AIrAsia case study

Topics: Low-cost carrier, Malaysia Airlines, AirAsia Pages: 5 (2575 words) Published: November 5, 2014

AIR ASIA Case Study Report
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Core concepts : Porter’s 5 forces, SWOT Analysis , Analysing the internal environment, Porter’s Value Chain, Competitive advantage within International context(cost analysis and differentiation) 1.0 Porter’s Five Forces:

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1.1 Threat of new entrants-
There is a need of high initial investment to run an airline industry business. This high capital requirement is in the form of buying of aircrafts, staff hiring, pilot hiring, etc. Thus, the threats of new entrants for AirAsia are very low. AirAsia uses a very simple and effective strategy of selling tickets. People have to buy tickets from AirAsia’s website which they do very easily. Thus, through this process, AirAsia saves a lot of money by not being liable to pay any travel agent. This Strategy of AirAsia is hard to imitate and makes them less vulnerable to new entrants. It also provides facilities to people like they can themselves print their ticket or boarding pass and thus competitors cannot easily copy this strategy of AirAsia. AirAsia Also has very good relations with Government which a very rare capability to have. It is not easy for any new entrant into the industry to gain confidence of the government straightaway. Thus, this makes this industry to enjoy a very low threat of new entrants as it is hard to get license and permit to establish an airline. Thus, Governments regulations are a big barrier to any new entrant into the industry. Most of the times, nowadays, customer choose their product. Thus, trust on the brand or brand loyalty plays an important role in this. Certainly, AirAsia has built their trust on customer. It is not easy for nay new entrant to come into the industry and gain customer’s trust and build reputation. Also, it can be said that AirAsia will continue to enjoy this trust of customer until and unless it provides the cheapest fare. 1.2 Threat of substitute-

Other transport methods: Substitutes are basically products or services which can replace existing product or services. Airline industry thus have a huge substitutability as for example, if one has to go within the country bus, train or personal vehicle are good substitutes as they are cheaper. Considering about long-haul like India or Australia, Airlines are a good option and have low substitutes. 1.3 Power of buyer-

The bargaining power of buyers is high as not many airlines provide flights at cheapest price. AirAsia certainly has lower prices and provide good facilities and amenities to customer. Development of technology has helped airline industry. Now, people can buy their ticket on a click. Customer can go through many airlines website and also some travel websites and easily look at more cheaper and better price. Therefore, airlines have less negation power and customer enjoy high bargaining power. 1.4 Bargaining power of suppliers-

Airline industry has two suppliers-Airbus and Boeing. They are the only two companies who supplies aircraft to industry and thus enjoy Duopoly. Thus, bargaining power of suppliers is high. Other important products suppliers like fuel also have a high bargaining power as the fuel used in Aircraft is special and not many companies provide them. The secondary suppliers like food suppliers don’t have a strong bargaining power as AirAsia doesn’t provide these amenities in the travel. Also, there are many suppliers of these resources thus it given the company enough options to choose from. Power of maintenance suppliers is moderately low. This is because AirAsia has outsourced the maintenance and the contract is provided on ‘’competitive bidding’’ method (Grant, 2013). The imperative suppliers like Fuel have a high bargaining power. This is because not many suppliers are there in the market and also the fuel used by the Aircraft needs special fuel. 1.5 Rivalry among existing firms

High competition: There are a lot of rivals of AirAsia. In Asia; a huge number of airlines are using...

References: Grant, Robert M, Contemporary Strategy Analysis, 8th Edition, 2013.
Faughey, Bernard, UCD MSc Project Management-Business Strategy Lecture Notes 2014-2015
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