PESTE Analysis on Australia For Air Asia Airlines

PESTE Analysis factors Political Threats

1.

Date of Analysis 2010/02/26

Potential Impact: Implication and importance

Your notes and

Opportunities

Trading policies

Maintains active and diverse international trade policy agenda which combines multilateral, regional and bilateral strategies to break down world barriers to trade. Trade policies are equally based on structural economic reforms to improve its international trade competitiveness, and initiatives to promote liberalization of international trade and investment rules.

High

Australia has good trading policies with its neighbor countries, and their trades are in favorable conditions, so operating Air Asia (AA) in Australia would be viable and there will be higher frequent business traveler.

2.

Home market lobbying/pressure groups

Committed Pressure group are allowed in Australia, which is good things, because of open political system, as results consumer and the citizen are more aware about the real business situation. Australia is a sophisticated and modern economy. It is open market and it has good relationship with international welfare organization High Pressure group

Medium

Pressure groups will make the organization to think about the Corporate Social Responsibly and Ethics that it need to consider and practice in Australia. AirAsia should come up with new business strategies which benefits environment, people and demoralizing un ethical activities.

3.

International pressure groups

Medium

In the environment, where there is high international pressure group, organizations should consider international issues and change their operation so that their daily operation, culture, functions and resources doesnt violate the international laws.

4.

Wars and conflict

No wars and Conflicts within the country, but active as Peace Keeping force in various Countries.

High

Australia isnt involved in any form of war within and outside the country, so the political environment seems to be sound. Hence Australia shall have higher tourist and business traveler. AA shall enjoy higher revenues as result of higher number of frequent travelers.

5.

Government policies

The Govt of Australia has open door policy, which always motivates various international business to invest their resource for the benefits of Australian consumer

High

Open door policy of AUS government shall always motivate AA to invest, penetrate and serve the future prospect of the Australian Market.

6.

Government term, change and elections

The Parliament of the Commonwealth of Australia holds voting election for House of Representative every 3 year and 140 days after the first meet, using Australian electron System

Medium

For a AA it, has medium impact, because the government isnt changing either fast or lasting long. The political environment is stable. The business has to three years of time to change in its policies when new government comes in power. Political stability is assured.

7.

Inter-country relationships/attitudes

Australia has good inter country relationship with other countries. It has established council with various countries like China, Japan, India, Korea and other countries Conservative in terms of Foreign Investment for Australian resource Industries. Overseas investors are limited to own stakes of 15% in major Australian resources companies; whereas capital ownership is limited to less than 50% for investment in new projects.

High

When there is good inter country relationship, the countries get involved in both inflow and outflow of FDI, as result AA shall have higher number of different frequent traveler between the countries.

8.

Governmental leadership

Low

Restriction on the Capital ownership shall turn investor off, and their working procedures, until and unless, the government welcomes investor which reform tax policies.

EconomicThreats
1.

Opportunities

and
Australia is facing recession, but still has the economic growth rate of 0.5, with typical inflation of 2-3%, with unemployment n rate of 5.7%.
Low

Home economy situation

Situation of home economy always has higher affect on the AA, since unemployment growth is 5.7%, and the economic growth is less than 1 % so AA doesnt seem to have frequent flyers from Australia as economic activities are decorating and as overall affect can be seen on the people lifestyle. Australia doesnt seem to be favorable. The corporate tax rate is very competitive in Australia compared to major economies. Similar to New Zealand and Thailand. The tax rate of Australia seems to be feasible to AA and they can operate in sound work environment.

2.

General taxation issues

There are various tax implied on Australia among them are y Sales tax- 10% y Corporate Tax rate 30% Competitive y Progressive Income Tax y Pay-As-You- Earn Tax( type of Income Tax)

High

3.

Seasonality/weather issues

Weather variation from north to south throughout the year. Extreme hot, humid and rainy at North during Nov/Dec. Pleasant weather is during April to September.

Medium

Seasons highly affects the business operation for an airline industry. The Australian weather and climate seems to be favorable for AA. But there might be fewer weather problems at the southern part of country.

4.

Market and trade cycles

Trade Cycle of Australia is more similar to the global cycle for trend.

