PEST Analysis Of AirAsias Essay

1.1Background picnicAsia was set up by Dato Tony Fernandes in 2001. In declination 2001, Fernandes and his portionners set up Tune Air Sdn Bhd (Tune Air), an institutionaliseline holding guild then bought over AirAsia. Now, AirAsia has become hotshot of the most successful airlines in the S forbiddenheast Asian region and the pioneer of mortified cost and no frills motivate in Malaysia. The leading scurvy f atomic number 18 airline in the Asia AirAsia has been expanding rapidly since 2001, to become an award winning and the largest poor cost holder in Asia. With a fleet of 72 aircrafts, AirAsia flies to over 61 domestic and international cultivations with 108 routes, and operates over 400 leaks daily from hubs located in Malaysia, Thailand and Indonesia. To date, AirAsia has flown over 55 billion guests across the region and continues to spread its fly to create to a greater extent extensive route network through its touch on companies, Thai AirAsia and Indonesia AirA sia.AirAsia believes in the no-frills(prenominal), hassle-free, low f be line of products concept and feels that safekeeping costs low requires high-pitched efficiency in every part of the vocation. Efficiency creates savings which are then passed on to guests so that inexpensive air travel discount become a reality. Through our philosophy of Now Everyone Can Fly, AirAsia has sparked a revolution in air travel with much and more plenty around the region choosing AirAsia as their preferred choice of transport. As AirAsia continuously strives to promote air travel, we as rise as probek to create excitement amongst our guests with our range of innovative and personalized service.The use up of the investigationThe aim of this abstract is to conduct a PEST and bone up analysis in the context of AirAsias international blood line operations, divulgeing the study variables involved and the impact of the specific threats and opportunities confronted by AirAsia .Besides that , The purpose of this report is to identify its stakeholders and core competencies, carry out a investigation of its external environment, refreshen a strategic analysis of Airasia to identify opportunities and threats it might face, and to isolate depict strengths and any weaknesses that indigence dealing with. Moreover a SWOT analysis go out be carried out to assess the extent to which its strategies are qualified to what is happening in its present environment. Fin alto draw and quarterhery, afteridentifying competitive strategy a Strategic plan will be made to gain competitive advantage.Chapter 2DISCUSSION2.1 Company OverviewAirAsia is before long one of the leading low cost airlines in South East Asia which has expanded rapidly and its still the second largest air carrier in Malaysia. It dynamic genius of duty is based on domestic and international flights, holiday and business locations for its customers domestically and internationally around the region with the lo w fare, safe and gadget means of transportation. (www.airasia.com).AirAsias visionTo be the largest low cost airline in Asia and serving the 3 billion people who are currently underserved with poor connectivity and high fares.AirAsias missionTo be the best corporation to work for whereby employees are treated as part of a bountiful family Create a universe-widely recognized ASEAN brandTo attain the terminal cost so that everyone can fly with AirAsia Maintain the highest caliber product, embracing technology to adulterate cost and enhance service levelsAirAsias determineAirAsia make the low fare model possible through the writ of execution of the following key strategiesSafetyFirstPartnering with the worlds most renowned support providers and accepting with the with world airline operations.High Aircraft UtilisationImplementing the regions fastest turnaround meter at tho 25 minutes, assuring lower costs and high productivity.Low Fare, No FrillsProviding guests with th e choice of customizing services without compromising on quality and services. Streamline OperationsMaking sure that processes are as easy as possible.Lean Distribution SystemOffering a blanket(a) and innovative range of distribution channels to make booking and traveling easier.Point to Point NetworkApplying the point-to-point network keeps operations simple and costs, low.Products and serve offered By Air AsiaIn-flight services Air Asia offer food and drinks on board broadcast . In-flight services customise meals and merchandise package upon gather up e.g. caps, T-shirts, and pants.Online services Online booking makes it more convenient for its customers to book online anywhere anytime. fledge information is in stock(predicate) to help customers make enquiries on flight schedules arriver and departure time and date. Chatter flight Created for a group of people, business travellers for purposes like alludeings, conventions, leisure or dismantle exhibition.Channels of di stributionA number of alternate channels of distribution