Table of Content

Executive Summary……………………………………………………… 3

History of Air Asia……………………………………………………….. 4

Objectives of Air Asia……………………………………………………. 5

Scope of Air Asia………………………………………………………… 5

Vision Statement…………………………………………………………. 6

Mission Statement………………………………………………………... 6

Corporate Strategy………………………………………………………... 6

Issues faced by Air Asia…………………………………………………... 7

External Opportunities of Air Asia………………………………………... 8

Value Chain of Air Asia…………………………………………………… 9

Competitive Advantage of Air Asia………………………………………. 11

Current Business Trends/IT Strategy of Air Asia ………………………… 12

Principles of Technology………………………………………………….. 13

Technology Requirements………………………………………………… 13

Roadmap for Air Asia’s Plan……………………………………………… 14

Proposed IT Strategies……………………………………………………. 14

Conclusion………………………………………………………………... 16

Reference…………………………………………………………………. 17

Executive Summary

This report was an internal analysis of Air Asia. It analyzed how Air Asia managed its

value chain, resources and how they created value for the firm. It also discussed how

Air Asia’s capabilities and competencies created competitive advantage. As a

conclusion of this report, there were three factors in shaping the firm to its

competitive position.

First, it was the decision to utilize only one type of aircraft as its fleets. It was the

foundation of Air Asia to create the competitive weapon. Then, it was the synergy

between Air Asia’s management and its employees. Finallly, it was Air Asia’s

capabilities in suppressing cost. They were the concrete result from above practices.

Various capabilities to decrease cost such as short-haul flight and quick turnaround

time were the backbone of Air Asia’s practices in exercising their strategy.

History of Air Asia

Air Asia is Malaysia’s first Low-cost airline. You may be wondering “what is a low

cost airline?” .Simply put a low cost airline generally has many features that

differentiate it from the traditional carriers. The features include ticketless travel,

online ticket sales, no international offices, no frequent flyer points, etc. Low-cost

airlines pioneered in 1979 and were first used by Southwest Airlines. A good example

of a low-cost airline is Virgin Express.

Currently, Air Asia is the largest low-fare airline in Asia. It was first established in

1993 but began to fully operate in 1996, on the 18th of November to be specific. When

it was first established, Air Asia was a government-owned conglomerate of DRB-

Hicom (formally Diversified Resource Berhad).

As at 2001, the company was in great debt and as a result was purchased by Tune Air

Sdn Bhd’s CEO, Tony Fernandes.

Two years after its purchase (i.e. in 2003), Air Asia launched an additional hub in

Bahru, and soon launched its very first international flight by flying to Bangkok,

Thailand’s national capital. In 2004, exactly one year after launching its first

international flight, Air Asia began flying to other countries such as Indonesia, Macau.

Air Asia has its main base as well as its head office in Kuala Lumpur International

Airport.

Objectives of Air Asia

As the largest low-cost airline, one of their major objectives is to provide their

customers with satisfaction. Their other objectives include:

The provision of advanced training and development to its pilots, cabin crew

and its other entire staff.

To grow the academy as a top class aviation academy in order to fulfill its

goals or target to be a local aviation training hub.

Finally, to improve or upgrade its equipments with the latest technological

advancements and to instill the best practices into their variety of services.

Current Scope of the Organization

Currently the organization is accepted in over fifty percent (50%) of the countries in

Asia. This is due to the fact that Air Asia provides services which satisfy the needs of

the customer. In addition to all this, it has set its standard and made itself recognized

as the best low-rate airline in Asia. Currently it has branches and academies in the

following countries:

Malaysia

Singapore

Indonesia

Macau

Vietnam

Philippines

Vision and Mission Statement

Vision statement

The vision of the organization is “to be recognized as the principal or top low-cost

airline in the Asian continent or region”.

Mission Statement

The missions which the organization intends to achieve include:

To be a low-cost airline that would offer five star services with a high

percentage of on-time performance or service.

To provide fares that would be affordable for their customers.

To meet the needs and demands of customers and also provide a variety of

services for its customers.

Corporate Strategy

In order to achieve its vision and mission, Air Asia has opted for the implementation

of a variety of IT strategies. In recent years, these services has aided in the

achievement of its vision and some of its mission.

