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August 31, 2009catatanraufmenduniaLeave a commentGo to comments

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³Without a strategy the organization is like a ship without rudder, going around in circles´. (Joel
Ross and Michael Kami)

Nowadays, the competition among airplane industries is very tough. According to Daniel Chan
(2000), with just about two years to go to the turn millennium, air wars over Asia are hotting up,
with some of the world¶s biggest airlines engaged in intense over Asian skies[1]. Each Of Airplanes
Company in the world trying to conduct some strategies to compete with another competitor in
their industry. A lot of airplane companies come out with different strategies to make their
company better than their competitors. To compete with their competitor in the business
environment, a company needs to make a strategy to achieve their long terms objective and can
be successful for doing their business.
Moreover, to be successful in their long terms objective and their business, company need to
identify their strategic management, because with good strategic management company can be
achieving their vision and mission to achieve the successfulness in their business. Regarding this
issues, the strategic management becomes important due to the following reason such as
globalization to survival their business, and than e-commerce become the critical success to the
company nowadays.

The two following reason are need to take into consideration, and than to be successful in the
company management, a company needs to consider the company ability and how to integrating it
with the as well as main factor in the internal and external factor. The main factor in the internal
and external factor can be identified with SWOT analysis. The internal factor can take a look into
strength and weakness in a company, and for the external factor, a company can look at
opportunities and threats in the external environment.

Furthermore, according to Daniel Chan (2000), the airline industry is a unique and fascinating
industry. It captures the interest of a wide audience because of its glamour, reach, and impact on
the large and growing numbers of consumers/travelers worldwide[2]. Based on this statement,
airline industry become the greatest opportunity for AirAsia. The growing numbers/travelers
worldwide can be the wonderful opportunity for AirAsia for running their business. In addition, to
captures and attract a customer to choose AirAsia as an airline option, AirAsia need to develop and
create a wonderful strategy and come out with special offering to their customer to successfully in
their business.
On this paper, I would like to identify and analyze the AirAsia Company strategic management:
³ How AirAsia can be a leader in the lowest cost carrier in the airplane industry´. I¶m interested to
more deeply identify and analyze the strategic management in AirAsia Company because AirAsia
have a lot of achievement and awards since year 2001 until present and than they have the
greatest strategy which is can make AirAsia to be a leader in the world¶s low cost carrier in airline
industry.

And than, AirAsia is one of the companies with good company strategic management and has a
successful story in the airplane industry in the world. AirAsia now becoming the leading low cost
carrier airline in the world and the achievement that AirAsia received to ascertain that AirAsia is
one of the best airplane companies. The achievement that AirAsia received in 2009 on the last
awards and recognition is the best low cost airline in the world.

In Addition, on this paper will be structured into four sections. Section 1.0 is introduction, Section
2.0 covers about AirAsia Current issues, in this section will be discusses about why AirAsia need to
consider a strategy, and AirAsia current issues. Section 3.0 mainly discusses about AirAsia
business strategy, this section also will be discusses about why AirAsia stressed to be low cost
carrier in airline industry, AirAsia SWOT (strength, weakness, opportunity, and threat) analysis,
and also AirAsia business strategy to solve the current issues. And than, section 4.0 would be the
last section is conclusion for this paper.

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On this section, I will discuss about the AirAsia current issues: how to be low cost carrier in airline
industry. This section involve, why AirAsia need to consider a strategic management, and than
what is the current issues that happen in AirAsia Company. This section will discusses the
importance of developed and consider strategic management in AirAsia Company, and identify of
current issues in AirAsia Company.

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Why a company needs to consider a strategic management nowadays? According to Daniel Chan
(2000), since the 1970s, the competition for the Asian air travel market has always been intense.
This became more intense in the 1990s as traffic volumes were squeezed[3]. Based on that
statement, the competition among airplane industry will become more grow, traffic volume also
would be increase, and also the Asian air travel market has always been intense. When the
competition in the airplane industry becoming though, complex, and rapidly change, AirAsia
company as a company that joined in the airplane industry business need to thinking strategically
and also must preparing a good strategic management. The AirAsia strategic management needs
to effectively and efficiently prepare and implement in the AirAsia company management. Why
AirAsia need to consider strategic management? The first reason is because the airline industry is
a unique and complex industry[4]. Based on the statement, the complexity and unique of the
airline industry, AirAsia need to come out with the greatest strategy to compete with their rival in
the same industry. Without the right strategic management, its possible AirAsia could not be able
be compete with the complex business environment in the airline industry.
Furthermore, the second reason why AirAsia need to consider a strategic management because in
a company nowadays, general management which is the process of achieving organizational goals
by engaging in the four major functions of planning, organizing, leading, and controlling may not
sufficient and supportive for the organization succeed in the world of complex environments. It
concerns about the process to manage the company internally but do not concentrate more on
creating competitiveness regarding environments affecting the organization. Even companies
adopt general management to sustain profitability by reducing the defects or costs, and improving
operations process in order to increase productivity, they may not succeed in the competition
because they perform only similar activities better than competitors but do not create distinctive
competitiveness.

