CASE STUDY

PAST YEAR OCTOBER 2009

Question 1

Identify five (5) of competitive advantages used by AirAsia (5 marks)

Five (5) competitve advantages used by AirAsia are :

1. AirAsia launching new routes from its hub in Kuala Lumpur International Airport at breakneck speed
2. AirAsia operates scheduled domestic and international flights and is Asia's largest low fare, no frills airline
3. AirAsia pioneered low cost travelling in Asia
4. It is also the first airline in the region to implement fully ticketless travel and unassigned seats
5. AirAsia operates with the world's lowest unit cost of US$0.023/ASK (available seat per kilometer) and a passanger break-even load factor of 52%

Question 2

Which of the Porter's generic strategies were applied by AirAsia in the case study and explain with example
(6 marks)

The Porter's generic strategies were applied by AirAsia in the case study are :

Cost Leadership

- AirAsia becoming a low-cost producer in the industry allows the company to lower the prices to customers.

- For example, AirAsia operates with the world's lowest unit cost of US$0.023?ASK (available seat per kilometer)

Differentiation
- AirAsia create competitive advantage by distinguish their products on one or more features important to their customers
- For example, in the five-year plan, AirAsia will strengthen and enhance its route network by connecting all the existing cities in the region and expanding further into Indochina, Indonesia, Southern China (Kun Ming, Xiamen, Shenzen) and India

Focus strategy
- AirAsia has a target to a niche market
- For example, the airline will focus on developing its hubs in Bangkok and Jakarta through its sister companies, Thai AirAsia and Indonesia AirAsia since with the five-year plan, AirAsia will strengthen and enhance its route network.

Question 3

Based on Porter's Five Force Model, analyze AirAsia's buyer power and supplier power (9 marks)

Buyer power
- AirAsia assessed by analyzing the ability to directly impact the price they are willing to pay for an item
- It is high when buyers have many choices of whom to buy and it is low when their choices are few
- For example, AirAsia operates with the world's lowest unit cost of US$0.023/ASK (available seat per kilometer) and a passenger break-even load factor of 52%

Supplier power
- AirAsia assessed by the suppliers' ability to directly impact the price they are charging for supplies
- It is high when buyers have few choices of whom to buy from and it is low when their choices are many
- For example, AirAsia is currently the main customer of the Airbus A320 the company has placed an order 0f 175 units of the same plane to service its routes and it is also enhance its route network by connecting all the existing cities in the region and expanding further into Indo China, Indonesia, Southern China (Kun Ming, Xiamen, Shenzen) and India