Host Country Political and Legal Environment Affect of Airasia

COMPANY AIRASIA karyon a. Introduction b. union bibliography c. Entry regularity to piece(prenominal) mart ( done exporting, spousal relationshipt move, franchising, licensing, etc) d. How do the global commercialize / refinement, centering styles and business organisation system affect the c on the wholeer- drama out mental process? Do they subscribe to ad upright / transfigure their ingathering or service to fit with the legions country foodstuff indispens up to(p)nesss? How does the connection face the aspiration? e. How does a host country semipolitical and international legal environment or p wiped out(p) barrier affect the Malaysian companies in their international trade activities?Bagaimana sebuah negara tuan rumah persekitaran politik dan antarabangsa undang-undang atau perdagangan halangan menjejaskan syarikat-syarikat Malaysia dalam aktiviti pemasaran antarabangsa mereka? Bagaimana sebuah negara persekitaran politik dan undang2 antarabangsa memb eri kesan kepada syarikat Malaysia dalam aktiviti pemasaran antarabangsa mereka? f. SWOT psychoanalysis of the society in term of their 4 Ps (product, equal, promotion and place) g. any opposites additional information h. Conclusion i. References a,b,h develop 1 c initiate 2 d part 3 e part 4(fathi) part 5 each(prenominal) person choose cardinal to do it n leave a comment which part u e real do yea tq handler 488 Strategy T01 Question 1 carri come onAsia, which is one of the soonest upset hail carriers (LCC) in Asia, has become a LCC since 2001. So far, it has expanded its ne 2rk from Malaysia to Thailand to Singapore, Macau and crimson the Mainland china in 2006. In unequal, line of descent Asia jumped out from an intra-Malaysia and Thailand mart to a real fashion Asia in the classic. Thus, what argon the possible core arguencies to ensure that in that respect is quantum stick out to succeeder?The indispens equal analysis on the guild on a frown f loor entrust answer the question. Resources, Capabilities & Core Competencies epitome a)Accounting Ratio synopsis In 2004, piece of cake Asias earnings strand before interest and taxes (16. 8), b humbled over on pileus employed (14. 6) and return on equity (37. 7) accounting ratios were above the effort aver climb on 14. 5 is the exertion come for earnings margin, 11. 6 for return on capital employed and 21. 2 for return on equity. This above average results indicates that the c whollyer has been managed intimately and frankincense is able-bodied to get mellow above-average returns.The join on in current ratio from 1. 24 (US$49. 206 million / US$39. 643 million)to 5. 60 (US$230. 024 million / US$41. 099 million) to a fault serves as a confident whiz to throneors and shargonholders in that oxygenize Asias solvency had strengthened and in that locationfromly is able to fulfill its debt obligations. In fact, the debt-to-asset ratio in the last 5 years was low an d diminish too. As a matter of fact, in 2005, it was s bank 0. 14, which was comparatively get off than many low salute carriers. b) Finance Resources institutionalize Asias net lettuce ending Jun 2005 was describe US$29. million, a 126% cast up year-on-year. The end of June 2005 financial summary showed that transmit Asia, the jumper lead low bell distributeline in Asia, had a huge reserve (bank and currency balances) of US$86. 6million. This is the come withs strength as very a few(prenominal) low exist line of merchandiselines of mistakable size have such(prenominal)(prenominal) large militia. With such huge reserves and low debt-to-asset ratio, glory Asia is gum olibanum capable of generating internal funds to finance any expansion. It is certainly business Asias strength. c)Organization Design and Organizational Resources advertise Asias shapingal structure is rather simple and flat as it involves a group of mental faculty in the ships lodge reporting to one manager. This serves air Asia wellspring as thebusiness requires a structure with fewer levels of steering so as to pass on to a greater extent amity and speak to reduction. In addition, the salute leadership dodging that the play a pine adopted besides allows bloodline Asia to counselling much intensely on atomic number 18as such as in/out-bound logistics, trading carrying into actions, grocery storeing, kick the bucket and customers. This in turn seconds to render synergy and cap aptitude to deliver the full spectrum of low toll carrier business. ) Physical Resources Despite having a large fleet of Boeing 737 aircraft for operation, Air Asia allay overcompensates to invest heavily. This includes the acquisition of more(prenominal) than open fire-efficient aircraft (A320) so that the society cease have sufficient capacity to meet the maturation needs and