An analysis of how to be low cost carrier leader in airline industry
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Introduction of The Company
1.1 Company overview
It can be stated that selected organization falls within airline industry and thus faces prevailing competition in market. There are a lot of of companies engaged within the business of air travel and therefore Air Asia focuses upon low cost travel so that they can compete with another rivals in the industry. Company mainly segment its market into middle class people and offer them low cost travel opportunity so that it helps in increasing the customer base of firm. Main product/service obtained by Air Asia is air travel, frequent flyer program, onboard luggage and in flight services so that consumers can be attracted towards firm (he Air Asia Company Strategic management: “How AirAsia can be a leader in the lowest cost carrier in the airplane industry”. 2009). Market position of Air Asia is that it is considered as the worlds biggest airlines engaged in providing travel services over Asia skies. However, there are several airline companies that are developing different strategies in regard to make the airline better and overcome the competitors. Thus, in regard to compete with rivals business undertakes low cost strategy and thus influence consumers towards firm which helps in enhancing the sales and profitability of firm in market (Barton and Bruder, 2014).
Furthermore, main competitors of Air Asia are Jetstar Airways, SilkAir and Tiger Airways etc. All these competitors are providing best air services and thus affects Air Asia that is providing low cost carrier to passengers. Revenue earned by Air Asia is RM 5.01 billion and thus it enhances the profitability of firm in market. Further, there are several issues faced by Air Asia relating to noise pollution, cost minimization and environmental issues. Thus, business needs to look over all these issues and thus focus upon overcoming the problem in regard to attain desired results (Chaudhari and Bakal, 2015).
Here, Air Asia is selected which is a Malaysian low cost airline and possess the highest fleet size and cover various destination all over the world. Business also focuses different passengers and provide low cost airline so that customer base can be increased. Thus, Air Asia faced different strategies issues relating to providing low cost carrier and leading the travel industry in market (Cronin and Sugimoto, 2015). Therefore, it is essential for firm to undertake effective strategic planning so that they can overcome such issue and thus attain desired profits.
1.2 Purpose of the report
The purpose of the study is to adopt an approach in regard to carry out an analysis of the issue regarding how to be lost cost carrier leader within airline industry. Thus, such issue needs to be identified and overcome so that improvement within business can be carried out. Here, there are several issue relating to high fuel cost, environmental issues and cost minimization. Thus, cost minimization is considered as an effective issue and therefore, it is essential for firm to become market leader while providing low cost carrier services so that they can overcome competitors prevailing in market (Power and Gendron, 2015). Therefore, it is essential for business to identify the prevailing issue and thus implement alternative approaches available for company so that they can overcome the identified issue. Here, low cost carrier issue requires to be overcome and alternative approach adopted by business is that providing quality services to customers in regard to make effective decision. Further, the identified issue faced by Air Asia conducts an effective analysis of the approach and thus in regard to provide low cost carrier services offering best product or service quality in regard to address the problem faced by firm so that best results can be attained (Wang, Li and Li, 2012).
1.3 Description and justification of problem or issue
1)In the current era of competition, where there are various competitors prevailing in market and providing different quality services or products to customers. Thus, it identifies that Air Asia is prevailing the issue of low cost fare and thus business is expanding rapidly since 2001 in order to attain organizational goals and objectives. Thus, top management of business aims to overcome this strategic problem and make a decision regarding providing low cost services but increasing the capacity of fleet so that brand image can be increased (Wang, Li and Li, 2015).
2)Top management of Air Asia identifies the prevailing issue through assessing that business is facing several issues in relation to noise pollution, environmental issue, cost minimization and high fuel cost etc, Thus, among them they identify that while providing low cost carrier firm is facing issue regarding becoming the market leader and overcoming tough competition in market (Wang and et. al., 2013). Thus, it is essential for firm to identify the reviews and opinion of customers regarding travel services provided by Air Asia and if needed they can improve the same to become the market leader.
3)The issue of becoming market leader by providing low cost services is the big problem and thus it needs to be overcome so that best results can be attained. Thus, it is essential for firm to assess that it is one of the main problem faced by firm and thus it affects the market share of firm. Such issue affects mainly Air Asia as there are various rivals operating in market providing different services to consumers at competitive prices (Yang and Jia, 2013). Further, business involves outsourcing strategy that incurs more financial losses and require different resources so that best results can be attained. Also, it impacts upon the consumers in the form that firm decreases the number of fleet size and also reducing flight number which impacts consumers in the form of selecting another airline company for travelling. It also impacts market, revenue and profit of Air Asia as it decreases in regard to assess the issue of overcoming the problem an becoming market leader (Ye and Simunic, 2013).
4)Such issue occurred due to prevailing competition in airline industry and thus Air Asia faces the issue of becoming market leader while providing low cost carrier services to customers. Therefore, it is essential for firm to overcome such issue and thus attain desired results in the form of becoming market leader (Yu and et. al., 2015).
