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CHAN CHEE MANG                         TP 021569                    BM026-3-3-INTSM




                            BM026-3-3 INTSM
                 INTERNATIONAL STRATEGIC
                              MANAGEMENT




                  Student Name                          Chan Chee Mang
                   Student ID                              TP021569
              Intake No and Course                      UC3F1201 IBM

        Assignment Title and Description                AirAsia in Vietnam
                                                     (Individual Assignment)

                   Module Code                         BM026-3-3 INTSM
                    Lecturer                            Halmi Bin Yusoff
                   Hand in Date                         19th October 2012
                   Word Count                                 2684




Asia Pacific University of Technology & Innovation                             Page | 1
CHAN CHEE MANG                            TP 021569                       BM026-3-3-INTSM



Executive Summary
AirAsia has been able to engage in foreign markets like Thailand and Indonesia by entry
mode of joint venture. As all eyes are on Vietnam now, it is also important for AirAsia to
take the opportunity to capture the vibrant and highly potential aviation market in the country.
With detail research on the PEST environment in Vietnam, AirAsia could understand the
Vietnam market better, exploiting the opportunities and overcoming the threats. Hence,
coming up with strategies according to AirAsia‟s strengths and weaknesses, and providing
Vietnam AirAsia‟s products that are suitable to the Vietnam market.

According to Daniel Chan (2000), since the 1970s, the competition for the Asian air travel
market has always been intense. This became more intense in the 1990s as traffic volumes
were squeezed. Based on that statement, the competition among airplane industry will
become more grow, traffic volume also would be increase, and also the Asian air travel
market has always been intense. When the competition in the airplane industry becoming
though, complex, and rapidly change, AirAsia company as a company that joined in the
airplane industry business need to thinking strategically and also must preparing a good
strategic management. The AirAsia strategic management needs to effectively and efficiently
prepare and implement in the AirAsia company management. Why AirAsia need to consider
strategic management? The first reason is because the airline industry is a unique and
complex industry. Based on the statement, the complexity and unique of the airline industry,
AirAsia need to come out with the greatest strategy to compete with their rival in the same
industry. Without the right strategic management, its possible AirAsia could not be able be
compete with the complex business environment in the airline industry.

Furthermore, the second reason why AirAsia need to consider a strategic management
because in a company nowadays, general management which is the process of achieving
organizational goals by engaging in the four major functions of planning, organizing, leading,
and controlling may not sufficient and supportive for the organization succeed in the world of
complex environments. It concerns about the process to manage the company internally but
do not concentrate more on creating competitiveness regarding environments affecting the
organization. Even companies adopt general management to sustain profitability by reducing
the defects or costs, and improving operations process in order to increase productivity, they
may not succeed in the competition because they perform only similar activities better than
competitors but do not create distinctive competitiveness.




Asia Pacific University of Technology & Innovation                                     Page | 2
CHAN CHEE MANG                            TP 021569                        BM026-3-3-INTSM



Additionally, they perform only operational effectiveness but not strategy. Operational
effectiveness and strategy are both essential to superior performance but they work in very
different ways. Strategy is about competitive position that the company performs different
activities from rivals or performing similar activities in different ways. To learn how the
companies create strategies and put them into action, the executives or strategists should
examine carefully an aspect of strategic management.

Moreover, the organization or company nowadays is faced with constantly changing external
environments and needs to ensure that its own internal resources and capabilities are more
than sufficient to meet the needs of the external environment. Organizations or companies do
not exist simply to survive in the market place but want to grow and prosper in a competitive
environment. In order to make sense of what is going on around them, firms must undertake
an analysis of their external and internal environment. To understand and how take an action
about external and internal environment, a company needs to support themselves with a good
strategic management.

Because of this reason, AirAsia need to consider a strategic management as the important
things in their company. The strategy that AirAsia need is not just how to reduce cost and
make the operational activities running effectively. But, AirAsia needs to come out with the
strategy that can make competitive position that the company performs different activities
from rivals or performing similar activities in different ways to achieve their business
successfully.

In addition, the third reason, why AirAsia company needs to consider and stress to a strategic
management? This is because, strategic management becomes important in AirAsia due to
the following reasons. The first reason why strategic management becomes important is
because the globalisation. The globalisation consideration impacts virtually all-strategic
decisions in a company. The globalisation also forced AirAsia Company to survival for
business. To see and appreciate the world from the perspective of others has become a matter
of survival business.

