Académique Documents
Professionnel Documents
Culture Documents
Executive Summary
of AirAsia X
AirAsia X: Can the low cost model go
long haul?
The purpose of this report is to investigate the possibility of AirAsia X sustaining their low cost
long haul business venture, in reference to a case study on AirAsia X. Research for this report
included the use of Porters five forces,
Word study of the1951
Count: macro-environment, and a Value Chain
analysis, to identify the key success factors of AirAsia X. The major findings show that AirAsia X
achievements is primarily due to its focus on cost reduction and product differentiation. While it is
clear that there is a market for running a long haul low cost airline, this report recommends that
AirAsia X continues to maintain their customer-orientated approach in planning and innovation, if
it wishes to survive the predicted competitive market, where challenges such as; staff grievances,
political interference, and an unstable economic condition will upset the market.
Page | 0
Student ID: 1039387
Module code: SM3027
Seminar Tutor: Adrian Haberberg
Turnitin ID: 19535090
Table of Contents
INTRODUCTION...................................................................................................... 2
THREAT OF ENTRY.............................................................................................. 5
EMPLOYEE AWARENESS...................................................................................... 6
1|Page
Student ID: 1039387
Module code: SM3027
Seminar Tutor: Adrian Haberberg
Turnitin ID: 19535090
INTRODUCTION
This report will investigate the strategic position of AirAsia X, applying the porter forces to
analyse its business environment, and the impact of emerging trends from the macro-
environment, using the relevant PEST analysis. This report will also explore AirAsia Xs low
cost approach using the value chain to analyse the strategy being implemented by AirAsia X,
and how its low cost model and product/ service differentiation complements the business
growth and competitive advantage in the industry. To conclude, a critical appraisal of AirAsia
Xs low cost strategy will be provided, using results from the previous
industry/environmental analysis to assess the sustainability of the AirAsia Xs competitive
advantage in the future.
2|Page
Student ID: 1039387
Module code: SM3027
Seminar Tutor: Adrian Haberberg
Turnitin ID: 19535090
services are available to the customer. This can influence the buyers decision by promoting
the airlines quality in service or reputation.
Buyers in this industry have a HIGH power, but is often subjected to international or long
haul flights, because the market is already too saturated with competition. Airlines may also
submit to the customers buying power, to gain competitive advantage. I.e. In economic
situations or Ecological concerns. Most low budget airlines operate nationally. And unlike
international airline, the national airlines tends to be monopolised by one or two company; In
this case, buyer will have LOW power.
Alternatively, the threat of substitution would vary depending on if the flight is regional or
international. The threat of substitution for regional or short haul flights will be high, because
customers could opted to use other modes of transportation that is within that region, as it
may be more cost effective.
THREAT OF ENTRY
As long as there is a need to travel, there will be numerous airlines trying to offer the best
services to the customers. Therefore, threat of entry for this industry would be high, due to its
vast customer population. Although, the market is becoming too saturated, making it difficult
for emerging firms to survive in a market that already has a fierce competition in cost,
product positioning and differentiation. This will make it harder to contest with these airlines
who has strong relationships with their distributors and supply chain, making the threat of
entry LOW.
3|Page
Student ID: 1039387
Module code: SM3027
Seminar Tutor: Adrian Haberberg
Turnitin ID: 19535090
Likewise, in the low budget airline industry, the supply chain relationships are important,
because it aids the firms economy of scale by allowing them buy materials in large amount,
for a fixed cost (depending on how strong the relationship is). New entrants diversifying from
other markets, can utilize existing capabilities and cash flows to gain competitive advantage.
Porter, M. (2008). Barriers to entry is HIGH due to strong relationships to suppliers, and the
threat to entry is LOW, depending on how many firms are entering the market.
4|Page
Student ID: 1039387
Module code: SM3027
Seminar Tutor: Adrian Haberberg
Turnitin ID: 19535090
EMPLOYEE AWARENESS
Most firms operate using the bare minimum number of staffs.
The low budget industry will see a rise in employee grievances, due to a perceived
notion of being overworked and under-paid
This will lead to unionization.
Labor cost may increase in Malaysia, and this will upset the low cost model.
5|Page
Student ID: 1039387
Module code: SM3027
Seminar Tutor: Adrian Haberberg
Turnitin ID: 19535090
6|Page
Student ID: 1039387
Module code: SM3027
Seminar Tutor: Adrian Haberberg
Turnitin ID: 19535090
management system
From the above analysis, this report deduced that the key success factors which would give
AirAsia X a sustainable competitive advantage is its managerial system, organisational
culture, already established brand with a large customer base, strong business model focus,
and product / service differentiation. AirAsia X has a lean firm infrastructure that encourages
creativity, and a business strategy that centres on its culture. Such strategies brought about the
seating configurations and flat bed innovation that distinguishes AirAsia X from its
competitors. The brand image and reputation has supported AirAsia X operations, and
increased customer loyalty. All these factors, including AirAsia sharing resources, gives
AirAsia X a long sustaining advantage in the industry. At the moment, AirAsia X strategic
resources meets all the VIRUS criteria; Its low cost model is valuable to the industry success
factors; the managerial prowess solely available to AirAsia, and thus cant be imitated; it has
a distinctive seating configuration and innovation that is rare; AirAsia X utilises a low cost
model that caters for the needs of its customer, by providing affordable quality service that
cannot be substituted. Though, there is always a level of uncertainty that dictates AirAsia X
sustainable factor, in the sense that regardless of Xs sustaining advantage now, the future is
very unpredictable. Such concerns includes; natural disasters in the operating region, terrorist
attacks, recession etc.
With the emergence of other low cost operators and full service carriers in the low cost long
haul market, AirAsia X must continue to be the market innovators, without losing sight of
their culture, vision, and business strategy. As a result of AirAsia X low cost approach, they
are bound to be various challenges in the future, including staff grievances and political
interference. The key to AirAsia X survival in the uncertain market is to maintain their
7|Page
Student ID: 1039387
Module code: SM3027
Seminar Tutor: Adrian Haberberg
Turnitin ID: 19535090
customer-orientated approach in planning and innovation, in order to acquire and retain their
high-value customers.
REFERENCE
8|Page
Student ID: 1039387
Module code: SM3027
Seminar Tutor: Adrian Haberberg
Turnitin ID: 19535090
Emma, K. (2012). Interiors optimise in-flight experience. Asian Aviation Magazine. 10 (2),
p23-26.
Forrey, B; Schotter, A; Doh, J and Lawton, T. (2012). AirAsia X: Can The Low Cost Model
Go Long Haul. Richard Ivey School of Business Foundation. 1 (1), p1-20.
Miller, T.O. (1992), ``A customer's definition of quality'', The Journal of Business
Strategy,pp. 4-7
Porter, M. (2008) The five competitive forces that shape strategy, Harvard Business
Review, 86 (1), pp. 78-93.
9|Page