Additionally, they perform only operational effectiveness but not strategy. Operational
effectiveness and strategy are both essential to superior performance but they work in very
different ways. Strategy is about competitive position that the company performs different
activities from rivals or performing similar activities in different ways. To learn how the companies
create strategies and put them into action, the executives or strategists should examine carefully
an aspect of strategic management.

Moreover, the organization or company nowadays is faced with constantly changing external
environments and needs to ensure that its own internal resources and capabilities are more than
sufficient to meet the needs of the external environment. Organizations or companies do not exist
simply to survive in the market place but want to grow and prosper in a competitive environment.
In order to make sense of what is going on around them, firms must undertake an analysis of their
external and internal environment. To understand and how take an action about external and
internal environment, a company needs to support themselves with a good strategic management.

Because of this reason, AirAsia need to consider a strategic management as the important things
in their company. The strategy that AirAsia need is not just how to reduce cost and make the
operational activities running effectively. But, AirAsia needs to come out with the strategy that can
make competitive position that the company performs different activities from rivals or performing
similar activities in different ways to achieve their business successfully.
In addition, the third reason, why AirAsia company needs to consider and stress to a strategic
management? This is because, strategic management becomes important in AirAsia due to the
following reasons. The first reason why strategic management becomes important is because the
globalization. The globalization consideration impacts virtually all-strategic decisions in a company.
The globalization also forced AirAsia Company to survival for business. To see and appreciate the
world from the perspective of others has become a matter of survival business.

The underpinning of strategic management hinge upon managers gaining an understanding of

competitors, markets, prices, suppliers, distributors, governments, creditors, shareholders, and
customers worldwide. The price and quality of firm¶s products and services must be competitive on
a worldwide basis, not just a local basis[5]. The globalization makes a rapid change in the business
environment. Every company has a same chance and opportunity for doing their business. For
those company doesn¶t aware and take this as important consideration, they will failed to compete
with their rival or competitors in their business.
Moreover, the strategic management becoming important due to the following reason is because
the rapid development in E-Commerce. Nowadays, E-commerce is becoming a business tool. E-
commerce also has become a vital strategic management and allows a company to sell products,
advertise, purchase supplies, bypass intermediaries, track inventory, eliminate paperwork, and
share information. In total, electronic commerce is minimizing the expense and cumbersomeness,
improved products, and higher profitability[6].
In conclusion, Air Asia is need to aware and consider with the strategic management. The reason
of the airline industry is a unique and complex industry, not just how to reduce cost and make the
operational activities running effectively. But, AirAsia needs to come out with the strategy that can
make competitive position that the company performs different activities from rivals or performing
similar activities in different ways to achieve their business successfully, and the last one is
because the effect of globalization and E-commerce becoming an effective tool in a company
nowadays.

Regarding to the importance of strategic management for AirAsia Company, the next part will
discusses about the current issues that happened in AirAsia Company.

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The leading low fare airline in the Asia ± AirAsia has been expanding rapidly since 2001, to become
an award winning and the largest low cost carrier in Asia. With a fleet of 72 aircrafts, AirAsia flies
to over 61 domestic and international destinations with 108 routes, and operates over 400 flights
daily from hubs located in Malaysia, Thailand and Indonesia. To date, AirAsia has flown over 55
million guests across the region and continues to spread its wings to create more extensive route
network through its associate companies, Thai AirAsia and Indonesia AirAsia.

Established on 12 December 2001, AirAsia has been such a big phenomenon in airline industry
especially in Asia. AirAsia with the ordinary symbol but with strong brand, ³now everyone can fly´
nowadays has been phenomena in Airlines industry. AirAsia is one of the airline companies who
more focused with the strategy how to reduce inefficiency and make it low possible fare in the
world. With the cost-efficiency, low complexity and profitability are always the cornerstones of
building a strong business.

