AirAsia Berhad Sanjay Velan Keith Woo Dharshviny Sasidharan Marketing Principles Assignment 1
Executive Summary AirAsia Berhad is an airline company that provides airlines services domestically as well as internationally. Within Malaysia, AirAsia has targeted a consumer market that consists of young adults, working adults as well as middle income groups. The distributions of AirAsia‟s services for Malaysia as well as other countries are through its official website, www.airasia.com and travel agencies which are scattered around Malaysia. Through an analysis of the internal and external environment of AirAsia, it indicates that AirAsia enjoys important strengths in its low cost services, its effective and focused management and its simple business model. Meanwhile their weaknesses are limited service resources due to low cost, limited human resources as well as its heavy dependency on outsourcing. AirAsia faces a healthy external environment highlighted with the low cost tickets that could be bought by all levels of society. Marketing Objectives The AirAsia marketing objectives are, “to be the lowest cost short haul airline in every market that they serve, to continuously launch new routes under AirAsia as well as to own 175 Airbus A320 models by year 2015.” (AirAsia Berhad Annual Report,2009) Marketing Strategy In order to accomplish its goals, AirAsia will lead its marketing activities toward the following strategies:
Target Market Strategy: AirAsia will continue to target its existing customers while expanding its routes to more developing and developed countries.
Positioning Strategy: AirAsia will continue to position its brand as the lowest cost airline by giving away incentives in order to attract customers from other airlines services.
Product Strategy: AirAsia will maintain its efficiency in providing services which are convenient to customers as well as increasing its flight frequency to maximize its profits.
Pricing Strategy: AirAsia maintains its fares to be as low as possible and exercises its „pay only for what you want‟ philosophy amongst its customers.
Promotion Strategy: AirAsia aims at generating positive customer feedback by giving away tickets for free as well as venturing into hotel lines and endless promotional fares and holiday packages to gain constant attention from its customers.
Place Strategy: AirAsia moves away from the traditional way of services placement. It launches mobile facilities, call centers and much more to facilitate customers.
Internal Environment Mission Statement The mission statement of AirAsia is to: “Be the Asia's leading low fare no frills airline and first to introduce "ticketless" traveling, AirAsia will be unveiling more incentives in the future to encourage more air travel among Malaysians.” (Now Everyone Can Fly, 2007) Organizational Structure The organization structure of AirAsia is quite a large one since it includes AirAsia Indonesia as well as AirAsia Thailand. (AirAsia Berhad Annual Report, 2009) However, the main personnel are as below:
CEO of AirAsia, Dato‟ Sri Dr. Tony Fernandes leads AirAsia. He is responsible for overlooking the entire operations of AirAsia.
Deputy CEO and co-founder of AirAsia, Dato‟ Kamarudin Meranun helps by being involved in the development of the company and its other ventures.
Thai AirAsia‟s CEO, Tassapon Bijleveld, heads the operations in Thai. His duty is to oversee all the aspects of Thai AirAsia as well as to boost the growth in Thailand.
Indonesia AirAsia‟s CEO, heads the operations in Indonesia. He administers the business in Indonesia as well as tries to enhance the growth of Indonesia AirAsia.
Corporate Culture AirAsia has developed a brand that is accessible to everyone. The driving force underneath their brand is the unique and friendly AirAsia experience. This conducive AirAsia culture is everywhere in their operations including the management, guests services, ground and flight operations. To fulfill their mission by providing the lowest cost flights to customers in order to
be the leading low-cost carrier, their positive, warm and welcoming service has in turn won many long term customers for AirAsia. External Environment Competitive Environment AirAsia faces a few different levels of competition. Among its direct competitions are companies that also provide airline services in Malaysia as well as other country‟s low cost carriers, such as:
MAS (Malaysian Airlines)
Firefly (Subsidiary of Malaysian Airlines)
Tiger Airways (Low Cost Carrier based in Singapore)
Cebu Pacific Air (Low Cost Carrier based in Philippines)
AirAsia faces indirect competition from the following:
Holiday packages offered by traditional full service airlines which are cheaper than AirAsia flights give customers a better option of flying.
AirAsia faces trouble with the Indonesian culture of as they do not prefer to fly with light and minimum baggage. This opens up opportunities for other airlines that are able to provide value added extras although at a relatively higher cost.
