Macro-environment Analysis on AirAsia and its effect on Marketing Decision Making
| Prepared by Gajanayagam Jeyasundram
This paper looks at a comprehensive macro-economic analysis using PESTEL and how it influenced marketing strategy and initiatives at AirAsia.
Table of Content
| Introduction * 1.1 Company Background
| Macro-environment Analysis * 2.1 Demographic Factors * 2.2 Economic Factors * 2.3 Natural Factors * 2.4 Technological Factors * 2.5 Political/Legal Factors * 2.6 Cultural Factors
1.1 Company Background
Air Asia was established in 1993, and started of as one of the subsidiary for government owned company, DRB Hicom. In the late 2001, when then executive of Warner Music wanted to established an airline in Malaysia, he went and meet with Tun Dr. Mahathir Mohammed (the fourth prime minister of Malaysia). Tun Dr. Mahathir took the opportunity to off load debt laden Air Asia to Tony Fernandez. Tony Fernandes via Tune Airways Sdn. Bhd bought over Air Asia with a token sum of RM1 and with a partial debt of 40million. Then AirAsia had only two Boeing carriers. Then, it was carrying around 200,000 passengers in a year. In 2011 alone, it was carrying almost 18 million passengers.
AirAsia slogan is “everybody can fly”. It highlights the low cost carrier strategy it employs. It seeks to keep cost low by offering no frills experience.
2.0 Macro-Environment Analysis
2.1 Demographic Factor.
AirAsia is situated in the geographic location with over 3 billion population. Which is almost half the world population, majority of them never flew before because of high travel cost. This is AirAsia competitive advantage. Its strict adherence to its low cost business model will enable it to tap into this market. Apart from that the low cost model has worked in US and Europe despite the cyclical nature of economic growth.
The diagram above is from IATA which shows that the additional passenger between 2006 and 2011. Asia pacific which is home of AirAsia shows the highest increase with almost 250 million additional passengers. (AirAsia Annual Report 2007)
The market outlook from Boeing shows that Asia Pacific region seeks to the highest increase in new airplane demand compared to other region. The demand for new airplanes from Asia pacific which is almost 50% of total demand in the coming twenty years underscores the increase level of growth in the Asia pacific market. This is true testament to AirAsia’s potential in the Asia pacific market. This is reflected in AirAsia’s aggressive approach in expanding. One of their main strategies in expanding their market is through joint venture in Thailand, Indonesia, Philippines, Japan and possibly India. 2.2 Economic Factor
Economic factors in decision making are undeniable. Kotler thinks that “economic environment effect consumer-buying power and spending patterns.” Total buying power depends on current income, prices, savings and credit. The consumer-buying power also will influence the changing of consumer spending patterns. Different areas will have the different affects influenced by the economic factors. The strong and sustained growth in the entire region consisting of South Asia, South East Asia and East Asia compared to the rest of the world especially traditional markets such as North America and Europe puts AirAsia as a AirAsia exist on the need to allow people who otherwise could not fly with traditional carriers to be able to fly. Hence, it targeted the larger lower, middle and upper middle class segment.
In its early stages, it created promotional campaign that revolved around giving away 1million free tickets, and sales promotional campaign involving rock bottom sales. Malaysians was immediately attracted to it. Hundreds of thousands if not millions of Malaysians, who otherwise would not able...
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