UiTM: Strategic Management

ROZIAH WATI BINTI RAHMAT

AIRASIA BERHAD

By:ROZIAH WATI RAHMAT

KARTINI KARIMYANG IZHANI ITHNIN

NOR ASALEHA HJ. MUHAMMAD MURAD


INTRODUCTION


AirAsia Berhad

• The ideas to built up the AirAsia

• The establishment of AirAsia

- Company Statement

- Management, Marketing and Financial Perspective

- Management and Leadership and Marketing Analysis


CASE SUMMARY/ BACKGROUND


With the tagline 'Now everyone can fly'(1), AirAsia’s philosophy of low fares is aimed (5) and to make flying affordable for everyone (2)

Existing Mission Statement


• AirAsia become one of among the world's first truly low-cost long-haul airlines in Asian Market.

• To become franchisor the globally renowned 'AirAsia' brand from AirAsia Berhad toward variety of industry such as Airline, Travel Tour, Hotel and Financial Services in the market that AirAsia enter.

• AirAsia Berhad to poised to extend AirAsia's success to the long-haul segment in growing market such as Cambodia, Philippine and Vietnam in the future.

• To offering sustainable and continued delivery of everyday low fares to current air travelers with changes environment.

Existing Objective


- Low fare, no frills- Frequent flights- Guest convenient - Safety first- Cost optimization operations

Existing Strategies


Develop New Mission Statement for AirAsia


'Now everyone can fly'(1), AirAsia’s philosophy (6)of low fares is aimed and to make flying affordable for everyone (3) Built up a strong brand name as a trendsetter in the aviation industry, particularly in terms of innovation (4), safety and service excellence (2) and coupled with consistent profitability (5). The corporate culture of AIR ASIA MALAYSIA is routinely described as fun and upbeat (7), where employees (9) are committed and passionate to the company’s vision and motivated to provide excellent customer (8) service.

New Mission Statement For The Organization


PROBLEM IDENTIFICATION


1. AirAsia had limited capital with liability are increasing year by years based on the new airplane Airbus A320 purchasing agreement (Competitive Information) 2(Moderate priority concerns)

2. There is a long and uneven legislative history of public policy toward pricing at the cost margin that Air Asia used (Economic) 3(Less priority concerns)

3. At the end of June 2005, the company still faces current liability RM152 million compare to RM149, RM145 million in the same period at 2004 (Economic) 3(Less priority concerns)

4. Pricing method at the cost margin on account at differences in the grade, quality or quantity of the commodity sold was exampled (Economic) 3(Less priority concerns)


5.AirAsia gain profit only in Malaysia market and remain loss in Thailand and Indonesia event the industry in the market are potential to grow. (Environment) 1(Need immediate concerns)

6.Oil Rate remain increase in US$110 and to maintain the low process in ticket AirAsia have to lower cost in their expenditure in Marketing activities. immediate concerns)2(Moderate priority concerns)

KARTINI BINTI KARIM

TOWS FRAMEWORK

KARTINI BINTI KARIM

OPPORTUNITY

• They are on the few airlines that fly nonstop to China and India and grab this market on the sub-region (competitive information)

• Airline company can probably control their own traffic at the local airport’s Low Cost Carry in KLIA does to save money (competitive information)

• Cutting down on delays can reduce the amount of money used to services debts and yield NPV’s (environmental)

• The economic of scale allow to streamline costing further and will allow more fare promotion to local destinations and along the way (economic)

• The recourses to develop new routes and potential point of the connection to promote domestic tourism in country by offer a simple yet affordable means of travel for local citizen (culture)

KARTINI KARIM

• Asian members open sky arrangement that allow increasing number of set in every countries that involved, it open the right to every airline industry to enter the market (political)

• More than 10 million passenger are used Malaysia as their link to other countries (demographic)

• Low rate in Marketing Strategy in Asian Airport and the introduction of Airline Forum and Carnival in European open opportunity to Asian Industry to enter the market (Environment)

