Professional Documents
Culture Documents
1.0 Introduction
5.0 m–Commerce
6.0 Recommendations
7.0 Conclusions
APPENDIX
REFERENCES
Individual Coursework
1.0 Introduction
Purcel and Toland (2004, 241) said “Internet and Communication Technology offer
the opportunity to reduce the barriers of distance, and give…. countries better access
to global economy”. This is where e-Commerce comes into picture which covers
electronics trading of goods and services, electronic fund transfer, online procurement,
direct marketing, electronic billing, etc, through internet. It is very important for
switching the traditional business models into a better model in terms of efficiency,
This report intends to analysis how the technology of e-Commerce and revolution of
m-Commerce impacts airlines industry in worldwide, especially low cost carrier. The
report begins by examining the strength, weakness, opportunities and threats (SWOT)
for AirAsia by using Porter’s Value Chain; and analyses AirAsia’s competitive
advantages by using Porter’s Generic Strategies model. The discussion then moves to
review how Microsoft Vista can be applied to m-Commerce and the benefit to
AirAsia and its customer. Lastly, summary and recommendations will be made to
identify the strategies that AirAsia can stay competitive and maintain its market share.
Page 2 of 25 05Sep2009
Individual Coursework
According the finding of Gillan and Lall (2002), traditionally in airline industry,
majority of air tickets were purchase through travel agent or call centers. By 2003, the
18%, this technology enable the development of low cost carriers (LCC).
offer low fares. E-commerce helps LCC to simplify the process of purchase by online
In terms of efficiency, LCC are able to perform real time transaction to a global
customer for 24 hours a day and 7 days a week. The data provide in online booking
combine with the right software will ease the business administration task to stored
and categorized automatically, update in real time and accessed on demand. This is
whereby LCC save cost on manpower to data entry this information. LCC also can
fully utilize the resources of information such as booking seat, customer database to
plan ahead their business strategy; this will help to minimize the empty seat and
maximizes the sales of seat. E-commerce and m-Commerce also provide convenient
to customers, they can easily compare the airline company to choose before purchase
in terms of quality, price and availability. Customers will purchase upon their
satisfactory after comparison; this business strategy is to create customer loyalty. The
first successful and pioneered LCC was AirAsia in asia. It is also the first airline in
Page 3 of 25 05Sep2009
Individual Coursework
In business, we can say that people take raw input (for example, resin) and “add
value” to convert it into something that customer are willing to pay money for (for
example, plastic container). The more value you added, more customers are ready to
pay a good price for you product or service, and keep buying from you. In year 1985,
management to identify the ways of an organization create value to their customer and
how to optimum these activities to gain competitive advantage. Porter argued that the
organization can be divided into a series of primary value adding activities and
Outbound logistic, Marketing and sales, and Services. The support activities include:-
infrastructure.
Porter’s Value Chain will be used as internal scanning to analyze the strength and
a) Inbound Logistics
AirAsia has placed an order of 175 units Airbus A320 to service its routes (AirAsia
Berhad 2007 Annual Report). Airbus A320 is less fuel consumption compared to
Boeing 737-300 aircraft. Ultimately Boeing 737-300 to be retired and replace with
Airbus A320 to overcome the increase of oil price by structurally reduce cost and
Page 4 of 25 05Sep2009
Individual Coursework
AirAsia pursue simplicity in operation by operating a single aircraft fleet. All the
aircraft can share to use the same tool, spare parts and same skilled manpower for
need many different special tool, spare part and required more manpower for different
aircraft. This will help to reduce the stock of part maintenance, less training for
b) Operation
ensure that its fleet is always perform in safe and best condition. GE began servicing
jet engines more than 50 years ago; they have world class capabilities, technology and
maintain low cost; whereby they don’t have to provide benefits to their workers, but
On the other hand, it also weakness of AirAsia do not have own maintenance teams.
of the contact, lack communication, poor quality and delayed services amongst others.