whitethorn be availableSelling direct Outbound gross revenue forcer Via mail order, Internet forebode salesSelling indirect Agent, who typically sells direct on behalf of the manufacturing business Distributor (also called wholesaler), who sells to retailers Retailer (also called dealer or reseller), who sells to end customersSales and sellingAirAsia is an international company, and going global invites a make do of contest. AirAsia has to deal with the competition of local companies in the corresponding field- airline business services. Competition for AirAsia would also be encountered in the virtual world-the net profit. As they entered into the use of modern technology such as the public domain would invite competition on the global scale. Different localities and countries go for divers(prenominal) technological standards, and quality take care policies, which AirAsia would have to adhere to, by adherence to t hese policies certain intended developments may be possible in certain communities but not acceptable in separates.According to CEOs of the company, Mr. Fernandez, there are a lot workers or low pay salaries earners who would like to travel oft to meet their families especially during special occasions but due to how expensive it was that time, their appetency are not fulfilled. By introducing a low fare will give all those people opportunity to travel if not more than once in a year. This enables them to identify their fundament mart. Reduced footing salesis one of the basics of securing a target trade for AirAsia. They reduce their determine to suit their class of customersBrandingAirAsia went into intensive General advertisements and different high profile activities, which contributed to the high offering of their companys image. They came with a brand Now every one can fly These points of radio link with their target customer help them to build their image, which in t urn created dedication from their customers.Group Discounts and OffersDiscounts or different offers can help exposure business to tender customers, resulting in a sales increase . AirAsia is a ticketless Airline that allows customers to purchase their ticket online with at a discounted rate. They also have a scheme of group discount and this help to get more target market, especially net profit based customers.2.2Core competenciesComputer Reservation System (CRS)AirAsias CRS (Open Skies by Navitaire) has helped it to grow at a dramatic pace in the past couple of years. Tony Fernandes, CEO AirAsia noticed that Navitaires Open Skies technology has truly enabled Airasias addition from 2 million riders to 7.7 million passengers in less than two years. Open Skies scaled easily to accommodate our issue. It is an incorporated web-based reservation and descent system. It implys Internet, call center, airport departure control and more. It is a direct sales engine that effectively e liminates the middleman (travel agents) and the sales commissions that need to be paid to them.Enterprise Resource platformning System (ERP)AirAsia has belatedly (May 2005) opted for a full fledged ERP system accomplished by Avanade consultants. By implementing this package AirAsia is looking to successfully maintain process integrity, reduce pecuniary month-end closing processing times, and speed up reporting and data recuperation processes.Self Check InWith the use of the novel self encumbrance in service a quicker and more convenient focal point to stopover in using mobile phones, laptops etc, connecting to the internet. This system is easier and faster for customers and their family tocheck in at or before they get to the airport without having to aline up at the counter to check in.Air Asia credit broadsheetAir Asia offers a choice of credit card facilities to fit in their customers travel life style be it business, leisure, readiness or holidays. With an Air Asia credit card a customer can purchase any goods or services while travelling anywhere in the world online.Go Holiday servicesAir Asia has a product called Go Holiday, with the help of E-commerce Air Asia is able to display their coverage maps, holiday resorts, low gear and average class hotels, car rental services, and activities in different countries with their different rates and prices on Air Asias web page.. Using E-commerce, customers are able to select and make a holiday and travel arrangement with a hotel of their choice and class, a pick up car and even medical services. And payments for all this can be done on the internet using credit cards or other online E-payment methods ahead of travel time.Foreign workers and Contractors strategyAirAsia also target most foreign workers from Indonesia, Singapore, Thailand, China, Macau who may not afford the expensive flight home and offer them the sordid fare which eviscerateed most of them as would go home very often without paying much.2.3 The CompetitorsCompanies in all industries have direct as well as indirect competitors. Direct competitors in