Competitive Advantage of Air Asia

What is Competitive Advantage ?

A competitive advantage is an attribute that allows a company to outperform its competitors. Competitive advantages allow a company to achieve superior margins compared to its competition and generates valuefor the company and its shareholders.

Examples of Competitive Advantage

1. Access to natural resources that are restricted to competitors
2. Highly skilled labor
3. A unique geographic location
4. Access to new or proprietary technology
5. Ability to manufacture products at the lowest cost
6. Brand image recognition

Strategies for Competitive Advantage

1. Cost Leadership

2. Differentiation

3. Focus

AirAsia’s Values

1. Safety first
2. High aircraft utilization
3. Low fare, no frills
4. Streamline operations
5. Lean distribution system
6. Point to point network

The low-cost concept became a moneymaker in the United States, where it was pioneered in the 1970’s by Southwest Airlines; the model for budget carriers elsewhere like Ryanair and easyJet in Europe.

AirAsia Internal Capabilities

Foster a dependency on Internet technology; such as direct ticketing

Online booking, online checking (flight status, promotions), boarding passes on mobile phones

Investment in the AirAsia Academy

Dynamic environment between employees and management, quarterly meetings

No communication barriers between employers and employees

“Employees before customers”

Aggressive marketing tactics, massive advertising, promotional packages

Employee motivation - rewards free flights for their staff

Offer customers the ticketless concept

Low operating costs - wages, airport fees, short ground waits due to simple boarding processes

Keeping costs low - uses one type of aircraft, Airbus A320

Differentiation Strategies to Online Businesses

Environment/ atmospherics

Making the intangible tangible

Building trust

Efficiency and timely order processing

Pricing

Customer Relationship Management (CRM)

Enhancing the experience

SWOT

Strenghs

Low cost operations

Fewer management levels, effective, focused and aggressive management

Simple proven business model that consistently delivers the lowest fares

Penetrate and stimulate potential markets

Multi-skilled staffs means efficient and incentive workforce

Single type fleet minimizes maintenance fee and pilot training cost

WeaknessesService resource is limited by lower costsLimited human resourcesGovernment interference and regulation on airport deals and passenger compensationNon-central location of secondary airportsBrand is vital for market position and developing it is always a challengeHeavy reliance on outsourcingNew entrants provide the price-sensitive services

Opportunities

Long haul flights are a trial to get undeveloped market share

Differentiation from the traditional LCC model by adding customer services or operation as full service airline with low fares

Ongoing industry consolidation has opened up prospects for new routes and airport deals

High fuel prices will squeeze out unprofitable competitors

Threats

Full service airlines may cut costs to compete

Entrance of other LCCs

High fuel prices decrease profits

Accident, terrorist attack, and disaster may affect customer confidence

Aviation regulations and government policy

Increase in operation costs in producing value-added services

System disruption due to heavily reliance on online sales

AirAsia Five Forces Analysis

Five Forces - an industry-level analysis to determine attractiveness of an industry

Threat of New Entrants – AirAsia’s low cost carrier strategy is to maintain efficiencies to sustain the lowest fares, thus being a barrier to new entrants

Threat of Substitute – As one of the most profitable low cost carriers, it is difficult for competitors to find enough efficiencies to become a substitute for AirAsia’s niche markets

Bargaining Power of Buyers – The more informed internet customers become, the more power they may have over AirAsia, especially if AirAsia is unable to maintain its low cost leadership position

Bargaining Power of Suppliers – Since AirAsia is the low cost leader, they may be able to force their suppliers to maintain or lower prices; they are in a better position to continue earning above average returns even if suppliers costs are increased

Conclution

and in the end the Low cost carrier strategy will have weaknesses and strengths, with the standards provided by Air Asia, they will be able to provide services and also provide strong competition especially in the field of low cost carriers and will make their competitors difficult to compete directly with Air Asia because it is able to strictly implement the Low Cost Carrier system