Air Asia Essay

1.Threat of wise EntrantsThe finis of barriers to entry depends on the strength of-i)Customer has little brand loyalty. If consumers of piece of cakeasia do non have brand loyalty, then(prenominal) the strength of the threat of un utilize entrants is truly towering. The high numbers of competitors in the effort also decrease Airasias guest loyalty. Most of the travelers prefer low cost. New competitors which want to fuck off in the industry have to spend little to compete with Airasia.ii)High ceiling requirement. The industry of respiratory tract needs large volume of start-up capital. The cost of scope up of offices, buying or leasing line of merchandisecraft, hiring pilots and former(a) staffs like air stewardess and etc incur a high start-up cost. Thus, the threat is low for Airasia.iii)Different output offered. Airasia offers assorted product comp ard to other competitors in Asia like Bangkok Airways, tiger Airways, and Air Philippines. former(a) than the passen ger sales ticket, Airasia also include holiday packages which is inexpensive more or less Asia. Airasia has good connection with hotels and tourism companies around Asia, which it is hard for new competitors to compete.iv)Low switching costs. Customers do not need to spend more(prenominal) on switching to another airline. The footing would not be truly earthshaking in differences, which it depends on the availability of competitors serve and suitability of the race time that prompts them to switch.v)Moderate access code to distribution channel. Airasia is the first airline party to enable customer book and purchase air tickets online in Malaysia. This makes its website www.airasia.com in truth famous among frequent travelers. Although new competitors apprize create a website for their comp each, it is so sensationr difficult to compete with Airasias website. The website is known of its simpli urban center and user friendly. Thus, new competitors atomic number 18 difficu lt to make known their websites to travelers.vi)Strict government regulations. In obtaining pass and permit to operatean airline caller-up is quite restricted. This is because in Malaysia, the airline industry is very competitive already and that the government also wants to protect the interest of its national airline, MAS which is operating on loses a few days back.2.Rivalry among existing firmsThe strength of this factor depends oni)High numbers of rivals. There are approximately 59 low fares and no frills airlines compete with Airasia. Among of them are Tiger Airways, JAL Express, JetStar Airways, Air Arabia and etc. Some of the airline does not compete outright with Airasia, but it competes indirectly in routes that Airasia does not fly. Thus, the higher the number of competitors, the more fierce the competition.ii)High fit(p) cost. The airline industry incur high fixed cost which consists of finance cost, hire purchase, and staff costs. The airline companies have to dis charge more market share to cover the fixed costs. In doing that, unending bell reduction is done by them to compete with others. Thus, the rivalry is strong.iii)Customers substantially switch. The nature of airline industry is that customers priority is to tang at price and flight schedule that suits them the best when buying air tickets. The main purpose of using the airline services is to get to the refinement intended. Customers can switch to other airline easily which makes the industry so competitive.iv)High exit cost. It is hard for an airline company to exit the industry. It is because the cost is high in paying the loans, staff retrenchment and flight cancellation refunds. Even make losses, the companies have to get running to cope with fixed costs. This makes the industry very competitive.v)Products are similar. As mentioned earlier, the main purpose of using airline services is to reach the destination. Every airline provides similarservices to customers. Though Aira sia provides other added services like hotel booking, and tour packages, it is subject to the customers selection. An industry with similar products offered is highly competitive.3.Threat of Substitute producti)Easy to switch. There are or so 59 low cost airlines competing in the industry. The airlines serve over one hundred cities and islands across the sub-continental regions of South Asia, Southeast Asia and Northeast Asia. Although some of the reckon carriers lonesome(prenominal) fly domestic routes within the country of origin, while only a few operates international routes connecting nearby countries, customers go away always verbal expression for alternatives.ii)Performance of substitutes. Performance of other airlines are quite similar with Airasias abandoned there is no obvious product differentiation. Performance of airlines normally consists of the verity of take off time, aircraft work and staff services. So far, Airasia had constantly reviewed its performance an d improve its services.iii)Relative price. The price of substitutes are about the same with Airasias. Some of the airlines offers cheaper price to achieve profitable passenger loads. The price offered depends on the time counterpane between the booking date and flight date. The longer the date, the cheaper will be the price. If the tickets are purchased last minutes, the price will be about the same with allowance airlines like MAS and Singapore Airlines. Thus, in this situation customers would switch to the premium airlines.4.Bargaining causation of buyersi)No significant product differentiation. The only difference Airasias product with others airlines is the holiday packages offered. Most of the low cost airlines concentrate on providing flight services only to customers. There is some offers hotel booking at the city that the airline flies to. However, Airasia makes the difference by providing holiday packages like font 3 days and 2 nights to Bali at RM800 per pax includesf light ticket, appointment and travel guides. For customers who do not want to follow the travel agencies and enjoys freedom, they will look for Airasias packages, but the customers portion of this pillow slip is small. Thus the bargaining power of buyers is strong as the main function they look for is to fly to destinations.ii)Low switching costs. Cost of switching to other airlines is low, so bargaining power of buyers is strong. Airasia is not the only airlines operates in Asia. Other than that the price offered by other competitors are not much different. The customer choice is subject to their convenience and flight schedule that fit them best.iii)Portion of buyers consumption on airline is moderate. This factor depends on portions of income an individual earns. The higher the portion, the more the customer look for cheaper price and frankincense, the stronger the bargaining power of buyers. Eg when a student without earning any income, will look for the cheapest price availa ble as the portion of his expenditure will be very substantial.iv)Customers have access to market information. The IT beingness had emerged since 20th century. Many big and success companies in the world uses IT and e-commerce to operate. Without IT, the contrast had boundaries and international business will be prohibited. With worldwide web, information can be gathered on one click. Customers access to the current airline market information is easy and available all the time. The airline companies have less room for negotiation. Thus, customers had strong bargaining power.v)Buyers power concentration in many hands. Most of the airline company customers are individual travelers, only some travel in groups. So the air tickets are purchased individually. The airline companies are not relying on a few groups of customers only. Thus, the bargaining power of buyer is strong.5. Bargaining Power of providersi) Supplier concentration in a few hands. The supplier of airline companies is the sack supplier, foods supplier, merchandise supplier and aircraft supplier. There are few suppliers in the market, eg the aircraft supplier, the companies are either Airbus or Boeing. In this case the power of supplier is strong. Other supplier like foods supplier and fuel supplier, the term of the supply mustinessiness be based on the market condition. The supplier cannot increase in like manner much of its price or risk losing long term business with the aircraft companies.ii)High switching costs. Most of Airasias aircraft are Airbus models. Previously the company used Boeing models, which they lease it and the company had since phased out most of the models and replace with Airbus. If Airasia is to switch to Boeing again, then the cost will be high, because training cost for employees to suit the aircraft features must be provided. Other than that, the technology used by Airbus is the most advanced, thus Airasia must rely to the Airbus engineers to do maintenance of the ai rcrafts and seek advices. Thus, bargaining power of suppliers is strong.iii)Relative lack of importance of buyers to supplier. Airbus is a UK based aviation company. Its customers come from around the world. So far 9,113 aircraft had been ordered, out of which 5,408 aircraft had been delivered by the company. Airasia had ordered 200 aircraft from Airbus and so far only 54 aircraft had been delivered. The percentage of less than 1%, 0.99% proves that Airasia is not Airbuss important buyer. Thus, Airbus had strong power over Airasia.