Porter's five forces and value chain model AirAsia

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Porter's five forces and value chain model AirAsia

  1. 1.  Named after Michael E Porter  This model identifies and analyzes 5 competitive forces that shape every industry and help determines an industry’s weakness and strengths
  2. 2. 1. Rivalry among existing competitors 2. threats of substitutes 3. Power of buyer 4. Power of supplier 5. Threat of entrants
  3. 3.  is a Malaysian low-cost airline headquartered in Kuala Lumpur. It has been named as the world's best low-cost airline, and a pioneer of low-cost travel in Asia. AirAsia group operates scheduled domestic and international flights to 78 destinations spanning 25 countries.
  4. 4.  In these day and in every industry there is some negative and positive trends, airline industry has limited customer so growth rate is not too high, so AirAsia has to try to be winner between its competitors.  AirAsia offers flights with lower price that other companies, but there are some companies that also offer service by the same price such as Tiger Airways and Firefly and also these companies provide service with the same level of AirAsia so, in this case rivalry among existing competitor is quit high to AirAsia
  5. 5.  We can define substitutes as a product or service that can be replaced with original product and give more satisfaction to customers. In airline industry these substitutes exist, For example if someone wants to go to Singapore from Kuala Lumpur can choose bus or train. As we know the bus is the cheapest transportation so customer prefers bus. But if we assume that customer wants to go to Australia airline is a good choice and by access internet customers will compar prices and chooses the more reasonable for themselves in such a case threat of substitutes is moderate to AirAsia
  6. 6.  Success of industry can influenced by buyer so, those companies offer better service to their customers are winner of competition. AirAsia has lower price with better services than others so it can be a good choice for customer. Power of buyer is a quite high to AirAisa.
  7. 7.  Every industry has some suppliers these suppliers have their own effect on the industry for airlines. There are only tow options Boing and Airbus. All airline company have the same situation. Both of them provide almost same standards aircraft and hence switching to AirAsia is low. Moreover AirAsia place order form Airbus to expend its routs to international routes so power of supplier may be reduced as Airbus's profit may be influenced by AirAsia (Royl. Simerly). Generally power of supplier is a quit moderate to AirAsia
  8. 8.  Setting up airline industry needs a high capital so it has high barriers, for example purchase aircraft, set up services, hire staff and….  It is not quiet enough, most of time customer choose the product or industry which they are really trust. New entrants have to create brand loyalty by making huge investment to establish reputation.  government legislation is one of the barriers for entering to this industry because it is too difficult getting a new flight route from government. Profit of Asia Air is related to extend their network for example MAS has been protected by Malaysia government on the route to Sydney and Seoul Incheon hence situation for AirAsia getting difficult to find a new route and it influence Air Asia's profit.
  9. 9.  In another way AirAsia is closed to government in south Asia this helps Ari Asia to open up and capture a sizable market in south Asian countries.  Government policy has limited new entrant so AirAsia is already settled on the market.
  10. 10.  If companies are to deliver value to their customers they must understand where value is created and where value potentially lose. Value chain put forward by Michael E. Porter is help managers identify activities which especially import for competitiveness and for attainment of company overall strategy this activity categorize in tow main activities:  i. Primary activity  ii. Supportive activity
  11. 11. 1. Inbound logistic: Refers to goods being obtained from the organization's suppliers and to be used for producing the end product 2. Operation :Raw materials and goods are manufactured into the final product. Value is added to the product at this stage as it moves through the production line. 3. Outbound logistic: Once the products have been manufactured they are ready to be distributed to distribution centers, wholesalers, retailers or customers. Distribution of finished goods is known as outbound logistics. 4. Marketing and sale: Marketing must make sure that the product is targeted towards the correct customer group. The marketing mix is used to establish an effective strategy, any competitive advantage is clearly communicated to the target group through the promotional mix. 5. Service: After the product/service has been sold what support services does the organization offer customers?. This may come in the form of after sales training, guarantees and warranties.
  12. 12. 1. Procurement: This department must source raw materials for the business and obtain the best price for doing so. The challenge for procurement is to obtain the best possible quality available (on the market) for their budget. 2. Technology development: The use of technology to obtain a competitive advantage is very important in today’s technological driven environment. Technology can be used in many ways including production to reduce cost thus add value, research and development to develop new products and the internet so customers have 24/7 access to the firm. 3. Human resource management: The organization will have to recruit, train and develop the correct people for the organization to be successful. Staff will have to be motivated and paid the ‘market rate’ if they are to stay with the organization and add value. 4. Firm infrastructure: Every organizations needs to ensure that their finances, legal structure and management structure work efficiently and helps drive the organization forward. Inefficient infrastructure is waste resources, could affect the firm's reputation and even leave it open to fines and sanctions.
  13. 13.  Inbound logistic : In Airline industry it is really important to have enough and accurate information about other competitor such as their strategy, finding the shortest way, how the other company manage their industry with fuel efficiency, how they cut off their price.  Outbound logistic: Ticket booking in Air Asia is online. Customers can easily book themselves. They can easily print their boarding card.  Sales and marketing: nowadays advertisement is one of important issue in business hence AirAsia sponsors some sport team.
  14. 14.  Service: In every industry there are different options for customers, so each industry try to provide Special services , more facility to retain their customers. Air Asia also has some , for example customer can pre-booked checked baggage for lower rate or they can online book hotel or rent taxi and also AirAsia have voucher for flight delay.
  15. 15.  Firm infrastructure: Air Asia focuses on their goal, they provides the lowest price for customers. They expand service to different countries.  Human resource management: Hiring expert personnel is a important issue and it decreases cost for industry.so AirAsia hires multiple skill personnel. This policy will increase the quality and efficiency and decrease cost for company.
  16. 16.  Technology development: Air Asia to reduce cost uses different efficient technologies : 1. Air Asia uses yield management system (YMS) which takes into account the operating cost and expected revenues. 2. Computer reservation system (CRS) as web- base for reservation. 3. Enterprise resource planning system (ERP) to speed up reporting and data retrieval process
  17. 17. THANK YOU END

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