The underpinning of strategic management hinge upon managers gaining an understanding of
competitors, markets, prices, suppliers, distributors, governments, creditors, shareholders, and
customers worldwide. The price and quality of firm‟s products and services must be
competitive on a worldwide basis, not just a local basis. The globalization makes a rapid
change in the business environment. Every company has a same chance and opportunity for



Asia Pacific University of Technology & Innovation                                      Page | 3
CHAN CHEE MANG                             TP 021569                        BM026-3-3-INTSM



doing their business. For those company doesn‟t aware and take this as important
consideration, they will failed to compete with their rival or competitors in their business.

Moreover, the strategic management becoming important due to the following reason is
because the rapid development in E-Commerce. Nowadays, E-commerce is becoming a
business tool. E-commerce also has become a vital strategic management and allows a
company to sell products, advertise, purchase supplies, bypass intermediaries, track inventory,
eliminate paperwork, and share information. In total, electronic commerce is minimizing the
expense and cumbersomeness, improved products, and higher profitability.

Asia‟s leading low cost airline, AirAsia started its business journey as a LCC in Malaysia. In
2001, AirAsia began to develop from an airline with debts to now be among the most
profitable airline in Asia. Throughout these years, AirAsia has also developed and improved
by transforming itself to a travel dealer instead of just an average airline by introducing Do-
It-Yourself packages to its travelers. No doubt that AirAsia faced competition from foreign
players, but still, AirAsia was able to secure a significant market share in Malaysia. However,
in order to gain higher sales volume, AirAsia must begin to penetrate other new foreign
markets.

From the research being done, it is important for AirAsia to start by entry mode of joint
venture and introducing the “Go Holiday” package in order to test the market and analyze the
amount of competition that AirAsia will face during its entry into Vietnam market. Then,
with knowledge on the competitiveness of the Vietnam market and understanding of
Vietnam‟s travellers‟ needs and wants, AirAsia would be able to compete with the major
players in Vietnam more efficiently by providing relevant products which could improve its
competitiveness by concentrating on low cost and service quality, ultimately increasing the
profit of AirAsia.

In conclusion, Air Asia is need to aware and consider with the proper international strategic
management while expanding their business in Vietnam. The reason of the airline industry is
a unique and complex industry, not just how to reduce cost and make the operational
activities running effectively. But, AirAsia needs to come out with the strategy that can make
competitive position that the company performs different activities from rivals or performing
similar activities in different ways to achieve their business successfully, and the last one is
because the effect of globalization and E-commerce becoming an effective tool in a company
nowadays.



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CHAN CHEE MANG                                               TP 021569                                       BM026-3-3-INTSM



Table of Contents
Executive Summary ................................................................................................................... 2
1.0      Introduction to AirAsia ................................................................................................... 7
2.0      Analysis of External Environment ................................................................................ 11
   2.1       Vietnam Airline Market using PEST Analysis ......................................................... 11
      2.1.1        Political Situation ............................................................................................... 11
      2.1.2        Economic Condition .......................................................................................... 12
      2.1.3        Social-Cultural ................................................................................................... 13
      2.1.4        Technology and Infrastructure Factors .............................................................. 15
   2.2       Opportunities for AirAsia.......................................................................................... 17
      2.2.1 Opportunities of AirAsia in Vietnam Airline Market ............................................. 17
   2.3       Threats faced by AirAsia........................................................................................... 19
      2.3.1 Threats faced by AirAsia in Vietnam Airline Market ............................................. 19
3.0      Analysis of Internal Environment ................................................................................. 20
   3.1       Strengths of AirAsia .................................................................................................. 20
      3.1.1        Exploitation and Accesses to Latest Technology .............................................. 20
      3.1.2        Low-Costs Business Model ............................................................................... 20
      3.1.3        Single Aircraft Type which gives lower turnaround time ................................. 20
      3.1.4        Strong Management Team ................................................................................. 21
      3.1.5        Established Brand and Reputation ..................................................................... 21
   3.2       Weaknesses of AirAsia ............................................................................................. 23
      3.2.1        Over-Relying on Online Sales ........................................................................... 23
      3.2.2        Limited Customer Service ................................................................................. 23
      3.2.3        Too Dependent on Outsourcing ......................................................................... 23
4.0      Generating Strategies with TOWS Matrix for AirAsia ................................................ 24
5.0      Entry Strategies for AirAsia.......................................................................................... 27
6.0 Marketing Strategies for AirAsia ....................................................................................... 28
   6.1 Maximized IT and implementing E-commerce in AirAsia business ............................. 28
   6.2 Generate new Product Package Strategy ........................................................................ 28
6.0      Conclusion .................................................................................................................... 30
7.0      References ..................................................................................................................... 31
8.0      Appendices .................................................................................................................... 37
   8.1       Appendix 1 ................................................................................................................ 37
   8.2       Appendix 2 ................................................................................................................ 37


