Air Asia X Strategic Situation

Introduction

Air Asia X is a long-haul whose headquarters is in Malaysia. Air Asia operates the airline. The first service by the company flew from Kuala Lumpur International Airport, Malaysia, to Gold Coast Airport, Australia. It flies to destinations within Asia and Oceania. It has a fleet of 14 aircraft. It is waiting for additional deliveries.

Analysis of the Organization’s business environment and of industry survival and success factors

Air Asia X’s business environment comprises the internal and external environments. The internal environment comprises of factors such as employees, management, finance, technology. These are factors are within the control of the business. On the other hand, the external environment comprises factors such as government and legal factors, Geo-physical factors, political factors, socio-cultural factors, demographic factors etcetera.  The external environment may comprise the operating environment and the macro environment.

The company’s environment influences its operations significantly. Within the internal environment, employees of the company work diligently to ensure success for the company. Moreover, the employees are also skilled and experienced. All departments set goals which they wish to achieve. They are industrious to ensure that they achieve these goals. The company’s management also forms its internal environment. The company is under clear leadership. The company’s CEO is Azran Osman Rani. The management is also skilled and experienced. This gives the company an advantage since the management works towards performance, to the best of the knowledge.

Regarding Finance, the company has had significant progress. The entry of key investors in the company has given it a significant boost financially. They have also assured the company sustainability and future expansion. More than 48% of the company belongs to Aero Ventures. This is a venture that Robert Milton of Air Canada owns. The Virgin Group owns 16% of the company while Air Asia owns another 165. Manara Consortium and Orix Corp own 20% stake. The latter two own stake worth RM250 million. Consequently, this means that Air Asia X has a sound financial base that can sustain its future expansion plans.

Industry Analysis

Pestle Analysis

PESTLE analysis refers to the analysis of political economic, social and technological factors that surround a business and which affect its operations. Economic factors are factors that relate to finance and the economic situation of the business and the environment in which the business is operating. Social factors include actors such as demographic composition and how it affects a business. Technological factors refer to factors that relate to technology, and which affect the operation of a business. Air Asia is no exception. Pest analysis for Air Asia X shows a combination of factors that relate to the political, social, economic and technological advantages that the company has. It also analyzes the weaknesses that the company regarding the same.

Looking at the economic conditions, Air Asia X is a branch of a stable company called Air Air Asia. Consequently, the company has a strong financial base. This enabled it to grow extremely fast after its inception in 2007. The company has grown tremendously over the years it has been operational. In addition, the company has enjoyed a period of economic stability in Asia. This means that more people travel around Asia and in the world. This translates into increased income for the airline. The political environment shows that Asia has enjoyed peace and stability intensively for the past few years. This offers a highly conducive environment for business.

Moreover, a technological analysis of the company shows improved usage of technology. The use of computers to control flight travels and manage carriage has been a tremendous boost for the company. This is because it helps to improve operations significantly. The company also enjoys an excellent social environment. Language barriers are not an issue of concern since the company can communicate to its clients in almost all languages. There are skilled attendants who can speak multiple languages. These people deal with customers in the most professional manner. The demography of Asia consists of a rich population of people who travel regularly within the country and outside. In addition, Asian countries have a large population of people. This increases the customer base for the company. This is the reason why the company enjoys working with about 0.6 million people every quarter. This also explains the increased profits for the company every financial year.

The legal environment of the business requires that it conforms to all regulations that govern operations of business within and outside Malaysia. The company conforms to tax regulations by ensuring that it pays tax promptly when it falls due. The company also conforms to all regulations regarding safety of the environment in which the airline operates. It also conforms to regulations regarding conservation of the environment such as maintaining standards of cleanliness. The company also pays license fees for its operations. This keeps it safe from wrangles with authorities. Demographic factors affect the company in that they comprise the population within which the company is operating. The population affects the operations since it defines the customer base. Within Malaysia, many people fly in and out. Moreover, the country exports goods and services through the Airline. This boosts the level of profits every year.