AirAsia faces problems with its cheap flights as fuel prices are on the rise.
Economic Environment AirAsia was set up in Malaysia, a developing country, where the industries, standards of living as well as the utilization of technology are inclining. Like many other developing countries, Malaysia is made up of more practical middle class society who usually works very hard to raise the standards of their lives. Parallel to the society in Malaysia, AirAsia‟s low cost concept is well accepted since the society is always searching for cheaper alternatives when it comes to
travelling via air. AirAsia also therefore sets up its main hubs at other developing neighboring countries such as Thailand and Indonesia. Starting off and setting up AirAsia in developing countries has helped AirAsia as it is the are of their target market as well as obtaining skilled labor forces are much easier and cheaper. The economic environment of AirAsia also includes its recent introduction to AirAsia X, which flies long haul routes. Amongst its routes are the developing countries such as United Kingdom, Japan and many more.(AirAsia-Flight routes, 2007) Developing countries have given AirAsia the opportunity of gaining more market potential for its services. It also helps AirAsia to be internationally recognized. Apart from these, AirAsia‟s economic environment also involves a good economic infrastructure to its growth. AirAsia„s rapid growth sees the government of Malaysia building a new hub to house its aircrafts. The Low Cost Carrier Terminal (LCCT) which handles almost 9 million passengers a year has provided AirAsia with a better opportunity of growth. (LCCT to Get Bigger and Better, 2008)
Technological Environment AirAsia relies heavily on technology in conducting their business. The technology usage by AirAsia has enhanced its business greatly because all of their ticket bookings are done online as they are well known for the „ticketless‟ service that they offer. It also enables customers to check flight information, allows them to do online shopping as well as gives opportunity to customers to book hotel rooms in their Tune Hotel services and so on. Apart from their main website, AirAsia also has created a blog in which it gives valuable insights about their company, their cultures and much more. The blog also enables customers to give their feedback, regardless of whether it‟s positive or negative. Through the blog, customers not only get more information on
AirAsia but also help AirAsia improve its quality of services. The use of technology in AirAsia is also utilized maximally as it also serves as a portal that carries AirAsia‟s brand name.
Political and Legal Environment Safety measures in an airline company are the most important element. Hence, even to start the airlines, AirAsia has obtained an AOC which is the Air Operator Certificate issued by the Civil Aviation Authorities. Their pilots too, have all obtained flying license from the Civil Aviation Authority. As for their main hub in Kuala Lumpur, the Low Cost Carrier Terminal (LCCT), the Malaysian Airport Holdings Berhad regularly inspects the management, operation as well as maintenance of it. They also ensure that the operations are carried out efficiently as well as the safety and security of passengers is heeded. The political and legal environment at AirAsia also sees it successfully obtaining open skies agreement with neighboring countries such as Thailand, Singapore and Indonesia.
Sociocultural Environment demographics The sociocultural environment of AirAsia sees it taking many things into account while serving its customers. The demographics of AirAsia sees it appealing to a wide selection of income groups. AirAsia not only targets the medium income groups but also the low ones. It is designed in such a way that customers can customize their flying experience matching to their income. Customers who can afford paying extra can opt for variety add-ons such as food and beverages, sleeping kit and so on. However, those who can‟t can disregard these add-ons and continue flying with AirAsia. AirAsia also pays much attention to the mores of people in Malaysia as well as its neighboring countries. Since the majorities are Muslims, AirAsia avoids all its food on air
from pork products as well as other „non halal‟ items such as alcohol and so on. In order to cater its international customers, AirAsia provides alcoholic beverages on air which is only restricted under the AirAsia X service. Apart from that, AirAsia also overcomes the barriers of language almost efficiently in its website. AirAsia‟s official website that handles all the booking and sales of tickets provides customers with a range of languages to choose from. At the moment, AirAsia‟s website can be visited under languages such as Thai, Mandarin, Japanese, Indonesian Language, Tieng Viet (Vietnam language) as well as Bahasa Malaysia and English. (Now Everyone Can Fly, 2007) By offering its website in many languages, AirAsia not only makes its website user-friendly but also is able to advertise its services effectively.
