Market strategy and recommendations to enhance the USP

marketplace schema and recommendations to evoke the USP piece of cake Asia p modest partake outlay has been volatile, with the viable reasons for this excitableness. marting Discuss the Market Strategy and recommendations to deepen the USP by use Models and diagrams.Operation ManagementAnalysis of prioritise operations issues which atomic number 18 of strategic nature for the comp whatsoever and feasible solutions.Module Code MGTM IM 002Submitted to Programme validation Team (Kaplan Financial)Submitted by Group 11Group members Name bookman ID No.Chanakya C0346816Buddha C0364220Musharaf C0361333Saif C0360683Submission Date Friday 23rd April, 2010 elude of ContentsTable of Contents 21. Introduction 32. Company Background 33. Meaning of Sh are equipment casualty unpredictability 33.2. Possible reasons for this capriciousness 44.2. Mareketing Strategy of publicize Asia 84.3. Environmental Analysis of air travel Asia on the basis of Porters Five Forces (Chart-3) 95.1. p icnic Asia Business put to work 115.2. aerate Asia prioritises issues 125.3. Possible solutions 136. Conclusion 147. References 141. IntroductionThe company chosen for this calculate is breeze Asia charge by Kaplan Financial and assignment requirements as fol startA report of no more than 3500 wordsPossible reasons for the share volatilityMarket system to enhance USPOperational issues and possible solutions2. Company BackgroundAir Asia was initially established in 1996 as a full-ser ill-doing regional air hose offering slightly cheaper manages than its competitors. It was not performing well and its bowl overing backsheesh was 2001 when it was bought by Tony Fernandes.Tony Fernandes restructured the company and re-established in Malaysia by enrolling some let out court airline expert wish Connor McCarthy (formal work outor of made European LCC Ryan air) in late 2001 as first no -frills, first-class honours degree hail toter(LCC) in Asia, then it got huge success a nd be keep abreast awards winner and largest imprint fare airlines in the Asia. Now Air Asia flies to over 61 interior(prenominal) and international destinations with 108 routes with its own 72 aircrafts and operates over 400 flights daily.Air Asia believes in the no-frills(prenominal), hassle innocent(p), embarrassed fare line of credit concept and feels that keeping approach low requires high efficiency in every part of the stemma. by its unique interchange point (USP), NOW EVERYONE CAN FLY, Air Asia gained a revolution in airline headache with more and more race choosing as their preferred choice of transport.3. Meaning of Share expense excitabilityMany of us use the word volatility in a loose sense, in a focal point that belies the accuracy with, which it sens be calculated. In fact, volatility is a statistical measure of the scale of fluctuations in the value of a share, a commodity or a parenthood market index in the recent past. It is ecumenically taken to be a good measure for the relative riskiness of an asset the high the volatility, the greater the risk of losing m superstary. Volatility, however, is not a static thing. It fluctuates sometimes rather sharply over time. (Peter Temple 02.08.2007)3.1 Air Asia Share Price VolatilityAs per Air Asia out sustain study the share toll of Air Asia has been volatile.Exhibit 5 Case StudyAirlinePrice on3Dec 2007US$Price on11 Jan 2008US$Share PriceChangeAir Asia0.520.43-16%Period of Change in Share PriceIn a very short term of a item share price of Air Asia goes see by -16% in a period of 1 month and 1 week this is extreme diverseness in share price so this is the sign of high volatility in share price.Air Asia Volatility from 2005-2009 (Chart -1)3.2. Possible reasons for this volatility on that point are lots of reasons for share volatility here in our campaign study of Air Asia. We have calculated on the basis of individually stratum that volatility graph of Air Asia shown above.Lat est Information in roue Market Investing on share price inescapably lots of information about companys present situation. Investor eternally invests their m atomic number 53y if they axiom the potential of getting good return from that investment. So information plays full of life role to attract the investors. Market adjusts the prices up or down depending on the way the market interprets that the information will affect the companys early winnings ability.In Air Asia case study in November 2004 they listed in Malaysia Stock Exchange that air Asia is going to purchase 175-aircrft airbus A320-200 to replace Boeing 737-300s because A320-200 more give notice efficient.This information attracts the investors to invest their gold because market interprets that this will affect the companys in store(predicate) earnings ability.We bathroom see in chart-1 in 2005 how share price go up by +0.63% so it shows the latest information has direct impact on share price volatility.Un ver itablety Future is unceasingly uncertain some ratiocination is made on the basis of future predictions. Investors are always keen on the past experience, current surgical branch and future expectations of the company. Uncertainty is a major barrier for investor to subscribe to their head teacher to invest in share market.What exactly had happened in the Air Asia, in 2006 they choose to enter in to a domestic-route rationalising arrangement with MAS. Under this covenant Air Asia took over more than two-thirds of MASs deviation making routes presume they can ease up profit from it as they are the LCC but this decision turns wrong because of uncertainty which is clear in chrat-1 that companys share price goes down by -5.03% .Psychological Issues on Stock