This report consists of an internal and external analysis of AirAsia using various methods including a PEST, Organization analysis, SWOT analysis and Porter’s 5 forces model. The main outcomes of the report are: 1.1 Conclusions reached:
1.2 Recommendations reached:
The company chosen for this report was AirAsia. The assignment required that: • A management report of 3,500 to 4,000 words is written on an organization. The report should describe, analyze and assess the impact of external and internal factors on the organization and evaluate the organization’s responses • In relation to technological change, analyze how it influences policies and decision making, critically evaluate the effectiveness of the organization and recommend areas for improvement in response for the organization. The company has been analyzed using the aforementioned procedures and tools; and conclusions and recommendations have been reached from these tools. 3. Background to AirAsia
3.1. Organization Definition
A ‘no-frills’ airline is defined as one “That uses charter and/or scheduled flights to offer bargain-basement fares. Budget airlines usually land at and take-off from secondary airports, do not provide in-flight meals or refreshments, and may not even offer numbered seat allocation. Their ticket prices are fixed and non-refundable in case of a cancellation or no-show”. (i) 3.2. Looking at the Organization
AirAsia is one of the fastest growing airline companies in the world, with a reputation as a low-cost, ‘no frills’ airline. It was originally a government owned business; yet, due to heavy debt, it was bought by former Time Warner executive Tony Fernandes in 2001, and this is where the real story begins. Their vision, under the slogan "Now Everyone Can Fly", 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”,(ii) and their mission is, under the banner of 'Affordable Airfares', “To attain the lowest cost so that everyone can fly with AirAsia,” without any compromise to Flight Safety Standards, as well as, creating a world wide recognizable brand with a ‘family’ atmosphere within working conditions for employees. (iii) These statements clearly show AirAsia’s value. Cost advantages through operational effectiveness and efficiency; coupled with strong brand marketing, go straight to the customer. Within two years, Tony Fernandes had gained recognition with numerous awards, including ‘CEO of the Year’ by Business Times and American Express and ‘Developing Airline of the Year 2003’ by Airfinance Journal. (iv) 4. Industry Framework Analysis.
4.1 Porter’s 5-Forces Model (Appendix 1)
From the analysis model, it is possible to conclude that supplier power is high due to monopolization of the industry by Boeing and Airbus. However, this is countered by the relative poor performance of airlines in the recent past. Although there are only two companies to purchase or lease airplanes from, the global crisis has limited new entrants into this market and reduced upgrading of planes for the immediate future. Buyer power is reasonably high because potential customers have access to price information through the internet and mobile technology; thus, they can find cheaper prices easier. Furthermore, changing from one airline to another has no costs and is easily achieved. Competition rivalry is currently in AirAsia’s favour. With price being the main battlefield of competition, AirAsia leads the way due to its low operating costs. However, there are more competitors entering the market that have major carriers as backers or owners which may lead to an ‘unrealistic’ price war in the future. Fortunately, with the Asian region being so vast and with its geographic ‘make-up’, air travel is not only a viable service but also the most efficient and convenient. This makes the threat of substitution low to AirAsia. Travelling from, for...
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