SWOT Analysis The SWOT analysis provides a summary of the strengths, weakness, opportunities, and threats identified by Air Asia through of its internal and external environments. (Analyzing AirAsia in Business Competition Era, 2009) Strengths The following are the strengths identified by Air Asia:
Low cost operation
Less management level, effective, focused and aggressive management
Simple proven business model that consistently delivers the lowest fares
Penetrate and stimulate to potential markets
Multi-skilled employees means competent and inducement workforce
Weakness The following are the weakness identified by Air Asia:
Service resource is limited by lower costs
Limited human resources could not handle irregular situation
Government interference and regulation on airport deals and passenger compensation
Non-central location of secondary airports
Brand is essential for market position and developing it is always a challenge
Heavy dependency on outsourcing
Constant competition with other low cost carriers as well as traditional full service airlines.
Opportunities The following are the opportunities identified by Air Asia:
Growing middle class population creates a larger market for AirAsia
Optional addition of services allows passengers to obtain full service airline with low fare
Opportunity to partner with other low cost airlines
Being low cost gives an upper hand despite the high fuel prices and eliminates competitors
Threats The following are the threats identified by Air Asia:
Full service airlines start cut costs to compete
Entrance of other (low cost carrier)LCCs
Users perception that budget airline may compromise their safety features to keep the costs low
Accident, terrorist attack, and disaster and affect customer confidence
More traditional airline services create subsidiaries which consists of low cost carriers
Enhance in operation cost in constructing value-added services
System disturbance due to heavily dependence on online sales
Marketing Objectives Following are the marketing objectives set by AirAsia Berhad (AirAsia Berhad Annual Report, 2009):
To be the lowest cost short haul airline in every market
To continuously launch new routes under AirAsia
To own 175 Airbus A320 by year 2015
Marketing Strategies Target Markets AirAsia will continue targeting its existing target markets. AirAsia‟s primary consumer target market is as follows: Demographics
Male and female young adults, working adults and middle income group
Age: 20-50
Household income : MYR 45 000
Education of Head of Household : Diploma and above
Psychographics
Travel via air for holidays at a cheaper rate
Fly to domestic and international routes for business purposes under a small budget
Alternative means of transportation to travel during festive season in a short period of time
Convenient travelling for students who travel from the West Coast to the East Coast of Malaysia
Media Habits
Individuals on the target market are most likely to receive news and updates regarding AirAsia via Internet or SMS compared to newspapers or the television.
The consumers are mostly technology savvy and thus are always connected to social networks such as Facebook, Twitter and MySpace.
They are most likely to listen to radio in their automobiles as well as in their hand phones.
Organizational Markets In order to increase distribution and sales of its services, AirAsia will target the following in the future:
Media organizations that travel abroad for advertising shooting
Companies that hire international citizens as their staffs.
Travel agencies that offer holiday packages.
Media organizations often have to conduct advertising shooting for their clients at international locations. Thus, a large group of people involved in those tasks need to travel via air to get to their location. AirAsia targets these organizations as they can profit through group travels. AirAsia can also benefit via group travel by targeting companies that outsources for staffs and experts from other countries to work in Malaysia. They also benefit greatly by targeting travel agencies as it indirectly increases its frequency; from individual travelers to travelling with family and friends as well as tour groups.
Positioning Strategy AirAsia‟s positioning strategy involves two levels of positions. Primarily the strategy revolves around Re-positioning AirAsia as a brand itself and De-positioning its competitors in the airlines industry. In its Re-positioning strategy, AirAsia targeted to involve itself in the airlines industry as a low-cost carrier, affordable, efficient and without the frills of full service cost flights. In their branding, they use the slogan ”Now everyone can fly”, pointing customers towards the fact that under their flagship, flying is now a very feasible and affordable option in travelling.Giving away free seats during certain celebrations, events and so on is AirAsia‟s way of pushing more attention towards the airlines rather than allowing people to focus on other options. The incentive behind these strategies generates tremendous amounts of competitive interest for the seats, hence, raising up the fact that: “Now everyone can fly”. The other half of their positioning strategy is to De-position competitors in the airlines industry. By pushing AirAsia out as a budget airline, they mark out a plan to communicate to the masses the idea that AirAsia is indeed the cheapest, most affordable, and economical low-cost carrier there is in South East Asia. On top of that, they also communicate the idea that AirAsia is efficient, dynamic and provides quality service as part of their operations. The goal in this section of the De-positioning strategy is to increase the demand of low-cost flights. With that, they will be able “reposition” their competitors as alternatives that are more expensive in nature. As of late, AirAsia has also adopted a new positioning strategy which is more holistic in nature by not only providing flights, but also optional hotel bookings, packages, and other options that are customizable to the consumer‟s budget. The goal is to generate a feel of ease and efficiency as consumers only need to rely on one direct source to sort out all their travel
arrangements. They‟ve also packaged with their flights their own hotel chain, Tune Hotel, to go with the positioning strategy. AirAsia‟s expansion into most of South East Asia also shows that they are determined to compete with the other fleets as part of their route strategy. In order to profit from the routes, they will need to be competitive in terms of two way routes rather than just one way routes. Marketing Mix Product Strategies: AirAsia‟s philosophy is girded by the fact that they have been seen as a small airline competitor for many years. Therefore, in order to win more customers and return customers, they need to ensure that their primary products and services are up to par and meet the defining needs of customers.