demands of their customers as well as to embrace to keep its follow low. The freshly aircraft tin humiliate fuel usage by nearly 12%, an important court saving, as fuel accounted for close 50% of the total operational be for the federation over a period of clipping. ) Technological Resources Air Asia was the first airline in Southeast Asia to go for e-ticketing so that traditional give out agents rear be bypassed. This implementation saves the speak to of issuingphysical tickets and eliminates the need for large and expensive qualification and booking systems. To catch ground exploit technologies, AirAsia made it possible for customers to leveraging tickets any from post offices or designated bank teller (ATM) machines.In short, Air Asias strength is in like manner about the ability to supplement on technologies well and ahead of its rivals to annex sales and dismay be. Human Resources counseling Although the employees were non enroll and the salaries nominateed by the caller-out were below those of its rivals, AirAsia is still able to keep its work force rund by providing a remuneration policy that is emulous and enchanting. Forinstance, all employees be offered a wide range of incentives that includes productiveness and perpetrateance-establish bon delectations, offer of shares or product line options.To render howeveraircrew and cabin incentives, AirAsia besides adopted a sector pay policy that gives extra incentives and thence this resulted in the conjunction needing fewer crews per flight (106 peraircraft) as compared to early(a) inexpensive airlines (110 per aircraft). All these causes not all when helped to improve productivity, it besides foster strengthened employer-employee alliances. In summary, human resource focal point, special(prenominal)ly the ability to motivate and improve productivity of the staff is surely Air Asias strength. g) Innovation Resources and Product DevelopmentSo far, AirAsia has managed to design its aircraft cabins that push aside smear wearand tear, sca vengeing clipping and cost. This forwarfared-looking work allows for quicker reversalsbetween flights and helps change magnitude grosss. In addition, AirAsia is overly able to leverage on forward-looking ideas to derive inviolable ancillary revenues from additional run. Forinstance, the companies also have their own brandmarked character throwaway and offers corporate go away run. Consequently, it also develops aircraft advertising by converting its skim overs into momentary billboards.The ability to innovate and come up with unique innovations to dismantle be and increase revenues shows that AirAsia possesses square property innovation resources that are valuable. h) Reputational Resources Air Asias success has been widely recognized. For instance, in 2003, it was named the Developing respiratory tract of the lead of instruction (by Air finance Journal) and the Asia Pacific air hose of the Year (by sum total for Asia Pacific Aviation, CAPA). In 2004 and 2005, the party also won several prestigious awards. Similarly, the companys CEO, Tony Fernandez has also won several recognitions.Most notably, the worldwide Herald Tribune listed Mr. Tony Fernandez in its Visionaries and Leadership series in 2003. Hewas consequently named the Asia Pacific Aviation Exe trim downive of the Year in 2004 and2005 (by CAPA) and is one of the 25 stars of Asia (by trading week). With just 3 years into operations, AirAsia managed to be listed publicly inNovember 2004 with animation from bankers and venture capitalists. AirAsia was subsequently named as one of the Best virginly Listed Companies and Asias Best Managed Company in the Airlines and Aviation Sector by Euro bullion after its IPO. effrontery the controlling perceptions of Air Asias reputation, the brand name is certainly the companys strengths. i)Risk Management In general, the types of risks AirAsia faces include (1) minute risk (2) equipment casualty risk and (3) credit risk. AirAsia purchas ed insurance policies to mitigate pure risk although it is done and operated a bit otherwise as it adopts an integrated approach risk management that goes beyond the traditional parameters of what is insurable. For instance, when AirAsia purchases insurance any policies to pass over against pure risk, it also makes a conscious effort to require them at a much lower rate lower than other LCCs.In addition, to mitigate charge risk, AirAsia hedged fuel cherishs at US$42 a barrel for the first half of2005, which was intimately lower than the set per barrel of US$70 in the posthumous 2005. AirAsia has little exposure to credit risk as it does not lend property to any external parties. Better still, customers who wish to purchase their air tickets need to make payment to the broad(prenominal)est degree readyly upon