Porters 5 forces

Threat of new entrants - Financial risk - Legal issues with landing right, the substantial complexities in operating across very different time zones, cultural arenas - The process of getting the necessary approvals and certification takes years - He used the Malaysia Airline certification to launch the new long haul carrier Determinants of supplier power - Long haul required a large type of airplane compared to current model of AirAsia, plus low cost approach, that choosing Airbus Industrys A330 aircraft is final choice.

Determinants of buyer power - Rapidly Growing new middle class travel intercontinental throughout Asia - Existing problem: passenger would not choose to flight long distance if amenities such as checked baggage, food and beverages, and onboard entertainment were not include in the ticket price. -

Threat of substitute products

Airbus provide more favorable financial term than Boeing, main competitor - AirAsia become one of the worlds largest operators of Airbus aircraft. Rivalry among existing firms - Industry growth rate forecast: a low cost network in Asia would one day attract European tourists and budget conscious business travellers, then support the launch of an ultra-competitive intercontinental airline. - Separation of X from AirAsia: cause of substantial differences between long haul and short haul operating requirement, decide to separate X from AirAsia. 100% of X resources independently managed - Historically, long haul operations targeted: business travelers or affluent individual travelers competing on service differentiation and route network integration. - A premium class cabin was a necessity was unquestionable. Many of the leading global long haul airline operated business class only flight between Tony Fernandess idea was to bring a low cost airline model to Malaysia He contemplated adapting a global, long haul element to the typically regional budget airline model. He believed could provide affordable long distance intercontinental air travel for the rapidly growing new middle class throughout Asia After 6 years operating, from 2 to 30 aircrafts and several regional subsidiaries companies in Thailand, Malaysia, Indonesia, Vietnam and AirAsia X2. The corporate slogan now became Now everyone can fly. 2008 & 2009 won the prestigious Skytrax Worlds best low cost Airline Award X separated from AirAsia entity .. He wants to take advantage of kthe strong brand, reflect the new, expanded service New airline AirAsia X Recruit new CEO from outside .. X survived and expanded when other regional competitors such as Hong Kong-based Oasis and Zoom Airline ceased operation at the height of the global financial crisis

Competitive advantage
Internal condition: Resources/ capabilities: - Tangible (land, raw material, building, equipment, cash) - Intangible (employment skill, reputation, cultural, technology, competitive knowledge, supplier & customer relation, license, trademark) Superior - Efficiency - Quality - Innovation - Customer responsiveness AirAsia reputation X as a franchise of Air Asia, allow it to leverage some existing infrastructure resources: - AirAsias pilots, engineers, cabin crews were cross-trained to operate both aircraft types - All ticket sales were integrated into a single website and booking system - All maintenance, customer service, back office activities were performed jointly, include MKT & administrative functions - Providing catering, fuel and legal advice without the usual inefficiencies that the start-ups have to battle with X maintain its laser-like focus on low cost X inherit resources from parent company: Employment skill already from AirAsia (well-trained pilot engineer and cabin crew) , technology, competitive knowledge, supplier & customer relation External position (superior customer value proposition) Better perceived experience because of: Performance results

Low cost leader Significant aspect (more detail below) - Aircraft selection: strong relationship with Airbus, trained maintenance needs, time & cost saving for training first use of A350 model-highest possible fuel efficiency A350-higher 20% saving capacity, 20% lower fee , earn same revenue - Higher utilization of space by maximizing seating capacity, more legroom more comfortable for long flight - Flat bed seat: a limit number of premium fully flat position for sleeping, a first in the world of budget airline, the worlds most affordable flat bed seat - Aircraft utilization: 16 hours every day than other average 11 hours => more flight per day, significantly reduced the fixed operating costs of X - a la carte inflight experience including premium seats, operational simplicity, inflight entertainment, food purchase

Achieve significant customer satisfaction. According to survey, passenger like the comfortable flat bed seat Joining IPO would be a great opportunity for Xs expansion plan

separate excellent in flight service Reduce purchasing complexity, no charging online

Significant aspects: Aircraft selection: by flying Airbus , X was able to leverage the strong relationship with Airbus Industries previously initiated by AirAsia. Airbus trained mechanics was available to meet the maintenance needs time and cost savings were achieved by utilizing cross training initiatives Young age of Xs fleet also helped the airline achieved the highest possible fuel efficiencies (the first order of A350 model- the most fuel-efficient airliner) X generally has around 20% higher seating capacity on the same airplane than most other carriers => allowed for X to charge up to 20% lower fees and earn the same revenue as its competitor Higher utilization of space by maximizing seating capacity: X used a 3-3-3 seating configuration throughout the airplane in one large single economy class , the most common figuration is 2-4-2 X reduced the width of the seats, provided more legroom instead which most refer by long flight customer survey Flat bed seat: a unique option on Xs flights was introduced on 2010, a limit number of premium fully flat position for sleeping, a first in the world of budget airline, the worlds most affordable flat bed seat. However, these additional offering had to be paid just like standard seat.