Efficiency: AirAsia is all about convenience and efficiency. Their aim is to allow customers to travel for as low as possible without losing profit for the airlines. Hence, the buzz is to create as many products and services that are circled around efficiency and convenience, such as, online bookings, check-ins, pre-ordered food, kiosks, mobile detailing. And alongside, their strategy, they‟ve also created convenience in the form of holiday packages and tours.
Flight frequency: In order to maximize profits, the airlines must be able to transport passengers. The more they transport, they more they profit. Therefore, AirAsia practices higher frequency in certain “high traffic” routes. This also serves the convenience of customers who fly frequently in and out of certain areas.
Mobile centre: AirAsia has launched booking services via mobile phone or landlines in order to provide customer efficiency when it comes to ticket booking and check-ins. The less steps and troubles a customer‟s goes through, the faster profit is generated and consumers are satisfied.
Easy payments: With the huge structural change in banking dynamics, AirAsia became the first airlines to launch services that enable customers to pay for tickets via Credit Cards over the telephone or cash at Alliance Bank outlets. This is also on top of their online transactions which only require a few steps and verifications.
Pricing Strategies:
Penetration pricing: AirAsia‟s pricing is designed to penetrate the market in order to capture volume. Hence, with lots of cost cutting exercises, they are able to bring the fares for as low as possible with the knowledge that consumers will be getting what they want for what they are paying for. The “low fare, no frills” concept is designed to basically just transport
customers. Of course, with that in mind, AirAsia has also diversified its in-flight products by providing services that are “on-site” for the customers‟ conveniences. Promotion Strategies:
Positive consumer benefits:
AirAsia‟s promotional strategy is deployed in such a manner in order to generate positive consumer feedback via its efficient and cost-effective options. Even in the instance of giving away free seats and tickets, the promotional strategy is aimed at generating attention rather than purely sales. Once the set numbers of free tickets are given away, there is still much buzz about the remaining packages and other alternative offers.
Publicity:
AirAsia pushes its strategy in terms of generating tremendous amounts of publicity with their endless strings of promotional offers. And with the generous amount of diversification in their hotel chain, alternative cost-reduction options, and publicity stunts, consumers were more than willing to give AirAsia the attention it wanted. And being a low-cost carrier alternative, AirAsia was able to capture a fair share of the current local market. Supply Chain Strategies:
Place:
AirAsia has designed its strategy in such a way that enables itself to move away from traditional placement of services. The strategy being deployed is in order to bring placement services to the customer, rather than inconvenience the customer. Hence, the primary designs
of mobility and telephony services that empower the customer to retrieve services wherever they are and for whatever it may be when it comes to the airlines.
References AirAsia
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http://www.airasia.com/iwov-resources/my/common/pdf/AirAsia/IR/AirAsia_AR09.pdf AirAsia-Flight Routes (2007) Route Map. Retrieved from http://www.airasia.com/id/en/travel information/routemap.html Analyzing AirAsia in Business Competition Era (2009) SWOT Analysis. Retrieved from http://elearning.lib.fcu.edu.tw/bitstream/2377/28913/1/M980005798101.pdf Metro Star (2008, April 28) LCCT To Get Bigger and Better. TheStar Online. Retrieved from http://thestar.com.my/metro/ Now
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