Read international strategy case and answer the question+analysis Essay Example
Intеrnаtiоnаl Strаtеgy Саsе Analysis
In general, the global airline industry is characterised by the existence of traditional carriers and low cost carriers. These two types of carriers use different business models that define their operations, brands and services. For instance, whereas traditional carriers seek to develop their brands as offering superior services in terms of comfort, customer experience and additional in-flight services, low cost carriers are modelled on the need to offer low cost services by minimising their operational costs. Although low cost carriers have traditionally focused on short haul flights, the current environment has seen such carriers offering long haul flights in the changing business environment, thus increasing the level of competition in the industry.
To begin with, the company was the first one to adopt the low cost carrier model in Asia. By adopting a model that had been used successfully by Ryanair in Europe and South West Airlines in the United States, the company had the first mover advantage in the Asian market (Forrey et al. 2012, p. 3). Secondly, the company managed to build a strong intra-Asian flight network that focused on the growing middleclass. This enabled it to attract tourists and budget-conscious business travellers who fuelled its rapid growth. Another factor that led to the success of AirAsia was its bet on developing long haul services on the low cost model. Contrary to conventional wisdom in the industry, the company set up these services which became successful in terms of operational costs and flight numbers.
AirAsia X had to develop differentiation around the low cost model in order to attract new and different customers. This entailed revisiting different elements of the original business model as used by AirAsia. First, the new airline stuck to the Airbus as its selected aircraft. Since this is what AirAsia had been using, choosing an Airbus fleet enabled the company to access a strong technical relationship with Airbus which had been initiated by the sister company (Forrey et al. 2012, p. 5). Secondly, AirAsia X, like its sister company, maintained its operational costs at a bare minimum. This was achieved by enhancing the utilisation of its aircraft from the average 11 hours per day to 16 (Forrey et al. 2012, p. 7). Another element revisited was about offering luxury services to clients. Unlike the tradition in low cost carriers, AirAsia X introduced optional entertainment services, a limited number of premium seats and catering services which could be purchased in-flight.
To start with, the company should evaluate potential destinations in terms of their appeal to potential travellers in Malaysia as well as in terms of how attractive the destinations are in accordance with the network analysis of the sister company. Also, the company should select new destinations based on the propensity of the local population at both destinations to travel on the route. This will ensure that the company selects and sustains highly profitable routes. The scenario was exemplified in the success of the Kuala Lumpur to Christchurch route that exceeded its initial projections to sell 44,000 tickets within the first three weeks of operation (Forrey et al. 2012, p. 13).
Forrey, B, Schotter, A, Doh, J & Lawton, T 2012, AirAsia X: Can the low cost model go long haul? Case study authorised for use in MGMT 3101 – International Business Strategy, at University of New Wales, from August 2013 to February 2014.
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