booking. Hence, this eliminates credit risk totally. So far, Air Asias holistic approach to risk management efficaciously is viewed favorably by its s retireholde rs roughly of the age, oddly the shareholders. ) Logistics This involves all areas of receiving, storing of inputs when producing outputs. So far, AirAsia precisely operates on a single type of aircraft, the Boeing 737-300. Based on a Report published by Aero Connections in 2004, that particular model was the best selling commercial special K of all metres out-of-pocket to its efficiency and cost effectiveness. AirAsia also has1382 employees and they received proper on-the-job reading workingshops so that they faecal matterperform multiple roles effectively within a simple and flat organization structure. ) Operations It processes inputs to fork over valuable products/ run. AirAsia has always been fuddled about standards and procedures. AirAsia is aware that maintaining its passenger base hit is of rife importance as indicated in the surveys in the linked States and Japan. Based on the companys 2003 yearly report, AirAsia had joined ventures with GE Engine expediencys for a business alliance that allows the latter to be in gripe ofmaintaining all Air Asias aircraft engines in the next five years.AirAsia had also managed to achieve substantially operate benchmarks in terms of flights on time and baggage handling where in 2004, the company registered 88% and 99. 9% respectively. c) Outbound Logistics This involves delivering products/services into a dispersal channel or to the final destination. As of new-made 2005, AirAsia operated 32 Boeing 737 aircraft that run over60 routes crosswise Southeast Asian regional interlock. Not only that, its aircraft interiors is also outfitted with signature red carpeting and plush leather seat to enable its guests to travel comfortably.In addition, it was also reported in prominent journals and magazines such as ABJ and AWM that many customers felt that Air Asias cabin crew demonstratedprofessionalism when carrying out their duties on air. d) commercialize placeing and Sales It involves all activities t hat inform customers about their products/services including those that induce and facilitate customers in making purchases. So far, AirAsia has promoted its company without incurring gamey sales and marketing expenses. Forinstance, its CEO Tony Fernandez always wears a red AirAsia baseball game cap in any of his interviews.His well theory out statements a lot reinforce Air Asias positioning as a small dispatcher loyal battling against giant industry incumbents that also offer low prices. As such, when ask, it also invested heavily and so far, its major(ip) sponsorships includedbeing the Official blue Fare Airline for football giant Manchester United. This embrace involved global sponsorship and advertising. e)Service AirAsia is one of the few airlines that had the shortest turnaround time, around 25minutes as op begetd to 45 to long hundred minutes recorded by other airlines. Hence, this allows AirAsia to advan drop backe from conducting more flights a twenty-four hour p eriod.Besides that, AirAsia emphasizes lot on maintaining a high quality service to all its passengers such as punctuality rate and excellent baggage-handling performance t o determine whether AirAsia has any core competencies (sustainable competitive advantages), the companys capabilities are assessed base on the four criteria valuable, rare, difficult to imitate and non-substitutable. The military rating results so far revealed that two core competencies below(1) The possession of tacit fellowship to build a business by leveraging on reinvigorated technologies ( profits). 2) The sacred zeal to cost- escape coupled with tacit knowledge to build highly efficient processes to enable it to bring to pass its business model (low cost). Success Factors of AirAsia As AirAsia continues to compete with other LCC (both existing and new) in Asia which also whitethorn adopt affordable strategy, what have to remember and read that the way customers differentiate them from their competit ors pull up stakes be rigorously on fare and reputation. As the saying goes, the lower the price, the higher the load factor. As such, Air Asias success is based on the hobby key factors ) salute Effectiveness AirAsia puts very blotto emphasis on lowering all avoidable costs so that it can continue to provide low fares and yet remain net profitable. This delegacy the company has to cut the cost of flight operation by flying to and from airdromes that offer cheaper take-offand landing fees. Besides that, passengers also were not provided with meals and entertainment as well as creature comforts such as pillows and blankets. AirAsia has also designed its aircraft cabins that minimize wear and tear as well as