Asia Pacific University of Technology & Innovation                                                                              Page | 5
CHAN CHEE MANG                                            TP 021569                                      BM026-3-3-INTSM



  8.3     Appendix 3 ................................................................................................................ 38
  8.4     Appendix 4 ................................................................................................................ 38
    Vietnam Visitors - Vital Statistics .................................................................................... 38
  8.5     Appendix 5 ................................................................................................................ 39
  8.6     Appendix 6 ................................................................................................................ 39
  8.7     Appendix 7 ................................................................................................................ 40
  8.8     Appendix 8 ................................................................................................................ 40
  8.9     Appendix 9 ................................................................................................................ 41




Asia Pacific University of Technology & Innovation                                                                          Page | 6
CHAN CHEE MANG                            TP 021569                        BM026-3-3-INTSM



1.0    Introduction to AirAsia




AirAsia was established in the year 1993 and starting its operation in 1996, founded by DRB-
Hicom, a government-owned conglomerate (AirAsia, 1996). Time Warner bought over the
heavily indebted airline in 2001and latter re-executive by Tony Fernandes‟ corporation- Tune
Air Sdn Bhd with 1 Ringgit Malaysia which is USD 0.26 at that time. However, AirAsia still
owned a huge debt of RM 40 million which is around USD 11 million (AirAsia, 2001). Tony
Fernandes taken his role in turning the company and started to produce the flight service
profits in 2002 by launching new routes in Malaysian states from its hub in Kuala Lumpur
(the capital city of Malaysia). The market segment of Low-Cost Carrier (LCC) of AirAsia
operation had become impactful in the flight service industry with the promotional fares
undercutting the former monopoly operator which is Malaysian Airlines (AirAsia, 2002).

Later on, Tony Fernandes expanded the flight business internationally and became the first
and most successful Low-Fare airline with more than 75 destinations in Asia including
Thailand, Indonesia, Philippines, Japan, Australia, India and China (AirAsia, 2008).

The spans of route network is the result the leading airline continues to pave the way for low-
cost aviation through innovative solutions, efficient processes and passionate approach along
with tourism business line together with the associate companies-AirAsiaX (Focusing on the
low-cost, long-haul segment), Thai AirAsia, Indonesia AirAsia, Philippines‟ AirAsia Inc and
AirAsia Japan believing in “Now Everyone Can Fly” (AirAsia, 2010). As we can see, rhe
main competitive advantage of AirAsia is AirAsia.com, using the Internet Infrastructure
which is E-Commerce strategy (online transaction) effectively with no boundaries across the
nation and works internationally, striking with the globalisation trend.




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CHAN CHEE MANG                              TP 021569                      BM026-3-3-INTSM



The vision of AirAsia is 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, 2007).
Furthermore, AirAsia also has the missions of (1) To be the best company to work for
whereby employees are treated as part of a big family, (2) Create a globally recognized
ASEAN brand, (3)To attain the lowest cost so that everyone can fly with AirAsia, and
(4)Maintain the highest quality product, embracing technology to reduce cost and enhance
service levels (AirAsia, 2007).

The aviation industry in Vietnam currently is relatively small. However, as year passes, it is
growing rapidly due to the trend in globalisation. With this reason, AirAsia will stand out in
Vietnam because its low fare offers as there are not many competitors. Also, the government
of Vietnam is taking part in privatising large state organisations incorporating Vietnam‟s
main airline as one of the step for opening up to foreign direct investment (FDI).

AirAsia’s Values           Key Strategies
Safety First (Partnering   The single most important criterion in an area that AirAsia will
with the world‟s most      never compromise on. AirAsia had complied with the conditions
renowned maintenance       set by regulators in all the countries where the airline operates.
providers and              Others than that, AirAsia had also partners with the world‟s most
complying with the         renowned maintenance providers to ensure that theirs fleet is
with world airline         always in the best condition. The power of supplier is high due to
operations.)               the airplane manufacturers only Boeing and Airbus. In addition,
                           the switching cost for the Boeing and Airbus is pretty low because
                           it can sell same standards to another airline. However, to make up
                           an airplane needs high technique and specialist so it is rarely
                           possible for AirAsia to extend and integrate their operation into
                           supplier part.


