Air Asia Blue Ocean Strategy

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Literature Review Most of the companies must have a strategy for competing in the markets in which they offer products or services. The strategy will either be implicit or explicit, and the extent to which a company is successful compared with its competitors relies on the creation of competitive advantage through the activities that it performs to design, market, deliver and support its product or service.

They develop strategy at an overall company level, within customer sectors and for regions, functions and locations.

The process is intended to be an iterative one and one that remains alive and is continuously updated and adjusted to suit the changing competitive and economic landscape. Few companies in the world have managed to survive, let alone prosper, over long periods of time. AirAsia approaches to prevent this occurring and to generate continued growth is to frequently re-assess its strategy so that they build strong businesses in the attractive industries of the future Company overview – Air Asia Berhad AirAsia’s leading airline was established with the dream that everyone can fly.

Since 2001, the company has swiftly broken travel norms around the globe. It has risen to become the world’s best. With a route network that spans through more than 20 countries. AirAsia continues to pave the way for low-cost aviation through innovative solutions, efficient processes and a passionate approach to business.

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According to Mr Tony Fernandes, they are in a huge market and they are only 5 yrs old company. Southwest Airlines has 400 planes in a market of 350 million people. AirAsia in a market that’s double, triple that.

What Is Blue Ocean Strategy

Because of that AirAsia has a lot of potential to grow, but grow sensibly and grow at the right pace. AirAsia have been aggressive on branding. They also put a lot of money into sports branding such as Manchester United. Many Asian companies don’t value branding as much because they don’t see it in the bottom line straight away. It’s something that even Mr Tony have to explain to his board time and time again, that the fruits of branding are over five years. But he thinks it’s been very key in AirAsia growth and they’ll continue to invest in it. BlueOcean Strategies

To compete with Malaysian Airline System (MAS) – before the acquisition of MAS shares and regional airline, Air Asia have managed to avoid the red ocean by looking into the factors that industry take for granted and also factors that important to customers. With the Four Actions Framework proposed by Blue Ocean Strategy authors, Air Asia have implemented many strategic moves to ensure they are making Malaysia Airline and regional airline company irrelevant. AirAsia Strategy By referring to the strategies picture we can summarize as below: Eliminate•The company have eliminate over the counter booking system. AirAsia also eliminate free Food/Beverage on the plane. This help AirAsia save cost. •They also eliminate Seating Class booking system. Reduce•“luxury” facilities provided by Airport Lounge. •No of attendance service on the plane. •Reduce the seat quality. Raise •Focus on several key destination •Increase frequency of flight Create•Online Booking system •Point to point travel system With this strategic move, Air Asia able to focus on factors that really bring value to the customers such as point to point travel system, easy booking system etc.

This will help Air Asia to reduce cost and at the same time increase the value to the customers – Value Innovation. SWOT Analysis of AirAsia. Strengths•Locally and Internationally Recognized •Constant Innovations •Keep a Strong Hold on the Industry •Successful company •Brand is all important Weaknesses•Dependence on innovation of its products •Reports on faulty /delay items •Confusion among consumers Opportunities•Opportunities in the International Market •Possibility of product expansion Threats•Unpredictable Market •High level of competition in Asean region A. Strengths 1. Locally and Internationally Recognized

AirAsia is undoubtedly become one of the most recognizable brand names in the airline industry in Malaysia. It has engaged in a marketing strategy all of which the Malaysia market has been made aware. The organization also has been successful in creating its name in the international brand. 2. Constant Innovations AirAsia with its first-rate management of its innovation time line is among the key causes following the firm’s accomplishment in creating consistent soaring levels of same store sales. With constant innovation that make the Malaysian people can fly with lower cost. 3.