Porter’s Five Forces

Rivalry

The Air travel market is a market that yields high profit margins. This market attracts many players. In addition to Air Asia X, other players are present. These include Berjaya Air, Sabah Air, Eaglexpress, Malindo Airways, MASwings among others. These companies pose a serious challenge to the company. To counter this rivalry, the company ensures competitive advantages through innovation, flexibility of volumes and variety of services.

Buyer Power

This refers is ability of customers to put the firm under pressure, which also affects the customer's sensitivity to price changes. Availability of buyer information is critical. The company provides information to the buyers through its website, through advertisements and other available techniques. The buyers are many and powerful. At the same time, the company makes sure that its prices are competitive in comparison with other firms in the industry so that customers may not move to other service providers for services.

Supplier Power

Air X’s suppliers are companies that supply goods and services to it. The company requires these for its operations. For instance, it buys such goods cleaning. The supply power for X is strong. This is because there are varieties of firms that can supply products to it.

Threat of Substitute Products and Services

Available substitutes include other modes of transport such as the electric train, road and water transport. These do not offer stiff competition because they cannot offer services equally competitively. Air transport is faster as compared to other modes of transport. This keeps the company at a more competitive edge compared than other companies.

Threat of new Entrants

Expanding airlines pose as new competition to the company. However, the industry has various barriers to entry. These include government restrictions on entry and asset restrictions. It thus becomes an industry that is difficult to enter. However, some new entries include RedQ airline. Such companies are likely to increase competition for the available market.

Air Asia X’s Strategy

One of the strategies that Airline X uses is ensuring increased social responsibility. The company cares about the society. It has started initiatives aimed focusing on social responsibility and increased awareness. For instance, Air Asia X has started initiatives such as the innovative laptop based under the one laptop per child program in Kathmandu. This shows that the company supports education. Moreover, the initiative creates more awareness. This helps to boost its image. Under the initiative, AirAsia X bought designed XO laptops that cost US$225 (RM675) each. This was for young children and also trained the teachers. This initiative aimed at integrating digital learning resources in classroom teaching. The initiative is a partnership with a non-profit organization called Nepal.  This helps to improve the quality of education within the landlocked country.

The company has years has tried to reach out to more customers over the years. It has introduced a number of measures in line with this goal. One of them is to increase the number of flight schedules to different destinations. Air Asia X is expanding its network into China by introducing direct flights to Shanghai from to Kuala Lumpur. The company also targets to commence six weekly flights. These will be flying from Kuala to Shanghai Pudong. Air Asia X will be flying on to Shanghai on a daily basis.  This will see that the company’s profits increase significantly in the next financial quarters.

The company also aspires to move to KLIA2 which is the country’s new low cost carrier terminal. It will provide an opportunity for the company to grow. This move will also give the company an opportunity for the company to offer increased flight transfers. Currently, the service enables connection of Air Asia Malaysia and Air Asia X flights using a single booking system at the LCCT. It also allows passengers to travel using one ticket.

 The company expects the new terminal to start operating in May 2013 as it targets that the project will be complete by April 2013. The company also has declared sale of IPO. It intends to enter the Bursa Malaysia main market next year. The company intends to increase its funding through the IPO issue. This money will finance operations for the company. It will also help to ensure sustainability for the future. The IPO move will also enable other people to know about the company. This means that it is a strategy to fund operations for the company.

The company also relies on a suitable Marketing Plan. Strategic management involves sustainability.  It is always necessary for a company to develop in a unique way so as to counter the existing competition. Air Asia X understands that there are many players in the markets. The management of the company ensures that it engages in continuous research into ways in which their products can be made unique. For instance, the company has integrated excellent passenger services within the aircrafts. This move aims towards ensuring that all customers are satisfied and happy with the services. .

Air Asia X also lobbies for online orders. This is where one can book a flight online. Customers do not have to move to the main hub to book flights. This is convenient for the customer.  This is a strategic move to reach out to passengers living in different places who may feel inconvenienced with travelling to book flights.

The company also reaches out through intensive marketing techniques. One of the ways it applies is to advertise its products. It does this online, through advertisements etcetera. This technique is extremely strategic as it has helped to boost sales for the company significantly. The company also makes use of social websites such as face book and twitter. One can follow it up on AirAsia. @AirAsia. This shows the company’s willingness to interact with people. Through such initiatives, the company creates awareness about its products. This move is extremely crucial as it helps the company to communicate to its customers. The customers can then respond to this call.