KARTINI KARIM

THREATS

• Regulatory framework in airline industry for each market in East Asian, North American and European market (name change or language barrier, fuel surcharge based on the subsidiary of local government, advertise fares for marketing strategy) (competitive information)

• Government regulation in Asian market are crucial aspect to enter the market bases on the survival local airline industry such as China and Singapore (legal)

• High Inflation in Thailand and Indonesia impact airline industry in terms of purchasing power of the customer and it decrease the demand to used the airline (economic)

• Market remains fragmented in majority development country in Asian and this give disadvantage to acted to this market without high financial support (economic)

KARTINI KARIM

• Changes in Malaysia Ringgit: USD$ unstable, that show that the loan and borrowing that used US currency have to face longer loan period (economic)

• Oil Rate remain increase in US$110 per barrel and to maintain the low process in ticket AirAsia have to lower cost in their expenditure in Marketing activities. (economic)

• Image of lower cost airline are low quality in safety that be mindset majority of the customer, based on high number of accident are from this categories (Social)

KARTINI KARIM

STRENGHT

• Converting a RM40 million debts into a multimillion Ringgit airline, Air Asia has become Asia’s leading low cost carrier in South-Eat Asia (economic)

• Consider Air Asia work ethics, organizational behaviors and also communities is one of the best in Malaysia (environmental)

• Air Asia success in order to having praiseworthy employees and in the same time making prevalent view on customer’s expectation (demographic)

• Air Asia stimulates demand by offering the lowest fares, comprehensive distribution channel and develops various products and services while maintaining simplicity (competitive information)

• Air Asia is effectiveness and brilliant of management upon employees to compensate their customers in a shape of what they call “now everyone can fly” (social)

KARTINI KARIM

• Used Total Quality Management (TQM) to ensure all people in an organization utilize their effort to contribute to the efficacious organizational goals meet (technology)

• Air Asia is the first airlines company in the world that offer a total comprehensive booking system by using mobile phone and wireless devices such as PDA (technology)

• Air Asia also offer cheap Hostel beds from RM13 by launching Go Hostel on 2 March 2005 (technology)

• Air Asia joint venture with RHB bank Berhad and Maybank2U to provided credit card service that be know as Tune Money (environmental)

KARTINI KARIM

WEAKNESSES

• There is a long and uneven legislative history of public policy toward pricing at the cost margin that Air Asia used (economic)

• At the end of June 2005, the company still faces current liability RM152 million compare to RM149, RM145 million in the same period at 2004 (economic)

• The increase the trade and other payables in buying 12 new aircraft Airbus A320 and this situation increase the loan and interest of payment in more than 20 years and the airplane only can be used in next 3 years (environmental)

• Limited Management experiences to most of the employee due to the task that incorrect the employee to doing multi task performance (culture)

KARTINI KARIM

• Non ticket system numbering for customer to set and this make unsystematic placed of order and increasing the time to spent in passenger looking for set (legal)

• Inconsistence of passenger number in weak day’s and AirAsia have to face the potential fly without maximum numbers of potential to gain the minimum expenditure for single flat (demographic)

KARTINI KARIM

FINANCIAL RATIOS

KARTINI KARIM

• Liquidity RatioThe liquidity ratio is the measure of the overall ability of the firm to meet its maturing obligation by relying on its current assets, in other words. It measures the ability of the firm’s liquid resources to pay current and maturity on items. For current ratio for AirAsia is also same. This indicates that the ability of the asset to be liquid into cash is same.

• Leverage Ratio Leverage ratio is concern with how much the company owes outsider in relation to assets value of the company and to the company’s long term capital structure. Higher borrowing indicates risk because the firm needs to finance the interest charge imposed on them. As measure in AirAsia financial statement, the Debt Ratio is Increase from 65.23% to 67.32% by 2.09 %. Its show that the ability of the one unit of total asset to pay the debt is increase.