Furthermore, according to Dawna and Blaise (2005), the most successful carriers came to
dominate their hub markets allowing them to exert greater control over pricing and capacity[7].
Based on this statement, the current issues in AirAsia Company are how to achieve to be a lowest
carrier in the world in Airplane industry. Regarding to this issues, Dawna and Blaise said, the most
successful carrier in the airline industry allowing them to exert greater control over pricing and
capacity.
In addition, according to Haddad (2003), the key to their current success has been to cut costs to
the bone through lower salaries and reduced overhead[8]. In airline industry nowadays, customer
not only looks at the service that airline company offered to them, but the price of the airline ticket
also can influencing the customer to use an airline company. AirAsia Company can compete with
the other competitor in the airline industry if they can cut costs through lower salaries and reduced
overhead.
Moreover, according to Daniel Chan (2000), these moves but a very small price to pay for
continued and greater access to the world¶s most prospective air travel markets[9]. The very small
price are offered to the customer also can give biggest affect in this business. As all airlines in low
cost carrier (LCC) industry compete on costs, AirAsia needs to offer the lowest possible fare in
order to win the competition in the current markets served as well as new markets[10].
In conclusion, the current issues in AirAsia Company are more focused in the competition of the
cost among an airplane industry. AirAsia as an industry company which is more focusing in the low
cost carrier airplane industry need to consider to make the lowest possible cost to compete with
the other competitors in their airplane industry. To achieve the lowest possible cost, AirAsia
Company has some strategy to achieve it. On the next section, I would like to discuss about
AirAsia business strategy: how to implement and achieve it.

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On this section, I would like to discuss about AirAsia business strategy. On the previous section, it
more focused about the importance of strategic management for AirAsia Company and what is the
current issue in AirAsia Company that was happening. On this section, would be involved with the
question, why AirAsia stressed to be low cost carrier in airline industry. And than what is AirAsia
SWOT analysis and how AirAsia solves the current issues in their company.

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Datuk Tony Fernandez as CEO of AirAsia Berhad said his philosophy is very clear: before a
business can grow, it needs to have its costs under control. It must be cost-efficient and profitable,
and it must create value. Costs that do not add value must be contained, reduced and even
eliminated. I have been asked by various people, ³How much lower can your cost reduce? You¶re
already the lowest in the world!´ My direct answer is if we do not strive to be more efficient and
choose to be complacent ± our days are numbered. This is a continuous task we have to face head
on year on year; it is the critical ingredient to operate a successful business[11].
Based on the Datuk Tony Fernandez said, AirAsia can be growing in the airline business if they can
control their cost. The cost that they have to running there must be efficient and reliable.
Everything that can make inefficiencies must be reduced and possibly to eliminate. What a Datuk
Tony Fernandez said is very strong opinion about their company to running their business. AirAsia
can be possibly competing with another airplane industries if they can make efficiencies to reduce
cost and make the low possible fare than another airplane industries.

Furthermore, based on the environmental scanning performed, the demand for low cost carrier
(LCC) industry will keep growing rapidly. The LCC industry attractiveness and profitability will
attract many full services airlines to launch its version adding the degree of rivalry in this industry.
As the implication, AirAsia, current market leader of LCC in Malaysia, Thailand, and Indonesia, will
face competition from both existing and new players. In order to sustain its competitive advantage,
AirAsia needs to leverage its competency in creating cost advantages across multiple value
chains[12]. Based on that statement, AirAsia need to make a consideration and more stressed to
be lowest cost carrier in the airline industry. The demand for lowest cost carrier is will be growing
rapidly, it can be the great opportunity for AirAsia Company to run their business.
In addition, AirAsia business strategy also centered on cost leadership. According to Porter¶s
generic strategies (1985), one of the generic strategies is the cost leadership[13]. The cost
leadership in AirAsia Company is already approving because AirAsia more focused and
concentrated in the lowest cost carrier in airplane industries. AirAsia wanted to be a leader in the
lowest cost for run their business. AirAsia builds and sustains its competitive advantage by
providing services at a price that simply lower than competitors price. Operation effectiveness and
outstanding efficiency are the two main characteristics of low cost business including in AirAsia.
Moreover, AirAsia believes in the no-frills, hassle-free, low fare business concept and feels that
keeping costs low requires high efficiency in every part of the business. Efficiency creates savings
that are then passed on to guests so that affordable air travel can become a reality. Through
 AirAsia philosophy of µNow Everyone Can Fly¶, Air Asia has sparked a revolution in air travel with
more and more people around the region choosing AirAsia as their preferred choice of transport.
As Air Asia continuously strives to promote air travel, AirAsia also seek to create excitement
amongst their guests with they range of innovative and personalized service.