High

Market and Trade cycle is similar like global trend so operating cycle is also affected on the basis of global trend. is Generally market trend affects the airlines business, as the transportation is highly required when market and trade cycle are performing good.

5.

International trade

Australia trade is more focused towards Asia and other pacific countries. It has Free trade Agreement with ASEAN, Chile, New Zealand, Singapore, Thailand and US. China is largest export market Official Interest of Australia has been declined to less than 3% in 2009, so that growth and investment can be increased, by lowering the cost of borrowing money

High

Presence of international trade shall increase the number of frequent travelers from each trading companies. Air Asia (AA) can have frequent travelers from AEAN, Chile, China, US and Thailand.

6.

Monetary issues

High

The interest rate in Australia is lower than 3%, so as for better operation, AA can get finance in a lower cost, to fund their daily operations.

7.

Disposable income

As per 2007-2008 Disposable income Upper level: $ 811 per week Middle level: $ 699 per week Lower Level: $ 44 per week.

Low

Disposable income defines customer behavior and their spending habit, when consumer spends more, the market then to grow and business profits tends to increase. AA should focus more on mass who has lower disposable income, as higher income earner tend to use full service flights rather than low cost flights.

8.

Job growth/unemployment

Current unemployment is 5.7%, where as every year 52700 were created as average.

Low

Since unemployment rate is 5.7%, which is lower, so AA might have problem to get skilled employees, they might require using different human resource recruitment tool to higher experience, skilled and trained employees. The compensation payout is also likely to be high because the supply of labor is low where as demand is higher. This isnt favorable for AA.

9.

Exchange rates

A reserve of foreign exchange and gold is $ 44.98 billion, Australian dollars (AUD) per US dollar - 1.2894 (2009), 1.2059 (2008), 1.2137 (2007), 1.3285 (2006), 1.3095 (2005)

Medium

Stability of Currency has impact on the long-term business in the economy. AA can be having confidence regarding the exchange rate of Australian Dollar. This is favorable for AA.

10.

Import/export ratios

The ratio between import and export ratio of Australia is 1:1.01. Export is higher than import by $ 5 billion AUS dollars

High

Higher export shall have higher number of business traveler and transportation of commodities can be seen. This concludes higher number of business travelers and commodities delivery.

Social Opportunities and Threats

1.
Media views Mass Media has higher influence among the people of Australia
High

Mass media has greater impact on people life, so AA can take advantage to position itself among the prospect future consumer through higher advertisement and promotional activities on mass media, there is high media reach in Australia.

2.

Religious groups

Catholic 25.8%, Anglican 18.7%, Uniting Church 5.7%, Presbyterian and Reformed 3%, Eastern Orthodox 2.7%, other Christian 7.9%, Buddhist 2.1%, Muslim 1.7%, other 2.4%, unspecified 11.3%, none 18.7%. As per 2009 Population: 2.1 million Age: 0-14 years: 18.6%, 15-64 years: 67.9%,65 years and over: 13.5% Race: white 92%, Asian 7%, aboriginal, other 1% Family Size: Nuclear Family Structure with 2.5 people per household. Description: age 15 and over can read and write. 4.5% of GDP is contributed to Education. total population: 99% male: 99% , female: 99%

Low

Religious diversity can have light affect the people buying or spending habit. In order to meet the customer need, AA can have few changes as required.

3.

Demographics

High

Market structure is good for AA, we can analyze the given information and state that 67.9% of people are within age group of the prime customer, consumer from the market can be easily targeted as the market has larger homogenous race of people. Family size is nuclear, we can be assured that people of Australia would be having high expense and they wouldnt save much of their income. So Australia is a favorable market.

4.

Education

High

Since the customer is highly educated, AA should provide detail informations regarding their products and service, and it also has higher advantage in terms of operation as it can have skilled and well educated employees. New management concept and technology of taking operations can be implemented and practiced for better efficiency. Every year number of consumer is increasing because of increasing number of immigrants, so AA can capitalize on capturing new markets and new customers. This is positive traits for AA since it operate on maximization of sales. Life expectancy of Australian is higher, where business had diverse customer in terms of age group. Employees tend to be less absence, as employees in Australia are less prone to disease. As conclusion we can say that employees productivity can be high.

5.