High Aircraft              In relates with this term, AirAsia‟s high frequency flights have
Utilisation                made it more convenient for guests to travel. AirAsia as the fastest
(Implementing the          in the region, had implements as a quick turnaround of 25
regions fastest turn       minutes.T his has resulted for AirAsia in high aircraft utilisation,
around time at only 25     lower costs and greater airline and staff productivity, whilst enable
minutes, assuring lower    them to gain more profits through removed frills service and
costs and higher           removed chair booking and extensive crew drilling on performing



Asia Pacific University of Technology & Innovation                                      Page | 8
CHAN CHEE MANG                           TP 021569                         BM026-3-3-INTSM



productivity.)            quick turnaround. AirAsia had replaced their aging Boeing B737
                          aircraft with the Airbus A320 aircraft in Thailand and Indonesia.
                          This was led to an all Airbus fleet provides them with an
                          opportunity to stamp their dominance as the ASEAN airline
                          throughout the AirAsia Group by the end of 2010. In addition, with
                          also their unmatched network connectivity, frequency and full-
                          fledged Airbus operation along with their low cost operations and
                          low-fare model, so AirAsia will enjoy a substantial edge over
                          competitors around them.


Low Fare, No Frills       AirAsia targets guests who are prepared to do away with frills such
(Providing guests with    as meals, frequent flyer miles or airport lounges in exchange for
the choice of             fares lower than those currently offered without comprising on
customizing services      quality and service. For example, the guests of AirAsia have the
without compromising      choice of buying exclusively prepared meals, snacks and drinks
on quality and            from their in-flight service at an affordable price. AirAsia put
services.)                emphasis on lowering all avoidable costs to sustain low fares and
                          remain profitable, even on low yields. What AirAsia do is cut the
                          cost of operating the flights on their chosen routes by flying to and
                          from airports that offer cheaper take-off and landing fees. Besides,
                          AirAsia end free meals and drinks during flights as travellers do
                          not expect excellent service. Also, AirAsia does not allocate
                          specific seats to passengers and there is only one class.


Streamline Operations     One of the key for AirAsia‟s success was made by the process as
(Making sure that         simple as possible. AirAsia was worked towards a single aircraft
processes are as simple   fleet, this actually greatly reduced duplicating manpower
as possible.)             requirements as well as stocking of maintenance parts. The area is
                          vast, the cultures diverse, the economies vibrant and the travel
                          links – well, that‟s where AirAsia spotted the opportunity. Some
                          are innovative ideas inspired by the talented people of AirAsia and
                          some are simple but functional moves that came from other
                          sources.




Asia Pacific University of Technology & Innovation                                     Page | 9
CHAN CHEE MANG                            TP 021569                         BM026-3-3-INTSM



Lean Distribution         AirAsia offers a wide and innovative range of distribution channels
System (Offering a        to make booking and travelling easier for its guests. AirAsia‟s
wide and innovative       ticket-less service provides a low cost alternative to their overall
range of distribution     guest in issued printed tickets.
channels to make
booking and travelling
easier.)


Point-to-Point Network    The LCC model adopts the simple point-to-point network. In
(Applying the point-to-   AirAsia, their flights are short haul (four-hour flight radius or less),
point network keeps       whilst their sister airline AirAsia X focuses more on the medium to
operations simple and     long haul flights (more than four-hour flight radius). The
costs low.)               underlying business is to fly a person from point A to B.



(Sources from: AirAsia.com)




Asia Pacific University of Technology & Innovation                                      Page | 10
CHAN CHEE MANG                           TP 021569                       BM026-3-3-INTSM



2.0     Analysis of External Environment

2.1     Vietnam Airline Market using PEST Analysis
        The following is the PEST analysis including political situation, economic condition,
social-cultural situation and technology factors of airline environment in Vietnam. From the
information of PEST analysis on Vietnam, various opportunities can be examined for AirAsia
entering into Vietnam airline market. Nevertheless, there are also threats that AirAsia may
face if AirAsia decide to enter Vietnam airline market.

2.1.1   Political Situation
For years, Vietnam‟s government policies have been operating under a communist regime, in
actual fact, Vietnam truly welcomes foreign direct investment (FDI) and enhancing trade
relations (Thompson G., 2009). “Doi Moi” which means economic renovation is established
by Vietnam in the year 1986 aiming to open up the country to foreign investment. The
Communist Party of Vietnam remains committed to market-oriented reforms and they do not
expect major shifts in policy direction over the next five years. The one-party system
implemented in Vietnam is usually contributing to short-term political stability (Business
Monitor International, 2011). The ruling communist party‟s authority is often intimidated by
the corruption among government bureaucrats (Business Monitor International, 2011).