They also may not drive the same standards and mission that drives by AirAsia and
Base on Table 1 below (AirAsia 2007 annual report), AirAsia implement high
frequency flights with a quick turnaround of 25 minutes which is the faster in the
region. They have optimize their operation by maximize the aircraft utilization at 12.0
block hours per day and load factor at 80%. Anyway, AirAsia’s utilization is still
Page 5 of 25 05Sep2009
Individual Coursework
lower than other LCC by 0.4 block hours per day due to they do not operate late night
flights.
In 2006, AirAsia has a poor On Time Performance (OTP) at 79%, whereby 21% of
the flights are delay. If based on the estimation for cost of delay USD74.10 per block
AirAsia on year 2006 is in huge amount. AirAsia not only loss in terms of money but
also customer’s confident and brand equity. With the improvement on operation by
using new aircraft -Airbus A320, OTP has gradually improved by 9% on 2008; And
to win back the customer’s confident, on 16 June 2008, AirAsia launched an On Time
Guarantee (OTG) champion where compensation will be given to customer for the
c) Outbound logistic
The LCC adopts simple routes, emphasizing point to point network rather that transfer
at hubs as full services airline. Again this will enhance aircraft utilization and
customer point of view, it’s very inconvenience for them because the luggage cannot
AirAsia take advantages of lower landing fees to landing at low cost terminal, which
is also without airport lounges’ charges. They also provide E-ticket rather than printed
Page 6 of 25 05Sep2009
Individual Coursework
AirAsia launched AirAsia Citibank card partner with Citbank on 12 July 2007. Point
collection on credit card can be converted into AirAsia vouchers to redeem free
flights, airport taxes, fuel charges, administrative fees and purchase of Xpress
Boarding. (The Star 12 July 2007). The credit card Exclusive promotion -fixed rebate
of RM36 on airport tax provided for those who sign up AirAsia Citibank card.
(http://www.airasia.com/creditcard/my/contest/citibank_promo_fares.htm)
AirAsia promote their brand and raise awareness of the airline being the sports
sponsors with many world famous names such as Manchester United, AT&T
e) Services
whereby they offers hotels, car rental, hostel and holiday packages at discounted rates.
Its value added services that compliments their low airfares with value for money
Prior this AirAsia has limited service to customers’ required special care. On 4
August 2007, AirAsia announces that they will enhance their facilities to
accommodate the needs of its disable guest. (Press release, 4 August 2007
http://www.airasia.com/site/my/en/pressRelease.jsp?id=4322bb92-ac1e00ae-
1ad0d890-a7d011e3) But the limitation is they can carry only a maximum 4 guests
per flight and failure of notification will results the service being unavailable. Under
certain circumstances they may require the guest to travel with a companion too.
Page 7 of 25 05Sep2009
Individual Coursework
f) Procurement
AirAsia bought into fuel hedges to protect the business from the unpredictable market
volatility when the experts and pundits prophesied that oil price would soon hit
US$200. The credit crisis unfolded in 2nd half of 2008, AirAisa has decided to unwind
the hedges. Observe due measure, for right timing is in all things the most important
factor (Hesiod). Currently they purchase fuel at the low market price, while other
g) Technology development
AirAsia boost their e-commerce business with launching of AirAsia Vista Gadget
with Microsoft on 31 January 2007. This gadget enables customers to keep update
with live travel information such as destinations, itineraries and pricing and latest
promotion. (http://www.microsoft.com/malaysia/pree/linkpage4327.mspx)
AirAsia enhance their service and maintain their low cost strategy by increasing use
of technology and new innovation. They launched self check-in machines on February
2009 (Press Release,18 Feb09), the technology introduce to eliminate long check-in
Trained effectively, however, they can become your biggest asset (Bartram and
Gibson, 2000). AirAisa started their in-house Flight Attendant (FA) training in 2003.
