Cost Management in Air Asia
1.0 INTRODUCTION
Background, History and the Business Concept
AirAsia is a brand of airlines operated by AirAsia Berhad. A Malaysian based low-fare company. AirAsia established in 1993 and start the operations on 18 November 1996 (Wikipedia, 2011)
Inspired by the success of Ryanair and EasyJet as low cost carrier, Toni Fernandes saw the potential of having the same concept in Asia. Air Asia executed the cost leadership strategy with introduced ticketless travelling, one type cabin, free seating, and online booking trough internet that able slash the price into 40% - 60% cheaper than regular airlines (Declanegan, 2012)
“Now Everyone Can Fly” described AirAsia’s value. Operational effectiveness and cost advantages created efficiency go directly to end user. Customer enjoy more surplus with price falls, and encourage more air travel among Malaysians (Khoo et all, 2005)
The study purpose is to analyse how AirAsia and its strategic cost management able to operate a business in low cost yet generate a profit, and able to sustain as one of the business leader in South East Asia.
2.0 LITERATURE REVIEW
2.1 What is Strategic Cost Management
Cost management is a process where entities have control, monitor and manage their own cost and expenses. It covers the whole budget of the business, inflow and outflow of cash and transactions in every certain of period. This is for the entity to keep track of their business transaction, and also to estimate budgets for the future. While strategic cost management is the overall recognition of the cost relationships among the activities in the value chain, and the process of managing those cost relationships to a firm’s advantage and also known as Cost Management Theory1.
2.2 The importance of strategic cost management to the company
Strategic Cost Management is one of the key business strategic planning. Dr Kalyani Srinivas C defined strategic cost management as a tool for competitive advantage and value
Background, History and the Business Concept
AirAsia is a brand of airlines operated by AirAsia Berhad. A Malaysian based low-fare company. AirAsia established in 1993 and start the operations on 18 November 1996 (Wikipedia, 2011)
Inspired by the success of Ryanair and EasyJet as low cost carrier, Toni Fernandes saw the potential of having the same concept in Asia. Air Asia executed the cost leadership strategy with introduced ticketless travelling, one type cabin, free seating, and online booking trough internet that able slash the price into 40% - 60% cheaper than regular airlines (Declanegan, 2012)
“Now Everyone Can Fly” described AirAsia’s value. Operational effectiveness and cost advantages created efficiency go directly to end user. Customer enjoy more surplus with price falls, and encourage more air travel among Malaysians (Khoo et all, 2005)
The study purpose is to analyse how AirAsia and its strategic cost management able to operate a business in low cost yet generate a profit, and able to sustain as one of the business leader in South East Asia.
2.0 LITERATURE REVIEW
2.1 What is Strategic Cost Management
Cost management is a process where entities have control, monitor and manage their own cost and expenses. It covers the whole budget of the business, inflow and outflow of cash and transactions in every certain of period. This is for the entity to keep track of their business transaction, and also to estimate budgets for the future. While strategic cost management is the overall recognition of the cost relationships among the activities in the value chain, and the process of managing those cost relationships to a firm’s advantage and also known as Cost Management Theory1.
2.2 The importance of strategic cost management to the company
Strategic Cost Management is one of the key business strategic planning. Dr Kalyani Srinivas C defined strategic cost management as a tool for competitive advantage and value
References: Chan, D. 2000. “Airwars in Asia: Competitive and Collaborative Strategic and Tactics in Action. “Emerald Management and Development, 19:473-488. Declanegan, 2012. AirAsia. http://declanegan.blogspot.com/2012/01/few-people-said-they-enjoyed-my-post-on.html Doddid, 2012. Business Model Low Cost Carrier Air Asia. http://doddid.com /2012/04/business-model-low-cost-carrier-air-asia/ Khoo, C. Hofman, S. Tjitrarahardja, C. Narayaswamy, R. 2005. Air Asia Strategic IT Initiative. University of Melbourne. Meaney, K. 2011, Importance of Cost Management for Business Success. On Website http://ezinearticles.com/?Importance-of-Cost-Management-for-Business-Success&id=5692129 http://www.ventureline.com/accounting-glossary/S/strategic-cost-management-definition/ http://www.deloitte.com/assets/Dcom-Ireland/Local%20Assets/Documents/ie_Consulting_ChangingYourTune.pdf