Bachelor of Business Management
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Strategic management examines the main enterprises take by a company’s top management which involved resources and performance in internal and external environments on behalf of owner (Nag, R.; Hambrick, D. C.; Chen, M.-J, 2007). Chandler explains strategy as, “the strength of character of the basic long-term goals and objectives of an enterprise, assumption of courses of action and the allocation of resources necessary for carrying out these goals.” Alfred D Chandler (1962). However, justifiable competitive improvement would not be attained through operational effectiveness alone argued by Michael Porter. Most of the common management innovations are about operational effectiveness. Operational effectiveness is carrying out similar activities which better than competitors. “Strategy is all about being different” (Porter 1996).
Companies such as Wal-Mart, Southwest Airlines, and IKEA have established unique, internally reliable, and hard to imitate activity systems. These had made them continued with competitive advantage. A company must make clear choices about what it wants to accomplish when a good strategy is given. The strategic management process involves three stages which is strategy formulation, strategic implementation, and strategy evaluation. It can be describe as an objective, logical, systematic approach for making major decisions in organizations. These three stage activities occur at three hierarchical levels in a large organization which is functional, corporate divisional or strategic business unit. (Fred R. David, 2013)
While Gregory G. Dess, 2012 argues that the three stages of strategic management process are highly interdependent and do not take place one after another in a sequential fashion in most companies. This study will be examined on AirAsia where AirAsia originally was founded by government and on 2 December 2001 was bought by Tony Fernandes. AirAsia was established in year 1993. It has travel around the earth and ascend to become the world’s best in year 2001. AirAsia remains to spread out the way for low-cost flight through the innovation, effectual and passionate attitude to business with a path of network that extent complete over 20 countries. There are some companies which link with AirAsia such as AirAsia X, Thai AirAsia, Philippines’ AirAsia Inc., AirAsia Japan and Indonesia.
2.0 STRATEGIC ANALYSIS
Business strategy analysis starts with an explanation of a firm’s strategic goals and business strategy. Implementation will then be evaluated from the view of the firm’s functional and operational capabilities that could result financial and competitive performance. (Dr. William R Boulton, 2001). Whereby, Anthony Hendry (2008) argues that strategic analysis referred as situation analysis. The tools of analysis an organization can use in determining changes in its general environment. The situation planning in which can be evaluated and restrictions of a PESTEL framework includes political, economic, social, and technological factors. However, a SWOT analysis will be also linked with scenario planning.
Asia’s leading airline was established with the dream of making flying possible for everyone. ‘To be the largest low cost airline in Asia and serving the 3 billion people who are currently underserved with poor connectivity and high fares.’(“Air Asia-Business,” 2012). It was set as the vision of AirAsia. While its mission included in which AirAsia wants to be the best airline company to work whereby employees are treated as part of the big family. Besides, AirAsia try to maintain the lowest cost hence everyone can fly with AirAsia. Highest quality product, embracing technology to lower the cost and improvement in service levels will be maintained by the AirAsia airline also. Lastly, create a globally recognized ASEAN brand will be the mission part of AirAsia.
3.0 STRATEGY FORMULATION
Strategy formulation discusses the process in which to choose the most appropriate action for the understanding of organizational goals and objectives and thus reaching the organizational vision. (managementstudyguide, 2009) Moreover, strategy formulation causes an organization in looking at the changing environment wisely and be prepared for the likely changes that could have occur. A strategic plan allows a firm to assess its resources, distribute budgets, and come out with the best operative plan in order to maximize ROI (return on investment). ( saylor.org, n.d.) Corporate strategy comprises decisions that are made to concern the direction of the entire organization. It is alarmed with issues that disturb the overall firm; example will be decided the size and structure of its business portfolio. (Wendel Clark, n.d.) Whereas, business strategy is the method a firm competes in a specific business segment.
Pricing, marketing and manufacturing efficiency are the concern issues of strategic decisions made in business level strategy. Business strategy is worried about mainly with attaining a competitive benefit in the market. (Wendel Clark, n.d.) The difference between corporate and business strategy is the choice of the strategy. Corporate strategy is where focused broadly on issue that affects the whole company. Conversely, business strategy is focused narrowly on a particular business unit with tangible problems. In general, corporate strategy is industrialized by the board of directors, the senior level. While, business strategy might be shaped by individual line managers. Market positioning is the management of a brand to produce a positive view of the community. With whole company concentrating in this activity and working with customers to place their manufactured goods efficiently, there are several elements are involved in market positioning, (Mary McMahon, 2013).
