The Importance Of Strategic Management In Organizations – A Case Study Of AirAsia

Definition of Strategy

A strategy has been defined as the direction and scope seen in any organization in the long term. It assists the organization in achieving an advantage with the help of its configuration of resources in the purview of a challenging organizational environment, with the aim of meeting the market needs and fulfilling stakeholder expectations. In any organization, at all levels – from the over the business to the employees – there is found an existence of strategies. Managing strategies is all about taking strategic decisions in all situations in an organization (Ronda?Pupo & Guerras?Martin, 2012). For Michael Porter, a strategy is either every action that is general and less costly or something that no one else does.

A business strategy, in direct terms, is a documented envision how an affiliation is setting out to fulfill their targets. A business strategy contains different key decide that charts how an association will approach fulfilling these destinations (Verbeke, 2013). The inspiration driving why having a strategy is so essential is because it gives business time to get a sentiment how they are performing, what their abilities are, and if these capacities can help them create. Not all associations hit the nail on the head straight away. There are trademark weaknesses inside all relationship for various reasons. What a business strategy does is endeavor to cure these deficiencies with the objective that associations don’t trip up and bear their impact too phenomenally. Strategies look at these future threats and help make courses in which they can overcome these hindrances (Slack, 2015). A particularly described business strategy will offer a guide on how the business is performing inside. A strategy can perceive examples and openings later on. It can take a gander at the more broad changes in the market, for instance, political, social or imaginative changes, and furthermore customer changes, and can make strategies so the business can modify and make to suit these future changes (Hrebiniak, 2013).

The functional arrangement of activity of AirAsia is dug in and truly ideal for various ventures moreover. With the wonderfully set destinations, mission and recorded strategy ensure the well-working of the association. Foundation of the organization is based upon simplicity, capability, impelling of new markets and big salary. Strategies highlight the thoughts of straightforwardness, quality services easily, et cetera. Additionally, the vision is to continue being a most insignificant cost in the market (Teoh & Khoo, 2012).

Importance of Strategy in Business

The association started its business with just three carriers in 1996 which created to exponentially. The organization has enough reputation in print and electronic media. With its negligible cost and splendid services and the purchaser devotion’s with the consequences of the association, the organization has created out as a market pioneer in the business (AirAsia.com, 2017).

Incomparable cost advantage, government courses of action, fulfillment of capital requirements, its select things, regard included services, and the centrality given to the supplier with the help of AirAsia unmistakably shows that the strategies picked by the association are fitting for it. The buyer’s inclination to the substitute, trading costs, and corporate stakes are the certain threats for the undertaking (Liang, 2012).

Strategic management is the methodical union and execution of key goals and initiatives taken by the top management in any company in support of the owners. They do so after carefully going through and assessing all the available resources and both the internal and external paradigms so that the best possible benefits can be reaped for the organization (Coulter, 2012).

It works as an instrument to ensure the founding of stable business contraption which fits in with all the vital components that are fundamental to effective management. It is the examination of various management frameworks and techniques which are revolved around the blend of cross-utilitarian decisions, which are surrounded after serious examination and are realized to support the achievement of a business’ goals. Strategic management practices are essentially revolved around bringing into insight the corporate methodologies of business with its strategic needs (Hubbard & Beamish, 2011).

Strategic planning is the methodology that makes sense of where an affiliation is going all through the next year or more, how it will arrive and how it would discern whether it arrived or not. The grouping of a strategic course of action is normally all in all affiliation, while the convergence of an attractive system is generally speaking on a specific product, service or program (Smith, 2013). There is an arrangement of standpoints, models and strategies exercised as a piece of strategic planning. The approach that a strategic course of action is delivered hang on upon the method for the affiliation’s leadership, culture of the affiliation, intricacy of the affiliation’s condition, scope of the affiliation, the aptitude of coordinators, et cetera. Affiliations have continually faced such weights to settle on huge decisions. Starting late, the weight has climbed to the point where an efficient yet versatile system of overseeing such decisions is called for (Haines, 2016).

