TABLE OF CONTENT
INTRODUCTION………………………………………………... 2
COMPANY BACKGROUND…………………………………… 3
MANAGING CHANGE AND INNOVATION…………………. 4
SWOT ANALYSIS
STRENGTHS……………………………………………... 5
WEAKNESS………………………………………………. 7
OPPORTUNITIES………………………………………… 8
THREATS…………………………………………………. 9
STRATEGICS MANAGEMENT………………………………… 10
MANAGING HUMAN RESOURCES…………………………… 11
CONCLUSION …………………………………………………… 12
RECOMMENDATION…………………………………………… 13
REFERENCES……………………………………………………. 14
INTRODUCTION
This project paper is to relate chapter that we choose in management subject to Suite with Air Asia Company. As our main topic is chapter twelve that is managing change and innovation .We can define Air Asia organizational change and how it managers might change structure, technology, and people. We describe the structural, cultural and human resources variables that are necessary for innovation. Further explanation will be discussed throughout this project. As we all had been informed, this task required to be relate with another chapters is chapter eight that is strategic management and managing human resources which is chapter ten .The chapter eight we will explain about the importance of Air Asia in strategic flexibility and describe Air Asia e-business strategies. The chapter ten, we will explain how Air Asia managers can manage downsizing and manage workforce diversity. It will show that how their organizations are dealing with work-life balance issues and how their organizations are controlling human resource.
COMPANY BACKGROUND
AirAsia is one of the award winning and largest low fare airlines in the Asia expanding rapidly since 2001. With a fleet of 72 aircrafts, AirAsia flies to over 61 domestic and international destinations with 108 routes, and operates over 400 flights daily from hubs located in Malaysia, Thailand, and Indonesia. Today, AirAsia has flown over 55 million guests across the region and continues to create more extensive route network through its associate companies. AirAsia believes in the no-frills, hassle-free, low fare business concept and feels that keeping costs low requires high efficiency in every part of the business. Through the corporate philosophy of "Now Everyone Can Fly", AirAsia has sparked a revolution in air travel with more and more people around the region choosing AirAsia as their preferred choice of transport.
MANAGING CHANGE AND INNOVATION
AirAsia has currently adopted information technologies strategically to integrate the operations and coordinate allthe business and management functions. The followings are few change and innovation that AirAsia has done in its marketing and sales activities as well as operation activity in the value chain.
1. Services
2. Technology
3. Business Model
4. Design
5. Creativity
SWOT ANALYSIS
STRENGTHS
1. Strong management team
Air Asia has a very strong management team with strong links with governments and airline industry leaders. This is partly contributed by the diverse background of the executive management teams which consists of industry experts and ex-top government officials. For example, Shin Corp (formerly owned by the family of former Thai Prime Minister - Thaksin Shinawatra) holds a 50% stake in Thai AirAsia. This has helped AirAsia to open up and capture a sizeable market in Thailand. With their strong working relationship with Airbus, they managed to get big discount for aircraft purchase which is also more fuel efficient compared to Boeing 737 planes which is being used by many other airlines
2. Strategy formulation and execution
The management team is also very good in strategy formulation and execution. The strategy that they have formulated at the beginnings was a clever blend of proven strategies by other low cost airlines is US and Europe. They are Ryanair's operational strategy (no frills, landing in secondary airport), Southwest's people strategy (employee comes first) and Easyjet's branding strategy (linking with other service providers like hotels, car rental).