Aircraft utilization: X model focused on achieving scale instead of a differentiated mix between premium and economy. Each of Xs aircraft was in the air for 16 hours everyday vs the industry average of 11 hours per day => the airline had to deviate from fixed flight departure and arrival times => proved that if the price is low enough, the time is more popular to passenger Utilization model: more flight per day than competitors would fly => help decreasing the overall interest and financing period, debt was deferred or spread out over more flights, which significantly reduced the fixed operating costs of X

Customer focused paid a la carte inflight experience including premium seats, operational simplicity All food and beverages were to be booked separately from the ticket. A reduced price pre-booking option was implemented to encourage sales. nearly 50% of all food was purchased inflight despite the pre-booking option Offer individual inflight entertainment for a fee in all seat backs on all flights while most of budget airline was not offers X put special emphasis on training flight crews to be clients focused and skilled in selling service and products Xs cabin crews provided some of the swiftest and friendliest service in the industry Reduce purchasing complexity. In December 2010, X launched a limited flight transfer option. The selection of the routes was strategic -

No charging online: X never charged any online, telephone or personal booking fees, did not provide refund after tickets were purchased except under very exceptional circumstances.

Business model: A business modelconsists of four interlocking elements that, taken together, create and deliver value: Customer Value Proposition; Profit formula; Key resources, and key processes

1. Customer value proposition Customer value is what customers get (benefits, quality, worth, utility) from the purchase and use of a product versus what they pay (price, cost, sacrifices), resulting in an attitude towards, or an emotional bond with the product Applying ERRC Grid to CVP (lm trn slide ri paste vo sau)

Strategic canvas (example Yellow tail) (hi li An, Thy cch lm)

2. Profit formula The Profit Formula is the blueprint that defines how the company creates value for itself while providing value to the customer Applying ERRC to profit formula Eliminate Reduce Raise Create

3. Key resources Applying ERRC to key resources Eliminate Reduce Raise Create

4. Key process Applying ERRC to key process Eliminate Reduce Raise Create

Market segmentation

Customer: X targeted a much larger potential passenger pool that would not ordinarily consider flying to intercontinental destination, characterized by substantially lower but rapidly growing disposable income Target new traveler with less disposable income from the economic base, they may not
travel at all. Our mission is bring down the fares so low, more people than ever before can experience the freedom of long distance level

MKT tool: Xs published fares included the seat and all departure/landing taxes but explicitly excluded all frills => the inclusion of the taxes and fees in the advertised ticket price made the calculation of out of pocket cost very simple to understand. Demographic: age, sex, income, education, stage in the family life cycle, A B C group sector

Behavior: Attitudes, knowledge, benefits sought, willingness to innovate, loyalty, usage rate Needs measure of consumers value system Benefit segmentation

Usage:

Benefit:

Price Factors affect price setting

Cost based pricing: adding a standard mark-up to the cost of the product All optional items such as seat assignment, checked baggage, onboard food and beverages, inflight entertainment, flight transfer or changes, pillows and blankets etc. => all purchased separately based on a fixed price list. Reduced the hurdle for the lower income clientele to decide on a flight compared to the confusion and hassle traditional carriers create with their hidden fees and brokerage-like variation in real out of pocket costs.

X operation focused strongly on flight safety while Xs cost per seat mile was just over US$0.02 per mile in 2009, less than one quarter of the cost of the traditional low budget airlines. X operated as an ultra-lean company, staffs hired to achieved safety and effectively complete only the basic transportation tasks, furthermore, labor cost in Malaysia is low X shares resources with AirAsia, focused on avoiding duplicate processes . X did not invest in terminal or other non-airplane related infrastructure that would increase fixed asset overhead Charge 20% lower fee than other competitor: X generally has around 20% higher seating capacity on the same airplane than most other carriers => allowed for X to charge up to 20% lower fees and earn the same revenue as its competitor Food purchase, inflight entertainment offer extra fee, while most of budget airline dont offer Premium fully flat seat bed for long flight provide as optional standard seat, these seat often considerd in business class of other airline

Performance important matrix The same principle, but an alternative view based on allocated numbers to easily understand and express who are overall or specifically the most significant rivals

Experience performance factors Ticket Price Seat Booking service Inflight entertainment Safety On flight service Time arrive/departure

Importance (most =5, least=1) 5 4 3 3 5 4 5

Hong Kong Airline

Brand report card A brandis a unique place occupied in the customers mind by a product or service. Therefore, when a brand has built a strong connection with its customer base, it has created the ultimate source of differentiation and, therefore, competitive advantage. Brand management decision or 10 brand report card ( hi li An)

1. The brand excels at delivering the benefits customers truly desire 2. The brand stay relevant 3. The pricing strategy is not based on customers perception of value 4. The brand is properly positioned 5. The brand isnt consistent 6. The brand portfolio and hierarchy could make more sense

7. The brand makes use of and coordinates a full repertoire of marketing activities to build equity 8. The brands managers understand what the brand means to consumers 9. The brand is given proper support. And the support is sustained over the long run 10. The company monitors sources of brand equity.

Blue ocean strategy Blue Ocean Strategy is essentially about managing innovation: value innovation by finding uncontested markets or creating customer demand Because markets are new increased competition means a larger pool of profits. The long haul budget airline model developed by X was considered an innovation Assumed an airline could not sustain profitable operations by charging low fares for long haul flights. The basic operating cost per flight were deemed too high and average flight bookings were either too low or too seasonal to make money The cost leadership model based on scale might not work for long haul flight Flat bed seat: a unique option on Xs flights was introduced on 2010, a limit number of premium fully flat position for sleeping, a first in the world of budget airline, the worlds most affordable flat bed seat. However, these additional offering had to be paid just like standard seat.