cleaning time so that cost associated to these areas can be lowered.The disclose designed cabins also resulted in lower gist and driping costs as things got done faster which in turn leads to better turn around time. Last but not least, to ensure cost effectiveness, Air Asia reconfigured the seating configurations of its Boeing 737 aircraft to increase seats from 132 to 148 and has and so far operated with only a single-class service. b) capacity and Productivity By using a ticket- little(prenominal) online booking system, staff that are properly trained toperform multiple roles as well as aircraft cabins that stiffen cleaning ime, AirAsia greatly enhances it operations efficiency and productivity, which is a very important ofthe cost leadership strategy. However, it should be noted that the cost leadership strategy works on the ut approximately costs, not necessarily the lowest price in the market. As the lowest cost operator, AirAsia is able to continue to survive in a price war as its low-cost positions a valuable defense against any rivals. c) Reliability AirAsia also chose more consistently second-string and regional aerodrome destinations instead of busy and congested main airports.Generally, less busy airports can be expected to provide higher rates of on-time departures. Besides, without the need to load and unload any cargoes, the turnaround time of an aircraft can be reduced greatly AirAsia clocked the regions fastest turnaround time at only 25 minutes. As a result, travelers can expert and look forward to more frequent and puncture flights. D) Higher Frequency of Service Predominantly, AirAsia offers point-to-point flights on short-haul routes less than 4 hours flight time. The company is also able to achieve higher plane utilization due to short turnaround time and as mentioned point-to-point routes.The ability to provide higher absolute frequency service to justify the smaller capacity of a LCC is another key to Air Asias success. In to the highest degree instances, such high frequency of services can also attractbusiness travelers since near of the time they are able to save time and catch theirconnecting flights on time All the success factors mentioned above explain Air Asias success. However, it sho uld also be noted that Air Asias earnest approach in preaching cost avoidance in every aspect ofadministration and operations is the key in sustaining a low-cost culture since its operation in2001.AirAsia also has been particularly effective at implementing the various measures and thus it continues to survive and prosper till today. Question 2 The construct of cost leadership strategy emphasizes on lowest costs, though not necessarily the lowest price, in the market. A stiff pursuing a cost-leadership strategy needs to gain a competitive advantage primarily by reducing its frugal costs below its competitors. To achieve this, the strategic actions must thus reduce costs and improve productivity. With this in mind, let us hold forth how the following strategic actions adopted by AirAsia swan its cost leadership strategy.A) subaltern Fare, No Frills Air Asias intense focus on providing air travel with no frills leads to substantial costs saving. The absence of in-flight service s reduced pre-flight preparations such as the loading of food and drinks, cleaning time and the cost of meals and administration. investing in kitchens and equipment for storing, heating and serving of meals can be avoided all together. B) Investment in Latest Technologies streamlined Operations AirAsia has heavily invested in purchasing the most mod aircraft A-320s.The new aircraft allow AirAsia to enjoy substantial lower fuel cost as these modern airplanes had lower fuel usage by as much as 12%. Fuel accounted for closely 50% of the total run costs and thus it is an important component of cost saving for AirAsia. By operational a single aircraft type allows AirAsia to achieve efficiency in executing its primary and secondary activities. Consequently, this leads to higherproductivity which in turn allows the company the option to expand their operations with the same reckon of employees and right size its manpower requirement. Improvedproductivity means more revenue for Air Asia.The extreme get down to achieve high efficiency in operations allows AirAsia to clock the fastest turnaround time of 25 minutes. This invariably leads to comparativelybetter productivity as the company was able to utilize its aircraft for an average of 13hours per day as opposed to 10. 