The Communist Party of Viet Nam has held power since unification. The decisions of its
leadership constitute national policy that the Executive (Central Committee) and the
Legislature (National Assembly) are required to follow. At provincial and city level, People's
Committees have considerable influence as their approval is a prerequisite for all
development projects and expenditure in their jurisdiction. The official Party policy is
"democratisation within a one party state". The powers of the Communist Party were
modified in the revised Constitution of 1992, which required Party organisations to act within
the law, and gave increased authority to the Prime Minister and the National Assembly. Day-
to-day policy advice comes from the Party Secretariat (made up of some 14 Politburo and
160 Central Committee members). The Central Committee considers key policy issues
several times per year, and five-yearly Party Congresses ratify major policy changes. The
10th Party Congress, held in April 2006, led to significant changes in the Party leadership,
although Nong Duc Manh retained the key position of General Secretary. The National
Assembly's June 2006 session subsequently confirmed a new Government leadership,
including new President, Prime Minister and key Cabinet ministers. The new Government



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CHAN CHEE MANG                              TP 021569                         BM026-3-3-INTSM



includes some relatively younger ministers and is considered a first step towards installing a
new generation of leaders. Vietnam's human rights record is gradually improving.
Government monitoring and control of all facets of the political, social, economic, and
religious lives of the people is reducing in some areas but is still intrusive and at times erratic.
Satellite television and the internet are now available, though internet use is monitored.
Religious and media freedoms are closely controlled, and political pluralism has yet to be
accepted.




2.1.2   Economic Condition
Vietnam is the world‟s 22nd fastest growing economy with GDP growth estimated to reach
6.3% in 2013 and 6.5% in 2014 (Thanh Nien News, 2012). Urbanization in Vietnam has been
accelerating recently, with a UN projection suggests that the urban population will exceed the
rural population by 2040 (The World Bank in Vietnam, 2011). Economic lift has brought
many people out of poverty in Vietnam, with poverty rate falling from 37.4% in 1998 to
14.5% in 2008 (The World Bank, 2012).

A renewed period of economic reform began in 1986 with the goals of improving living
standards and encouraging foreign investment through more open economic policies. The
initial steps of economic reform "doi moi" had been gradual. But during the 1990s, enhanced
institutional support and steadily improving infrastructure made Vietnam's growth rate one of
the highest in the region. This growth brought impressive gains in incomes and in the quality
of life of the Vietnamese people. The investment-led growth of the mid-1990s began to tail
off even before the Asian financial crisis dealt a further blow. Investor expectations were not
being met, and many projects suffered from excessive bureaucratic interference. However,
the cautious economic policies of the government enabled the economy to avoid the serious
balance of payments, fiscal, and banking crises common elsewhere in the region. Since 2000,
GDP growth rates have continued to track strongly, reaching 8.3% in 2007, but dropping
back to an estimated 6.2% in 2008. In recent times, the Government has had to focus its
policy efforts on avoiding a macroeconomic crisis; however, with inflation likely to have
peaked and the merchandise trade deficit having eased back, there are now concerns that
policymakers will become complacent, with the government potentially shifting its focus
back to boosting growth rather than stabilising the economy. The government has started to
heed the calls of donor governments and investors for greater transparency, reform of the
SOE, financial and trading sectors, and improved public sector governance. Implementation


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CHAN CHEE MANG                           TP 021569                        BM026-3-3-INTSM



has been slow, however, and Viet Nam retains a strong commitment to state enterprise and
outmoded financial and trade regimes. Reforms and restructuring have reduced the numbers
of state owned firms to around 6,000, but despite preferential access to credit through the
state banking sector, these enterprises are not growing strongly enough to absorb the growing
numbers of unemployed. Vietnam's growth over the medium term depends on whether it
becomes a truly multi-sector economy in which private businesses are able to grow and
compete in an undistorted environment with the same freedoms as state enterprises. In 2007,
FDI inflows exceeded government's expectations and credit growth rose by approximately 50
percent. However, forecasts for growth are being scaled down in light of rising inflation and
other signs the Vietnamese economy is overheating.




2.1.3   Social-Cultural
Annual population growth rate from year 1999-2009 is 1.2%, with total population as of year
2009 is 85.85 million (United Nations, 2012). Gap widens between rich and poor with growth
of income inequality since 2002 (KTSG, dtinews, 2012) and availability of large and trained
workforce at low cost. If we explore the Vietnamese culture through the lens of the Hofstede
5-D Model, we can get a good overview of the deep drivers of Vietnamese culture relative to
other world cultures (Geert Hofstede, 2012).