AirAsia’s Strategy

The ability to reliably modify and conform strategic course in focus business, as a component of strategic desires and developing conditions, and make new product and services, and in addition new plans of activity and creative ways to deal with make a motivating force for an association. If an affiliation has strategic agility, it’s prepared to modify its arrangement of activity quickly (Kotter, 2014).

Strategic finding requires a delicate exercise in watchful control between holding sharply to the visualization of winning though in the meantime modifying to the consistent changes in our general environment. It moreover requires the headway of new capacities and strategies for considering. A complete target is to make strategic agility, or the aptitude to retort swiftly to shifting market conditions minus losing base on the visualization of winning. It is the strategic agility, and additionally the capacities with regards to bestowing in moving ways, making accountabilities for execution, and getting the arranged results (Weber & Tarba, 2014).

Focusing on giving air abandon beautifications at significantly cut down costs, AirAsia has made sense of how to fulfill cut down costs to accomplish high explorer loads, bit of the general business, and profit by wiping out game plan of expensive in-flight services, flying a regular fleet, pitching tickets to voyagers direct, and constraining work, workplaces and overhead costs. Likewise, AirAsia’scarrier upkeep contract costs were represented to be liberally lower than various flying machines, totaling to AirAsia’s competitive advantage that was furthermore exasperated by its current fleet. AirAsia’s great security and bolster standards permitted AirAsia to get perfect rates on its assurance systems, extending consumer conviction. Like this, this is an important, exceptional, irreplaceable limit and hard to copy (by contenders), which makes sustainable (cost) competitive advantage for AirAsia (Liang, 2012).

AirAsia flying machines and agents were more enough and truly used as differentiated and diverse air ships. Like this, this capacity outfits AirAsia with a sustainable competitive advantage as it is phenomenal, difficult to duplicate and without substitutes. AirAsia made sense of how to be all the more capable of executing the low-cost philosophy, giving it a competitive (cost) advantage as it can keep up its low confirmations for explorers. In view of great advancement, AirAsia could penetrate potential markets. AirAsia transforms into a pioneer among low-cost transporters in Southeast Asia, getting a steady extension from regional media outlets. Hereafter, the airplane could invade and animate potential markets by enhancing media scope: brand care headway without achieving great arrangements and marketing costs. What’s more, AirAsia’s official sponsorship for Manchester United, which included overall sponsorship and publicizing, moreover propelled the brand past the region. Like this, as these capacities are unprecedented, difficult to copy and without substitutes, it is a sustainable competitive advantage for AirAsia (Stead & Stead, 2013).

SWOT Analysis of AirAsia

Environmental analysis of any company is conducted so that all the external and internal factors that affect the organization’s performance and strategic position in the market can be identified. It entails the evaluation of the levels of threat or opportunities that the identified factors might present. Environmental analysis is conducted in two forms: internal and external, also referred to as micro-environment and macro- environment (Baker, 2014).

The internal environment of any organization can be evaluated with the help of a SWOT analysis. The acronym SWOT is used to define the framework used for analyzing an assortment of micro environmental factors including Strengths, Weaknesses, Opportunities and Threats (Hollensen, 2015).

STRENGTHS AirAsia’s major strength is its low maintenance and operational costs. Because of that, they are able to adopt the low cost fare models so that they can improve their customer satisfaction levels. Low operational costs are due to the use of online reservation systems and quick checks. They have a strong management team, headed by an ex-Ryanair director who helps in reducing expenses. They also boast of a good technology based infrastructure (Grant, 2016).

WEAKNESSES AisAsia has a major weakness in the form of implementation of latest technologies due to the demand of huge amount of investment. The rising fuel prices additionally pose a threat for AirAsia as it increases their operational costs. The low cost approaches have led the company to have less number of staff in comparison with the other rivals in the industry, and this creates problems during peak times (Grant, 2016).

