External Analysis Of AirAsia
External Analysis of AirAsia
Perform an external analysis of AirAsia and identify possible opportunities and threats encountered by AirAsia.
Industry Analysis
An industry analysis was performed to assess the budget airline industry.
1. Bargaining Power of Supplier
Overall, power of supplier is high as there are limited (availability of) suppliers (only Boeing and Airbus), the switching cost is high (i.e. airplanes and their maintenance are costly), and there are few substitutes for airplanes (i.e. air travel covers longer distances in a shorter period of time).
2. Bargaining Power of Buyer
As there are almost no switching costs for customers switching from one budget airline to another, the bargaining power of buyer is moderately high. Moreover, customers are able to compare prices of budget airline via the Internet, giving them more choices.
3. Threat from Substitutes
Although there are several substitutes (i.e. trains and ships), the geographical structure of Asia has made air travel an efficient, viable, and convenient mode of transportation. Hence, threat from substitutes is moderately low.
4. Threat from New Entrants
Though the entry barriers are high (i.e. capital requirement and government restrictions such as air service agreements), threat from new entrants is moderately high. With increased deregulation by Asian governments, and growing demand for affordable low fares amongst budget-conscious travelers, competition increased (i.e. more full-service airlines launched their own budget airlines). For example, AirAsia’s success prompted several incumbents to start or being to consider starting their own budget airlines, which had the advantages of brand marketing and loyalty, and other benefits which overflowed from their parent companies.
5. Rivalry Intensity
Intensity of rivalry is moderately high due to the increased competition (with more competitors wanting a part of this growing lucrative market), and high exit cost. Exhibits 8 and 9 provide
Perform an external analysis of AirAsia and identify possible opportunities and threats encountered by AirAsia.
Industry Analysis
An industry analysis was performed to assess the budget airline industry.
1. Bargaining Power of Supplier
Overall, power of supplier is high as there are limited (availability of) suppliers (only Boeing and Airbus), the switching cost is high (i.e. airplanes and their maintenance are costly), and there are few substitutes for airplanes (i.e. air travel covers longer distances in a shorter period of time).
2. Bargaining Power of Buyer
As there are almost no switching costs for customers switching from one budget airline to another, the bargaining power of buyer is moderately high. Moreover, customers are able to compare prices of budget airline via the Internet, giving them more choices.
3. Threat from Substitutes
Although there are several substitutes (i.e. trains and ships), the geographical structure of Asia has made air travel an efficient, viable, and convenient mode of transportation. Hence, threat from substitutes is moderately low.
4. Threat from New Entrants
Though the entry barriers are high (i.e. capital requirement and government restrictions such as air service agreements), threat from new entrants is moderately high. With increased deregulation by Asian governments, and growing demand for affordable low fares amongst budget-conscious travelers, competition increased (i.e. more full-service airlines launched their own budget airlines). For example, AirAsia’s success prompted several incumbents to start or being to consider starting their own budget airlines, which had the advantages of brand marketing and loyalty, and other benefits which overflowed from their parent companies.
5. Rivalry Intensity
Intensity of rivalry is moderately high due to the increased competition (with more competitors wanting a part of this growing lucrative market), and high exit cost. Exhibits 8 and 9 provide
References: • Ireland, R D, Hoskission, R E & Hitt, MA 2009, The management of strategy concepts, 8th edn, South-Western Cengage Learning, USA • Singh, K, Pangarkar, N & Heracleous, L 2010, Business strategy in Asia a case book, 3rd edn, Cengage Learning Asia, Singapore