Power distance - This dimension deals with the fact that all individuals in societies are not
equal – it expresses the attitude of the culture towards these inequalities amongst us. Power
distance is defined as the extent to which the less powerful members of institutions and
organisations within a country expect and accept that power is distributed unequally. Vietnam
scores high on this dimension (score of 70) which means that people accept a hierarchical
order in which everybody has a place and which needs no further justification. Hierarchy in
an organisation is seen as reflecting inherent inequalities, centralization is popular,
subordinates expect to be told what to do and the ideal boss is a benevolent autocrat.
Challenges to the leadership are not well-received (Geert Hofstede, 2012).

Individualism - The fundamental issue addressed by this dimension is the degree of
interdependence a society maintains among its members. It has to do with whether people´s
self-image is defined in terms of “I” or “We”. In Individualist societies people are supposed
to look after themselves and their direct family only. In Collectivist society‟s people belong
to „in groups‟ that take care of them in exchange for loyalty. Vietnam, with a score of 20 is a



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CHAN CHEE MANG                            TP 021569                        BM026-3-3-INTSM



collectivistic society. This is manifest in a close long-term commitment to the “member”
group, be that a family, extended family or extended relationships. Loyalty in a collectivist
culture is paramount and overrides most other societal rules and regulations. Such a society
fosters strong relationships, where everyone takes responsibility for fellow members of their
group. In collectivistic societies, offence leads to shame and loss of face. Employer or
employee relationships are perceived in moral terms (like a family link), hiring and
promotion take account of the employee‟s in-group. Management is the management of
groups (Geert Hofstede, 2012).

Masculinity or Femininity - A high score (masculine) on this dimension indicates that the
society will be driven by competition, achievement and success, with success being defined
by the winner or best in field – a value system that starts in school and continues throughout
organisational behaviour. A low score (feminine) on the dimension means that the dominant
values in society are caring for others and quality of life. A feminine society is one where
quality of life is the sign of success and standing out from the crowd is not admirable. The
fundamental issue here is what motivates people, wanting to be the best (masculine) or liking
what you do (feminine). Vietnam scores 40 on this dimension and is thus considered a
feminine society. In feminine countries the focus is on “working in order to live”, managers
strive for consensus, people value equality, solidarity and quality in their working lives.
Conflicts are resolved by compromise and negotiation. Incentives such as free time and
flexibility are favoured. Focus is on well-being, status is not shown (Geert Hofstede, 2012).

Uncertainty avoidance (UAI) - The dimension Uncertainty Avoidance has to do with the
way that a society deals with the fact that the future can never be known: should we try to
control the future or just let it happen? This ambiguity brings with it anxiety and different
cultures have learnt to deal with this anxiety in different ways. The extent to which the
members of a culture feel threatened by ambiguous or unknown situations and have created
beliefs and institutions that try to avoid these is reflected in the UAI score. Vietnam scores 30
on this dimension and thus has a low preference for avoiding uncertainty. Low UAI societies
maintain a more relaxed attitude in which practice counts more than principles and deviance
from the norm is more easily tolerated. In societies exhibiting low UAI, people believe there
should be no more rules than are necessary and if they are ambiguous or do not work they
should be abandoned or changed. Schedules are flexible, hard work is undertaken when
necessary but not for its own sake, precision and punctuality do not come naturally,
innovation is not seen as threatening (Geert Hofstede, 2012).



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CHAN CHEE MANG                           TP 021569                        BM026-3-3-INTSM



Long term orientation - The long term orientation dimension is closely related to the
teachings of Confucius and can be interpreted as dealing with society‟s search for virtue, the
extent to which a society shows a pragmatic future-oriented perspective rather than a
conventional historical short-term point of view. Vietnam scores 80, making it a long term
orientation culture. Societies with a long-term orientation show an ability to adapt traditions
to a modern context that is pragmatism, a strong propensity to save and invest thriftiness,
perseverance in achieving results and an overriding concern for respecting the demands of
Virtue. The countries of South East Asia and the Far East are typically found at the long-term
end of this dimension (Geert Hofstede, 2012).




2.1.4   Technology and Infrastructure Factors
Vietnam is aiming to accomplish its development plan for the aviation sector by 2020
including further expansion for aircraft fleet, building and upgrading airports, and developing
better airport operations and air traffic management (Moye E., 2012). According to the
International Air Transport Association (IATA), by 2014, Vietnam will become the world‟s
third fastest-growing market for international passengers and freight, and the second-fastest
in the number of domestic passengers (Moye E., 2012). The World Economic Forum‟s 2010
Global Enabling Trade Report rated Vietnam 103 out of 125 countries for availability and
quality of transport infrastructure (Australian Government, 2012). The government has also
implemented a 3-year discount scheme in April 2010 to provide charges relief to airlines at
Vietnam‟s major airports (IATA, 2011). Now, Vietnam has a world class air navigation
service provider (IATA, 2011).