One major IT strategy that has aided Air Asia in the achievement of its vision and

mission is the implementation of an Online Reservation System (ORS). This system

enables the customer buy tickets online, reserve specific seats online, online hotel

reservation, etc.

Another IT strategy adopted by Air Asia is the introduction of an Enterprise Resource

Planning and Revenue Management System (ERPS and RMS) which aids them in

allocating resources to help in the development organization, quicker accumulation of

annual report, salary planning, etc.

Although Air Asia has implemented an ORS to provide customers with services

online, there are various services which can still be provided to customers online.

Some of these services include:

The ORS should enable customers check themselves in (i.e. self check-in) by

providing details of what they intend to carry in their luggage for the trip. By

doing so, the system is able to prevent the customers from including

dangerous objects or items in their baggage.

The Enterprise Resource Planning and Revenue Management System can

provide a flight schedule which could prevent numerous flight delays of the

airline.

These solutions above can aid in the further achievements of Air Asia’s current vision

and mission.

Issues faced by Air Asia

1. Delay Complaints

This is the most conversant complaint amongst Air Asia’s customers. Although Air

Asia provides top class service, its major challenge is its flight delay. Majority of its

flights are delayed due to the fact that there is no hanger to land, which makes them

continuously circle round the airport until a free hanger is available or as a result of

bad weather especially during the raining season. This problem causes Air Asia to lose

its reliability amongst its customers.

2. Withdrawal from Abu Dhabi

Air Asia X, an extension of Air Asia, has recently announced that it wants to withdraw

its services from Air Asia due to the low ticket demand, etc. As a result of this Air

Asia has decided to go back to the drawing board in order to develop a new strategy

which would provide the requested demand or needs of the customers in Abu Dhabi.

Opportunities available to Air Asia in light of external development

1. Low fare Trips to Neighboring Countries

Compared to traditional airlines, Air Asia provides low fares to customers flying to

neighboring countries, such as Indonesia, at a cheap rate. For example, the cost of a

flight from Indonesia to Malaysia. On Air Asia, the price charged for a flight from

Jakarta to Johor Bahru is 100,000 Indonesian Rupees, which is approximately (89)

Malaysian Ringgit. On the other hand, traditional airlines such as Malaysian Airline or

Lion Air (Indonesia) charge customers an outstanding sum of at least 1.05 million

Rupees making it impossible for the average Indonesian to fly with a traditional

airline. By providing cheap fares to customers, Air Asia has made itself open to the

Indonesian aviation market.

2. Promotions and Special Offers

Air Asia also boosts itself in the aviation market by offering or providing its

customers or guests with limited time offers or special promotions. These offers helps

Air Asia increase its customer base all round Asia.

3. Malaysian Government Support

Due to the fact that Air Asia was formerly owned by a government owned

conglomerate, Air Asia has gained the support of the Malaysian government even in

2001. This was so that it could increase the use of the Kuala Lumpur International

Airport which was not being used conversantly by airlines and its citizens.

4. Building Hubs/Academies in Neighboring Countries

In order to provide skilled services in countries where its services are provided, Air

Asia built hubs in Malaysia’s neighboring countries. Some of these countries include

Singapore, Indonesia, Macau, Bangkok, etc. By building these academies or hubs, Air

Asia also provide job opportunities for citizens of those nations, thereby reducing the

unemployment rate in these nations.

Value Chain of Air Asia

After putting Air Asia’s competing environment into consideration, I was able to

derive the value chain (activities that take place in the organization and enable the

organization have a competitive advantage) of the organization. These activities are

assumed or considered to be significant to Air Asia in creating its value as a low-cost

air carrier.

Primary Activities

1. Landing slots acquisition:

Landing slots are scarce resources and also possess critical value in airlines industry. Air Asia

wishes to ensure that it has adequate landing slots which would maintain its flight schedules.

2. Passenger Transportation:

This is the main source of Air Asia’s profit. The provision of safe and secure low-cost carriers

by Air Asia has increased its customer base and its profit. This is as a result of the experience

acquired by the aircraft ground maintenance. Furthermore, the aircraft ground maintenance of

Air Asia has derived various methods in driving down the cost for this activity showed a great

effect in suppressing the cost low.