5 hours by other airlines. Again, improved productivity means more revenue for AirAsia. c)Low Fixed Costs Air Asias ability to acquire low rates for long-term guardianship contracts and aircraft leases led to substantial cost savings. It was reported that Air Asias average contractual lease charge per aircraft come downd by more han 60% from 2001 to 2004. Similarly, its aircraft maintenance contract costs were also reported to be substantially lower than any other airlines. In view of the airlines high safety and maintenance standards, AirAsia was also able to procure indulgent rates on its insurance policies. All these help lower fixed costs. d)Lean Distribution System The use of e-ticketin g helps to save the cost of issuing hardcopy tickets, which were estimated at US$10 per ticket. The company also saved on agents commissions and avoided the need for large and expensive booking and reservation systems. This too helps lower the overall costs. ) Minimize strength Expenses AirAsia implemented flexible work rules and streamlined administrative functions which allowed employees to perform multiple roles. This human resource policy facilitated AirAsia in lowering its personnel costs. In 2004, it was reported that AirAsia had the lowest staff-to-per aircraft ratio (106 staff per aircraft as compared to 110employees per aircraft registered by other low cost carriers) and this helps lower staffcost. f)Use of Secondary Airports Typically, AirAsia operates out of secondary airports, which involve lowerlanding, parking and ground handling fees.These airports were also less busy and had shorter runways, thus helped reduce fuel drug addiction while aircraft queue for takeoff or go on the ground. As many secondary airports were older, they were often close to urban areas and were thus more attractive to some travelers. In short, the use ofsecondary airports can increase sales and help to keep operating costs low The ability to lower cost and at the same time widen profit margin (through increaseproductivity) augurs well with AirAsias cost leadership strategy.This provides AirAsia the options to either lower its prices and gain market share and sales from rivals or keep its prices atpresent market level and make more profit for every unit exchange. This inevitably helps AirAsia in its defense against strong-growing competitions specially when it comes to price war from strong rivals Question 3 The PESTL digest and the door guard Model provide an overall analysis of the operating environment that AirAsia competes in. Also, the analysis of low cost carriers (LCC) industry reveals that it is so concentrated that intense competition is inevitable.However, a midst the challenges faced, there are still plenty of opportunities for AirAsia to explore and exploit. PESTL Analysis Macro Environment a)Economics Asias rapid frugal growing and sprouting middle class continues to fuel the ripening of air travel in Asia. This harvest-tide in air travel was also due to the region having geographicly dispersed countries with large population, a rapid increase in trade and touristry as well as the respective political science investments in their airports, airlines and travel infrastructure.Although rapid growth and change magnitude trade and businesses may intensify competition (entrance of other LCCs) and even lead to full-service airlines start cut costs to complete, it can present opportunities for airlines to enlarge their markets. Oflate, projections by economists had put Asia at the top of global economy growth charts in the coming years. b)Political/ Legal Government policies are important drives for the success of Asia. In the late19 90s, there was increase privatization and deregulation of the airline industry in Asia.It was observable that some Asian countries established open-skies agreements while others allowed the creation of private airlines. For instance, in 1997, a few LLC spouted rapidly after Malaysia signed an open-skies agreement with the United States. Hence, it appears that although the travel market will be expanded, in populace AirAsia would also have to operate in a more challenging environment with intense competitions. As of 2006, governments intervention and regulation remained substantial.Forinstance, although Thai AirAsia managed to launch its services between Singapore and Thailand in 2004 successfully, the company still could not expand beyond the Singapore-Thailand routes because it could not acquire landing rights elsewhere. c)Social-Cultural Surveys revealed that more people were willing to compromise on food and otherservices in exchange for lower prices. In fact, it was stated t hat price of tickets was the single most important enumerateation that influenced passengers decisions and of course this included without having to compromise on safety and punctuality.In addition, more and more over the years cost conscious unfilled and business passengers were also looking to make their work outs decrease further. This presents an opportunity for all LCCs to increase their revenues by oblation travelling at a much lower fare. d) Demographic In 2005, the total population in Asia stands at more than 3. 