Prices Human behaviour is one of the important work out that affect the share price of the company how investor venture about the company will determine whether to invest in it or not.Entering the British tycoon, founder and chairman of the Virgin Group Sir Richard Branson with 20% stake in Air Asia X in 2007. Expansion of credit line with Sir Richard Branson attracts the large numbers of investors in the company because psychology of people believes the successful image of Richard Branson which as a result there is hike of share price by +6.62% in the year 2007.Inflation The overall general upward price movement of goods and religious service of processs in an economy, usually as measured by the Consumer Price Index and the Producer Price Index. everywhere time, as the cost of goods and services increment, the value of money is going to finalize because a person wont be able to purchase as much with that money as they previously could.Inflation is as well one of the factors that affects the share price and deuce-aces to share volatility. As from the case study fire cost had a significant impact on Air Asia, as it was the recession time occurs during the year 2008 were the international c rude oil price reached at the high of about US $150 per barrel. So it was very costly for the airlines to purchase displace at that high price which leads to increase the price of the fines. As it was the recession time clients alike could not afford the change magnitude price plane fare so they used the alternatives way. Where there is slight numbers of guests airline industries had lost Billions of dollars collectable to that occurrence. So fanfare affected the share prices a lot.Although Air Asia tried to cover its operational cost by hedging, buying give notice-efficient airbus A320-200 and carving fuel consumption by just about and doubled the number of landing that we get from the tyre. They were not able to sustain on the similar price of tickets.As per exhibit 6 case study.Following are the calculation kindle and oil ratio = fuel and oil cost R even soue(2008) Fuel and oil ratio= 74164.88146731.5(2008) Fuel and oil ratio= 50.5%(2007) Fuel and oil ratio= 44488 .62111346.3(2007) Fuel and oil ratio= 40.0%% = Current year ratio-base year ratio Base year ratio% = 50.5-40.0 40.0% = 26.25%So cost of the fuel increased by 26.25% due to hike in oil price in 2008 the cause of inflation has direct impact on companys realize profit ratio if net profit is going to decrease so investor dont want to invest their money in non profit company. See chart-1 due to inflation the share price decreased by-45.34% in 2008.Demand and Supply It is another important factor that affects the share price. Demand is willingness and ability to pay where as supply depends on the market contend and suppliers ability. When demand is high supply is less and vice versa and when demand is high price of the product is also high and is low.In case of AirAsia recession caused its demand per share down in 2008, entrance of British tycoon Richard Branson increased the demand of share because of investors psychological beliefs. Restructuring of the no-frills, low cost in Asia increased the numbers of customers travelling with Air Asia which gives the US$6 million of profit December 2002 which obviously rise of demand of share which leads to increased in share price.Economic Strength of Market and Peers Doing business in current market everyone should grapple the market strengthens and the competitors of the business without considering these things it is impossible to do business. The economic strength of the peers heavily affected the share price of the company.The strong competitor of the Air Asia is MAS, as it is national carrier of Malaysia. To promote healthy competition in 2006 Malaysian government brought MAS and AIRASIA in concert then government starts with route rationalisation of MAS where Air Asia took 96 loss making routes of MAS slice these routes were operated by MAS government used to domiciliate subsidies for the fuel cost. This is totally unfair competition which leads share price down of Air Asia in 2006 you can see in chart 1.In 20 08 MAS come up with the unaccepted everyday low fare Campion .It certain an over whelming response which was funded by the government it was totally win-win position for MAS and that caused proscribe impact on Air Asia in 2008 which is clear from chart-1.4. Definition of selling StrategyA marketing dodging is a process or model to allow a company or organization to centralise limited resources on the best opportunities to increase sales agreements and thereby gain a sustainable emulous advantage.4.1. Porter generic strategiesStrategy on the dimensions of strategic scope and strategic strength. Strategic scope refers to the market acumen while strategic strength refers to the firms sustainable competitive advantage. The generic strategy framework (porter 1984) comprises two alternatives each with two alternative scopes. These are specialty and low-cost leadership each with a dimension of Focus-broad or narrow. yield specialty (broad) constitute leadership (broad)Market se gmentation (narrow)(Chart-2)4.2. Mareketing Strategy of Air AsiaAfter the restructured of the airline, the foundation is based on Low constitute and muscular Cash Flow,strategy is based on Low fare and service so goal is obviousely on high margin and sustainable growth and romance is continue to be LOWEST cost. So you can see they are totaly foc victimisation on the Low cost Low Pricing so they getting strong cash flow sustainable growth.So they are following porters generic strategy. Their strategic scope is referring to market sixth sense and while strategic