PEST Analysis Of AirAsias Essay Example for Free

PEST Analysis Of bearingAsias Essay1.1BackgroundAirAsia was set up by Dato Tony Fernandes in 2001. In December 2001, Fernandes and his partners set up Tune Air Sdn Bhd (Tune Air), an airline holding comp any(prenominal) then bought over AirAsia. Now, AirAsia has become one of the most successful airlines in the Southeast Asian region and the pioneer of busted woo and no frills travel in Malaysia. The leading low f ar airline in the Asia AirAsia has been expanding rapidly since 2001, to become an award winning and the largest low cost attack aircraft carrier in Asia. 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, siamese connectionland and Indonesia. To date, AirAsia has flown over 55 jillion guests across the region and continues to spread its wings to create more extensive route network through its associate companies, Thai AirAsia and Indon esia AirAsia.AirAsia believes in the no-frills, hassle-free, low f ar tune concept and feels that keeping costs low requires high efficiency in every part of the melodic phrase. Efficiency creates nest egg which atomic tot up 18 then passed on to guests so that affordable air travel butt endnister become a reality. Through our philosophy of Now Everyone Can go, AirAsia has sparked a revolution in air travel with more and more people around the region choosing AirAsia as their preferred choice of transport. As AirAsia perpetually strives to promote air travel, we likewise turn overk to create excitement amongst our guests with our range of innovative and personalized improvement.The aim of the investigationThe aim of this analysis is to conduct a PEST and SWOT analysis in the context of AirAsias international business operations, come uponing the major variables involved and the impact of the specific threats and opportunities confronted by AirAsia .Besides that, The pur pose of this report is to identify its s comebackholders and core competencies, carry out a investigation of its external environment, review a strategic analysis of Airasia to identify opportunities and threats it might face, and to isolate detect strengths and any weaknesses that need dealing with. Moreover a SWOT analysis allow be carried out to assess the extent to which its strategies are suitable to what is happening in its present environment. Finally, afteridentifying competitive strategy a Strategic plan will be made to gain competitive advantage.Chapter 2DISCUSSION2.1 partnership OverviewAirAsia is currently 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 nature of business is based on domestic and international flights, holiday and business arrangements for its customers domesti songy and internationally around the region with the low fare, safe and convenience mean s 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 company to work for whereby employees are treated as part of a extended family Create a globally recognized ASEAN brandTo attain the lowest cost so that everyone can travel with AirAsia Maintain the highest quality intersection, embracing engineering science to reduce cost and enhance service levelsAirAsias determineAirAsia befuddle the low fare model possible through the implementation of the following key strategiesSafety showtimePartnering with the worlds most renowned maintenance providers and complying with the with world airline operations.High Aircraft UtilisationImplementing the regions fastest turnaround time at only 25 minutes, assuring lower costs and higher productivity. down(p) Fare, No FrillsProviding guests with the choice of customizing services without compromising on quality and services. Streamline OperationsMaking received that processes are as simple as possible.Lean Distribution SystemOffering a wide and innovative range of distribution channels to run booking and travelling easier.Point to Point NetworkApplying the point-to-point network keeps operations simple and costs, low.Products and Services offered By Air AsiaIn-flight services Air Asia offer nutriment and drinks on board programme . In-flight services customise meals and merchandise package upon request e.g. caps, T-shirts, and pants.Online services Online booking makes it more convenient for its customers to book online anywhere anytime. flight of steps information is available to help customers make enquiries on flight schedules arrival and departure time and date. Chatter flight Created for a group of people, business travellers for purposes uniform meetings, conventions, leisure or even exhibition.Channels of distributionA number of alterna te channels of distribution w gatherethorn be availableSelling handle Outbound sales forcer Via mail order, Internet Telephone salesSelling indirect Agent, who typically sells direct on behalf of the producer Distributor (also called wholesaler), who sells to retailers Retailer (also called bargainer or reseller), who sells to end customersSales and MarketingAirAsia is an international company, and going global invites a tummy of disceptation. AirAsia has to deal with the competition of local companies in the same field- respiratory tract services. Competition for AirAsia would also be encountered in the virtual world-the internet. 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 take a crap different technological standards, and quality consider policies, which AirAsia would have to adhere to, by adherence to these policies certain intended developments may be possi ble in certain communities but not acceptable in others.According to CEOs of the company, Mr. Fernandez, there are a lot workers or low pay salaries earners who would like to travel often to meet their families especially during special occasions but due to how pricy it was that time, their desire 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 target foodstuff. Reduced price salesis one of the basics of securing a target market place for AirAsia. They reduce their price to suit their ground level of customersBrandingAirAsia went into intensive General advertisements and other 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 contact with their target customer help them to build their image, which in turn created loyalty from their customers.Group Discounts and Offer sDiscounts or other offers can help exposure business to in the buff 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 contrivance of group discount and this help to get more target market, especially internet based customers.2.2Core competenciesComputer Reservation System (CRS)AirAsias CRS (Open Skies by Navitaire) has helped it to wrick at a dramatic pace in the past couple of years. Tony Fernandes, CEO AirAsia described that Navitaires Open Skies technology has truly enabled Airasias harvest-tide from 2 million passengers to 7.7 million passengers in less than two years. Open Skies scaled easily to accommodate our growth. It is an integrated web-based reservation and inventory system. It includes Internet, call center, airport departure control and more. It is a direct sales engine that effectively eliminates the middleman (travel agents) and the sales co mmissions that need to be paid to them.Enterprise Resource Planning System (ERP)AirAsia has deep (May 2005) opted for a full fledged ERP system implemented by Avanade consultants. By implementing this package AirAsia is looking to successfully maintain process integrity, reduce financial month-end destruction