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Compare Malaysia airline with AirAsia airline as competitor. Give 3 recommendations for Malaysia airline. Essay Example

  • Category:
    Business
  • Document type:
    Assignment
  • Level:
    High School
  • Page:
    2
  • Words:
    1146

5Assessment

Competition between AirAsia and Malaysian Airlines

The fundamental idea of introducing a low fare carrier is the ability to manage the operations at very low costs (Abdullah, 2010, p. 70). First, the Air Asia’s move to maintain a competitive advantage was achieved in five ways. First, they operations involved non-ticket services which saved them US$1 per every ticket. Second, they do not offer any meal or other services but they sell them to the passengers. Third, it works through supply chain management in order to get its supply-part inventory. Fourth, the company usually cuts any unnecessary cost by preventing provision of any connection flights as well as train pilot in order to save fuels. Finally, the company operated one type of aircraft only (Abdullah, 2010, p. 71). The cost of funding for Air Asia will be based on the performance of its market share price. That is, if the share price is strong, the ability of the company to attract investors will be made stronger and existing investors will increase their holdings, and vice versa.

In order to maintain its competitive advantage, the Malaysia Airlines introduced its business transformation plan focused on profitable growth under the nig challenges of overcapacity, intense competition, rising fuel costs, and liberalisation of ASEAN skies in the airline industry (Abdullah, 2012, p. 70). Malaysia Airline is aimed at becoming a Five Star Carrier in the world with a consistent profitable mission. Achievement of this mission led to adoption of five business strategies which include lower costs through its “Everyday Low Fares” strategy , five-star products and services, comparative fares, get more revenues and more customers. This plan is exposed to rapid changes in environment such as rising fuel prices which could easily lead to failures or very low profits. Its strategies has led to blame on Malaysian airlines by the Air Asia on the grounds of predatory and subsidy pricing (New Straits Times, 2008).

Every company continues with maintaining its strategies and the competition between the two will continue and the resources will be directed towards the short run and long run benefits. The competition between the two airlines is a great benefit to the consumers as they will pay low fares. However, the unpredictable changes in environment as well as the fierce competition may be a challenge to the stability of the two companies (Bani, 2002).

Recommendations

  1. New business model

It is clear that there are unpredictable changes in environment. This means that Malaysian airlines is in a business involved in very high risks due to pressures from external factors such as global political scenario and economic down turn. In this case, as the company advances in providing services at lower costs, it should be more cautious in regard to their long term investment (Abdullah, 1995). Thus, there are various suggestions in regard to the new business model which include strategies of pursuing more opportunities especially spreading their services to other destinations such the third world countries. It is also advisable to review the rationalisation of its routes and lay more focus on the routes that are more profitable. This means that profitable routes may not necessary be having a high volume in order to be profitable. This is on the grounds of the principle of niche market and differentiation. The MASKargo should also be more focused on the transhipment and shipping activities in the regions that are closer to Malaysia such as East Asia among other nearest parts. It should also initiate regional training base especially to the regions where their main competitors are located. Although there is still an increase in the number volume of passengers, the airline should also focus on conversion of its aircraft to airfreight due to increase in demand for cargo services.

  1. Strategic management

The future success of the business relies most on the effectiveness of the management strategy. It is recommended that Malaysian airline should concentrate on the following issues:

  • The mission and vision of the company must be understood and communicated in a clear manner to every personnel in order to ensure maximum corporation and contribution in achievement of the desired goals. In order to do this the company should first realise that it is going global and it is suggested that it may adopt a new corporate culture, of being service oriented, more careful and prudent instilled among the personnel, particularly the top management. In addition to these, there is a need to develop incentive and reward programs for employee motivation. This will make every employee to understand his or her significance to the success of the company.

  • Given that performance is a continual process, the management should always display their competencies in management and ensure that the staff trained in order to improve performance. One of the effective ways is to ensure that staff participates in the process of making decision, where appropriate. In order to fit in the global management of human resource, it is suggested that a decentralised management structure is introduced, a model that is widely accepted in most successful organisations (Chang, & Yeh, 2002).

  1. Planning process

One of the main challenges of Malaysian airline undertaking any drastic expansion under its strategies which tend to led to more cheap services with corresponding small profits. Thus, it is suggested that Malaysian Airline should be very cautious in assessment of their resources before engaging in any process of deploying them for various purposes. For instance, it may be a good ideas to deploy its resources in expansion of its services to more profitable routes, should also continue to pursue their opportunities in the already established routes. With it competitive experience, the company should also try to enter in international destinations where big players have withdrawn. Malaysian government should also give room for foreign ownership in this company. Such strategic alliance will allow the company to pursue more business opportunities which it could not have enjoyed if it will go it alone. In this way the company will be in a better position of venturing into more profitable international destinations which will serve as a strengthening factor towards gaining a competitive advantage in the region (Sekaran, 2003).

References

Abdullah MZ 1995, ‘Measuring and Monitoring Service quality at Malaysia Airlines’, Managing Service Quality, vol. 5, no. 2, p. 25-27.

3, pp. 62-76vol. Central Asia Business Journal, ’, Competition in the airline industry: The case of price war between Malaysia Airlines and Air AsiaAbdullah, TAT 2010, ‘

Bani, E 2002, ‘Air Asia, MAS likely to complement each other’, Business Times, 24 January

Chang, YH & Yeh, CH 2002, ‘A survey analysis of service quality for domestic airlines’, European Journal of Operational Research, vol. 139, p. 166-177.

New Straits Times 2008, Idris: MAS low-fare campaign fully self-funded, Biz News, 16 May, p 45.

Sekaran, U 2003, Research Methods for Business: A Skill-Building Approach. 4th ed. New York: John Wiley & Sons, Inc.