3. Brand name
AirAsia's brand name is well established in Asia Pacific. Besides the normal print media advertising & promotions, AirAsia's top management also capitalised on promotions through news by being very "media friendly" and freely sharing the latest information on Air Asia as well as the airline industry. Their partnership with other service providers such as hotels and hostels, car rental firms, hospitals (medical tourism), Citibank (AirAsia Citibank card) has created a very unique image among travellers. Alliance with Galileo GDS (Global Distribution System) that enables travel agents from around the world to check flight details and make bookings have also contributed to their string brand name. Air Asia's local presence in few countries such as Indonesia (Indonesia AirAsia) and Thailand (Thai AirAsia) have successfully "elevated" the brand to become a regional brand beyond just Malaysia. The links with Manchaster United (one of the world's most famous football teams) and AT&T Williams Formula One team have further boosted their image to a greater extend beyond just the this region
4. Low cost leader in Asia
AirAsia is the low cost leader in Asia. With the help of AirAsia Academy, AirAsia has successfully created a "low-cost airline mentality" among their workforce. The workforce is very flexible and high committed and very critical in making AirAsia the lowest cost airline in Asia.
5. Excellent utilization of IT
The excellent utilization of IT have directly contributed to their promotional activities (email alerts and desktop widget which was jointly developed with Microsoft for new promotions), brand building exercise (with over 3 million hits per month and on the most widely surfed booking engines in the world) as well keep the cost low by enabling direct purchase of tickets by consumer thus saving on airline agent fees
WEAKNESS
1. Limited Service
Being low cost and budgeted flights, AirAsia cannot provide additional service to the customer as per the customer requirement. The service provided was very limited, there weren't business class, no frill service and other service.
2. Unable to handle irregular situation
Being budgeted airlines, the human resources are limited to reduce the cost, the staff's member cannot cater various situational needs and handle irregular situation that arises during their operations.
3. Dependent of Internet for minimizing distribution cost
AirAsia had to be solely dependent on e-commerce tool such as internet and phone, but market in Thailand and Indonesia had low internet penetration and credit card usage. Hence the airline was missing out the potential prospects within these markets.
4. Heavy dependent on Contracts and outsourcing
Various contracts and agreement were made to outsource different operation, including maintenance and repair service to others in order to minimize cost. If ground support service contractors failed to provide service in time, overall operation would be affect and delay the boarding time can be experienced.
5. Questionable on-time performance
Limited aircraft also means unavailability of standby planes in the event of operational problems. Passengers have to face trouble traveling on-time, which ultimately affecting brand equity.
6. Air Asia does not have its own maintenance, repair and overhaul (MRO) facility.
It may be a good strategy when they first started with only Malaysia as the hub and few planes to maintain. But now, with few hubs (Malaysia, Thailand and Indonesia) and over 100 planes currently owned and about another 100 planes to be received in the next few years, AirAsia have to ensure proper and continuous maintenance of the planes which will also help to keep the overall costs low. It is a competitive disadvantage not to have its own MR
OPPORTUNITIES
1. Differentiation from traditional LCC model by adding customer service or operation as full service airline with low fare
Operational improvements can expand and better service to customers able to modify the company's profits, because of increasing competition due to the increasing number of low cost airline competitors, and aggressive competition against big airlines or traditional.
2. Ongoing industry consolidation has opened up prospects for new routes and airport deal
Cooperation between airports across the country can help increase profits for the company. Existing with collaboration, AirAsia able to add their company flight destinations throughout the country.
3. High fuel prices will squeeze out unprofitable competitors
The increasing oil price at the first glance may appear like a threat for AirAsia. But being a low cost leader, AirAsia an upper hand because its cost will be still the lowest among all the regional airlines. Thus, AirAsia has a great opportunity to capture some of the existing customers of full service and other low cost airline's customers. However, there will be also some reduction in overall travel especially by casual or budget travelers.
4. AirAsia will get inherent advantage in long distance travel
With additional routes, as well as a good operation. AirAsia is able to attract more customers for long-haul routes by offering affordable flight prices, because not many low-cost airlines flying long distances.
5. Developed innovation technology
Technology development could help the budget airline's go further, except to facilitate the operating system it can also facilitate customers to communicate directly through the online system for booking tickets or to view the flight schedules and flight prices that are offered. Technology can also help promote the company to the world.
