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Pest Analysis (Air Asia)

Introduction PEST Analysis is the Political, Economic, Social culture and Technology analysis that a company does to determine the overall business environment. A PEST analysis is a look at the external environment of a company or a business that plays an important role in managing and decision making of a company. It is crucial for a company to consider its environment before relating with the public or customers. The PEST analysis examines the impact of each of the factor on the company. Thus, political factor considers the impact of legislatives changes, stability of the economy and event that related with the government and politics that may affect the business. Influence of economy, such as interest rate, stability of economy, inflation levels and such helps the company make better decision on how to operate their company effectively. Besides that, the social drive is a crucial part on PEST analysis. Creating and developing a social culture takes time and effort and a new motive driven company such as Air Asia has to develop me method on how to connect with the societys lifestyle, demographics, and media. Technological point of PEST analysis relates with competing technology development with other competitors and effective information and communication between the market and the company. Political Analysis Political Analysis mainly states about the aviation acts and regulation which needed by aviation company such as Air Asia to operate their business. The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. Political stability is inessential to create a safe economy market that enables the market to grow. Political issues may cause problems in the outcome of the company. Some of the political factors that may affect a company are events that affect the operation of the company; therefore regarding an aviation company such as AirAsia political events will affect the result of the company. Event such as political uncertainty in Thailand on 25 November 2008; when anti-government protesters recently blocked flights for a week in Bangkoks main airport. This issues affects AirAsias political analysiss because AirAsia as just newly opened franchises in Thailand AirAsia X which begun operating 2 November 2007. Another political issue that came abroad was the 2002 Bali bombings that occurred on 12 October 2002 in the tourist district of Indonesia. The attack was the worst terrorist attack in Indonesia approximately 202 died. This affected the whole flight aviation around South East Asia due to political pressure and death of tourist. Due to this mayhem AirAsia had to make security measure to secure the security of the flights. Government decided to take drastic measures due to this issue and highlight the Civil Aviation Offences Act 1984 (Act 307). Besides that, the 2009 flu outbreak worldwide has seriously affected the whole world causing serious damage in US, Europe and Asia. In Malaysia, a large flu pandemic subtype H1N1 has made an outbreak, therefore many airports had been closed due to this affect. Economic Analysis In 2009, the world hardly managed to cope with H1N1 influenza pandemic. Even so the
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Pest Analysis (Air Asia)

similar year the world witnessed a global economic slowdown that affected the economic stability. For AirAsia it was business as usual according to their financial statement 2009 AirAsia managed to produce 148% increase on operating profit RM447million that is approximately 22million passengers more than the previous year 2008. AirAsia is Asias largest low cost carrier with the widest route connectivity and the largest customer base. Where else while the economic is going through recession AirAsia managed to make a higher profit, this may due to their low cost carriers which passengers favorably choose. Air Asia is one of the businesses that have successfully adopted cost leadership through operational effectiveness and efficiency. The cost advantages have enabled Air Asia to become the Asias leading low fare airline. Air Asia has successfully positioned itself in customers mind. Customers approximately 14million passengers travelled AirAsia in 2009 this is because the customer pay less compared to other airlines. Managing fuel effectively and increase in employment is an important factor despises International global credit crisis has resulted in increasing unemployment and global trade will shrink by 9 percent in 2009. Employment rate has constantly increased from 3799 to 4593 employees in the year 2009 as stated in the financial statement. This benefits the financial performance of AirAsia by increasing the operating profit margin 29.1%. Social-culture analysis Air Asia operates with many diversified regions in Asia, all of them are different in their own unique way and this allows AirAsia to attract their passengers throughout Asian countries with has many diverse languages and cultures. Related to the difference of the nature the demographic factor helps AirAsia to manage their customers effectively. In Malaysia itself there are about 7 different languages which are the Bahasa Malaysia, English, Chinese, Tamil, Telugu, Malayalam and Punjabi. Air Asia accommodate to three prominent languages which are Bahasa Malaysia, English and Chinese. Just as any other airline AirAsia also accommodates to many different classes such as economy class, hot seat class, standard seats class and premium economy class which is equivalent to a business class seat. As worlds best low-cost airline 2009 and 2010 AirAsia managed to satisfy their customers just like any other airline would do. Besides that, Asian business values cooperation rather than individualism. This can be seen in the reliability of the different aviations in many others countries towards AirAsia. This is also due to the branding of AirAsia in South East Asia. Branding and trends are important for an organization such as AirAsia to promote their services. A fact that AirAsia is not just a profit making company but a good branding and innovative company was proven when AirAsia launched a campaign in November 2009 1 Million Free Seats and has promptly set a new world record with the number of seats that were grabbed within 24hours 402,222 seats. The response demonstrates the power of branding, and the attraction of AirAsia as a value airline. Technology Analysis Technology factors in one of the major reason of the growth of AirAsia. Well managed ticketing system and e-ticketing has lowered distribution costs thus, eliminating travel agent fees. AirAsia has used the full potential of the technology by connecting to the
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Pest Analysis (Air Asia)