5 one thousand million. The UnitedNations statistics also show that Asia has an astonishing demographic dividend where more than 35% of its population is below the age of 25 and more than 55% hovers below the age of 35.This in filmly means that the change magnitude large population of the middle age group equates to a larger working age population with more disposable income and thus the likeliness of more business and leisure travels is almost confirmed. Th is thus presents another golden opportunity for AirAsia. e)Technological New services such as Internet Telephony and the increase in the use oftelecommunications services (such as purchasing air tickets online) provide AirAsia with the opportunity to leverage on new technologies to increase their sales.In addition, e-commence and internet-based activities (such as online holiday and hotel reservations)are other areas where AirAsia can derived ancillary revenues from. Better still, in some instances, technology advancements also means having opportunities to reduce operation costs such as savings on commissions for travel agents AirAsia was the first to do so However, amidst these benefits and cost saving, AirAsia must be mindful that system faulting due to heavily reliance on online sales can pose serious threat to the company. Analysis of the Industry In 2004, the airline industry flew 1. billion passengers, of which about 30% were in Asia. Airline merchandise in Asia is projec ted to grow at 7. 1% annually for the next 5 years and more than triple in the next 20 years. Given Air Asias strong presence in the region, this presents vast opportunities to enlarge the companys market shares. The Airline businesses are closely linked to economic activities in Asia and the world. As such, AirAsia needs to be advised with the business cycle so that it can to take full advantage of such effects especially when there are changes in discretionary income and consumer disbursal patterns.AirAsia also needs to be mindful that increase in demand of fuel and limited summate can lead to higher fuel price that decrease yield. Last but not least, the restore of crisis such as 9/11 (2001) and severe acute respiratory syndrome outbreak (2003) was able to hit the airline industry earnestly and as such they continue to pose serious threat to airlines. Analysis of Competitive Forces porters Five Forces Analysis a)Threat of Substitute Products The theory threat of substitute s is moderately low since there are several other substitutes such as cruises, rails, buses and cars.However, the archipelago geographical structure of Asia made air travel the most viable, efficient and convenient mode of transportation which is a surplus for AirAsia b) Power of Buyers The power of buyer is high due to almost no switching cost for customers to switch from one LCC to another. In addition, the access to the internet also allows customers to have all the information on prices charged by the different LCCs. c)Power of Suppliers The supplier has an speed hand (high power) due to limited number of suppliers(only Boeing and Airbus). d)Threat of New EntrantsThreat of new entrants is moderately low as the portal into the industry requires high capital. Moreover, the industry is also passing regulated since every potential entrant is required to obtain approval from the civil aviation delegacy of the particular countrybefore the company is allowed to be operated. e)Inten sity of Rivalry Industry contender is moderately high due to competition and high exit cost. Nonetheless, market participants understand and realize that price war is negative forthem and thus they tend to avoid direct price competition to make themselves friendly competitors.Stakeholder Management Air Asias stakeholders can be divided into capital market stakeholders (shareholders and major suppliers of capital e. g. banks and venture capitalists), product market stakeholders(primary customers, suppliers and host communities) and organizational stakeholders (employers and managers). Air Asias stellar performance since its establishment in 2001 has brought nourish to its shareholders since they were receiving positive returns from the day of the companys instauration to recent time 2005.Between 2001 and 2004, AirAsia enjoyed a compound average growth of45% for sales and 407% for net income as well as cash flow positive from the time it began its operations. All these inevitably increase the value of investments significantly. This probably explains wherefore AirAsia has always enjoyed strong support from banks and venture capitalists when the CEO took the company public in November 2004. AirAsia satisfies its customers by offering low fares without having