1.4 Description and justification of the approaches used
Air Asia uses effective strategic management approach that helps in improving the cost minimization issue and thus overcome the issues so that best results can be attained. Such issue helps in improving the business performance so that they can attract large number of customers towards firm and enhance market share of firm. Cited firm concentrated upon cost leadership issue and thus believes in no frills, hassle free, low fare business concept so that keeping low cost helps in improving high efficiency within every part of firm (Zadek, Evans and Pruzan, 2013). Through increasing the efficiency it helps in providing best comfortable services to guests and thus attain desired results. However, it is not essential for companies to disclose the approach they have used. It could be used at the top management level and even employees working within firm are not aware about the fact that business is using strategies for minimization cost and attracting large consumer base (Goldsmith, 2015). Thus, it would help in improving market share and thus provide information to consumers regarding the used strategy that would help them to improve business goals and thus success can be attained. However, business uses ethical approach that helps them to provide lost cost fares to consumers and attracts them towards business in order to enhance sales and profitability in market. Thus, it can be stated that using such method through which lowering the cost would result in benefiting the firm and thus enhance market share.
2. ANALYSIS AND DISCUSSION
2.1 Critical appraisal of the approach used
It can be assessed that the approach used is cost leadership and thus it is effective as it helps in improving the business performance so that best results can be attained. However, it is significant for business to implement the approach and thus provide better quality product or service to consumers. Main strengths of such theory is that it assists in improving the customer base and enhance brand image of firm in market. Therefore, it is essential for enterprise to focus upon enhancing consumer base (Frensch and Funke, 2014). While, the weaknesses faced by implementing such approach is that it affects consumers as they possess different other options available in market delivering similar quality services. As such there was no mistake made while implementing the approach of cost leadership, firm adopts such approach in regard to become market leader and thus improves market share within firm. Also, implementing ethical approach is suitable, acceptable, feasible and appropriate so that desired quality products or services could be delivered to clients in market. Thus, it can be stated that cost leadership is considered as an effective approach that helps in improving business performance in market and attain success (Hwang and Yoon, 2012).
It can be evaluated that cost leadership is one of the effective approach that needs to be implemented within firm and thus improves business performance in market. In such competitive market, airline businesses such as Air Asia focuses upon influencing customers to travel from their airlines by providing them the best quality services at low cost. Thus, it is considered as one of the low cost airlines and develops their brand image in market. Also, it helps firm to make effective decision making which results in attaining high market share and gain profits. Air Asia implements such strategy within firm which helps them to improve their performance in market and thus achieve overall goals.
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2.2 Improvements in the approaches used
It is essential for Air Asia to improve the cost leadership strategy and provide appropriate improvements within the approaches so that success can be attained. In such competitive environment, it is essential for firm to improve the effectiveness and thus overcome limitations and weaknesses so that better quality products or services could be delivered to consumers and thus enhances the sales and profitability of firm in market (The Air Asia Company Strategic management: “How AirAsia can be a leader in the lowest cost carrier in the airplane industry”. 2009). Also, ethical approach is considered as an effective method through which firm performance in market could be enhanced. Further, limitations faced by business in relation to not providing any additional services such as no frills, no connecting flights, no paper tickets, no VIP lounges etc, helps firm to save its cost and provide low cost services to consumers. Thus, it is essential for Air Asia to improve its approaches within competitive market so that they can enhance business performance and thus improve operational activities so that sales can be improved. Further, it is crucial for enterprise to focus upon effective strategy that assists in improving business effectiveness and thus result in ensuring competitive cost for services provided (Goldsmith, 2015)
2.3 Other available approaches
Other than the used approach by Air Asia could be mind games and scenario approach. Both these approaches could be implemented within firm and thus assists business to overcome their issues and thus enhance the sales and profitability of firm in market. Both the identified is also appropriate for Air Asia as it would help them to remain competitive in current market conditions. Therefore, it is essential for enterprise to focus upon using different theories and methods so that suitability of cost effective leadership can be applied in regard to attain best results (Frensch and Funke, 2014). Thus, it is significant for enterprise to implement mind games in which top management uses effective strategy and thus implement the same in regard to improve the business performance by delivering low cost carrier to consumers and satisfying their needs. However, it is an effective strategy that assists in implementing the approach so that best results can be attained. Further, scenario approach is also useful as it assists in implementing the method and thus understands the scenario effectively so that it could help in implementing the approach and thus justify the suitability aspect so that success can be attained (Proctor, 2014).