strength refers to the firms sustainable competitive advantage. (On the basis of chart-2)Product differentiation Air Asia was the first airline operator in Asia to adopt with the low-fare, no-frills concept. It also becomes the regions first airline to introduce fully ticketless travel and implements free seating indemnity. Thats Product differentiations makes It a successful airline in the market.Cost leadership Air As ia become the businesses that fully adopted cost leadership through operational effectiveness and efficiency. The cost advantages were enabled Air Asia to offered airfares 40% to 60% lower than those of its rivals. Some even cost less than bus fare. crimson in 2008 when oil prices gone up they controlled over the cost by layered-hedge strategy to pay for fuel in advance and qualify for low price its pilots have cut fuel consumption by close to 20%.Market Segmentation Air Asia changes the human psychology in Asia by offering low fare and targeting middle course society. in front people think that only rich people can take flight but then come with the No Frills, Low Cost toter under the tagline Now Everyone Can Fly. This whole idea captured the middle class and now no one is felling faired to fly.4.3. Environmental Analysis of Air Asia on the basis of Porters Five Forces (Chart-3)The threat of the entry of bracing competitors Air Asia is using penetration strategy under this t here is always threat of the modern entry exist because Air Asia is get success in the reach of LCCs so now everyone want to do same business with same strategy.The intensity of competitive rivalry Competition rivalry is currently in Air Asias favour. With price being the main battlefield of competition, Air Asia leads the way due to its low operating cost. However, there are more competitors accounting entry the market that have major carriers as backers or owners which may lead to an unrealistic price war in the future.The threat of substitute products or services Air Asia is domestic carrier so there is earth of substitute services are high customer can go for Bus services either for Railways or for their own transport facilities because of low distance if their services and prices are not effective.The bargain power of customer Today is world of Information Technology and communication everyone can take in the world easily so unprovoked availability of information and f ellowship can make the bargaining power of consumer strong. E.g. customer can easily switch to other airlines by comparing the fares of different airlines. Even there are now lots competitors in LCCs so customer can easily move.The bargaining power of suppliers For Air Asia bargaining of suppliers is major factor. In the airline industry basically there are only two major aircraft provider Boeing and Airbus. Although Air Asia is major customer of Airbus even than the bargaining power of suppliers is high due to expertise and few substitutes.4.4. Unique exchange Proposition of Air Asia Fernandes restructured Air Asia in 2001 , with the No Frills, Low Cost Carrier under the tagline Now Everyone Can Fly this unique selling point for Air Asia. This new business model was huge success. With this new unique selling point the company gained impressive profit. Then they come with palmy to Book, Easy to Pay Easy to Fly to encourage sale through online fight, telephone booking and through co-partner local banks and post offices.4.5. recommendation Some modification in current market strategy on the bases of Marketing Mix (7Ps) to enhance Unique Selling Point.Product (service) in that respect is a huge opportunity for Air Asia to expand its route and service and numbers of flights, they also lacking in good service in terms of flight delay. Because of it they get lots of complaints they should work on that to enhance good servicePrice They are working on penetration price strategy and under this they are providing the cheapest price in the market and that is a strengths but if you see the margins per seat is very low it makes turn over high but not the net profit so they should control the operating cost to cover up that margin. So they should go with penetration.Place Presently Air Asias putting more stress on Malaysia. Singapore, Thailand and Indonesia wherever Air Asia X only on Australia but low cost concept can also capture the market of India, China, Pakistan and Bangladesh and for abundant haul they can go for Europe and US.Promotions As LCCs they are however targeting the middle class so to keep up the sale and to enhance USP they should come up with the new promotions scheme after a certain period of time because middle class is major customer, they should know they like changes and savings in their purchasing.People From the starting they are only providing standard-class service on board its seems they are not targeting business class so if they come up with some of its more business concerned routs with business class they must get positive response.Process Refers to the systems used to financial aid the organisation in delivering the service. Process must be very simplified so that customer feels comfortable and convenient and preferred again and again. fleshly Evidence Where the service is provided. Physical Evidence is factor which makes customer to make judgement on the company or service. E.g. Customer accept what he/she spent so from the starting Air Asias tag line is No Frill airline but if you provide the frills even in the low cost it makes everyone happy. My meaning for frills is good service with the outstanding staff institution and an unexpected interior of the craft.5. Operation ManagementThe collection of people knowledge, technology, and systems within