STRATEGY FORMULATION STAGE 1: The Input Stage EFE Matrix IFE Matrix STAGE 2: The Matching Stage IE Matrix STAGE 3: The Decision Stage QSPM
Vision is the agreement on the basic vision for whichthe firm strives to achieve in the long run is criticallyimportant to the firm’s success. –Fred David One definition of vision comes from Burt Nanus, a well-known expert on the subject.Nanus defines a vision as a realistic, credible, attractive, future for an organization
Mission statement componentsO CustomersO Products or servicesO MarketsO TechnologyO Concern for survival, growth, and profitabilityO PhilosophyO Self conceptO Concern for public imageO Concern for employees(Fred R. David)
INPUT STAGEExternal Factor Evaluation (EFE)matrix method is a strategic-management tool often used forassessment of current businessconditions. The EFE matrix is agood tool to visualize and prioritizethe opportunities and threats that abusiness is facing.
Internal Factor Evaluation (IFE) matrix is a strategic management tool for auditing or evaluating major strengths and weaknesses in functional areas of a business.•IFE Matrix summarizes and evaluates the major strengths andweaknesses in the functional areas of a business.•EFE matrix is a good tool to visualize and prioritize theopportunities and threats that a business is facing.•Ratings and Weighted Scores are two important variables in IFEand EFE matrices.
MATCHING STAGEThe Internal External Matrix or short IE matrixis based on an analysis of internal andexternal business factors which are combinedinto one suggestive model.Internal-External (IE) Matrix positions anorganizations various divisions in a nine celldisplay through plotting them in a schematicdiagram. The size of each circle representsthe percentage sales contribution of eachdivision, and pie slices reveal the percentageprofit contribution of each division in IE Matrix(David, 2007).
Alternative Strategy Forward Backward Horizontal Integration Integration Integration Market Market Product Penetration Development Development Related Unrelated Diversification Diversification DivestitureRetrenchment Liquidation
DECISION STAGEQuantitative Strategic Planning Matrix(QSPM) is a high-level strategicmanagement approach for evaluatingpossible strategies. Quantitative StrategicPlanning Matrix or a QSPM provides ananalytical method for comparing feasiblealternative actions. The QSPMmethod falls within so-called stage 3 ofthe strategy formulation analyticalframework.
Vision Statement To be the largest low cost airline in Asia and servingthe 3 billion people who arecurrently underserved with poorconnectivity and high fares.
Mission StatementO To be the best company to work for whereby employees are treated as part of a big familyO Create a globally recognized ASEAN brandO To attain the lowest cost so that everyone can fly with AirAsiaO Maintain the highest quality product, embracing technology to reduce cost and enhance service levels
Values We make the low fare model possible through the implementation of the following key strategies,O Safety First: Partnering with the world’s most renowned maintenance providers and complying with the with world airline operations.O High Aircraft Utilization: Implementing the regions fastest turnaround time at only 25 minutes, assuring lower costs and higher productivity.O Low Fare, No Frills: Providing guests with the choice of customizing services without compromising on quality and services.O Streamline Operations: Making sure that processes are as simple as possible.O Lean Distribution System: Offering a wide and innovative range of distribution channels to make booking and travelling easier.O Point to Point Network: Applying the point-to-point network keeps operations simple and costs low.
AirAsia Long-Term ObjectiveO From philosophy of AirAsia “Now Everyone Can Fly”, that is the long term objective of AirAsia, to make every people from every background can fly with AirAsia.O From their Vision statement “To be the largest low cost airline in Asia and serving the 3 billion people who are currently underserved with poor connectivity and high fares”. AirAsia try to cover the Asia region market first before they try to serve people all around the world.
Vision Statement Analysis SheetApproach In the statement AnalysisRealistic To be the largest low Of course it’s realistic vision to be cost airline in Asia the largest low cost airline in AsiaCredible Serving the 3 billion That statement very inspire people employee to achieve service with high level of excellenceAttractive Currently underserved Encourage employee to serve the with poor connectivity passengers that currently and high fares underservedFuture To be the largest low The future goal of AirAsia is to cost airline in Asia become low cost airlineLength One sentence , 24 words . Short and clearly enough to explain about AirAsia long term objectiveWhat do we AirAsia want to become the largest low cost airline in Asiawant tobecome?Decision The vision is sufficient for the company, realistic, credible, attractive and future view
Mission Statement Evaluation MixComponent Yes/N Statement oCustomers YES To attain the lowest cost so that everyone can fly with AirAsiaEmployees YES To be the best company to work for whereby employees are treated as part of a big familyPublic Image YES Create a globally recognized ASEAN brandSelf Concept NO NonePhilosophy NO NoneSurvival NO NoneGrowth/profitTechnology YES Embracing technology to reduce costMarket YES Everyone can fly with AirAsia globally recognized ASEAN brandProduct services YES Maintain the highest quality product, embracing technology to reduce cost andDecision Fulfill six from nine missionlevel enhance service statement criteria, that’s means mission statement of AirAsia is good to implement to the company.