AirAsia follows the low cost-carrier (LCC) to gain consumers. However, resource-based strategy argues that organizations should differentiate their major strategic strengths and seek for ways to develop. Thus, use them repeatedly to leads the competitive environment (John Thompson., Frank Martin, 2010). In fact, AirAsia uses aircraft resources base strategy. All the resources are from Airfax, Boeing and Airbus (Industry Resources, n.d). Airfax yields two market letters that includes “Jet Transport Aircraft” and “Regional & Commuter Aircraft” which provide information for turboprop and local jet aeroplane for AirAsia (Industry Resources, n.d). AirAsia has other base resources where they provide online ticket booking services using internet technology (Air Asia, n.d). Appendix 2 shows the home page of AirAsia.com as the channel of marketing and sales.
It simplified the dealing and less time consuming where customers could book flight tickets online with simple and easy steps. AirAsia provides low-priced tickets for customers compare to other airlines is one of the benefits for consumers. This supports them in building in additional loyalty from customers. Furthermore, AirAsia also has online booking system which enables consumers to book ticket online and save the cost and time. However, there are disadvantages faces by the consumers such as flights delay. AirAsia may have delays of flight time and this had caused significant impact to consumer’s loyalty. Consumers may consider in switching airlines at times because AirAsia is not a 24-hour service airline. Subsequently, the advantages for competitors will be complimentary foods. AirAsia does not provide any complimentary meals when MAS actually offered complimentary meals for consumers.
Other than that, AirAsia has a poor luggage allowance where they only offer luggage not more than 15 kg compare to MAS which offer luggage allowance. MAS are a full service airline where AirAsia is a no frills airline. Therefore, it leads to the consumers to go alternative choices, AirAsia’s competitors, when the switching cost is low. The difficulties faced by AirAsia’s competitors are where they are unable to lower their ticket price as AirAsia. Air Asia has the skills attracting consumers by providing promotions on festival seasons to increase profit for the organization. Competitors of AirAsia anyhow do not have the skills for this directly compete. A diversification is to increase the variation of product or markets in which to compete.
There are two general types of diversification which is related and unrelated diversification. Related Diversification is the enlargement of an industry adds to its existing product lines or markets (“Related Diversification,” n.d). Related diversification has the advantage of issuing the risk taking to creating or offering same and connected products, or penetrating same markets. Whereas, unrelated diversification is an industry expands innovated or unconnected product lines or markets (“Related Diversification,” n.d). AirAsia has share in different type of companies therefore AirAsia is an unrelated diversification company. The advantage of unrelated diversification is the development of detailed analysis of the environment and the business’s own resources naturally brings enormously good financial results (Formulation of strategy, n.d).
Nonetheless, there must be a small risk investment with a potential for important returns. In some cases of business attainment, this diversification may keep finances on hand all the way through a seasonal slowdown, adding to the money flow for the major company activities (Formulation of strategy, n.d). However, there are some disadvantages. It needs good manage skills in which to accomplish positive unrelated diversification to every business activities and timely identify and resolve even the tiniest troubles (Formulation of strategy, n.d). The higher the number of business activities, the harder the general management mission is.
Joint Venture is explained as a creation of novel firm to reach certain purposes of partnership such as short-term project among two or more form (Business Dictionary, 2013). Joint Venture will be suitable for Air Asia. On July 21, 2013, Press have announced that ANA group, Japan major airline and Air Asia are about to joint venture as ANA. They have been looking for an opportunities to begin a new low-cost based business (“ANA and AirAsia,”2013). Joint venture would values AirAsia by expanding its scope and contributing to support bilateral bind among ASEAN and Japan. Yet, the joint venture of ANA and Air Asia may balance potencies of the two organizations to generate new demand with the objective of creating inexpensive and excellence travel for populace. Therefore, joint venture is appropriate for Air Asia in order to expand their business. 4.0 STRATEGIC IMPLEMENTATION
Organizational culture can be known as corporate culture. It is refers to the principles and behaviors that contribute to the unique community and psychological environment of an organization. (Business Dictionary, n.d). AirAsia’s present organizational culture is they have a specific policy for pregnant travelers and babies that can flight on board. Also, AirAsia value the quality of product and maintain it even though low cost airline is provided. Besides, AirAsia has this organizational culture where their main red colour, which generally linked by means courage and passion. Organization structure is originally a hierarchical planning of lines of power, communications, rights and duties of an organization. (Business Dictionary, n.d). Likewise, organizational structure concerns with the division of worker and management of task.