Threats
1. Oil price at six month high.
Oil prices have surged to six-month highs above USD65 per barrel. Unhedged AirAsia could experience an up to 50% increase in fuel costs in the second quarter compared with an average of around USD40 per barrel in 1Q2009, which will have a major dampening effect on earnings.
2. Swine flu spread.
If swine flu continues to spread and there is a major outbreak in Southeast Asia, all carriers, including AirAsia could be significantly affected. LCCs in Mexico – the epicentre of the outbreak – have reported traffic reductions in the order of 50% and the country's full service carriers have abandoned their international expansion plans. This does not appear likely at this stage, although Japanese cancellations have escalated recently.
3. Rates beyond the control of airline operators.
Certain rates like airport departure, security charges and landing charges are beyond the control of airline operators and this is a threat to all airlines especially low cost airlines which tries to keep their cost as low as possible. For example, Changi airport in Singapore charges SGD21 for every person who departs from Singapore.
4 Create a low cost subsidiary.
AirAsia's profit margin is about 30% and this has already attracted many competitors. Most of the full service airlines have or planning to create a low cost subsidiary to compete directly with AirAsia. For example, Singapore Airlines has created a low cost carrier Tiger Airways. Users' perception that budget airlines may compromise safety to keep costs low.
-Full service airlines start cut costs to compete
-Entrance of other LCCs
-High fuel price decreases yield
-Accident, terrorist attack, and disaster and affect customer confidence
-Aviation regulation and government policy
-Increase in operation cost in producing value-added services
-System disruption due to heavily reliance on online sales
STRATEGIC MANAGEMENT
AirAsia as a company that joined in the airplane industry business must preparing a good strategic management and need to thinking strategically when the competition in the airplane industry becoming though, complex, and rapidly change. The competition among airplane industry will become more grow, traffic volume also would be increase, and also the Asian air travel market has always been intense. The AirAsia strategic management needs to effectively and efficiently prepare and implement in the AirAsia company management.
1. Unique and complex industry
AirAsia is a unique and complex airline industry. AirAsia need to come out with the greatest strategy to compete with their rival in the same industry. Its possible AirAsia could not be able be compete with the complex business environment in the airline industry without the right strategic management.
2. Planning, Organizing, Leading, and Controlling
In a company nowadays, general management engaging in the four major functions of which is planning, organizing, leading and controlling. The process of achieving organizational goals by may not sufficient and supportive for the organization succeed in the world of complex environments. It concerns about the process to manage the company internally but do not concentrate more on creating competitiveness regarding environments affecting the organization. Even companies adopt general management to sustain profitability by reducing the defects or costs, and improving operations process in order to increase productivity, they may not succeed in the competition because they perform only similar activities better than competitors but do not create distinctive competitiveness.
Additionally, they perform only operational effectiveness but not strategy. Operational effectiveness and strategy are both essential to superior performance but they work in very different ways. Strategy is about competitive position that the company performs different activities from rivals or performing similar activities in different ways. To learn how the companies create strategies and put them into action, the executives or strategists should examine carefully an aspect of strategic management.
Moreover, the organization or company nowadays is faced with constantly changing external environments and needs to ensure that its own internal resources and capabilities are more than sufficient to meet the needs of the external environment. Organizations or companies do not exist simply to survive in the market place but want to grow and prosper in a competitive environment. In order to make sense of what is going on around them, firms must undertake an analysis of their external and internal environment. To understand and how take an action about external and internal environment, a company needs to support themselves with a good strategic management.
Because of this reason, AirAsia need to consider a strategic management as the important things in their company. The strategy that AirAsia need is not just how to reduce cost and make the operational activities running effectively. But, AirAsia needs to come out with the strategy that can make competitive position that the company performs different activities from rivals or performing similar activities in different ways to achieve their business successfully.