AirAsia IFE MatrixKey Internal Factors IFE MATRIX Weight Ratin g Weighted- score StrengthsAirAsia Academy 0.2 4 0.8Flexible and High Committed workforce 0.05 3 0.15Good cabin service 0.03 3 0.09Use new aircraft 0.02 3 0.6Excellent utilization of IT 0.03 3 0.09Successfully “elevated” the brand to 0.05 3 0.15become a regional brandE-booking and M-booking, quick way to 0.02 3 0.06book ticketsAlmost every two week the new promo 0.015 4 0.6First mover of low cost airlines 0.1 3 0.3
Weaknesses AirAsia does not have its own 0.2 1 0.2 maintenance, repair, and overhaul (MRO) facility Lot of complaints from customers on 0.12 2 0.24 their service Limited human resources could not 0.05 2 0.1 handle irregular situation Total 1 3.38 Weight The weight assigned to a given factor indicates the relative importance of the factor. Zero means not important. One indicates very important. Rating Major weakness is represented by 1.0 Minor weakness is represented by 2.0 Minor strength represented by 3.0 Major Strength represented by 4.0Based on IFE matrix above score of AirAsia Internal condition is 3.38 that is indicate AirAsia has very strong internal position.
AirAsia EFE MatrixKey External Factors Weight Ratin Weighted- g score OpportunitiesBig market share in air transportation 0.3 3 0.9Interaction among the industries of 0.03 4 0.12tourism and transportationTax reductions in tickets fees 0.02 1 0.02Inconvenient topographic structure flight 0.02 1 0.05Differentiation low cost airlines service 0.1 4 0.4The population of Indonesian people 0.05 3 0.15Corporate facility services 0.03 1 0.03
Key Internal Factors Weight Rating Weighted- score Threats The number of new airlines/followers 0.1 2 0.2 The rise of fuel prices 0.03 1 0.03 Weather uncertainty 0.02 1 0.02 Declining public trust 0.05 4 0.20 Full service airlines start cut costs 0.25 1 0.25 Total 1 2.34 Weight From 0.0 to 1.0 to each internal and external factor in EFE and IFE Tables. Weights indicate the relative importance of that factor to being successful in the firms industry. Rating Rating of external factor from 1 to 4 IFE Tables to indicate how effectively the firms current strategies respond to the factor. 1 = the response is poor. 2 = the response is below average. 3 = above average. 4 = superior.Based on EFE Matrix above, AirAsia has total 2.34 weighted score whichindicates that AirAsia has slightly less than average ability to respond to external factors.
Alternative Strategy Selection Using IE Matrix This IE matrix tells us that AirAsia should hold and maintain its position. The company should pursue strategies focused onincreasing market penetration or product development strategy.
Alternative Strategy Based on IE MatrixCells I, II, and III suggest the grow and build strategy. This meansintensive and aggressive tactical strategies. Your strategies shouldfocus on market penetration, market development, and productdevelopment. From the operational perspective, a backwardintegration, forward integration, and horizontal integrationshould also be considered.Cells IV, V, and VI suggest the hold and maintain strategy. In thiscase, your tactical strategies should focus on market penetrationand product development.Cells VII, VIII, and IX are characterized with the harvest or exitstrategy. If costs for rejuvenating the business are low, then itshould be attempted to revitalize the business. In other cases,aggressive cost management is a way to play the end game.
Strategy Selection Using QSPMGiven by the Sum Total AttractivenessScore figure. The Market Penetrationstrategy yields higher score than theMarket Development strategy.The Market Penetration has a score of7.21 in the QSPM shown above whereasthe Market Development strategy has asmaller score of 5.69.
ConclusionO Vision of AirAsia The vision statement is sufficient for the company. Realistic, credible, attractive and future view is included in their statement.O Mission of AirAsia Fulfill six (customer, employee, public image, technology, market and product /services) from nine mission statement criteria, that’s means mission statement of AirAsia is good to implement to the company.O “Now Everyone Can Fly”, that is the long term objective of AirAsia, to make every people from every background can fly with AirAsia.
ConclusionO From IFE matrix we know actually the internal position of AirAsia has strong internal condition. But from EFE matrix AirAsia has slightly less than average ability to respond to external factors.O IE matrix tells us that AirAsia should hold and maintain its position. The company should pursue strategies focused on increasing market penetration or product development strategy.O Quantitative Strategic Planning Matrix (QSPM) we came to conclusion that acquiring a Market Penetration is a better strategy. This is given by the Sum Total Attractiveness Score figure.
SuggestionO Vision and Mission statement We suggest AirAsia Mission statement will be better when they put the philosophy of AirAsia (“Now Everyone Can Fly”) in that statement. For instance the one point added for mission statement may be “Serving every people even they low, middle or high economy level can fly with us”O Strategy Selection The strategy should adapt by AirAsia from our analysis is Market Penetration Strategy, when looking to adapt for increasing AirAsia sales, profits and of course market share this strategy is very appropriate to implement. Marketing efforts of the company to offer their existing products in the current markets is called market penetration strategy. The best way to do this to attract competitors customer and looking for potential customer for the existing products.
Suggestion How do AirAsia find new customers and emerge from the current industry condition? Kind of marketing effort for AirAsia to reach more Indonesian Market Share:O Provide membership card for special fares and miles bonus, this card can be get by customer when he/she make at least five flight (any destination) using AirAsia.O Clarify the AirAsia is not Malaysian Airline, AirAsia is Airlines for everyone, of course for Indonesian too.O Give value added to customer in the flight, for instance free Newspaper, free snack or headphone to listen music on a plane.O Embrace the positive campaign (campaign of cheap, on time and safe traveling/zero accident) of AirAsia to media.O Use low-cost and high credibility Online Social Media and Forums.O Special promo fares for two way flight at the same day, it will increase the number of business people passengers.O Assurance the on-time of every Flight, when flight has been delayed more than 15 minutes without clarity, AirAsia will be gives the coupon of discount (30%- 50%) for next flight to same customer on a same month of delayed flight.