the aviation industry are companies that offer flights to similar destinations on comparable terms of travel. Direct competitors include Malaysia Airlines offering flights in same routes .Singapore Airlines offering flights on same routes between London and Kuala Lumpur. Thai Air operating flights between capital of Thailand an Kuala Lumpur. Air Srilanka operating flights between Colombo and Bangkok. AirAsia are facing buckram competition with study international and national airlines on the market shares In contrast to other airlines ,AirAsia offers discover value for money2.4Analysis of Environmental FactorsIn analyzing the macro-environment, it is important to identify the divisors that might affect a number of alert variables that are likely to influence the organizations supply and get hold of levels and its costs (Kotter and Schlesinger 1991). The ext ernal environment of any organization can be analyzed by conducting a PEST analysis. The acronym PEST is used to describe a systema skeletalework for the analysis of a range of macro environmental factors including the Political, Economical Social and Technological environment.PEST Analysis for AirAsiaPolitical transitory outside Malaysia is difficult. Bilateral agreement is one of the main obstacles in the mien of low cost carriers. Landing charges is also another big influencing factor on costing of low fare airlines. The low- cost airline industry in south-east Asia has been underdeveloped because the aviation market is tightly adjust by bilateral air rights agreements. Threat of terrorism, people is afraid to fly after the September 11 terrorist attacks incident.EconomicIn spite of immobile competition from Malaysian Airline (MAS), AirAsias low-cost carriers offering tuppeny tickets and few in-flight services are gaining attraction in the region. Current nook hit the aviat ion business. But with this economy slowing down, more people will want to enjoy its cheap tickets. Oil prices is another restrictive factor for this type of airlines. If oil prices go high, it is very difficult to control cost of operation.SocialPassengers are reluctant to board a no-frills airline for a long-haul flight. Increasing worlds population, tourists and number of ameliorate people laboursaving for the growth of aviation industry. Outbreak of the Severe incisive Respiratory Syndrome (SARS) has scare people to fly. AirAsia commit to Safety First comply with all regulatory agencies, set and maintain consistently high standards tell the security of stave and guests.TechnologyAirAsia provides online service that combines air ticketing with hotelbookings, car read and travel insurance. To help keep costs in check, Air Asia has pushed internet booking services. AirAsia also recently introduced GO Holiday, the airlines online programme where guests can book holiday package s online in real time AirAsia has bought in A320 to replace Boeing 737. The Airbus A320s improved fuel efficiency and extra dexterity which leads to better performance and reliability.SWOT analysis for AirAsiaStrengthsLow practicable and attention cost by having a single aircraft type fleet i.e. from Boeing 737 to Airbus A-320. prudence of scales benefits. Low operating cost due to being No Frill, online reservations system, quick check in etc. thither is huge untapped market in the region, especially for business travellers and for-the-first-time-flying ingredient. As it is low cost airlines, it can target customers who are currently using non-aircraft modes like, Bus, Trains, car to travel to outer spaces. weaknessHuge investment to purchase air planes and implementing latest technologies there is high amount of operational cost. Rising fuel price. Increased the operational cost.The flight times are more or less limited to 2.5 hours. So they cannot operate flights of longer duration without any Frill, so No-Frill becomes impossible to implement for passengers.OpportunityLow fares offer by AirAsia has encourage people from all walks of life style to fly. Especially, during economy down turn. Airbus A320 would encourage greater passenger capacity and offer comfortable service to customers. Introduction of SMS booking allows customer to book their seat at anytime and anywhere. With the commitment in ensuring the security of staff and customers, customer will have more confident to fly via AirAsia.ThreatsThere are more no-frills airlines may take off in Asia to meet increasing consumer demand following the success story of Malaysias calculate carrier AirAsia. Singapore Airlines plans to launch a budget carrier, they see the success of AirAsia. They know how big the market is and how good the opportunity is in Asia. Travelers may not choose AirAsia if they are totravel long distance flight. They will prefer airlines such as MAS or SIA which provide better services. Demand to fly decreased via terrorism and outbreak of the SARS.2.5 Marketing PlanCost advantages activitiesAirAsia already introduced cost advantages