Air Asia X has also expanded flights to different destinations around the world. For instance, the company began flights to London in 2009. This year alone, it posted $161.02 million (Oxford Business Group Malaysia (2010). This was remarkable.

The company has a culture of integration between workers. The company has a culture whereby all workers receive the same treatment. It is only here that we find the CEO working closely with other workers and interacting freely. For instance, all employees are addressed by the first name, including the Chief Executive Officer. Moreover, the company has coined the term all stars to refer to all employees. This culture allows free interaction. It allows any employee to approach the other freely without fear. This has led to unity in the company.

During the Financial crisis of 2008, X thrived despite other companies crumbling. This is because it could draw resources from its parent company Air Asia. This helped it to remain intact as the financial crisis hit other airlines.

The airline has also maintained low costs at KL. The company has its own low cost carrier terminal. This gives it a competitive advantage over all other airline companies in the industry.

The company maintains excellent customer services on board. One may eat as much as he wants on board. This is part of a program for dealing with customers in the right way so as to boost the company’s image and maintain customers for long.

The company also made an early decision to postpone the implementation of a reward program. Through this, the company maintained transparency in the system. For instance, it did not charge any booking or telephone fees. The company also did not allow refund of tickets after a passenger had booked. It launched the first frequent flyer program in 2010. In addition, the company also introduced flat bed seats. This is a strategy that makes the customers feel comfortable on board. Some of them can even sleep.

Appraisal of the Strategy

The strategies that Air Asia X applies are relevant to the needs in the market. For instance, engaging in marketing initiatives helps the company to boost sales levels. Increased sales translate into increased profits for the company. The twitter move is strategic since it meets current trends. More and more now are online as compared to the past. After tweeting, many potential customers can see them. This helps to increase awareness about the company. It helps to reach out as much as possible. This move puts the company on a competitive edge. It improves to improve the image of the company. This way, many customers would love to use the service for travel.

The social responsibility strategy is excellent. It shows the company cares about the needs of the community in which it operates. This move also helps to boost the company’s image and create awareness about its existence. It also puts the company on a competitive edge over all its other competitors.

The increases application of marketing helps the company to reach out. Other companies in the industry do the same. Air Asia X cannot be an exception considering that it has to inform customers about what it offers. Moreover, the company must ensure it keeps in touch with old customers so that they come back. This can only be met through public relations and intensive marketing, which Air Asia X does.

Expansion strategies help the company’s profits to increase exponentially. For instance, since it expanded flights to London in 2009, the company’s profits have continued to increase over the years. The company then ploughs back profits to finance other projects. This shows that the company’s future is secure, if the same trend it follows the same trend.

Scale and Scope

Air Asia X is a subsidiary company of Air Asia. It started in 2007 with the aim of expanding operations of the parent company, Air Asia. The company serves different destinations around the world. It flies within Asia and Oceania. As at 2011, the airline had a fleet of 11 aircraft. These included 9 airbus A330s and two airbus A 340s. The former have a sitting capacity of 377 while the latter have a sitting capacity of 327. Recently, the airline has expressed interest of travel to other countries such as South Africa. The airline plans to expand operations to the People’s Republic of China.

Value Chain

The airline engages in domestic flights within Malaysia.

The airline also engages in international flights to other countries e.g London.

The airline also sells direct tickets to passengers as a way to reach out to more of them.

Online orders are also part of their program. A passenger does not have to go to the main hub to book a flight. In addition, one may book through the telephone. The airline pays for such telephone calls.

The company offers food and drinks for purchase on board.

The company airline also offers entertainment services on board, for instance video games and powerful screens for movies.

Conclusion

Air Asia Company has applied various strategies to ensure its survival and future expansion. In line with this, it has increased its marketing initiatives. It also engages in corporate social responsibility measures. This move has seen it expand tremendously over the past few years. The company’s business environment comprises of many factors. These factors affect the business in one way or another. Air Asia X struggles to keep alive amidst the heavy competition it faces. With this progress, the company will achieve significantly.