Vietnam Foreign Relations From the early 1990s Vietnam moved quickly to restore
relations with the international community. 1995 was a historic year for Vietnam, with its
entry into the Association of South East Asian Nations (ASEAN), increasing integration into
the global economy (especially a framework agreement with the European Union), and the
establishment of formal relations with United States. China will continue to be Vietnam's
single most important bilateral relationship. The two countries regularly exchange high-level
visits and are currently building a closer relationship. A treaty delineating the land border
between the two countries was concluded in December 1999, thus resolving a longstanding
bilateral dispute. Other tensions, for example over the contested territory of the Spratley
Islands in the South China Sea, have been prevented from spilling over into broader high-
level relations. Membership of ASEAN is central to Vietnam's economic development and


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CHAN CHEE MANG                          TP 021569                     BM026-3-3-INTSM



international economic integration strategies. Around 30% of Vietnam's trade is with ASEAN
countries. Under the ASEAN Free Trade Area (AFTA) and the ASEAN Investment Area this
co-operation is expected to continue to grow. Viet Nam is an increasingly active member of
ASEAN, having hosted both the Sixth ASEAN Summit in 1998, the ASEAN Regional
Forum (ARF) Post Ministerial Conference in 2001, and successfully hosted the fifth Asia
Europe Meeting (ASEM) in 2004. In 1998 Vietnam was admitted to full membership of
APEC, and hosted this Summit in November 2006. Vietnam has formally acceded to the
WTO (January 2007) and is currently undertaking the role of non-permanent member of the
United Nations Security Council for the 2008-2009 year.




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CHAN CHEE MANG                            TP 021569                       BM026-3-3-INTSM



2.2    Opportunities for AirAsia
There are 2 major events that are taking place now or going to take place in less than 6
months from now. First, is the ever increasing oil price? Second, is the “ASEAN Open Skies”
agreement that has been reached? The increasing oil price at the first glance may appear like
a threat for AirAsia. But being a low cost leader, AirAsia an upper hand because its cost will
be still the lowest among all the regional airlines. Thus, AirAsia has a great opportunity to
capture some of the existing customers of full service and other low cost airline‟s customers.
However, there will be also some reduction in overall travel especially by casual or budget
travellers. The “ASEAN Open Skies” allows unlimited flights among ASEAN‟s regional air
carriers beginning December 2008 (AirAsia, 2008). This will definitely increase the
competition among the regional airlines. However, with the “first mover” advantage as well
as its strengths in management, strategy formulation, strategy execution, strong brand and
“low-cost” culture among its workforce, this agreement can be seen as more of an
opportunity. There is also some opportunity to partner with other low cost airlines as Virgin
to tap into their existing strengths or competitive advantages such as brand name, landing
rights and landing slots (time to land). The population of Asian middle class will be reaching
almost 700 million by 2010. This creates a larger market and a huge opportunity for all low
cost airlines in this region including AirAsia (AirAsia, 2010).

2.2.1 Opportunities of AirAsia in Vietnam Airline Market
AirAsia has a vibrant and high potential in the Vietnam aviation market. First, it is because
the state constitution of the country itself has planned for expansions and developments of
airlines and airports over the next decade (Centre for Aviation, 2012). Also, Vietnam is also
moving closer to ASEAN open skies and preparation for necessary steps and following a
route to enter such a regional market has been estimated to be done by 2015 (Vietnam.net,
2011). Furthermore, Vietnam is aiming to accomplish its development plan for the aviation
sector by 2020 which includes further expansion for aircraft fleet, build and upgrade airports,
and develop better airport operations and air traffic management (Moye E., 2012).

By the year 2014, Vietnam is assuming to become the world‟s third fastest-growing market
for international passengers and freight, and the second-fastest in the number of domestic
passengers (Moye E., 2012). Vietnam has a world class air navigation service provider
(International Air Transport Association IATA, 2011). According to IATA, improving
efficiency will be critical in maintaining Vietnam‟s competitiveness (Hung Q., 2011).
Recently, Vietnam has been nominated as one of the fastest emerging economies today
having a huge potential for businesses as the growth in GDP (Thanh Nien News, 2012).