to compromise to quality and service. This helps to attract new customers as well as retain existing ones.In orderto ensure that all specific needs are met, the companys key staffs travel regularly to mingle with the host communities so that they understand them better. This has facilitated Air Asias aggressive expansion and resounding success in the regional markets which include Thailand and Indonesian over a short span of time. For instance, Air Asias joint venture with Shin Corporation to launch its new LLC achieved immediate success. In just 3 days of operations, it sold more than 20,000 seats on domestic routes.This speaks well of Air Asias ability to meet (oreven exceed) the expectations of its c ustomers. Besides that, AirAsia also strives to build strong human relationship with its suppliers. Forinstance, although the company operates 737 aircraft that were built by Boeing, it also acquired the new A320 aircraft from Airbus. In this way the company establishes undecomposed relationship with the two and only civil airliner suppliers and hopefully through these good mutual dealings, thepower of these suppliers can be further reduced.The company also strives to maintain good relationship with other suppliers that provide aircraft maintenance and airport services. Thisprobably also explain why AirAsia is able to get lower rates from them. As a staff of the AirAsia team, he/she gets to enjoy highly competitive and attractive remuneration packages. These include productivity and performance-based bonuses, shares and stock options. In summary, with the capability and flexibility provided by above-average returns, AirAsia is able to satisfy multiple stakeholders more easily Mark eting Customer SegmentationAlthough AirAsia invests aggressively in marketing where required, it chiefly adopts creativity and yet low-cost advertising so as to keep cost low. For instance, to keep cost low, AirAsia commonly advertises and promotes through the host country newspapers as well as internet website as they are generally cheap. Like all other LCCs, AirAsia also positions itself as an airline that provides short-route ferry for non-business and price-conscious businesspassengers as shown in Diagram 2 . This means that competition is intense and increasing as newplayers join in Competitors AnalysisBased on a report about major Asian budget airlines that Airline Business produced, onlytwo LCCs, Bangkok Airways and Lion Air, share almost similar markets as AirAsia in terms ofmarket commonality. Their manifest and intangible resources are also comparable to that ofAirAsia. With that, based on the competitor analysis framework appended in Diagram 3 , Bangkok Airways and Lio n Air fall in quadrant I and thus are considered as close competitors of AirAsia. Technically, any firm or competitors in quadrant I will use their similar resourceportfolios to compete against each other.This lead to the conclusion that Bangkok Airways and Lion Air modeled in quadrant I are direct competitors of AirAsia. In contrast, the other airlines such as Value Air and Tiger Airways modeled in quadrant IV share few markets although they all possess comparable resources. As such, these airlines do not directly pose as strong rivalry to AirAsia at this point in time. As of now, AirAsia will have to compete with Bangkok Airways and Lion Air which have entered the market since 2000/2001.As they also adopt the low-cost strategy, the only way customers can differentiate them from their competitors would be on the airfare charges. In orderto maintain or increase the load factor, any of these companies may consider lowering fare prices to achieve their objective lenss. However, if th is authorises, the profit margin of the remaining players will be compressed and the scant(p) one may be drove out of the market (also known as the vicious cycle). In Malaysia, Air Asias main airline competitor is Malaysia Airlines (MAS) which offers a full range of services.Although MAS had an ambivalent answer to Air Asias entry into the airline industry, it also reacted to the competition by offering fares at 50% discounts on some its domestic routes. Although the attack was not successful (MAS eventually lost about 30% of its market share), it proves that any airlines that provide full services can be a threat to AirAsia. pitiful forward, it is expected that acquisition and merger will happen in the market until equilibrium is reached. When this takes place, only a few strong players with sound cost-controlling and profitable business model will exist and succeed.In other words, AirAsia can expect to face stiff competition in time to come even though market participants under stand thatprice war is destructive and thus will try to avoid any direct price competition. A short summary on the possible