3. Advertising and promotion: Important activities to popularize the brand of AA

Rigorous advertisements and promotions offered to customers have aided Air Asia in the

increase of their customer outreach. Presently, Air Asia has an outstanding customer base of

over five (5) million customers across Asia.

4. Marketing & Sales: Computer Reservation System

This is a strategic enabler for Air Asia to compete with other competitor. The sale of tickets to

customers online has provided Air Asia with over sixty (60%) percent of its revenue. By

optimizing this online reservation system, Air Asia can develop new analytical tools which

can deliver precise and accurate in good time. A very good example of this is the E-business.

Support Activities

The infrastructures owned by Air Asia would aid it in the formulation of a strategic

decision. This strategic decision would benefit Air Asia because it would prompt

employees to support its strategy (especially if the strategy provided would benefit

them).

In a nutshell, although it cannot be said that an organization has undertaken all its

primary and support activities, it can still be said that Air Asia has created a value

chain that would aid it in its approach to its strategy and achievement of its vision and

mission.

Competitive Advantages of Air Asia

There were three (3) basic factors that form the competitive advantage for Air Asia in

its aim to provide low cost air transportation services. They include:

1. The strategic decision which relates to the use of one type of aircraft:

This decision turned out to be a key strategic decision. It pointed out the significance

of economies of scale (the cost advantages that a business obtains due to expansion)

in considerable amount.

2. The Synergy between Air Asia’s management and its employees:

The synergy also resulted to numerous capabilities which formed Air Asia’s

competitive advantage. Without management support, employees will not be

motivated in their creation and services, and would eventually affect the performance

of the firm. Hence, the synergy proved to be significant for Air Asia and also hard to

be imitated or copied by its competitors.

3. The Company’s Capabilities:

This is the most important competitive advantage of Air Asia. The procedures,

methods and tips which were created by the employees have helped Air Asia thrive on

the low cost services which they created. Also, they are the undisclosed methods of

Air Asia which could not be imitated or copied.

Current Business Trends and IT Strategy of Air Asia

Currently, the business trends as well as Air Asia’s IT strategy has aided in the rapid

growth of the organization. The business trend is in relation to their sales and

marketing activities.

Technological Infrastructure

In recent times, Air Asia has implemented the use of sophisticated and also the latest

technological gadgets and infrastructure in order to enhance and improve services

they provide to their customers. By making use of only the latest technological

infrastructure, Air Asia can also increase customer safety on board the airline. This

would help boost customer trust and reliability.

Provision of services to customers via Internet

To further increase their customer outreach, Air Asia has chosen to implement an

Online Reservation System (ORS), an integrated online reservation and inventory

system dedicated to providing the customer with services such as online ticket sale,

online hotel reservation, customer care or call center etc, through the widely used

internet. This system, which was developed or created by Navitaire, an organization

which provides airline solution and maintenance to airline organizations, is used to

provide customers services in the comfort of their home, thereby reducing the trouble

of having to wait in long lines or queues at the airport.

Management Information System

Air Asia uses an Enterprise Resource Planning and Revenue Management system to

prevent organizational mix-up. This system, which was also developed by Navitaire,

aids the organization resource allocation, report accumulation, salary planning, etc.

Principles of Technology

There are numerous principles of technology. Some of these principles are stated

below:

Reliability: The system should function properly and should not cause any

problems for its users.

Flexibility: The system should enable people use tools appropriate to the

user’s field of study and task.

Responsive: the system should function and respond correctly to any

instruction given by its user.

Affordable and Sustainable: It is important for systems o be easy to acquire or

own and also easy to maintain should any problem arise.

Technological Requirements

In order for a system to function properly it requires the following equipment:

An Operating System (OS): This is a software that controls the execution of

computer programs. Some examples are Linux, Windows XP, Windows 7,

etc.

A Web Browser: These enable the user access the internet and acquire

information which is required for his/her job.

Other requirements include: Resolution and Color, etc.