an organisation that has primary responsibility for producing and providing the organizations products or services is referred to as operations. operations direction is the preparedness, scheduling, control and co-ordination of the activities that transform inputs into finished goods and services. It is important because it can constrict costs, differentiate the organizations products and services and impact upon quality and therefore may increase revenue through increased customer satisfaction. (Phil Kelly 2009).This section is a process analysis to identify and prioritise current strategic operation issues and possible solution for A ir Asia.5.1. Air Asia Business ProcessAir Asias operations management is focusing carefully on managing the processes to produce and distribute its services.These processes embarrass-Procurement- buying various materials from suppliers and vendorsManagement control and coordinating functions to go out goals are being met.Product (service)- managing the service- creation, development, distribution and sales.Quality management important to effective operations management by continuous improvement.Inventory management-Method like JUST-IN-TIME inventory control saves costs and improves on quicker pitch to end customers.Logistics management focuses on the flow of services from Air Asia to its customer prioritizing on efficiency and cost effectiveness.Distribution channels.8) Booking by mobiles is also available.5.2. Air Asia prioritises issues1. Air Asia always pore on how to shave inefficiency and make it low possible fare in the airline business As we know they are operating pen etration on market strategy to reduced costs, they even reducing the salaries and incentives of the employees, cutting down the staffs and even cutting down this facilities given to staffs and implementing the new efficient system like YMS, CRS AND ERP, which were implemental to reduced the cost but not to that extent.2. Higher fuel cost around the world Frequent fluctuation in fuel cost is one of the major problem for Air Asia as its emphasis on low cost their profit margin per ticket is low as price of fuel goes up they have to charge tickets price which creates prejudicious effects in customers eyes.3. Complain Its because of delay in flight and even cancellation is one of the major current issues in Air Asia.4. No maintenance, bear upon and transcend As we know they dont have their own maintenance, haunt and overhaul so they have to spend on maintenance, repair and overhaul.5. Incresing competition At present competition in the airline industries growing day by day many ful l service airlines start cut costs to compete and new entry of LCC.6. Aviation regulation and government policy Changing rules and regulation in aviation industry and government policies is also one of the issues that Air Asia facing today.7. Easy to buy, soft pay and easy to fly In Malaysia Air Asia company was the first internet ticket seller airlines company. They are offering Easy to Book, Easy to Pay Easy to Fly system for their customers. So customers are easily paying and booking their ticket by online5.3. Possible solutions1. Cost control As we know cost is one of the main possible solutions that can save any organisation from loss and compete in the competitive market. Air Asia can save their cost by starting their own maintenance and repair wing and overhaul routes.2. Implementing the APS system Implementation of APS system will provide several new functions to Air Asia. The followings are several APS functions that can foster Air Asia in increasing its performanceAPS s ystem will friend Air Asia in assessing suppliers performance and providing the capability to streamline monitoring process. (Aberdeen Group, 2004).provider portal will provide information hub for airlines and their suppliers to prevent errors happened during operational activities much(prenominal) as order processing (Aberdeen Group, 2004)These functions enable airlines and aircraft manufacturers and other suppliers to have collaboration strategy in managing inventory (e.g. spare parts), maintenance schedule, and design collaboration. roadway profitability analysis tools enable airline companies to conduct analysis for planning efficient routes.3. Outsourcing Air Asia can use outsourcing strategy to be a lowest carrier in airline industry. If they can implement outsourcing strategy then they will get some benefits like,Cost benefitsIt will reduce risk.Outsourcing can give competitive advantage in Air Asia.Air Asia can reduce cost for IT.4. Expansion of Air Asia business As Air A sia is focusing on middle class people its working out towards Indian and China has potential to gather the huge success. We know the tribe of Asian middle class are rising very fast. So it is a great opportunity for LCC cost airlines including Air Asia to expand their business in Asia.6. ConclusionAs we know Air Asia is a confidential information low fare airline in Asia. Its low cost attracts more and more customers and its market value and has increased its revenue. But knowing it from closemouthed its share price is volatile so management should focused on sustainable development with utilising marketing mix as we discussed above and should focused on customers as customers are key point for the companys success. Only low cost will not sufficient to survive in the competitive market. Providing good services like as they are saying easy to book, easy to buy and easy to fly but it is not always the facts as they are getting complains of delaying flight and even cancellation wh ich makes bad paper in the eyes of customers. Thats why they need to operates APS systems to overcome such a problems.