In conclusion, with there believes to make a low possible fare for to the customer, AirAsia was
becoming an Airline company that is chosen by so many customers. The best philosophy of AirAsia
µnow everyone can fly¶ means to giving an opportunity to all the people to flight with the lowest
possible fare and making them can flight even they only have the less money.

In conclusion, the reason why AirAsia more stressed to be low cost carrier in airline industry
because:

1.Ê AirAsia believes to compete in the airline industry, it must be cost-efficient and profitable, and it
must create value. Costs that do not add value must be contained, reduced and even eliminated.
2.Ê Demand for low cost carrier (LCC) industry will keep growing rapidly.
3.Ê And than the best philosophy of AirAsia µnow everyone can fly¶ means to giving an opportunity to
all the people to flight with the lowest possible fare.
The lowest possible fare that AirAsia was implementing is the best strategy that they are used to
compete with their rivals in the airplane industries. AirAsia believes with the lowest fare that they
are offering to the customer, they can attract customer more than their rival in the airplane
industries.

In addition, to achieve the lowest possible fare in the low cost carrier airplane industry, AirAsia
also need to make analysis about their SWOT (strength, weakness, opportunity, and threat). On
the next part, I would like to discuss about the AirAsia SWOT analaysis

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Strengths, Weaknesses, Opportunities and Threats Analysis are one of the important things in a
company. This SWOT analysis is for identifying the internal (strength and weakness) and external
(opportunities and threats) factor for AirAsia Company to achieve their goals and objectives to be
low cost carrier company in airline industry. To be successful in the company management, a
company needs to consider the company ability and how to integrating it with the as well as main
factor in the internal and external factor. The main factor in the internal and external factor can be
identified with SWOT analysis. On this section, I will identify one by one the strength, weakness,
opportunities and threats in AirAsia Company. The purpose of this analysis are for identify the
internal and external factor that AirAsia need to consider to be low cost carrier in airplane industry.
These are the strength, weakness, opportunities, and threat in AirAsia.

1.Ê Strengths
÷Ê Air Asia has a very strong management team with strong links with
governments and airline industry leaders.

This is partly contributed by the diverse background of the executive management teams that
consists of industry experts and ex-top government officials. According to Johnston (1996),
without the protection of national airlines brought about by deregulation, building alliances as
strategy became necessary for many airlines to stay competitive and gain access to a global
market too huge for any existing airline to dominate[14]. The strong links with the government
and airline industry leaders is one of the strength of AirAsia Company.
For example, Shin Corp (formerly owned by the family of former Thai Prime Minister ± Thaksin
Shinawatra) holds a 50% stake in Thai AirAsia. This has helped AirAsia to open up and capture a
sizeable market in Thailand. And also, with their strong working relationship with Airbus, they
managed to get big discount for aircraft purchase which is also more fuel efficient compared to
Boeing 737 planes which is being used by many other airlines

÷Ê The management team is also very good in strategy formulation and execution.
` The strategy that they have formulated at the beginnings was a clever blend of proven strategies
by other low cost airlines is US and Europe. They are Ryanair¶s operational strategy (no frills,
 landing in secondary airport), Southwest¶s people strategy (employee comes first) and Easyjet¶s
branding strategy (linking with other service providers like hotels, car rental).

÷Ê AirAsia¶s brand name is well established in Asia Pacific.

Besides the normal print media advertising & promotions, AirAsia¶s top management also
capitalized on promotions through news by being very ³media friendly´ and freely sharing the
latest information on Air Asia as well as the airline industry. Their partnership with other service
providers such as hotels and hostels, car rental firms, hospitals (medical tourism), Citibank
(AirAsia Citibank card) has created a very unique image among travellers. Alliance with Galileo
GDS (Global Distribution System) that enables travel agents from around the world to check flight
details and makes bookings have also contributed to their string brand name.