KARTINI KARIM

• Activity RatioActivity ratio use to measure the efficiency of the management in utilizing the assets of the company as well as managing the overall operation of AirAsia. The account receivable turnover indicates the ability of this company stock to be sold is decrease from 0.0016 times to 0.0002 times. This indicates that the ability of the company to charge its stock over the year

• Profitability RatioThe profitability ratio measure the relative success of the firms that is combine the effect of liquidity activity and leverage management on the firm’s overall operating result. It relates to the firm’s ability to obtain returns relative to sales, assets and equity. Profitability ratio gives an insight into the company policies and is regarded as an important ratio by the auditors to detect any errors or unusual fluctuation as due to error of fraud. The Profit Margin, its indicates by the ratio we found out that the Net Profit Margin for AirAsia increase from 1.67% to 2.32%.

KARTINI KARIM

D’PEST ANALYSIS

YANG IZHANI ITHNIN

MATRIXS

YANG IZHANI ITHNIN

TOWS MATRIX

• ANALYSIS In SWOT matrix is widely be used as strategic

planning for AirAsia, the analysis does have some limitations in themes of competitive advantage, so it must end with it own self. The matrix can be starting point go discussion on how proposed strategies could be implemented as well as cost benefit consideration that ultimately could lead to competitive advantage for AirAsia in this industrial. This SWOT matrix indicated forward, and horizontal integration; market penetration; market development, product development, conglomerate diversification and joint venture.

YANG IZHANI ITHNIN

SPACE MATRIX

• This is quite importance to comprehend, as while organizations are subject to constant change, and as a result often work continually on various contingency plans, AirAsia should be consistency in approach. Competitive quadrant indicated backward, forward, and horizontal integration; market penetration; market development and joint venture.

YANG IZHANI ITHNI

BCG MATRIX

• ANALYSISIn Start division it means high relative market share and high industrial growth rate should receive substantial investment to maintain or strength AirAsia dominant position in Low Cost Airline System in Malaysia and East Asian Countries. In Start quart it indicating forward, backward and horizontal integration; market penetration; market development; and product development are appropriate strategies for these divisions to consider.

YANG IZHANI ITHNIN

THE INTERNAL –EXTERNAL (IE) MATRIX

• ANALYSISThe IFE total weighted score on the x-axis and the EFE total weighted scores on the y-axis for the AirAsia company are 3.47 and 3.21, so that the prescription for division falls into cells I,II,IV that can described as grow and build. Intensive (market penetration, market development and product Development) or integrative (Backward Integration, forward integration and horizontal integration) strategies can be most appropriate for these divisions.

YANG IZHANI ITHNIN

GRAND STRATEGY MATRIX

• ANALYSISNote that the left column consists of key external and internal factors, and the top row consists of flexible alternative strategies. Specially, the left column of information obtained directly from the EFE Matrix and IFE Matrix. In a column adjacent to the critical success factors, the respective by each factor in the EFE Matrix and the IFE matrix are recorded. Based on the situation AirAsia in Quadrant I, that are consider alternative available are Market Development, Market penetration, Product Development, Backward Integration, forward integration and horizontal integration and also related diversification strategies can be most appropriate for these divisions

YANG IZHANI ITHNIN

COMPETITIVE PROFILE MATRIX

• ANALYSISThis is quite importance to comprehend, as while organizations are subject to constant change, and as a result often work continually on various contingency plans, AirAsia should be consistency in approach. Competitive indicated backward, forward, and horizontal integration; market penetration; and market development.

YANG IZHANI ITHNIN

MATRIX ANALYSIS AND TOWS SUMMARY

• ANALYSISBased on the analysis in the matrix, AirAsia can choose Forward Integration, Horizontal Integration, Market Penetration, Market Development and Product Development as the alternative strategies to achieve the company objective but each of the strategy have the pro and contra for AirAsia. The beat alternative strategy can be only be choose based on the strengths and weakness of AirAsia and based on QSPM analysis it determined the best among the best.