Page 8 of 25 05Sep2009
Individual Coursework
necessary training to all the employees which includes pilots, engineers, cabin crew,
ramp support and guest services front –line staff. AirAsia join partnership with CAE
to manage TRTO training; and similar partnership with Aviation Australia to provide
i) Firm Infrastructure.
AirAsia currently operates from six hubs located at Low Cost Carrier Terminal
(KLIA), Johor Bahru, Kota Kinabalu, Bangkok (Thailand), Jarkata (Indonesia) and
destinations and operates over 500 domestic and international flights daily. AirAsia
also create a seamless bridge of unity across Asia by consistently adding new routes
After reviewing the strength and weakness in AirAsia, we must consider the
opportunities and threats in market place. During credit crisis on 2008, everyone is
having difficulties for the economy slow down. But it is an opportunities to AirAsia
as most of the company cut expenses on business travel by switching from full service
airline to low cost airline. On the other hand, ASEAN Open Skies allow unlimited
flights among ASEAN's regional air carriers beginning December 2008; it allow
AirAsia adding Singapore routes which has proven to be high yielding and is
Page 9 of 25 05Sep2009
Individual Coursework
There are some other factors that beyond control that affecting AirAsia’s low fare
policy, such as airport departure, security charges and landing charges. The boom of
new establish competitor from full service airline on low cost subsidiary such as MAS
has created Firefly is a threat to AirAsia. The tightly regulated international intra-
Asian market is a major obstacle to the full-scale development of low cost carriers in
the region
I view today’s economy as the Value economy. Adding value has become more than
just a sound business principle; it is both the common denominator and the
competitive edge (Arthur Levitt, Jr) In summary, AirAsia has added value and
strength to maintain their low cost strategy and striving for continuous improvement
as the lowest fares, quality services and dependability LCC; with the unmistakable
tagline, “Now Everyone Can Fly”, AirAsia has made flying affordable for more than
Page 10 of 25 05Sep2009
Individual Coursework
face of changing conditions” (Walker 1992, p35). According to Michael Porter, the
three methods for creating a sustainable competitive advantage are through Cost
indeed based on the product’s characteristics. Focus strategies can be either based on
Firm following cost leadership strategy accept cheaper components, use standard
production processes, and seeks high market share in order to reduce unit cost (Philips
quality at the lowest price with saving on the particular feature or facility that
customers do not care. Most popular no frills strategy is pursued by LCC whereby
customer is clearly understanding that they will be serve by operating the flight
services at lowest fare, prompt schedules and keeping clear of facilities like baggage
transfers, meals, seat arrangement etc, which anyway the customers were not bothered
about. AsiaAsia is one company that continuously strives to reduce cost and in the
market place it has got the image of “World’s best low cost Airline” and “Now
everyone can fly” with the affordable airfare they offered. The key strategies
Safety First by complies with the condition set by regulators and partner with
Page 11 of 25 05Sep2009
Individual Coursework
staff productivity.
Low Fare, No Frills by keeping clear of facilities like baggage transfer, meals
seat arrangement etc., which any way the customer were not bothered about.
AirAsia has awarded as “Best Asian Low-Cost Carrier” by TTG Travel Awards 2008
and “Aisa’s Best Budget Airline” under Best In Travel Poll 2008 by Smart Travel
Asia.com. Following AirAsia’s success, many others have followed and expending
their market share like the Malaysia-based Firefly, Singapore-based Tiger Airways
and Jestar Asia and Thailand-based One-Two-Go, Bangkok Airways and Nok Air.