processing times, and speed up reporting and data retrieval processes.Self Check InWith the use of the smart self check in service a quicker and more convenient way to check 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 queue up at the counter to check in.Air Asia quote cardAir Asia offers a choice of credit entry card facilities to fit in their customers travel life style be it business, leisure, training or holidays. With an Air Asia credit card a customer can purchase any goods or services while travelling anywhere in the w orld 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, first 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 cheap fare which attracted 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. Dire ct competitors in the aviation industry are companies that offer flights to similar destinations on comparable term of travel. Direct competitors include Malaysia Airlines offering flights in same routes .Singapore Airlines offering flights on same routes among London and Kuala Lumpur. Thai Air operating flights between Bangkok an Kuala Lumpur. Air Srilanka operating flights between Colombo and Bangkok. AirAsia are facing strong competition with major international and national airlines on the market shares In contrast to other airlines ,AirAsia offers better value for money2.4Analysis of Environmental FactorsIn analyzing the macro-environment, it is important to identify the factors that might affect a number of vital variables that are likely to influence the organizations supply and demand levels and its costs (Kotter and Schlesinger 1991). The external environment of any organization can be analyzed by conducting a PEST analysis. The acronym PEST is used to describe a framewo rk for the analysis of a range of macro environmental factors including the Political, Economical Social and scientific environment.PEST Analysis for AirAsiaPoliticalFlying outside Malaysia is difficult. Bilateral agreement is one of the main obstacles in the way 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 regulated by bilateral air rights agreements. Threat of terrorism, people is afraid to fly after the September 11 terrorist attacks incident.EconomicIn kindle of strong competition from Malaysian Airline (MAS), AirAsias low-cost carriers offering cheap tickets and few in-flight services are gaining attraction in the region. Current recession hit the aviation business. But with this deliverance slowing down, more people will want to enjoy its cheap tickets. Oil prices is another regulatory factor for th is typewrite 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. increase worlds population, tourists and number of educated people helpful for the growth of aviation industry. Outbreak of the Severe Acute Respiratory Syndrome (SARS) has scare people to fly. AirAsia commit to Safety First comply with all regulatory agencies, set and maintain consistently high standards ensure the security of staff and guests.TechnologyAirAsia provides online service that combines air ticketing with hotelbookings, car take aim and travel insurance. To help keep costs in check, Air Asia has pushed internet booking services. AirAsia also recently deliverd GO Holiday, the airlines online programme where guests can book holiday packages online in real time AirAsia has bought in A320 to replace Boeing 737. The Airbus A320s improved fuel efficiency and extra capacity which leads to bette r performance and reliability.SWOT analysis for AirAsiaStrengthsLow operational and maintenance cost by having a single aircraft type fleet i.e. from Boeing 737 to Airbus A-320. Economy of scales benefits. Low operating cost due to being No Frill, online reservations system, quick check in etc. There is huge untapped market in the region, especially for business travellers and for-the-first-time-flying segment. As it is low cost airlines, it can target customers who are currently using non-aircraft modes like, Bus, Trains, car to travel to distances.WeaknessHuge investment to purchase air planes and implementing latest technologies there is high measurement 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 long-lasting 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 commission 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 budget 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 advantage s 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 maintenance cost (one of the major expenses in airline industry), scheduling cost, administrative cost, and inventory of parts. Creative and low-cost advertising significantly reduces marketing 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 charge its sales to limited travel agentsAirAsia assigned multi-skilled cabin crews (2-3crews/flight), cost-effective training, performance based reward and incentives systemsTarget MarketLow- income Customers and tourism segmentMalaysia emergence as a regional business and tourism hub has provided AirAsia plenty of room for growth and has fuelled regional air passenger traffic.Transit passengersKuala Lumpur is the operational hub for AirAsia, wh ich 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 but expansion of AirAsiaExtending New RoutesExtending current services into upstart markets may be helpful to further growth of this company. It is possible to achieve this strategy by launching existing services into novel 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 StudyContract with hotels and tourist performance at new destinationsFinding out strategic partnerMarketing new routes and destinationTime frame and costIt will take 1 to 2 years to start a new route and estimated cost around $200 million to new aircraft and for marketing cost. Organizational changeRecruiting new employeesArranging training for n ew employeesOpening new office in new destinationEvaluation criteriaNew destinations are implemented to achieve new market development. Flight number in new destination is the best way 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 why 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 modification of aircrafts onboard facilities Time frame and costIt will take 6 months to 1 year to blast installation new facilities in a single aircraft and estimated cost around $0.2 million to new aircraft and for marketing cost. Organizational changeRecruit ing 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 calendar method of birth control 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 values 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 possible to say that still there is some other picking to expand this company. Adding new route and introducing business class suite may be sui table option for AirAsia for further growth.3.2 RecommendationsTo remain leader in the market in serving customers, AirAsia has to re-evaluate their current strategy. Recommendation for improvement can be outlined as follows AirAsia should make any major changes to their strategy after proper technical and feasibility study to forefend 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 offsetting to save environment.REFFERENCEDaniels, J. D. Radebaugh, L. H. (1998), International Business Environments and Operations, 8th edition, Addison-Wesley, USA. Peng Mike W, 2006, world-wide Strategy, Thompson, United StatesPorter Michael E, 1998, Competitive Advantage, The Free Press, United States. Websiteswww.airasia.comwww.navitaire.com/res