1.
Page 1
Microeconomics & Strategy
Case study: AirAsia

2.
Page 2
Contents
Microeconomics
and Strategy
Market structure
and industry
analysis

3.
Page 3
Airasia: An overview
• Vision: To be the largest low cost airline in Asia
• Strategy:
– Safety First
– High Aircraft Utilization
– Low Fare, No Frills
– Streamline Operations
– Lean Distribution System
– Point to Point Network
• Business Model: Low-cost-carrier

4.
Page 4
PEST analysis: AirAsia
http://www.free-management-ebooks.com/dldebk-pdf/fme-pestle-analysis.pdf
Macro-environment

5.
Page 5
PEST analysis: AirAsia
http://www.free-management-ebooks.com/dldebk-pdf/fme-pestle-analysis.pdf
• Bilateral agreement
• Landing charges
• Threat of terrorism
• Competition
• Current recession
• Oil prices
• Customers’ reluctance to enter cheap airline with long flights
• Increasing world's population, tourists and number of educated people
- Online service that combines air ticketing with hotel bookings, car hire and travel
insurance/GO Holiday
- Upgrade the planes

6.
Page 6
Porter’s Five Forces: AirAsia
The market – competitors
The
organisation
Figure 2.1 Exploring Strategy, Scholes et al
Potential entrants
Threat of entry
Buyers
Bargaining power
Substitutes
Threat of substitutes
Suppliers
Bargaining power
micro-environment

7.
Page 7
Porter’s Five Forces: AirAsia
The market – competitors
The organisation
-Rivalry with
competition – high
Figure 2.1 Exploring Strategy, Scholes et al
Potential entrants:
High
Threat of entry
Buyers:
High
Bargaining power
- Offer cheaper flights with
better quality compared to
similar competitors
Substitutes:
moderate
Threat of substitutes
Suppliers
:
moderate
-All airlines seem to
have same two options
– Airbus or Boeing
-Airasia order Airbus
form of airplane so
benefits of airbus will
be influenced by
airaisa
-High capital to set up new airlines
-Brand awareness
(to create brand loyalty by
making huge investments
to establish their reputation)
-The government legislation
to get new routes
(Air Asia has always been
close to the governments in
South Asia)
-Government policy limited the
New entrants so AirAsia is settled
Bargaining power
-Depends on the
distance to travel and
the price
-Once customers fly
with airasia, they may
choose again even
with shorter distance
and a little bit higher
price

8.
Page 8
Porter’s Five Forces: AirAsia
and now
• Potential entrants
– Now less threat because more
tourists/educated people are willing to pay for
cheap flights with guarantee of safety/less
luxury
• Most busiest routs
– Airasia shouldn’t compete with national
routes but international routes
– Example: flights from Japan to the USA

9.
Page 9
References
• https://www.ukessays.com/essays/marketing/pest-and-swot-
analysis-of-airasias-international-business-operations-marketing-
essay.php
• http://www.slideshare.net/mariammana/task2-tc644mariam-
afsharp67787
• http://centreforaviation.com/analysis/airasia-x-long-haul-low-cost-
service-to-the-us-will-provide-an-important-test-for-the-asian-model-
218201