Kotler argue that differentiation is the process of adding a set of meaningful and
2003, p.315). Differentiation provides excess returns by permitting higher prices for a
unique product offering, and most often characterized by superior quality of product
outperformed its competitors throughout its history. Singapore Airlines has achieved
position its image as “Stretch out. Luxuriate. Rejuvenate” in the Asian market. The
customers for Singapore Airlines will enjoy the highest standard of quality service
and innovation across all classes. The cuisine provided is created by their
Page 12 of 25 05Sep2009
Individual Coursework
awarded the “Best Airline” in Asia and South East Asia by Skytrax World Airline
Focus strategy also called as segmentation strategy or niche strategy, the firm
concentrates on a few selected target markets rather than across the entire market. The
opportunities may exist because the firm may able to serve a narrow market segment
more effectively than industry wide competitors and the small niches that large
companies overlook. AirAsia X extends AirAsia’s proven business model and brand
into narrow market for long-haul distances over 4 hours flight time across Asia
Pacific region; through use of the focused cost leadership strategy. The key strategies
contributing AirAsia X as focused cost leadership are exactly same as AirAsia; the
differences is AirAsia adopt a broad competitive scope while Airsia X use their core
The focused differentiation strategy applies the principle of added value within a
small segment of a market rather than across the entire market. In order to be
successful in the differentiation sector it has always been necessary for airline to be
innovative and brand building. Eva Air is the brand that won Trusted Brands Awards
customers’ needs, and the ability to innovative. Eva airline differentiate their service
by launching a new concept fleet incorporating Hello Kitty especially for Hello Kitty
Page 13 of 25 05Sep2009
Individual Coursework
5.0 m-Commerce
Durlacher (1999) defines m-Commerce as “any transaction with monetary value that
commerce is the blessing for everyone in this modern era where everyone needs fast
and reliable access to internet regardless of time and space. The wireless handheld
devices that use for M-commerce are palmtops, smart phones with WAP, cell phones
with GPRS, video game consoles (example MS Xbox), Personal Digital Assistants
US will be increase from 270.3 million at 2008 to 308.7miilion in 2013 (Table 3). On
the other hand, Billing Revolution survey conducted by Harris Interactive shows that
71% of US adults felt that it’s safe to make a purchase via their mobile phone (Table
3). Andy Kleitsch, CEO of Billing Revolution comment that “There clearly a large
US population of consumers opens to the ideal of making purchase via their cell
phone.” There is wide speculation that M-commerce will surpass E-commerce as the
method of choice for digital commerce transaction as the content delivery over
wireless devices becomes faster, reliable, more secure and scalable. Mobile phone
users have more than quadrupled in the pass few years, even surpassing the growth
enable AirAsia to reach out to even more consumers, cut down operating cost and
expand our services to market with low computer / internet penetration” said Tony
Page 14 of 25 05Sep2009
Individual Coursework
Without doubts that there are similarity between e-Commerce and m-Commerce, but
Bearer TCP / IP & Fixed Wireline GSM , GSM/GPRS , TDMA , CDMA , CDPD ,
Networks Internet Paging networks
http://www.mobileinfo.com/mcommerce/differences.htm
Basically the devices used for m-Commerce is mobile in convenience size and can be
Commerce is only limited in those area where we have internet connectivity with PC
at bigger size.
Each mobile device has certain characteristics that influence its usability, such as size
and color of display screen, input device, memory, bandwidth capacity, supporting
operating systems and availability of internal smart card reader. For example if the
display screen is too small, we may not view the screen as whole and miss out some
Page 15 of 25 05Sep2009
Individual Coursework
important information. While we may not face this problem in e-Commerce as the
information and others. Purchase of ring tones, mobile screen savers, games and
There are various e-payment systems that implement such as eCash, NetCash and
devices, m-payment system required special software to run the full-fledged payment
above, but finally it provide the same result as Chaffey (2004) and Kotler (2003) said
“ its has reached millions of homes bring enough information, entertainment and
Page 16 of 25 05Sep2009
Individual Coursework
6.0 Recommendations
The competitive environment has gone awry amid confusion. Many airline have
routes to compete with low cost airlines. AirAsia needs to work closely with
deprived.