Immigration/emigration

Every year 0.2 million people immigrate to Australia.

High

6.

Health

As per 2008, Australia spends approx 10% of its GDP for health care of its citizen. Australia has health care system called Medicare, which gets funded by the 1.5% if the income tax. Life expectancy of Australia is 81.63 years; male: 79.25 years; female: 84.14 years.

High

7.

Living standards

As per 2008, Australia has Purchasing Power Parity $39,000.

High

Australia has higher purchasing power parity, which is good for business to determine customer purchasing power. But AA is low budgeted airline; most of the consumer would like to use traditional Full Service Flight to enjoy better service. Attitudes to work of Human resources, defines how organization operation is affected and how to work with people. Managers in AA should work with in employee in parallel terms being more focused on team work.

8.

Attitudes to work

Australians are flexible to work. People have proper balance between their work life and their personal life.

High

9.

Staff attitudes

Lower power distance and higher authority shall fail. Power distance is 36 compared to world average has 55.

High

AA should practice decentralization the authority, to achieve its objectives and optimize the use of available resources from sound management as per its employees.

10.

Management style

Democratic and consultative management is highly preferred.

style

of

High

AA should adjust to Democratic and consultative style management, within Australia. Doing so shall increase the productivity of the overall organizational employee in Australia as highly concern with work and management style that is practiced.

Technological and Threats

1.

Opportunities
Total expense for Innovation, Industry, Science and Research was Aus $312 for year 2009.
High

Research funding

AA can take benefits from the research programs of Australia for better technologies and use of new management and operation in its organization to be more competitive and productive in international market.

2.

Intellectual property issues

The current value of intellectual property in Australia is over $30 billion. Australia defends those properties that are notably within WTO. Australia Consumer energy worth $ 50 billion, every year. Electricity usage: 222 b kWh, oil usage: 953,700 bbl/day, Natural Gas : 34.2 b cu m Australian domestic networks consist of fiber-optic, wireless, and satellite. Telephone user, landline: 9.37 m, Cellular: 22.12 m, Radio, AM: 262, FM: 345, TV Station: 104, Internet User: 15.7 m user.

High

When AA, develop new concepts technology for its better operation in its organization, the company can be sure that its ideas shall be protected, and company gets more effective and efficient.

3.

Energy uses/sources/fuels

High

AA highly depends on the availability of energy either that be oil or electricity. AA should prepare for itself for advance technology that reduces less energy or some alternative to current energy requirements. Australia has good access to energy, so AA wont have any problem regarding the availability of energy. AA is budgeted airline, since most of it sales is made by internet and mobile SMS, Australia has good information communication infrastructure which is good. AA cost cutting strategy to reduce the agent cost can be implied as 22.12m are cell phone user and half of the population has access to internet.

4.

Communications

High

5.

Transportation

Australia has Road : 913,000 km, Railway: 33,819 km, Pipeline system:27000 km, Airports: 464 Sea port: 14 major sea port

High

AA can take benefits from proper transportation infrastructure of Australia to better perform and serve its passenger in maximum way.

Environmental - SWOT
1.
Ecological Australia is a large island continent and is one of the most biologically diverse countries in the world, with a large portion of its plants and animals and ecosystems found nowhere else. About five percent of Australia is national parks that provide excellent places from which to experience such diverse habitats as rainforests, deserts, coral reefs and woodlands, and the plants and animals that inhabit them. Medium Australia can be good market place for AA from the point of Tourism industry, because of Australia unique bio diversity, its ecosystem, its national parks and other ecological aspect. For AA, it is good opportunity to take to provide service and increase their sales by serving foreign visitors or tourists.

2.

Environmental issues i. International ii. National iii. Local

International: Global Warming National: Marine conservation, Native fauna, Ocean dumping, oil spills, whaling. Local : Mining and Waste Management

Medium

While operating in Australia, AA has to consider not having negative impact on environmental issues of Australia and support Australias campaign regarding environmental issues.

3.

Environmental

Current environmental issues touches issues regarding natural resources are affected by human use directly and indirectly.

Medium

AA, should have system, what uses recycled things, such as paper, plastic and other resources that doesnt have negative impact and shall promote the environmental issues, that benefits Australia in long-term.