Keep a Strong Hold on the Industry The company is an established name in the Airline industry. It has built a reputation of excellence that new entrants in the industry strive for. With this standard of rigorous marketing strategies AirAsia will continue to exist in the coming years. 4. Successful company The passenger had increased to 14,253,244 in 2009. In Malaysia the favorable brand right now is AirAsia. Sales of its airline ticket had increased in 2009. A sale of its ticket is also very strong, and this represents a huge contribution to income for AirAsia. 5. Brand is all-important

AirAsia established and healthy brands. With promoting Manchester United football club has made the world knows who is AirAsia. B. Weaknesses 1. Dependence on innovation of its products In this industry AirAsia is dependence of its innovations. Bear in mind, the near most competitor is close to Malaysia. If the company make a wrong move in its product strategies than customer will go to others that offer more innovative product. 2. Reports of customer complaint Although AirAsia is giving low price of airline ticket but customer complaint to the company is compiling day by day.

With flight delays and the complaint are arising and the company needs to tackle to such problem. 4. Confusion among Customers When AirAsia putting flight promotions in the newspaper advertisement, they will be using red color. However, recently Malaysian Airline System – MAS (before the shares acquisition) also using red color in the newspaper advertisement. This in the first place will confuse the customer on which is AirAsia and MAS. C. Opportunities 1. Opportunities in the International Market With rigorous product marketing by the company, AirAsia have high opportunities in the International Market areas.

AirAsia have dedicated to continue with cost-efficiency and expansion. 2. Possibility of product expansion To the customer, AirAsia has become a strong brand. AirAsia will not just be number one in size it has become number one in the minds of customers. This is the passion of AirAsia and this has currently become possible as many has switch from flying with MAS and turn to AirAsia. D. Threats 1. Unpredictable Market The market that AirAsia is operating on is also dependent on the situation of the country within. If the people have the ability to fly than the company will survive and gain profit.

However if the situation is vice versa than the company will have a problem to sustain it cost and operations 2. High competition in the Asian region. In the region we have other airline that can offer competitive offering to customers. Malaysian Airline System is the nearest one. With the introduction of Fireflyz, MAS is offering similar with AirAsia in terms of low cost flight. Garuda Airways and Thai Airways also can give a good competition with AirAsia. Being successful attracts competition, and AirAsia is working very hard on in order to retain its competitive position. Porter’s Five Force Analysis 1.

Industry Rivalry- Moderate With the acquisition of stock in Malaysian Airline System the closest high rivalry has become moderate. 2. Buyers Power – High Customer does not have many options to choose from. The demand for new and updated features and also the markets are increasing 3. Threat of Suppliers- Low ?Hardware and airplane component can easily get. 4. Threat of Entry- Low ?Huge capital requirements ?Strong market strategy required 5. Threat of Substitutes- Low ?Currently the company has become the optional company that people will hop in to fly due to low cost. Porter’s Five Force Apple’s Competitor Analysis We can see if a new player or a new competitor, they must engage head on with AirAisa. To date AirAsia still maintain it low cost flight and it is a though scenario to put lower price compare to AisAsia to attract new customer. ?People will still buy and fly with AirAsia as the company flight ticket is lowest in Malaysia. With this scenario the buyer power to AirAsia is very high. ?Aircraft maintenance part and services can easily get and this would not be a troublesome to the company because the aircraft parts and the expertise such aircraft engineer is easily can be found in Malaysia

Conclusion AirAsia focus on really understanding consumer needs and problems. By increasing our consumer insight, they are able to develop new products that solve these needs and problems. To date over half of AirAsia sales are via internet booking and it is steadily rising. To AirAsia philosophy is very clear, before a business can grow, it needs to have its costs under control. It must be cost-efficient and profitable, and it must create value. The company need to do a continues task and this they had to face head on year on year; it is the critical ingredient to operate a successful business.

According to AirAsia cost-efficiency, low complexity and profitability are always the cornerstones of building a strong business. While a strong foundation does not guarantee a solid house, it is the only basis upon which to build. Truly AirAsia has become a company that implement the Blue ocean strategy. Reference: 1)http://www. airasia. com. my 2)http://www. blueoceanstrategy. com/ 3)http://blueoceanstrategy. org/ 4)Ireland R. D. , Hoskisson E. R. & Hitt A. M. , (2011) Chapter 7, Strategic Acquisition & Restructuring, p. 169, The Management Of Strategy, Concepts & Cases, (9th International Edition) South-Western, Canada.