OPPORTUNITIES The Asian market has seen an increase in the number of customers with the help of the low cost approach to the airline carrier companies. Airlines have been employing the low cost fare model that would be proven beneficial for them in attracting customers from all across the world and in turn, would assist in improving the productivity of the companies with an aim to remain sustainable for the future (Grant, 2016).

THREATS The increase in the number of competitors all over the world, especially in the Asia Pacific countries, poses a major threat for AirAsia. This increase in competition for AirAsia in the Asia Pacific region would serve as a potential threat that has the capacity to influence the development and sustainability of AirAsia in future negatively. There is also the threat of customers choosing SIA or MAS airlines over AirAsia because of their services (Grant, 2016).

Table: SWOT Analysis of AirAsia

Source: (Created by Author)

The external environment of any organization can be evaluated with the help of a PESTEL analysis. The acronym PESTEL is used to define the framework used for analyzing an assortment of macro environmental factors counting Political, Economic, Social, Technological, Environmental and Legal Environment (Ho, 2014).

Political	Air Asia faces extended test while working its business outside Malaysia in light of similar understandings. Proportional comprehension is one of the noteworthy hindrances for the improvement and headway of negligible exertion transporters in the Asia-Pacific region. Likewise, landing charges is also a champion among a colossal segment that obstructs the advancement and change of AirAsia in the country. Nevertheless, the market headway in the Asia-pacific territory has executed the issue of air transport duties and has allowed to the air ship to work its business outside Malaysia (O’Connell, 2012).
Economic	Air Asia offers low-priced tickets to the regulars in Asia-Pacific region that are accountable for growing purchaser unwaveringness in the area. The low cost fare model of the transporter has engaged it to create and make in the Asia-pacific region. Fiscal withdraw in the Asia-Pacific area is accountable for the accomplishment of low cost fare model of the air ship as endless number of regulars need to get air tickets at diminished costs (Ho, 2014).
Social	The extending number of travelers and people in the Asia-Pacific territory is also backing up the improvement and progression of the airplane. Air Asia complement on ‘Safety First’ and track all the quality measures for giving finest services to the consumers in a cost-practical way (O’Connell, 2012).
Technological	AirAsia gives online services to air ticketing with the objective that consumers can without quite a bit of an extend to get to tickets. Moreover, the bearer has started late exhibited an air ship online program where guests can enjoy without quite a bit of an extended book their excursion packs. Mechanical parts have extended the efficiency of air ship in different states in the Asia-Pacific region (Ho, 2014).
Environmental	The Company has completed a couple of procedures for the environmental safety to shield the environment from any undesirable influence of defilement. Transporters grimy the environment and in this way it is crucial for the air ships working in the Asia-Pacific area to complete appropriate processes for the environment affirmation (O’Connell, 2012).
Legal	Market headway in the Asia-pacific locale has given huge advancement prospect to the Air Asia air ship yet has moreover extended the legal considerations for the transporter. Air ship needs to accomplish all the right essentials and procedures for coordinating their commercial operations in several countries (Ho, 2014).

Table: PEST Analysis of AirAsia

Source: (Created by Author)

The key abilities of Air Asia fuse the limit of giving splendid services at lower costs, the ability to contract, plan and make delegates, exceptional progressive culture and strong brand picture. These inside capacities of AirAsia meet the VRIN standards since they are fit for giving the association a competitive advantage over contenders

AirAsia is looking for after cost leadership and differentiation frameworks, such as, by concentrating on the low-wage specialists and via the course of action of the great bore and particular services for the regulars (Rothaermel, 2015). It is practical for AirAsia to look for after both cost leadership and differentiation methods at a comparative with the help of an integrated strategy method. This is in light of the fact that integrated strategy tactic would engage AirAsia to attain or recognize more than one ultimate target meanwhile. Such as, joining cost leadership and differentiation systems would allow AirAsia to give ease services that are exclusive and perceived. Interminable supply of the two frameworks, more clients are pulled in and lured to use a more rough measure of AirAsia’s services. Regardless, the extensive preparation that ought to be received such a strategy afore is made with a particular ultimate objective to evade probabilities of being caught in-the-middle (Amiruddin, 2013).

