and with only three B737 aircrafts was able to quickly create one of the most profitable airlines in the world. Economies of Scale – Economies of scale exist wherever proportionate increased in the amounts of inputs employed in a production process result in lower unit costs. (Grant, p 232) * Technical Input-Output relationships – “AirAsia operates a single type of aircraft, the Boing 737. A single aircraft type offers economies in purchasing, maintenance, pilot training and aircraft utilization.” (Grant, p 630) * Specialization – Because of their smaller size and repetitiveness of activities the employees are able to specialize on their specific roles, but due to the limited number of roles, they can cross train employees to seamlessly cover other roles. In a sense they have specialized their employees to be cross-trained reducing down time and training costs. By exploiting the flexibility advantages of smaller size; second, by avoiding the difficulties of motivation and coordination that accompanies large scale. (Grant, p 233-234) Economies of Learning – Learning occurs both at the individual level through improvements in dexterity and problem solving, at the group level through the development and refinement of organizational routines. As noted above, in Specialization, the AirAsia employees have a more robust learning advantage over their competitors. Their increased individual skills and process inputs help create a culture of improved organizational routines. Process Technology and Process Design – A process is technically superior to another when, for each unit of output, it uses less of one input without...
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