AIR ASIA CASE STUDY Essay Example
Examine the concept of cost efficiency and cost leadership
In the recent days, airlines competition has become very tough. Every airline company in the world tries to carry out various approaches to deal with their competitors in the industry. Many airlines companies conduct different strategies to improve their company; far much than their competitors (Dou 2013). For effective competition, every company requires to introduce a plan in order to accomplish these long term aims for the success of the company. The idea of Air Asia stands on the faith that the requirement for short-haul air transportation charge is flexible. That means that more people will fly if the flight costs reduce (Joseph 2012).
Previously, the airline concept stood on the belief that airline traffic increase with economy growth and that price reduction would only lead to revenue decreases. After beginning of the ‘no frills’ concept in the Air Asia, this theory has been proved wrong and moves from power to power by escalating the market size and of late winning away passengers from the key airline competitors (Khalilzad 2000). With its increasing strategies as the purpose to get to first-rate standard globally, selling in Asia has been the main cause of success achievement. Air Asia is among the few companies that have productively taken on cost leadership through operational efficacy and competence. The cost benefits have made it possible for the Air Asia to become the foremost low cost airline (Dou 2013).
Air Asia has managed to situate itself in the minds of customers. Air Asia has offered transport to over fifty-five million passengers within Asia (Oanh 2013). Also, Air Asia has undertaken ventures into other markets that harmonize with the airline venture. It has begun the franchises such as the tunes inns and red box messengers to acquire utmost effectiveness within the airline commerce (Yeo 2012). Datuk Tony Fernandez as the Air Asia CEO once stated in his philosophy that before any business can succeed, it requires its prices to held under control. Air Asia service attracts new clients who are price sensitive (Henry 2012). Air Asia has achieved its aggressiveness through cost leadership and differentiation. Air Asia uses dynamic policies for advance fuel payment before prices increase. Due to this strategy, the Air Asia is able to reduce costs substantially in comparison with other airlines (Xiao 2012). Air Asia works with only one model of aircrafts for extensive cost reduction; maintenance is made simpler and cheaper. Also, the spare-parts supply is reduced as well as staff trainings (Khalilzad 2000). Improved purchase terms have also been established. This Airline utilizes information technology in e-ticketing, hence, avoiding the traditional flight agents. It has minimized its cost through elimination of reservation systems that save the company the expenses of issuing tickets (Joseph 2012).
Air Asia receives maximum media exposure because they lead in low cost airlines in Asia. Therefore, it manages to promote its services without incurring any expenses. However, the company invests where necessary. It sponsored Manchester United, an international soccer team, where it gained global recognition (Oanh 2013). Air Asia usually operated from secondary airlines which made it possible for it to reduce fares due to low operation expenses. The Air Asia instills low cost policy by insisting on cost avoidance such as tag costing, avoiding overheating in flight ovens. Through the above strategies, the Air Asia has managed to low price flights to customers but still maintaining high revenue (Henry 2012).
Discuss Whether Strategies of Cost Leadership Imply the Absence of Key Differentiator’s between Low-cost Air Carriers.
Basing on Air Asia, strategies of cost leadership do not imply the absence of key differentiator’s factors. Besides Cost leadership, Air Asia offers differentiation competitive benefits, through the goal of being a cheap but high class and inventive airline. It offers a unique experience to its clients which include; e booking systems, SMS booking systems, self sign in counters, among other services (Joseph 2012).Due to its mutual venture with home carriers in the South East Asian nations, Air Asia is able to increase its coverage and cover variety of the major cities in both regional and domestic directions.
Air Asia also has a unique trade-name image which delivers a message of youthfulness. In comparison with full service carrier, it is an airline full of energy and attracts the youths attracts new clients who require a low budget flight (Henry 2012). It is believed that there is no surety for achievement of sustainable differentiation through invention and that differentiation can only be achieved through class and service (Jerad 2010). Also, it is believed that position is all about activity system and easy uniformity in all activities, in line with the company’s strategy. Air Asia constructs its product name through provision of high quality services at cheap prices (Holser 1997).
At the beginning, Air Asia concentrated on interior destinations and has now targeted worldwide destinations (Holser 1997). Air Asia is differentiated through its extensive tow LCC as the clients do not require checking at distinct carriers to get to specific destinations at the cheapest price. It is build on the similar no-frills service model, in which the charge is almost 80% lesser than that of the competitors, joint with other services that need the client to pay extra cash for food and leisure. Also, Air Asia creates pleasure amongst its clients with a wide variety of inventive services (Dou 2013).
Competition with the Air Asia means adapting the airline’s business policy. However, it has some benefits over its competitors in that; it has extensive experience, and its brand name is highly recognized (Holser 1997). Air Asia has the power to set aside rules and structure in the airline business for the operational appropriateness. Through its value ‘Now Everyone Can Fly,’ Air Asia has gone on board with an uprising in air travel many of air travellers choosing Air Asia as their favourite preference. Furthermore, customer devotion is based on differentiation that acts as a defence means against competitors (Henry 2012).
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