The usage of an integrated approach is probable in light of the way that Air Asia has feasibly finished cost leadership and a strong brand picture in the low cost hauler industry. Regardless, for the new Air Asia X, the association may not win concerning joining standard frameworks since it has not arranged itself in the goal showcase, not in the slightest degree like Air Asia which has a fabulous position in the market (Abdullah, Chew & Hamid, 2017).

PESTEL Analysis of AirAsia

Porter’s Five Forces model is used for competitive analysis and is widely implemented by organizations to develop their strategic positions in the industry (Dobbs, 2014). The five forces of the model are discussed below to explain the nature of competition that AirAsia faces in the aviation industry.  

Threat of New Entrants	Entry into the aviation industry requires high startup costs, which acts as a barrier for new entrants. In addition, the government rules and legislations are quite strict, which makes applying for permits and licensing difficult for new airlines. Moreover, brand awareness plays an important role, which is absent in the case of a new player in the industry. Hence, all these reduce the threat for AirAsia (Yashodha, 2012).
Threat of Substitute Products	The aviation industry has several low cost airlines operating, making it easier for customers to find an alternative. Alternatives or substitutes are in two forms: direct and indirect. Direct substitutes are the rival airlines, whereas, indirect substitutes include bus, ferry or any other forms of transport. Short distance and budgeted in-land travelling would be convenient by bus. The Internet helps customers help compare ticket prices too (Yashodha, 2012).
Rivalry Among Existing Firms	Due to the presence of a high number of competitors in the aviation industry, AirAsia is at a disadvantage. It faces intense competition and an ugly price clash from other low cost airlines like Tiger Airways, Air Arabia and Jet Star. The industry has limited number of customers, because of which the growth rate is low. Thus, AirAsia has to steal the market from its contenders (Yashodha, 2012).
Bargaining Power of Buyers	For any industry customers are the main influencing factors that can decide their profit or loss. AirAsia provides their customers with the lowest possible price, but still, the comparison between airlines exist. Since they are not the only one providing service, it is easy for the customer to shift to some other airline service as they are sensitive to price hikes and drops (Yashodha, 2012).
Bargaining Power of Suppliers	The airline industry has only two main suppliers, Airbus and Boeing, making the supplier power high. AirAsia aircrafts use Airbus models, making them dependent on Airbus engineers for maintenance works of the aircrafts and seeking advice. This increases the bargaining power of the supplier. On the other hand, AirAsia’s large order from Airbus weakens the authority of suppliers and in turn influences their profits (Yashodha, 2012).

Table: Porter’s Five Forces Analysis for AirAsia

Source: (Created by Author)

Conclusion

AirAsia is organized in customary cycle markets where it gets the competitive benefit for its commercial approach and technique. Giving customers unique products and services with low charge is synonymous to the AirAsia stamp. The affiliation has understood how to transmit low affirmations by reliably keeping charges low via high ability in every craft of the commerce and dealing with straightforwardness. The association has demonstrated that helpful energies among internal and external components could grow a competitive advantage. This has permitted AirAsia to situate and be the market frontrunner for LCC in South East Asia. Regardless, it is indispensable that AirAsia should re-survey its techniques and focus on focus qualities and aptitudes. For this why, AirAsia ought to rethink their market and precise courses to get regard other than cost and endure the resistance. From this audit, it is probable to express that still, and there is some other contrasting possibility to develop this association. Counting new course and exhibiting business class suite might be an appropriate choice for AirAsia for added improvement. On complete examination of AirAsia Airline Company using unique models, one may state that inevitable destiny of the association is wonderful and association must package some new systems to place themselves in new resign where new members to the market can’t reach.

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