There are various kind of organizational structure in a phrase to identify structures that satisfy the deal among specialization and coordination. (Business Dictionary, n.d). Air Asia follows the divisional structure at this time. (“Case Study of Air Asia,” 2013). Divisional structure emphases the workers who are in charge of certain product type or market service base on their workflow. (Business Dictionary, n.d). Divisional structure will be valuable because there will be seniors who inspire and innovate from time to time. However, the disadvantage is where resource allocation bases on temporary contribution. There are 12 departments in the organization and senior in every department. This enables AirAsia to function well and reach their goals. (“Case Study of Air Asia,” 2013).
Besides, AirAsia could also be functional structure. Functional structure is when managerial is grouped according to specialization by function. (Business Dictionary, n.d). For example, Air Asia’s marketing managements can group with different areas of functional management such as, innovating and creative group to form a specialization function that might benefits Air Asia in encouraging more ideas in order to increase sales. Furthermore, Air Asia could assist a career path to each functional area. Air Asia could therefore achieve an efficient organization by swapping to functional structure.
An organizational process is when an entire comprising together acting in harmony to accomplish missions or reach objectives effectively and efficiently (“The organization process,” n.d). AirAsia made several outsourcing, such as computer reservation system (CRS) by the company Navitaire Open Skies technology company, and then the implementation of enterprise resource planning (ERP) by Microsoft Corporation. (“AirAsia Inc.”, 2009), however, they can improve their organizational processes through the implementation of outsourcing their business. Implementation of the strategy in the Asian aviation business outsourcing can provide a cost-effective, because it can cancel the additional resource utilization. Additionally, through the use of outsourcing, AirAsia will have management of each system are outsourced to another company, therefore, the implementation of outsourcing is much more superior, because it can give the least cost, reduce risk which AirAsia could not control it. (“AirAsia”, 2009).
In addition, Asia Pacific’s main organizational process is their low cost airlines. They are known as the lowest-cost airline. However, they can be achieved from traditional industries to modern industrial transfer, the implementation of e-commerce operation effectiveness and outstanding efficiency, maximizing information technology (IT) in their company (“AirAsia Inc., 2009). Implementation of e-commerce can reduce the price of travel, and to reduce the price of paper ticket. For this reason, AirAsia can achieve their goals into the lowest airline carrier worldwide. Stakeholders are the individuals or groups that affect or being affected by an organizations action. Stakeholders could be customers, suppliers, governments, local community and shareholders. (Business Dictionary, n.d).
Customers, employees, shareholder and government are the stakeholders for AirAsia. AirAsia inclines to generate profits by broadening business to reach Asia with the help of stakeholders. Besides, AirAsia also increases routes and networks through careful calculated manner, offer cheaper ticket at most of the time, provide a safest level for low cost airlines to satisfy their consumers. Last of all, AirAsia creates and expand the brand population to increase the numbers of investors return. 5.0 Conclusion
To sum up, AirAsia will be the top airline company with low-priced tickets and allowing everyone to fly around the world. AirAsia was suggested to offer more selections of foods and drinks to increase the satisfaction of passengers and to improve the company. Moreover, AirAsia should considering to give extra luggage allowance of 25 kg to the passengers. An upright leadership style might affects the whole company and workers to develop motivate and innovate. With the motivation and innovation, consumers have confidence in that AirAsia can be the successful airline company.
6.0 Reference List
1. AirAsia: Corporate profile. (n.d.) AirAsia.com. Retrieved November 11, 2013from http://www.airasia.com/ot/en/about-us/corporate-profile.page 2. Anthony Henry. (2008). Understanding Strategic Management. OxfordUniversity Press Inc: New York. 3. Dr. William R. Boulton. (2001). Understanding the Strategic Analysis Model.RetrievedNovember 11, 2013 fromhttp://www.auburn.edu/~boultwr/html/strategic_analysis_model.htm 4. David. Fred R. (2013). Strategic Management: Concept and Cases. PearsonEducation, Inc: England. 5. Dess, Gregory G., G.T. Lumpkin and et al,. (2005). Strategic Management. 2 ed.New York: McGraw-Hill Irwin. 6. Andreas Birkholz. (2004). Business Analysis of Web.de AG. Druck und Bindung:Books on Demand GmbH, Norderstedt Germany. 7. PEST and SWOT analysis of AirAsias international business operations. (n.d.).UKEssays.com. RetrievedNovember 11, 2013 fromhttp://www.ukessays.com/essays/marketing/pest-and-swot-analysis-ofairasias-international-business-operations-marketing-essay.php 8. Jim Riley. (2012). Porter’s Five Forces Model: analysing industry