AirAsia company needs to consider and stress to a strategic management because the globalization. The globalization consideration impacts virtually all-strategic decisions in a company. The globalization also forced AirAsia Company to survival for business. To see and appreciate the world from the perspective of others has become a matter of survival business.
The underpinning of strategic management hinge upon managers gaining an understanding of competitors, markets, prices, suppliers, distributors, governments, creditors, shareholders, and customers worldwide. The price and quality of firm's products and services must be competitive on a worldwide basis, not just a local basis.The globalization makes a rapid change in the business environment. Every company has a same chance and opportunity for doing their business. For those company doesn't aware and take this as important consideration, they will failed to compete with their rival or competitors in their business.
Moreover, the strategic management becoming important due to the following reason is because the rapid development in E-Commerce. Nowadays, E-commerce is becoming a business tool. E-commerce also has become a vital strategic management and allows a company to sell products, advertise, purchase supplies, bypass intermediaries, track inventory, eliminate paperwork, and share information. In total, electronic commerce is minimizing the expense and cumbersomeness, improved products, and higher profitability
In conclusion, Air Asia is need to aware and consider with the strategic management. The reason of the airline industry is a unique and complex industry, not just how to reduce cost and make the operational activities running effectively. But, AirAsia needs to come out with the strategy that can make competitive position that the company performs different activities from rivals or performing similar activities in different ways to achieve their business successfully, and the last one is because the effect of globalization and E-commerce becoming an effective tool in a company nowadays.
.CURRENT STRATEGIC IT IMPLMENTATION
AirAsia has currently adopted information technologies strategically to integrate the operations and coordinate all the business and management functions. The followings are few system implementations that AirAsia has done in its marketing and sales activities as well as operation activity in the value chain.
Yield Management System (YMS)
Anticipates and reacts to the behavior of customers to maximize the revenue - taking into account the operating cost and aids AirAsia to optimize prices and allocate capacity to maximize the expected revenues by 2 levels:
Seat
Seats are available at various prices in different points of time. A reservation done at a later date will be charged more than the one done earlier for the same seat
Route
By adjusting prices for routes / destinations that have a higher demand when compared to others.
Results increased revenue (3-4%) by taking advantage of the forecast of the high / low demand patterns, lower prices as YMS has aided AirAsia to increase the revenue by offering higher discounts, more frequently during off-peak times while raising prices only marginally for peak times.
MANAGING HUMAN RESOURCES
CONCLUSION
The main problem of the case analysis is that AirAsia overlooks their customer's actual needs because the firm is too focused on maintaining their balance between cost and profitability. The analysts see this as a hindrance to the company's mission and objectives, because they are too focused on the innovation of their services andcampaigns while maintaining the no-frills concept. With too much attention on makingchanges in their services, the company might fail to actually satisfy their customers' needs.The analysts therefore conclude that establishing a good relationship betweenthe marketing team and other company departments is the best alternative in order to solve the firm's main problem, for failure to ensure good relationships among sectorsmay cause the company to stray from delighting their customers to focusing oninnovating their service instead.The alternative will not only garner more sales for the company, but also goodservice image and increased popularity in the market due to delighted customers' word-of-mouth marketing. Moreover, the company need not adjust their budgeting becauseall they have to do is create good relationships among sectors through open dialoguesand cross-functional meetings. Most importantly, if the departments get along to achievea common goal, company strategies will be effectively implemented. Marketinginvestments will surely be returned in the form of well-formed customer relationships,loyalty and equity.