activities. Some of them describe below Utilising one type of aircraft (Boeing 737-300 which will be fully replaced with Airbus A320) results in reduction of attention cost (one of the major expenses in airline industry), scheduling cost, administrative cost, and inventory of parts. Creative and low-cost advertising significantly reduces market cost. On the other hand, AirAsia direct sales through internet, call centres, walk-in airport sales, and sales offices significantly reduce the commission fee to travel agents as AirAsia only assigned its sales to limited travel agentsAirAsia assigned multi-skilled cabin crews (2-3crews/flight), cost-efficient training, performance based reward and incentives systemsTarget MarketLow- income Customers and tourism segmentMalaysia emergence as a regional business and tourism hub has pr ovided AirAsia plenty of room for growth and has fuelled regional air passenger traffic.Transit passengersKuala Lumpur is the operational hub for AirAsia, which is the best connection point between Europe and Asia/Australia has supported the growth of their business. AirAsia has been using this connection point to promote their business.2.6 Proposed Strategy for further expansion of AirAsiaExtending New RoutesExtending current services into impudently markets may be helpful to further growth of this company. It is possible to achieve this strategy by ingress existing services into new geographical area or new market segments. Adding new routes and destinations are possible especially there is growth Malaysia and East Asia tourism.Activities related to this strategyMarketing researchFeasibility bailiwickContract with hotels and tourist agency at new destinationsFinding out strategic partnerMarketing new routes and destinationTime frame and costIt will take 1 to 2 years to undert ake a new route and estimated cost around $200 million to new aircraft and for marketing cost. organisational changeRecruiting new employeesArranging training for new employeesOpening new office in new destination paygrade criteriaNew destinations are implemented to achieve new market development. Flight number in new destination is the best port to measure result of this strategy.Private Suite for business customerIntroducing new services into existing markets implies product development. This strategy involves the development of fresh competencies and requires business to expand customized services which can apply to current markets. Thats wherefore Emirate Airlines introduce high quality first class private lounges to attract business travelers.Activities related to this strategyTechnical and feasibility StudyAllocated budgetContract with a company to install new facility.Installation and adaptation of aircrafts onboard facilities Time frame and costIt will take 6 months to 1 year to complete installation new facilities in a single aircraft and estimated cost around $0.2 million to new aircraft and for marketing cost. Organizational changeRecruiting new employees to serve business customerContract with new or existing company for catering service for business customer. Evaluation criteriaQuantitative measurement of this product would be number of booking or occupancy.Chapter 3CONCLUSION3.1 ConclusionBy studying PEST, SWOT and marketing analysis, it could be said that AirAsiais situated in standard cycle markets where it get competitive advantage for its business policy and strategy. Providing customers with superior products and services with low fare is synonymous to the AirAsia brand. However, it is necessary that Airasia should re-evaluate its strategies and focus on core set and competencies. For this why, AirAsia should reconsider their market and specific routes to obtain value other than price and survive the competition. From this study, it is p ossible to say that still there is some other option to expand this company. Adding new route and introducing business class suite may be suitable option for AirAsia for further growth.3.2 RecommendationsTo remain loss leader in the market in serving customers, AirAsia has to re-evaluate their current strategy. Recommendation for approach can be outlined as follows AirAsia should make any major changes to their strategy after proper technical and feasibility study to suspend unnecessary risks. Oil price is a big factor to low fare airlines. So this company should make longer contracts with fuel suppliers for more stability As Airasia operates their fight very frequently, so they should have a spare aircraft at each location to avoid delays. AirAsia should consider environmentally friendly operation system as such as carbon paper offsetting to save environment.REFFERENCEDaniels, J. D. & Radebaugh, L. H. (1998), International Business Environments and Operations, 8th edition, Add ison-Wesley, USA. Peng Mike W, 2006, Global Strategy, Thompson, linked StatesPorter Michael E, 1998, Competitive Advantage, The Free Press, United States. Websiteswww.airasia.comwww.navitaire.com/res