Air Asia¶s local presence in few countries such as Indonesia (Indonesia AirAsia) and Thailand (Thai
AirAsia) has successfully ³elevated´ the brand to become a regional brand beyond just Malaysia.
The links with Manchester United (one of the world¶s most famous football teams) and AT&T
Williams Formula One team have further boosted their image to a greater extend beyond just the
this region

÷Ê AirAsia is the low cost leader in Asia.

With the help of AirAsia Academy, AirAsia has successfully created a ³low-cost airline mentality´
among their workforce. The workforce is very flexible and high committed and very critical in
making AirAsia the lowest cost airline in Asia.

÷Ê The excellent utilization of IT

The excellent utilization of IT have directly contributed to their promotional activities (email alerts
and desktop widget which was jointly developed with Microsoft for new promotions), brand
building exercise (with over 3 million hits per month and on the most widely surfed booking
engines in the world) as well keep the cost low by enabling direct purchase of tickets by consumer
thus saving on airline agent fees

1.Ê Weaknesses
÷Ê Air Asia does not have its own maintenance, repair and overhaul (MRO) facility.
It may be a good strategy when they first started with only Malaysia as the hub and few planes to
maintain. But now, with few hubs (Malaysia, Thailand and Indonesia) and over 100 planes
currently owned and about another 100 planes to be received in the next few years, AirAsia have
to ensure proper and continuous maintenance of the planes which will also help to keep the overall
costs low. It is a competitive disadvantage not to have its own MRO facility

÷Ê AirAsia receives a lot complaint from customers on their service.

Examples of complaints are around flight delays, being charged for a lot of things and not able to
change flight or get a refund if customers could not make it. Good customer service and
management is critical especially when competition is getting intense.

1.Ê Opportunities
÷Ê There are 2 major events that are taking place now or going to take place in
less than 6 months from now.

First, is the ever-increasing oil price. Second, is the ³ASEAN Open Skies´ agreement that has been
reached. The increasing oil price at the first glance may appear like a threat for AirAsia. But being
a low cost leader, AirAsia an upper hand because its cost will be still the lowest among all the
regional airlines. Thus, AirAsia has a great opportunity to capture some of the existing customers
of full service and other low cost airline¶s customers. However, there will be also some reduction in
overall travel especially by casual or budget travelers.

Second, is the ³ASEAN Open Skies´ allows unlimited flights among ASEAN¶s regional air carriers
beginning December 2008. This will definitely increase the competition among the regional airlines.
However, with the ³first mover´ advantage as well as its strengths in management, strategy
 formulation, strategy execution, strong brand and ³low-cost´ culture among its workforce, this
agreement can be seen as more of an opportunity.

÷Ê There is also some opportunity to partner with other low cost airlines.
As Virgin to tap into they exist strengths or competitive advantages such as brand name, landing
rights and landing slots (time to land).

÷Ê The population of Asian middle class will be reaching almost 700 million by 2010.
This creates a larger market and a huge opportunity for all low cost airlines in this region including
AirAsia.

1.Ê Threats
÷Ê Certain rates like airport departure, security charges and landing charges are beyond the control of
airline operators
This is a threat to all airlines especially low cost airlines that tries to keep their cost as low as
possible. For example, Changi airport in Singapore charges SGD21 for every person who departs
from Singapore.

÷Ê AirAsia¶s profit margin is about 30% and this has already attracted many competitors.
Most of the full service airlines have or planning to create a low cost subsidiary to compete directly
with AirAsia. For example, Singapore Airlines has created a low cost carrier Tiger Airways.

÷Ê Users¶ perception that budget airlines may compromise safety to keep costs low.
In conclusion, the SWOT analysis that AirAsia have is on of the major component to make AirAsia
more strength in their business and can make they are able to compete with the same low cost
carrier airline industry.

After I¶m discussed about the SWOT analysis, I would like to discuss about the AirAsia strategy to
solve the current issues: How AirAsia can be a leader in the lowest cost carrier in the airplane
industry.

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Regarding to the airplane industries issues that is low cost carrier was becoming an important
issue if AirAsia want to compete with other airplane industry that is involved with low cost carrier
business.