Roadmap for Air Asia’s Technology Plan

The necessity or importance of an Information Technology (IT) strategic plan is to

develop a new method or process that would correct the mistakes of the mistakes or

short comings of the organization’s strategic plan.

In order to develop an excellent strategic plan, it is essential to view and analyze the

current strategic plan of the organization, the strengths, weaknesses, opportunities and

threats to the organization and other necessary aspects of the organization. This would

aid in decide how to go about the plan and also what would aid the development f the

organization.

To aid the development of Air Asia, the CEO, Tony Fernandes, and other members of

the Board of Director have requested an Information Technology strategic plan for

their organization. This strategic plan would consist of the companies current trends,

value chain, background, corporate strategy, etc. a good IT strategic plan would aid in

the adverse growth or development of Air Asia.

Major strategic directions recommended for Air Asia

1. Open more Asian markets:

Most low-cost airlines are expected to have superior prospective in Asia due to the

fact that there are numerous Asian cities which inhibit over two (2) million people

along with an increasing middle class population. As a result of this, it is necessary for

Air Asia to take advantage of Asia’s rapidly growing middle class population by

providing affordable air travel. In addition to providing services to the Pearl River

Delta in Southern China in the year 2004, Air Asia can extend its air travel services to

the Coastal Cities in China.

2. The provision of an upgraded Online Reservation System

Although Air Asia already has an ORS, it is sill necessary for Air Asia to upgrade this

system. This is due to the fact that the current ORS does not provide some essential

services. By upgrading the ORS, Air Asia would be able to enable customers check

themselves in (i.e. self check-in), etc.

3. Flight Schedule

Currently, Air Asia has an Enterprise Resource Planning and Resource Management

System which aids them in resource planning, report (i.e. profits, losses, etc)

accumulation, etc. This system can also aid Air Asia develop a good flight schedule.

This would help Air Asia keep to time and prevent customer delay.

Conclusion

In conclusion, it can be said that Air Asia’s current business and strategic plan has

aided in the development of the organization. Although the strategic plan has aided

the development of Air Asia, the plan still doesn’t fully provide services at would

meet the needs of the customers and does not fully aid the achievement of the vision

and mission.

To meet or correct the short comings of the current plan, the strategic plan above

would correct all mistakes in the old plan and aid in the further development of the

organization.

Reference

OPPapers, Research Papers and Essays for all, on History of Air Asia, linked to

http://www.oppapers.com/. Accessed on 24th March, 2010

Air Asia, on the Objectives and Current Scope of the organization, linked to

http://www.airasia.com.my/. Accessed on 25th March, 2010

Air Asia, on the Vision and Mission of Air Asia, linked to

http://www.airasia.com.my/. Accessed on 25th March, 2010

Meaning and Importance of Corporate Strategy, on the he Corporate Strategy of Air

Asia, linked to http://university-essays.tripod.com/. Accessed on 25th March, 2010

Air Asia Review, on the Issues faced by Air Asia, linked to

http://airasiareviews.blogspot.com/. Accessed on 25th March, 2010

OPPapers, Research Papers and Essays for all, on External Opportunities of Air Asia,

linked to http://www.oppapers.com/. Accessed on 28th March, 2010

NetMBA, on the Value Chain of Air Asia, linked to http://www.netmba.com/.

Accessed on 1st April, 2010

Wikipedia, Free Encyclopedia, on the Competitive Advantage of Air Asia, linked to

http://www.wikipedia.org/. Accessed on 2nd April, 2010

Wikipedia, Free Encyclopedia, on the Current Business Trends and IT Strategy of Air

Asia, linked to http://www.wikipedia.og/. Accessed on 2nd April, 2010

University of Melbourne, on Principle of Technology, linked to

http://www.unimelb.edu.au/. Accessed on 2nd April, 2010

Wikipedia, Free Encyclopedia, on the Technological Requirements of Air Asia, linked

to http://www.wikipdia.org/. Accessed 3rd April, 2010

B-net, on the Roadmap of Air Asia’s Technology Plan, linked to

http://www.findarticles.com/. Accessed on 5th April, 2010

OPPapers, Research Papers and Essays for all, on Major Strategic Direction of Air

Asia, linked to http://www.oppapers.com/. Accessed on 6th April, 2010