The document discusses a PEST analysis that was conducted on Air Asia, a leading low-cost carrier in Southeast Asia. It begins by explaining what a PEST analysis is and the four factors that are analyzed: political, economic, social, and technological. It then provides details of Air Asia's PEST analysis, examining how factors like government policies, GDP, lifestyle trends, and smartphone usage affect the company. The analysis concludes by noting some benefits of conducting a PEST analysis, such as identifying threats, opportunities, and implications of entering new markets.

1. TOPIC: PEST ANALYSIS ON
NAME: MOHAMED ABDI MOHAMED
ID: 09111500008
INTAKE: JANUARY
SUBJECT: STRATEGIC MANAGEMENT
LECTURER: MR JULIAN

2. INTRODUCTION
The PEST Analysis
Describes the framework of macro-environment factors used in the environmental scanning
components of strategic management. The PEST analysis is the most common approach for
considering the external business environment. PEST analysis stands for Political, Economic,
Social, and Technological analysis. PEST analysis provides a comprehensive list of
influences on the possible success or failure of a particular strategies.
The underlying thinking of the PEST analysis is that the enterprise has to react to changes in
its external environment. This reflects the idea that strategy requires a fit between capabilities
and the external environment and so it is necessary for an enterprise to react to changes.
Political changes might be expected to include, for instance, general changes in the domestic
political climate, government change, world power shifts, as well as specific legislation and
regulation.
Economic changes is likely to include the effects of economic cycles, patterns of world trade,
currency conversion rate changes, commodity prices, changes in capital markets, labour
markets and rates, and economic effects on suppliers and particular groups of customers.
Social change includes the effects of demographic patterns, tastes and habits, and concerns
about the environment and sustainable development.
Technological change covers the effects of technological change on products, processes, and
distribution channels.
PEST ANALYSIS ON AIR ASIA
AirAsia Berhad is a leading Low-Cost Carrier in the Association of Southeast Asian Nations
region (ASEAN).
Air Asia’s steps to conducting pest analysis:
1. Determine relevant factors within each subset to asses.
2. Evaluate how the factors affect the company domestic and regional operations.
3. Develop appropriate strategy and management approach.

3. POLITICAL FACTORS
Government policies
The airline industry operates in a highly regulated political environment, AirAsia as a private
company had to face a competition from government owned rival airlines which is MAS. For
that reason AirAsia signed partnership with Malaysian airlines.
Leadership
Malaysia is multi-party democracy country. The ruling Barisan Nasional party has been in
power over 25 years. This fact provided the country with a high degree of stability, which is
important factor for businesses investing in the country and as a member of ASEAN AirAsia
have access to bigger market.
ECONOMIC FACTORS
GDP
The Gross Domestic Product (GDP) in Malaysia was worth 338.10 billion US dollars in 2014.
This growth help companies like AirAsia to acquire new planes since aircraft leasing costs are
reduced 40% at these times.
INFLATION
Due to high inflation rate in Malaysia up to 2.7 % and the fall of the ringgit against US dollar,
led to net profit decline to 77%. The regions leading budget carrier saw average fare growth
turn negative. AirAsia was forced to cut slash prices compete with other carrier in the various
countries where it operates. Fares charged by Malaysian government were the lowest
international.
SOCIO-CULTURAL FACTORS
LIFESTYLE
The standards of living of people in Southeast Asia have the ability to pay for air travel and
have test for leisure and vacations. AirAsia offers low-cost flights with the world's most
technologically advanced, safest and most reliable passenger aircraft.

4. INCOME
Median monthly house hold for Malaysian in 2014 increased to RM4, 585 than RM3, 626 in
2012 which is growing at the rate of 11.7 per cent annually. With this high income rate the
financial freedom to travel by air. AirAsia over wide range of flight to Southeast Asia and
Australia.
TECHNOLOGICAL FACTORS
INTERNET
With close to 19 million users online, Malaysia has a social media penetration of 64%, which
is considered one of the highest in this region—second only to Singapore. AirAsia offer
lower prize for through their website for the customers comfort instead of going to an agent.
That will reduce what AirAsia spends on flight ticket agents and other channels efficiently.
SMARTPHONE APPS
With The number of Malaysians using smartphones rise to 87.9%. The increasing use of mobile
phones for a wide range of activities beyond voice calls. AirAsia introduced mobile apps for their
customers to book for their flights, the apps was downloaded more 10,000,000 times on android and
IOS devices.

5. Benefits of PEST analysis
 Provides a simple and easy-to-use framework for your analysis.
 Spot business opportunities with advance warning of potential threats.
 Adopt practices
 Question existing assumptions
 Involves cross-functional skills and expertise.
 Helps to reduce the impact and effects of potential threats to your organization.
 Aids and encourages the development of strategic thinking within your organization.
 Provides a mechanism that enables your organization to identify and exploit new
opportunities.
 Enables you to assess implications of entering new markets both nationally and globally.

6. References
Merit ResearchJournal of Art,Social Science andHumanitiesVol.1(2) pp.013-017, June,2013
YasminYashodha/ElixirMgmt.Arts 51 (2012) 11164-11171
Calvinloo,Vulcanpost.com,august,2015
Wataru Suzuki,nekkieAsianreview,14,may, 2015
Departmentof statistics Malaysia(DOSM), Reportof HouseholdIncome andBasicAmenitiesSurvey
2014
MalaysianCommunicationsandMultimedia Commission(DOSM),HANDPHONEUSERSSURVEY
2014