Can Air asia sustain its success?

Based on theexternal analysis, demand for budget airlines is expected to grow rapidly, attractingmore competition and increasing the degree of rivalry. The attractiveness and profitability willattract many full-service airlines to launch their own budget airlines.Due the Southeast Asian region having the lowest rate of air travel per capita among the other regions indicates a strong potential for growth. As low prices alone cannot sustain AirAsia, it hasto maximize its operational efficiency to maintain its competitive advantage (i.e. being the leader in budget airlines) in the advent of existing and new competitors. Therefore, AirAsia has toleverage on its core competency (identified in theinternalanalysis) to create cost advantagesacross multiple value chains.For example, AirAsia could exploit the potentials of affordable (cheap) air travel by Asia sburgeoning middle class by leveraging on its operational efficiency (i.e. expanding into Chinaand India, which have large populations), propelled by Asian governments liberalization of theaviation industry (i.e. promoting tourism within and around Asia). When looking for (new)Indian routes (in its expansion into India), in order to adhere to its strict adherence to 3 hoursflying time model, AirAsia could start with routes (from Bangkok to India); leveraging onAirAsia s efficiency and resources. Efficiency creates cost (competitive advantage) savings that can be passed on to customers,resulting in lower ticket prices and improves its brand image (perceived value) for customers (i.e.cheap tickets and shorter flight times). Also, as AirAsia has established quite a number of Southeast Asian routes (e.g. China, Indonesia, Singapore, Malays Thailand, Hong Kong andMacau), it could look at joint ventures with pan-Asian budget airlines (e.g. Virgin Blue) toextend it services beyond (Southeast) Asia.Moreover, AirAsia s low cost model emphasizes on the importance of maintaining costdiscipline (cost competitive advantage), it has no intention of moving up the airline value chain.This may prove to be a competitive advantage for AirAsia as it continues to provide customerswith cheaper ticker (than competitors), with flights that are efficient and reliable (e.g. safety):increasing customer confidence and appealing to the increasing number of budget travelerswhoarewiling to compromise on services for a cheaper, but safe and efficient flights.For instance, in order to maximize its existing (cost and differentiation) competitive advantages,AirAsia could use its Thai subsidiary (Thai AirAsia) to claim use of Thailand s open skies agreements to overcome the barrier of bilateral aviation pacts that threaten to limit its growth(i.e. fly to Singapore, Brunei and Cambodia) In addition, AirAsia would have to continuously identify new sources of cost advantage toenable it to provide the lowest price possible to budget-conscious customers, further improvingits market position with a range of innovation and personalized services.AirAsia managed to enhance its current offerings (and profitability) with substantial ancillaryrevenues derived from additional services (i.e. provision of in-flight food and drinks, and online sales of hotel, car, and holiday reservations, as well as travel insurance), and corporate travelservices, and even had its own branded credit card, further increasing brand awareness and valuefor customers (differentiation competitive advantage).AirAsia could further enhance its offerings by issuing smart cards, which are compatible with itsexisting ticketless booking system: one card for ordinary travelers (i.e. offering instant rewardswhen topped up and offers greater value than its purchase price), while the other offers unlimitedtravel for frequent travels (i.e. provisionally priced and allows customers to make as many tripsas they want within a specified period); leveraging on its use of technology (differentiationcompetitive advantage).Therefore, in conclusion, it is possible for AirAsia to sustain its success as the long-run forecastcontinues to be very positive

References: Ireland, R D, Hoskission, R E &Hitt, MA 2009, The management of strategy concepts, 8thedn, South-Western Cengage Learning, USA Singh, K, Pangarkar, N &Heracleous, L 2010, Business strategy in Asia a case book, 3rd edn,Cengage Learning Asia, Singapore