YANG IZHANI ITHNIN

QUANTITATIVE STRATEGIC PLANNING

• ANALYSISProduct Development is consider as the best strategy for AirAsia to achieve it long term goals and in the same time can used the alternative strategic as main power to achieve it.

YANG IZHANI ITHNIN

LONG TERM OBJECTIVE AND ALTERNATIVES STRATEGY FOR PRODUCT DEVELOPMENT

YANG IZHANI ITHNIN

LONG TERM OBJECTIVE PRODUCT DEVELOPMENT

•To increase operating profit by 25% for AirAsia new countries operation in Philippine and Cambodia and Middle East.

• To increase highly skilled element of workface by 10% at the end years 2008

• Increasing sales of ticket by 20% into all level of AirAsia division in 5 year

YANG IZHANI ITHNIN

ALTERNATIVE STRATEGIES IN PRODUCT DEVELOPMENT

• RepositioningRepositioning can be used to aim diversity away from existing market by uncovering new applications, uses or market segment for current product. In AirAsia situation repositioning means AirAsian can niches their segmentation to be more focus and realistic. By using the same objective “Everyone Can Fly”, should AirAsia repositioning their product more toward the middle segment people? The answer will be yes. AirAsia X is the best example of repositioning but it limited in long destination to European and China in one way fly. AirAsia should develop new services that not only capture sub domestic market but also future market in Middle East such as UAE, Qatar or Arab Saudi in addition to increasing better image about quality airline system from Asia.

YANG IZHANI ITHNIN

Advantages• By implemented this strategy AirAsia can achieve as below

advantages in their performance and operation:• Strategic decisions involving services and product-which

product lines should be continue, which to add and which to delete.

• Can identified and select the potential market in which AirAsia will have competitive advantage.

• Such statement of focus can drive the operations of a firm.

Disadvantages• By implemented this strategy AirAsia should also consider

several problem that may occur such as:• Product and services that provide small and limited growth

rate will be not notice as potential market• Limitation in terms of management power and financial cost

YANG IZHANI ITHNIN

New Product Lines or Additional

New product lines means AirAsia develop such product (1) new to the provider as opposed to the market place (2) be additional to the product range already on offer. For example, AirAsia can provide service such as van and buses to tack customer from the local transport to airport or having travel tour in stop destination for customer during the waiting time in local destination. This develop new lines in AirAsia service and other development can AirAsia done such as selling Insurance cover to the passenger.

YANG IZHANI ITHNIN

Advantages• By implemented this strategy AirAsia can achieve as

below advantages in their performance and operation:

• It helps in the task of the long term objective• Differentiation, can be based on product quality,

product features, innovation, service, distribution, or strong brand name

• Lost cost strategies can be based on an experience curve, which links cost reduction to cumulative production volume, or on other factors such as no-frills products or automated production processes.

• A preemptive move attempts to generate a “first-mover” advantages

YANG IZHANI ITHNIN

Disadvantages• By implemented this strategy AirAsia should also

consider several problem that may occur such as:• Difficult to coordinate various functional are

strategies so that AirAsia don’t work at cross-purpose.

• Focus strategy will direct its effort toward narrow part of either the product line or the market.

NORASALEHA BINTI MUHAMAD MURAD

McKinsey 7S Implementation Framework

NORASALEHA MUHAMAD MURAD

• Strategy• Structure• System• Style• Shared Value• Skills


TIME PHASE PLAN

NORASALEHA MUHAMED MURAD

COST ESTIMATES


In order to adopt product development strategy, which involves introducing the new or modified services to the present markets, we expect the sales and marketing expenses increase by 11.27%, property, plant, and equipment increase by 57.4%, administrative expenses decrease by 41.22%, other operating expenses increase by 59.54%, investing activities increase by 35.62%, financing activities increase by 29.3%. Income and expenses for each income statement are translated at average exchange rates.


CONCLUSION


• Strategic analysis• Management prospective • Marketing prospective • financial prospective • Overall conclusion

ROZIAH WATI , KARTINI , YANG IZHANI AND NORASALEHA

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