The strategy that AirAsia was implementing to make they are being a successful in low cost carrier
and can compete with other competitors in this field of business are:

1.Ê Maximized IT and implementing E-commerce in AirAsia business

Nowadays, E-commerce is becoming a business tool. E-commerce also has become a vital
strategic management and allows a company to sell products, advertise, purchase supplies, bypass
intermediaries, track inventory, eliminate paperwork, and share information. In total, electronic
commerce is minimizing the expense and cumbersomeness, improved products, and higher
profitability[15]. According to this statement, E-commerce can change the way of doing business
nowadays. E-commerce becomes a major success to Airplane Company to make effectively and
efficiency in their business.
AirAsia is one of the airplane companies, which is implementing E-commerce and maximized their
information technology usage to make the efficiency and effectively in their company and make
possible low cost carrier in their business. According to Pultorak (2004), when the business
strategy and IT are aligned, the IT infrastructure can continuously sense the changing business
needs and respond by provisioning or redeploying resources to match the demands of the
business[16].
Moreover, to maximize their IT, AirAsia implemented current IT such as yield management system
(YMS), computer reservation system (CRS), and enterprise resource planning (ERP) system[17].
Lets we discuss the current IT that AirAsia implemented one by one.
Yield management system as revenue management system it understands, anticipates, and reacts
to the behavior of customer to maximize revenues for the organization. In this system, AirAsia
 used it to takes into account the operating costs and aids AirAsia to optimizes price and allocate
capacity to maximize expected revenues.

The optimization is done on two levels in AirAsia:

v Seat (Every seat is considered an opportunity to maximize revenue.

Seats are available at various prices in different points of time. A reservation done at a later date
will be charged more than the one done earlier ± for the same seat)

v Route (By adjusting prices for routes/destinations that have a higher demand when compared
to others).

The effective method however is to combine these two levels for all flights, all routes so that both
the seat and the route are effectively priced for all the flights.

As a result, by using this yield management system, AirAsia can understands the behavior of their
customer and offering the effectives and efficiency strategy and also can allocate capacity to
maximize the expected revenue. By this system, AirAsia can make efficiency to know their
customer using IT technology with lowest cost.

Furthermore, the other system that AirAsia implemented is customer reservation system (CRS); it
is an integrated web-based reservation and inventory system. It includes Internet; call center,
airport departure control and more. It is a direct sales engine that effectively eliminates the
middleman (travel agents) and the sales commissions that need to be paid to them.

By using this system, AirAsia can reduce the cost and eliminates the middleman (travel agents)
and the sales commission to pay them. After that, this system are very customer friendly because
the entire customer if want to buy or make a reservation a ticket directly via online, and no need
to come to the ticket counter. In conclusion, by using this system effectively, efficiency, customer
satisfaction, fast and secure in buying a ticket already met. It means the lowest cost can possibly
achieve.

And than, the last system that AirAsia used in maximized IT to meet the lowest cost during their
business activities is the implementation of enterprise resource system (ERP). From the view of
managers in a company, the emphasis is on the word planning; ERP represents a comprehensive
software approach to support decisions concurrent with planning and controlling the business[18].
Based on the definition, ERP is the system that integrated comprehensive software to make the IT
system is more effectively and efficiently. By implementing this package AirAsia is looking to
successfully maintain process integrity, reduce financial month-end closing processing times, and
speed up reporting and data retrieval processes, (Microsoft Malaysia)[19]. In addition, it is a
system focusing on capturing transactions in daily operations and helping AirAsia to save its
operational costs as well as to increase the efficiency and integrity in its operation (Microsoft Press
Pass, 2005)[20]
As a result, the system that AirAsia implemented by using strategy to maximized the IT system
(yield management system (YMS), computer reservation system (CRS), and enterprise resource
planning (ERP) system) can be a great strategy to make AirAsia more effective and efficiency and
possibly able to reduce the cost and eliminated inefficiency in their business.

1.Ê Operation effectiveness and outstanding efficiency

One of the AirAsia strategies to solve the current issues/problem in the lowest carries competition
among the LCC airline industry is to make operation effectiveness and outstanding efficiency. How
AirAsia implemented this strategy to make operation effectiveness and outstanding efficiency? To
make this strategy successfully implemented:

÷Ê AirAsia move from the traditional business into modern business by implementing E-commerce
and maximize the information technology (IT) in their business.
The implementation of E-commerce can reduce the cost of travel agents, and less of ticketing
paper cost.
÷Ê AirAsia also choose the route by adjusting prices for routes/destinations that have a higher
demand when compared to others.
÷Ê And than AirAsia also trying to reduce by using better maintenance management.
According to Gloker (2002), by using the better maintenance management, AirAsia can save large
proportion of its maintenance cost contributes approximately 9% to the overall cost of an
airline[21].
In conclusion, those are the Air Asia strategy to make Operation effectiveness and outstanding
efficiency in their business. With this strategy, AirAsia can achieve their goals and objective into
the lowest carrier airplane in the world.