February 2009, which is more finger friendly and more accessible to the information
required through mobile devices. The idea of Microsoft Vista is that you can look at
your mobile device to see where you are supposed to be or you are meeting with next
by viewing the screen; the screen is presented with icon of voicemails, emails, text
messages and date and time of your next appointment (Figure 4). This will allow
itineraries, pricing and even online booking directly from the Window Vista at
anywhere and anytime. Microsoft Vista also enables customer keep updated with
latest news and travel promotions. Ultimately with information gather, Customer can
plan and organize their trip by using the phone’s internet features.
Page 17 of 25 05Sep2009
Individual Coursework
enhance the customer experience with our brand. The collaboration allows us to
promotions and updates to the region” said Kathleen Tan, AirAsia Executive Vice
President during launching of AirAsia Vista Gadget (Press Release, 31January 2007).
Since promoting Microsoft Vista in e-Commerce will help to expand their market
channel; ultimately the application of Microsoft Vista into m-Commerce will enhance
AirAsia able to promote their brand and raise awareness as said by Microsoft
the branding and commercial value of such innovations as the sidebar gadgets on
Windows Vista”.
destination, itineraries, pricing and thus online booking directly from the Window
Page 18 of 25 05Sep2009
Individual Coursework
Window Mobile enable AirAsia’s customer for planning, organizing and entertaining.
By using the phone’s internet feature, customer can visit AirAsia website to see if the
Customer even can check in boarding pass up to 24 hours before flight by using web
check in facility.
Page 19 of 25 05Sep2009
Individual Coursework
7.0 Conclusions
Low cost carriers have reshape the traditional airline business model and have
significantly change the competitive dynamics of the industry. The successful model
Overall, AirAsia seems to value added in operation and optimum the strength of their
firm but by buyers in the amounts they are willing to pay for the product or services
(Rayport et. Al, 2003). But the report has revealed that customers are willing to accept
their cost leader strategy which is no frills, hassle-free in exchange for low fares.
which is inescapable but never arrives (Chaharbaghi and Lynch, 1999). AirAsia
Page 20 of 25 05Sep2009
Individual Coursework
APPENDIX
Page 21 of 25 05Sep2009
Individual Coursework
COMPETITIVE ADVANTAGE
LOW COST DIFFERENTIATION
BOARD Characteristics:- Characteristics:-
COMPETITIVE SCOPE
Table 1
Table 2
Page 22 of 25 05Sep2009
Individual Coursework
Table 3
Figure 4
Page 23 of 25 05Sep2009
Individual Coursework
REFERENCES
Bartram, S. & Gibson B. (2000) The Training Needs Analysis Toolkit, 2 nd ed.
Amherst, MA: HRD Press, Inc
Business The Ultimate Resources, 2nd Edition. A & C Black Publishers Ltd 2006.
p104
Chaffey, D. (2004) E-business and E-commerce Managament. 2nd ed., Harlow, UK.
FT Prentice Hall.
Gillan, D. & Lall, A., 2002. The economics of the Internet, the new economy and
opportunities for airports, Journal of Air Transport Management 8, 49-62.
http://www.airasia.com/creditcard/my/contest/citibank_promo_fares.htm, AirAsia,
2009
http://www.airasia.com/site/my/en/pressRelease.jsp?id=4322bb92-ac1e00ae-
1ad0d890-a7d011e3, AirAsia, 2007
Kotler., P. (2003). Marketing Management. 11th Ed. Upper Saddle River, NJ: Prentice
Hall
Phillips, L., D. Chang, and R. Buzzell (1983) "Product Quality, Cost Position and
Business Performance: A Test of Some Key Hypotheses," Journal of Marketing, 47,
Spring, pp. 26-43.
Purcell, F., and Toland, J. (2004). Electronic commerce for the south pacific: a review
of e-readiness. Electronic Commerce Research 4, pp. 241–262.
Rayport & Jaworski (2003). “Introduction to E-Commerce”, 2nd ed., Int’l ed.,
McGraw Hill, New York.
Page 24 of 25 05Sep2009
Individual Coursework
pressRelease.jsp?
Page 25 of 25 05Sep2009