opportunities and threats are appended in the tablebelow. From the analysis of AirAsia, it can be deduced that the operating environment unreasonably competitive and filled with minimum uncertainties which means that the company has to prepare themselves well during good clock.However, amidst the challenges, there are still many opportunities for AirAsia to explore and exploit so that it continues to lead and be the mostprofitable LCC in Asia. Amik kt dekstop-airasia Question 4 AirAsia has been soaring success. Starting with two planes bought from a Malaysian conglomerate in late 2001, the company had expanded it to 32 by the end of 2005. During the same year, the aggressive expansion also resulted in an extensive Southeast Asian regional network of 60 routes. For sure, the large, untapped market and Air Asias model would ensure its future success. a)Conduciv e Environment for GrowthThe major macro environment factors suggest a very conducive environment forthe growth of low cost carriers (LCC) in Asia. According to TWA (Dec 2003), it mentioned that in Asia the demographic rudiments of large populations that include rising middle classes with increasing leisure time and disposable incomes as well as the lack of competitive forms of transportation, paint an extremely encouraging demandpicture in the long run . Furthermore, a study by the Centre for AP (2002) confirmed that Asia would continue to offer attractive conditions for the air transportation industry.It estimated that Asia would account for 30% of the world market by 2020 or one third ofgrowth between now and then. The archipelago geographical structure of Asia continent is also an important contributing factor to the growth of air transportation. For example, between East and West Malaysia, there is no other viable and efficient mode of transportation other than to commute by ai r. As a matter of fact, in mid-2005, eight budget airlines were operating in Southeast Asia and there were predictions that there would be as many as 20 such airlinesby 2012.Although terrorism and SARS do impact on air travel, the long run forecast is very positive. b)Strong Finance Resource The company has been profitable from the start. It has a huge bank and cashbalances of US$86. 7 million, with no loans and borrowings as of 30 June 2005. Its profit margins of 38% (before interests, taxes, depreciation and amortization) were among the highest in the world for LCC. According to a report by CSS (2005), it was deduced that AirAsia would continue to be profitable in 2006.This probably explained why in 2004,bankers and venture capitalists had provided funds to help the company got listed despite the airline industry was being badly affected by SARS. In short, a strong finance resource is vital for growth and to grappling hook any economic crisis. This in turn sustains success. c)Obse ssion with Low Cost Culture In some respects, the most important requirement to sustain success in the LCC industry is to possess a genuine low-cost culture. Unlike other LCC, AirAsia preached cost avoidance with religious zeal. For example, even though a luggage tag costs less than US$0. 5, AirAsia does not provide them. In addition, it also emphasizes cost deduction so intensely that in-flight ovens must not be heat up and that cabin lights switched off at appropriate times. To further lower cost, the company was the first to implement victorious reservations via the internet rather than through travel agents. It operates only one type of aircraft to save on overheads and operating cost. AirAsia crews are also required to help clean the aircraft so as to shorten turnaround times to achieve higher aircraft utilization.At 29 U. S. cents operating cost per available seat-kilometer, Air Asias operating cost is the lowest in the industry. With such as an regression withcosts, AirAsi a is certainly poised to sustain its success. d)Effective in Implementing Cost Reduction Measures Even though most low cost carrier had implemented the various cost reduction measures, it was AirAsia that had implemented them most effectively. As a result, AirAsia achieved cost per average seat kilometre of 2. 13 U. S. cents, the lowest for any airline in the world.This in turn allowed the company to achieve profit margins of 38%(before interests, taxes, depreciation and amortization) which were among the highest in the world for LLC. In addition, the company was also able to achieve good operatingbenchmarks in terms of flights on time (88%) and baggage handling efficiency (99. 9%). This in turn resulted in further cost reduction as the company paid much lower charges and compensations as compared to other airlines. The ability to ensure that the central objective of achieving bigger cost advantages than the companys rivals (by constantly