past year question ( oct 2009, part d ) Case Study

Past year question : October 2009 (part D)

QUESTION 1

The five competitive advantages used by AirAsia are it operates scheduled domestic and international flights and it using low fare, no frills airline. AirAsia pioneered low cost travelling in Asia. It is also the first airline in the region to implement fully ticketless travel and unassigned seats. Next is AirAsia operates with the world's lowest unit cost and a passenger break-even load factor.

It has hedged 100% of its fuel requirements for the next three years, achieves an aircraft turnaround time of 25 minutes, has a crew productivity level that is triple that of Malaysia Airlines and achieves an average

aircraft utilisation rate of 13 hours a day.

QUESTION 2

The Porter's generic strategies were applied by AirAsia are cost leadership, differentiation and focused strategy.

For cost leadership, AirAsia is having when it use the lowest price in the target market segment. As example, AirAsia operates scheduled domestic and international flights and is Asia's largest low fare, no frills airline. AirAsia pioneered low cost travelling in Asia.

Next is differentiation. A differentiation strategy is appropriate where the target customer segment is not price-sensitive, the market is competitive or saturated, customers have very specific needs which are possibly under-served, and the firm has unique resources and capabilities which enable it to satisfy these needs in ways that are difficult to copy. As example, AirAsia operates with the world's lowest unit cost of US$0.023/ASK(available seat per

kilometer) and a passenger break-even load factor of 52%. It has hedged 100% of its fuel

requirements for the next three years, achieves an aircraft turnaround time of 25 minutes,

has a crew productivity level that is triple that of Malaysia Airlines and achieves an average

aircraft utilisation rate of 13 hours a day.

And the last one is focused strategy. This dimension is not a separate strategy per se, but describes the scope over which the company should compete based on cost leadership or differentiation. The firm can choose to compete in the mass market (like Wal-Mart) with a broad scope, or in a defined, focused market segment with a narrow scope. In either case, the basis of competition will still be either cost leadership or differentiation. As example, AirAsia will strengthen and enhance its route network by connecting all the existing cities in the region and expanding further into Indochina, Indonesia, Southern China (Kun Ming, Xiamen, Shenzen) and India. The airline will focus on developing its hubs in Bangkok

and Jakarta through its sister companies, Thai AirAsia and Indonesia AirAsia.

QUESTION 3

Based on Porter's Five Force Model, AirAsia's buyer power is AirAsia has many competitors like Tiger Airways, Jetstar Asia, Nok Air, Lion Air and Cebu Pacific which make the buyer power will be high when buyers have many choices of whom to buy. That's why AirAsia try to be the first airline in the region to implement fully ticketless travel and unassigned seats to reduce the buyer power.

Next is supplier power, will be high when buyer have fewer choices to buy from and it will be low when their choices are many. Best practices of IT to create competitive advantage. AirAsia try to compete with the others by having unique resources and capabilities which enable it to satisfy these needs in ways that are difficult to copy.

AirAsia operates with the world's lowest unit cost, has a crew productivity level that is triple that of Malaysia Airlines and achieves an average aircraft utilisation rate of 13 hours a day.