RECOMMENDATION
For this case analysis, the analysts recommend the third alternative course of action, which is to establish and ensure good relationships among the marketing team and other company departments. Similar to "brainstorming", it is to be done altogether in order to make an effective plan of delighting customers while still keeping expense sat bay. Cross-functional meetings are expected to be held with the marketing team leading among the other departments. An open dialogue among them must take place and then they should agree on a certain point of convergence, which the company will act upon afterwards. Based on the criteria the analysts have come up, the company is expected to have an increase in sales volume by getting the product more known to more and more people. If the marketing plan or strategy is well prepared and done, the nit will bring good impact on customers as the services availed were able to delight them. If that happens, it will be a delight for the company as well for having profitable customers
Second opinion :
In order to gain market share and sustain its competitive advantages to be the low cost carrier in the high demanding environment, AirAsia must
1. Develop new ways to manage both customer relationships and suppliers
or partners to optimize customer loyalty, supplier relationships, and revenue. The following diagram shows the strategic forces of value proposition of the airline industry, showing that the focus on Supplier and Alliances and Customers will drive positive values to AirAsia can achieve. Customer Relationship Management (CRM) application will be one of the area of strategic IT implementation that AirAsia can focus to achieve high values to both shareholders and customers.
2. Maximized IT and implementing E-commerce in AirAsia business.
Nowadays, E-commerce is becoming a business tool. E-commerce also has become a vital strategic management and allows a company to sell products, advertise, purchase supplies, bypass intermediaries, track inventory, eliminate paperwork, and share information. In total, electronic commerce is minimizing the expense and cumbersomeness, improved products, and higher profitability.According to this statement, E-commerce can change the way of doing business nowadays. E-commerce becomes a major success to Airplane Company to make effectively and efficiency in their business.
AirAsia is one of the airplane companies, which is implementing E-commerce and maximized their information technology usage to make the efficiency and effectively in their company and make possible low cost carrier in their business. According to Pultorak (2004), when the business strategy and IT are aligned, the IT infrastructure can continuously sense the changing business needs and respond by provisioning or redeploying resources to match the demands of the business.
Moreover, to maximize their IT, AirAsia implemented current IT such as yield management system (YMS), computer reservation system (CRS), and enterprise resource planning (ERP) system.
3. Operation effectiveness and outstanding efficiency.
One of the AirAsia strategies to solve the current issues/problem in the lowest carries competition among the LCC airline industry is to make operation effectiveness and outstanding efficiency. AirAsia move from the traditional business into modern business by implementing E-commerce and maximize the information technology (IT) in their business.
The implementation of E-commerce can reduce the cost of travel agents, and less of ticketing paper cost.AirAsia also choose the route by adjusting prices for routes/destinations that have a higher demand when compared to others.And than AirAsia also trying to reduce by using better maintenance management.
According to Gloker (2002), by using the better maintenance management, AirAsia can save large proportion of its maintenance cost contributes approximately 9% to the overall cost of an airline.
In conclusion, those are the Air Asia strategy to make Operation effectiveness and outstanding efficiency in their business. With this strategy, AirAsia can achieve their goals and objective into the lowest carrier airplane in the world.
4. Implemented outsourcing in their business
To make the lowest carrier in airplane industry, AirAsia also face with challenged to make a decision in terms of efficiency in their business how it will acquire the system. AirAsia have two options in this strategy: in house building or outsourcing. In the strategy that AirAsia used and implemented, AirAsia more preferred to used or implemented outsource system in this strategy. The decision in outsourcing has several benefits such as cost, competency, control, and also competitive advantage.
By implemented outsourcing in their business strategy will provide:
Cost benefits to AirAsia because it can be eliminated in more resource consumption (time financial).
reduce cost in IT system activities which is can make possible more cost in their business.
easily to control all the system that is outsourced to another vendor or company. The control in this strategy also gives benefits because AirAsia function only to be a controlled a system that is AirAsia used.
reduce risk, and it can make AirAsia not spend their financial to cover the risk factor in this strategy.
REFERENCES
http://www.slideshare.net/Prabhdeep8421/air-asia-12182484
http://www.slideshare.net/Antfenech/air-asia
http://itsaboutmymot.wordpress.com/2009/08/31/the-airasia-company-strategic-management-%E2%80%9C-how-airasia-can-be-a-leader-in-the-lowest-cost-carrier-in-the-airplane-industry%E2%80%9D/
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