Both the discussed approaches are effectively implemented within Air Asia and thus success can be achieved accordingly. However, it is essential for the top management of airline to implement mind game approach which is suitable for them to become the market leader. As firm focuses upon enhancing the ability and deliver quality services to customers so that using mind games and implementing suitable strategy proves to be beneficial. However, it helps in enhancing the sales and profitability of firm in market. For instance, top management of Air Asia uses mind games approach which assists firm to identify the competitors available in market. It also helps in giving tough competition to each other so that Air Asia focuses upon using cost effective strategy which proves to be effective in terms of retaining consumers for long term. Thus, it is considered as the appropriate strategy which would benefit firm in terms of both high sales and profitability. Further, another approach used is scenario approach in which management focuses upon assessing the current business scenario and thus implement the strategy accordingly so that delivering low cost carrier facility to consumers proves to be beneficial for firm and thus attain customer satisfaction in market. It is also considered as an appropriate approach and thus proves to be beneficial for firm in order to enhance sales and profitability.
3. CONCLUSION AND RECOMMENDATIONS
3.1 Justification of the most appropriate approach
It can be stated that the most effective approach used within Air Asia is ethical approach that would help firm to implement best results and thus improve business performance in market. Thus, it enhances the sales and profitability of firm in market. Also, using such approach assists in improving best outcomes so that cost effective leadership strategy is being followed by enterprise and delivers low cost fare to consumers that enhances sales of firm. Also, such approach helps airline industry in regard to attain desired results. As compared to other approaches it is the most effective and thus help firm to improve its business performance so that more number of customers can be attracted towards enterprise and they can improve its market share and brand image (Hwang and Yoon, 2012). Scenario approach strength is to identify the best scenario within firm and thus apply the strategies to enhance business outcomes. While the weaknesses is that it is essential for business to identify the scenario as well as strategy that need to be applied that affects business functions. While, ethical approach is most appropriate and thus it assesses the strength that Air Asia needs to identify the ethical considerations so that it does not affect the expectations of consumers. The main limitation is that ethical approach influences consumers decision to travel from the airlines. Therefore, it can be stated that ethical approach is considered as the most effective and thus it identifies best results in the form of attaining best results. It can be considered that the selected approaches possess both strengths and weaknesses so that it affects the business sales and profitability. However, implementing mind games and scenario approach is suitable that focuses upon assessing its merits and demerits. Main strength of such approach is that it helps employees to identify the needs and wants of consumers while the weakness is that it is unable to assess the appropriate scenario that needs by the firm in order to operate in market. Therefore, adopting scenario approach and implementing cost effective leadership strategy would not be so feasible. Therefore, it is essential for business to undertake appropriate strategy so that through implementing such approach it would result in enhancing satisfaction among consumers. Thus, adopting such approach is found suitable in relation to implement cost effective strategy so that best prices are set in relation to improve sales and profitability.
3.2 Implementation of the most appropriate approach
It can be stated that the main approach used is ethical approach and thus it is considered as effective that helps in implementing the same in regard to attain best results. Thus, it helps in identifying the strategy which results into assessing that Air Asia assists in attaining effective leadership action through using cost effective leadership. It means that firm attains the market leader tactic in regard to overcome the problem and thus attain best results. However, through implementing the effective strategy it helps in improving business performance and thus success can be attained (Zadek, Evans and Pruzan, 2013). However, it is essential for enterprise to become low cost carrier leader in such competitive market and overcome competition so that success can be attained. Thus, it helps in improving brand image in market and thus sales and profitability of Air Asia can be improved. Through identifying the issue and problem it is essential for Air Asia to overcome the problem and thus implement cost effective strategy which results in overcoming the rivals in market. Implementing cost effective strategy using ethical approach means no hidden cost added so that customer satisfaction can be attained. However, if business charges extra cost related to any tax and then promoting it as a low cost carrier than it would result into affecting the consumers' expectation and thus decreases the sales of firm in market. Therefore, it is essential for firm to implement the approach effectively and thus attain best results effectively and efficiently.
Specific action plan consists of the following points:
- Specific action plan consists of the following points:
- To identify the business values and beliefs.
- To obtain commitment from the top management of firm.
- Further, involving board of directors to take necessary action within ethical implementation of plan.
- Later, developing proper ethical code of conduct.
- Developing ethics into business mission and vision in regard to attain desired objectives.
3.3 Summary of the key learning
It can be concluded from the study that appropriate decision could be made in regard to overcome the problems and thus best results can be attained. Thus, here identifying the problem faced by Air Asia in relation to become low cost market leader in carrier and thus for this firm implements cost effective leadership so that success can be attained. Therefore, it helps in improving market share and profitability so that best results can be attained. However, it is essential for enterprise to focus upon improving cost effective leadership and thus overcome the weaknesses as there are wide range of rivals available in market. Thus, it can be assessed that implementing such strategy would result firm to enhance its market share to satisfy the needs of clients. Also, it is essential for airline firm to provide best quality products or services and thus improve business performance in market.
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