1.Ê Implemented outsourcing in their business

To make the lowest carrier in airplane industry, AirAsia also face with challenged to make a
decision in terms of efficiency in their business how it will acquire the system. AirAsia have two
options in this strategy: in house building or outsourcing. In the strategy that AirAsia used and
implemented, AirAsia more preferred to used or implemented outsource system in this strategy.
The decision in outsourcing has several benefits such as cost, competency, control, and also
competitive advantage.

By implemented outsourcing in their business strategy will provide:

÷Ê Cost benefits to AirAsia because it can be eliminated in more resource consumption (time financial).
÷Ê And than for the competency, AirAsia competency is not in IT. By implemented outsourcing in the
IT field, AirAsia also can reduce cost in IT system activities which is can make possible more cost
in their business.
÷Ê After that, by using outsourcing, AirAsia can easily to control all the system that is outsourced to
another vendor or company. The control in this strategy also gives benefits because AirAsia
function only to be a controlled a system that is AirAsia used.
÷Ê By using outsourcing, AirAsia also can reduce risk, and it can make AirAsia not spend their
financial to cover the risk factor in this strategy.
÷Ê The implementation of outsourcing also can give competitive advantage in AirAsia because the
strategy can be greater rather than created by AirAsia itself.
Furthermore, some of outsourced example that AirAsia did are in AirAsia computer reservation
system (CRS) by Navitaire Open Skies Technology Company, and than implementing enterprise
resource planning (ERP) by Microsoft Corporation, and also implementing AirAsia X. By
implemented outsourcing more better than in house operation, because it can give more lowest
cost, reduce risk, more effectively and efficiently, and also can easily control by AirAsia and than
more fast in AirAsia company.

  
The competition among airplane industries is very tough. Each Of Airplanes Company in the world
trying to conduct some strategies to compete with another competitor in their industry. To
compete with their competitor in the business environment, a company needs to make a strategy
to achieve their long terms objective and can be successful for doing their business. The strategic
management becomes important due to the following reason such as globalization to survival their
business, and than e-commerce become the critical success to the company nowadays. a company
needs to consider the company ability and how to integrating it with the as well as main factor in
the internal and external factor.

How AirAsia can be a leader in the lowest cost carrier in the airplane industry? To be a leader in
the low cost carrier, firstly, AirAsia need to consider about their strategic management. The reason
why need to consider strategic management because the first reason is because the airline
industry is a unique and complex industry. The second reason, the strategy that AirAsia need is
not just how to reduce cost and make the operational activities running effectively. But, AirAsia
needs to come out with the strategy that can make competitive position that the company
performs different activities from rivals or performing similar activities in different ways to achieve
their business successfully, the third reason because a globalization and implementing E-
commerce.
The current issues in AirAsia Company are more focused in the competition of the cost among an
airplane industry. AirAsia as an industry company which is more focusing in the low cost carrier
airplane industry need to consider to make the lowest possible cost to compete with the other
competitors in their airplane industry.

How AirAsia can solve the current issues to be a low cost carrier leader in airplane industry? The
first is to identify and analyze the SWOT analysis, and than to solve the current issues with some
strategies such as Maximized IT and implementing E-commerce in AirAsia business, Operation
effectiveness and outstanding efficiency, and the last one is implemented outsourcing in the
AirAsia business.

References

Chan, D. (2000). ³Air wars in Asia: competitive and collaborative strategies and

tactics in action.´ Emerald management and development #: 473

Chan, D. (2000). ³The development of the airline industry from 1978 to 1998 A strategic global
overview.´ management development #(Emerald journal ): 489
Chan, D. (2000). ³Air wars in Asia: competitive and collaborative strategies and tactics in
action.´Emerald management and development #: 473 ± 488.
Chan, D. (2000). ³Air wars in Asia: competitive and collaborative strategies and tactics in
action.´Emerald management and development #: 484.
http://www.scribd.com/doc/2516371/Strategic-Management

http://www.scribd.com/doc/2516371/Strategic-Management

Rhoades, D. L. and B. W. Jr (2005). ³Strategic imperatives and the pursuit of quality in the US
airline industry.´ managing service quality $(Emerald journal): 344.
Haddad, C. (2003), ³Catch him if you can´, Business Week, September 15, pp.93-4