customers via internet. The major sale made by AirAsia is via internet. This can be seen from the AirAsias 2009 financial statement 76% of sales are made via internet well use of networking has been a successful factor on managing the sales, more over advertising their airline has made a difference in the Asian Airlines. Due to major growth in technology recently airline industry has develop ways on how to reduce the cost of travelling by introducing Airbus. AirAsia has the youngest fleet in Asia with the new Airbus A320 and A330, improved fuel efficiency, extra capacity, and innovations means better performance and reliability. Economical fuel burn and simpler maintenance result in lower costs, effecting cost optimization to enable AirAsia to enjoy considerable cost savings thus providing low fares all-year round, besides of course a much better quality service in air. These airlines will replace the pervious Boeing 737 which has served AirAsia well. Information and communication technology (ICT) has allowed AirAsia to reduce operating costs and provide fast, effective service in areas including; checking fight schedules, book seats, electronic check in and pre order meals. Furthermore information regarding AirAsia, they have no.1 Travel Website in Asia and the biggest ecommerce website in Asia; Monthly average of 20 million unique visitors and 210 million page views in 2009. This shows the effectiveness of AirAsia connecting with technology. Regarding on connecting with technology, AirAsia also ranked as no.1 Facebook corporate account in the transportation field in the region. Connecting through social media such as Facebook; AirAsia has a huge advantage over the other competitors due to the growth of Facebook to 500 million active users. Benefits of PEST Analysis PEST analysis helps users in their decision making process as it evaluate the macro environment where business operate. By conducting PEST analysis, one can understand the environment therefore is able to make decision with better and well informed information. PEST analysis is also useful to understand the big picture of the environment and therefore helps users to understand the risks associated with the business. It enables an organization to anticipate future business threats and take action to avoid or minimize their impact. For example based on the AirAsia case study, by understanding the political factor; users can know whether the company has any compliance risk. Failure to comply with any laws and regulation especially in the aviation industry can result in adverse effect for the company. For PEST to be effective, analysis have to undertake on a regular basis. In doing so, company are able to seize any opportunities and discover any trends before its competitors does so thus giving it a competitive advantage over its competitors. Moreover, PEST analysis is a useful at the start of a business planning process. It enables management team with background and context information about targets towards growth, new product development and brand positioning. Besides that, PEST analysis is also useful in starting a business in new region, by understanding the unknown assumptions therefore able the company adapts to the new environment. Conclusion As a conclusion, PEST analysis factor are important in determining the surrounding
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factors that may influence the company. On the other hand using this analysis for the benefit of the company may result as an advantage. Therefore by doing this coursework I get to understand the effects of factors such as PEST towards AirAsia and how AirAsia has external factors that play a major role on their operating system; especially due to many of AirAsias business has to do with the environment. Appendix Reference: http://www.highbeam.com/doc/1P2-17780415.html http://www.airasia.com/iwov-resources/my/common/pdf/AirAsia/IR/AirAsia_AR09.pdf PR Buzz Factor : How Using Public Relations Can Bost Your Business. Lawson Russell, Publisher: Kogan Page Ltd. Date Published 02/2006 pg: 73-80 http://www.japantoday.com/category/world/view/thai-protesters-disrupt-bangkokairport (Thailand Article ) http://airtravel.about.com/b/2006/09/10/the-after-effects-for-air-travel-post-911.htm ( Sept 11 01) http://www.msnbc.msn.com/id/7857269/site/newsweek/ ( Thailand and Malaysia) http://www.fugly-bali.org/bombing.html (Bali Bombing) http://www.globalwarmingart.com/wiki/Wikipedia:2009_swine_flu_outbreak ( H1N1 pandemic flu )

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