Q2. Discuss the relevance of AirAsia’s strategic decisions in offering short-haul services.
AirAsia is an international budget airline whose success can be attributed to effective strategic decisions aimed at generating profits. Strategic decisions are about operating in a different way from the competitors. One of the crucial AirAsia’s strategic decisions was to offer short-haul services. The services are characterized by quick turnaround times of 25 minutes and high-frequency services, low-fares, as well as ‘no-frills’ services. The services were part of the company’s decision to capitalize on the local market by flying destinations that were close to its main hub. The low-fares were aimed at attracting customers from different segments and capturing its service promise (Walker, Gountas, Mavondo, & Mullins, 2015). In addition, the company introduced automated systems and innovative solutions to offer greater value to its customers. In this case, the company sought ways to provide better services and maintain internal operational coherence at lower costs to survive and thrive.
AirAsia’s strategic decision for providing the short-haul services reflects a case of a company that is maintaining its competitive position by maintaining a strong marketing-oriented approach. This is an aspect of positive marketing orientation in which the company develops a customer-focused strategy and builds distinctive advantages to its services through product innovation and addition of key services into the offering brought to the market. A market-oriented firm will constantly monitor the changing needs of customers and attempt to satisfy the needs by modifying its total offerings while still making a profit (Zainal, Radzi, Hashim, Chik, & Abu, 2012). Because of the local market that sought easy and quick short-haul flights, the company was able to increase the frequency of its local operations and incorporate easy check in and traveling services. This is an aspect that would fulfill the need for frequent local flights while at the same time saving the company in terms of service cost. The customer-oriented and market-oriented strategy was enabled through a customer value-based organizational culture, characterized by the company managers who are skilled at learning about the customers as well as the changing market demands and managing the process of innovation. The strategic customer-focused decision enabled costs to be managed and risks to be contained while offering adequate flight services.
Q3. Discuss the relevance of AirAsia X’s strategic decision in offering long-haul services.
AirAsia also operated a long segment and established a franchise, AirAsia X, to expand its low-cost haul segment. The decision behind the strategic move to operate the long-haul segment is based on the low-cost strategy. The low-cost strategy is built on the understanding that the carrier is by nature, low-cost and thus will be profitable. Business scholars have argued the viability of Porter’s view that the actions of a firm influence the market environment and, therefore, strategic moves are aimed at creating a competitive advantage for the firms (Pizam, 2012). The low-cost strategy is primarily linked to process efficiency and thus the company would be able to offer long-haul services at a competitive price. This would generate industry market share, particularly in regard to the price-sensitive customers.
In the long-haul operation expansion, the company faced some hurdles and the focus shifted to partnerships with other airlines like Jester and Malaysian Airline. The partnerships were specifically aimed at the achievement of cost efficiencies and positioning the company in the long-haul segment (Walker et al., 2015). Positioning is a decision aimed at defining the brand image relative to competition within a market segment (Janiszewska & Insch, 2012). The positioning strategy makes use of the brand’s low-cost benefit to taking advantage of a strong low-cost purchasing rationale that gives the company a real advantage. This would allow the company to maintain its cost-leadership, corporate strategy that would complement the aspect of brand positioning, which marketed the company in the long-haul segment. The company’s business-level strategy to offer the low-cost services holds on to the basis of understanding the company’s customers who seek low-cost airline services. The outcome of the combination of cost-leadership and understanding the customers is the ability to offer good long-haul segment services at a competitive price while maintaining a global image presence. In this way, AirAsia X could remain visible as a low-cost airline in the long-haul segment.
Q4. Identify the strategic mistakes made by AirAsia X.
AirAsia X strategic decisions to enter into cross-border partnerships is one of the mistakes that can potentially harm the successful streak of the company. This is primarily because of a potential strategic mismatch. The partnership with Jester, for instance, meant that the company is attempting to blend and merge cultures and this would bring destructive changes to the focus on being a low-cost airline. In addition, the partnerships with more established airlines in the long-haul segment would allow more control over AirAsia X and this would mean losing key talent and ignoring internal employee issues. This means the company would lose its brand image as a low-cost airline in trying to match the partners and thus failed to deliver on the goals stated. This would also lead to the failure by the company to approach its low-cost customer market as an aggregate smaller and thoughtfully defined segment.
Another strategic mistake that may not seem imminent in regard to the current cost-leadership based on low-cost fares is the complete focus on the low-cost strategic group. AirAsia X has looked at its strategic group and found that other airlines had overlooked the budget group of travelers. Despite the number of innovations such as automated systems and ‘no frills’ services, the company has ignored the ability of their strategic group to start a price war. The aviation industry is highly dynamic and according to Nhuta (2012), being caught up in the competitive edge of low fares can lead to competitors’ action remaining unobserved. Price wars may be a tool for the company’s self-destruction. In most cases, the lowest price that the company bases its brand on might invite price cuts by rival airlines and this may result to lower profits for the company. In cases where some competitors may overreact with their price-cutting moves, it will make it impossible for the company to operate and compete at all.
References
Janiszewska, K., & Insch, A. (2012). The strategic importance of brand positioning in the place brand concept: elements, structure and application capabilities. Journal of International Studies, 5(1), 9-19.
Nhuta, S. (2012). An Analysis of the Forces That Determine the Competitive Intensity in the Airline Industry and the Implications for Strategy. International Journal of Physical and Social Sciences, 2(9), 433-469.
Pizam, A. (Ed.). (2012). International Encyclopedia of Hospitality Management (2nd ed.). New York: Routledge.
Walker, O. C., Gountas, J., Mavondo, F., & Mullins, J. (2012). Marketing Strategy: A Decision-Focused Approach (2nd ed.). North Ryde BC, NSW: McGraw-Hill Australia.
Zainal, A., Radzi, S. M., Hashim, R., Chik, C. T. & Abu, R. (Eds.). (2012). Current Issues in Hospitality and Tourism: Research and Innovations. New York: CRC Press.