Chan, D. (2000). ³Air wars in Asia: competitive and collaborative strategies and tactics in
action.´Emerald management and development #: 483.
Kho, C., S. H. Aruan, et al. (2005). AirAsia- Strategic IT Initiative. Faculty of Economics and
Commerce University of Melbourne3.
http://www.airasia.com

Kho, C., S. H. Aruan, et al. (2005). AirAsia- Strategic IT Initiative. Faculty of Economics and
Commerce University of Melbourne8.
Porter, M.E. (1985). ³Competitive Strategy: Creating and Sustaining Superior Performance.´ New
York: The Free Press.

Johnston, H. (1996), ³Partnership Up in the Air´, Asian Business, August, p.53

http://www.scribd.com/doc/2516371/Strategic-Management

Pultorak, D. (2004, July). Beyond Alignment. Ë


 

 .
Retrieved from http://us.foxit.net/download/beyond_align.pdf 22nd October 2005

Kho, C., S. H. Aruan, et al. (2005). AirAsia- Strategic IT Initiative. Faculty of Economics and
Commerce University of Melbourne9.
Vollman, Thomas E, Berry, W.L, (2005). Manufacturing planning and control for supply chain
management. Fifth edition. McGraw-hill .p-109

Microsoft (2005) Budget Airlines in Asia Pacific Fly High on Microsoft Business Solutions. Retrieved
from http://www.microsoft.com/malaysia/press/linkpage4285.asp on 20th October 2005

Gloker, et.al. (2002), The Airline Industry More Than Just Transportation
[1] Chan, D. (2000). ³Air wars in Asia: competitive and collaborative strategies and
tactics in action.´ Emerald management and development #: 473
[2] Chan, D. (2000). ³The development of the airline industry from 1978 to 1998 A strategic global
overview.´ management development #(Emerald journal ): 489
[3] Chan, D. (2000). ³Air wars in Asia: competitive and collaborative strategies and tactics in
action.´Emerald management and development #: 473 ± 488.
[4] Chan, D. (2000). ³Air wars in Asia: competitive and collaborative strategies and tactics in
action.´Emerald management and development #: 484.
[5] http://www.scribd.com/doc/2516371/Strategic-Management
[6] http://www.scribd.com/doc/2516371/Strategic-Management
[7] Rhoades, D. L. and B. W. Jr (2005). ³Strategic imperatives and the pursuit of quality in the US
airline industry.´ managing service quality $(Emerald journal): 344.
[8] Haddad, C. (2003), ³Catch him if you can´, Business Week, September 15, pp.93-4
[9] Chan, D. (2000). ³Air wars in Asia: competitive and collaborative strategies and tactics in
action.´Emerald management and development #: 483.
[10] Kho, C., S. H. Aruan, et al. (2005). AirAsia- Strategic IT Initiative. Faculty of Economics and
Commerce University of Melbourne3.
[11] http://www.airasia.com
[12] Kho, C., S. H. Aruan, et al. (2005). AirAsia- Strategic IT Initiative. Faculty of Economics and
Commerce University of Melbourne8.
[13] Porter, M.E. (1985). ³Competitive Strategy: Creating and Sustaining Superior Performance.´
New York: The Free Press.
[14] Johnston, H. (1996), ³Partnership Up in the Air´, Asian Business, August, p.53
[15] http://www.scribd.com/doc/2516371/Strategic-Management
[16] Pultorak, D. (2004, July). Beyond Alignment. Ë


 
 .
Retrieved from http://us.foxit.net/download/beyond_align.pdf 22nd October 2005

[17] Kho, C., S. H. Aruan, et al. (2005). AirAsia- Strategic IT Initiative. Faculty of Economics and
Commerce University of Melbourne9.
[18] Vollman, Thomas E, Berry, W.L, (2005). Manufacturing planning and control for supply chain
management. Fifth edition. McGraw-hill .p-109
[19] Microsoft (2005) Budget Airlines in Asia Pacific Fly High on Microsoft Business Solutions.
Retrieved from http://www.microsoft.com/malaysia/press/linkpage4285.asp on 20th October 2005
[20] Ibid
[21] Gloker, et.al. (2002), The Airline Industry More Than Just Transportation.
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