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Meaning that the country had led to the rapid growth of middle class Vietnamese which
creates a larger potential market giving the opportunity for AirAsia to become the low-cost
leader in Asia, and is driving demand for more low-cost flights. (See Appendix 1)

This shows that Vietnam has a strong domestic growth rate coupled with its geography; a
country stretching for thousands of kilometres on a north-south axis creates a need for long
distance freight haulage (Business Monitor International, 2011). Currently the country has
only one Vietnamese LCC which is Jetstar Pacific with account only 16% of total domestic
capacity. (See Appendix 2) The other major domestic markets in ASEAN are Indonesia,
Malaysia, Philippines and Thailand which are having LCC penetration rates above 50%
(Centre for Aviation, 2012). Vietnam goes second for capacity growth in the region, only
beaten by Indonesia. (See Appendix 3).

In addition, Vietnam‟s domestic market has been growing at double digit clip since 2007,
with full-service operator Vietnam Airlines the main beneficiary (Centre for Aviation, 2012).
With more low cost carriers (LCC) penetrating Vietnam market, there would be possibility of
faster growth which would be a large opportunity for LCC like AirAsia to increase sales
growth in the Vietnam market with low fares. Furthermore, AirAsia‟s proposal on joint
venture with Vietnam‟s local brand VietJet which is 100% privately owned, with 70% stake
held by local partners and 30% by AirAsia, is seen as a comparative advantage. More rapid
expansions can be made as there is no need for lengthy approval processes by the government
to emerge new routes or aircraft which the government-owned organisations are facing
(Centre for Aviation, 2012).

According to Vietnam Travel (2009), over the past 10 years Vietnam has seen an
extraordinary growth in tourist numbers of 286% rise since 1998 and in recent year‟s growth
has been as 20% compared to the previous year. Vietnam Travel stated that the air
transportation is the main mode of transport used by tourists travelling to Vietnam. (See
Appendix 4) Last but not least, the vital factor for airline costs is fuel. (See Appendix 5)
Prices for jet fuel are rising swiftly nowadays, prompting airlines to raise fares, tack on new
fees, and to consider offering fewer flights or flying smaller planes (Martin T.W., 2011). As
AirAsia‟s focus is on maintaining lowest operating costs, the organisation might not depend
much on its fares compared to other airlines.




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2.3    Threats faced by AirAsia
Certain rates like airport departure, security charges and landing charges are beyond the
control of airline operators and this is a threat to all airlines especially low cost airlines which
tries to keep their cost as low as possible. For example, Changi airport in Singapore charges
SGD21 for every person who departs from Singapore. AirAsia‟s profit margin is about 30%
and this has already attracted many competitors. Most of the full service airlines have or
planning to create a low cost subsidiary to compete directly with AirAsia. For example,
Singapore Airlines has created a low cost carrier Tiger Airways. Because of the low cost
business structure, users tend to have the perception that budget airlines may compromise
safety to keep costs low.

2.3.1 Threats faced by AirAsia in Vietnam Airline Market
Vietnam does not allow usage of foreign airline brands like other ASEAN countries to protect
the local airline industry, which is the main threat faced by AirAsia. This is also the main
factor of the low LCC penetration rates in the country because when AirAsia can have the
same look, strategy and model as its other affiliates; it would not be much challenge for
AirAsia as the organization has already built up trust and low cost mentality among travellers
all around Asia. Instead, AirAsia might not able to face the competition from the strong
competitors using a local brand, hence failing in Vietnam market.

Furthermore, the macroeconomic instabilities in the year 2010 and 2011 are likely to weigh
on public acceptance of the one-party political system, and operation riot like street
demonstrations to protest economic conditions could develop into a full-on challenge of
undemocratic rule in Vietnam (Business Monitor International, 2011). In few years to come,
Vietnam‟s political condition might not differ much due to the strong domestic control, but
the one-party system might be unsustainable over a longer period of time. The changes in
Vietnam‟s ruling party of their country‟s political situation would cause impactful effect on
the country‟s economy and perception of foreign investors towards the country‟s prospect.
Also, the unstable of the country‟s economy will lead to inflation where increase in prices for
goods and services, but local‟s income remain the same. Travellers including Vietnamese will
tend to decrease the intensity to travel which will have an impact on AirAsia‟s revenue.




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3.0     Analysis of Internal Environment

3.1     Strengths of AirAsia

3.1.1   Exploitation and Accesses to Latest Technology
The excellent utilization of IT have directly contributed to their promotional activities such as
email alerts and desktop widget which was jointly developed with Microsoft for new
promotions, brand building exercise with over 3 million hits per month and on the most
widely surfed booking engines in the world as well keep the cost low by enabling direct
purchase of tickets by consumer thus saving on airline agent fees. Also, flight tickets can be
reserve online via AirAsia‟s website (see Appendix 6) or through mobile booking via
mobile.airasia.com. Travellers could check their flight status and other promotion items
online. In addition, boarding passes are also available on mobile phones which make it more
convenient and save time for travellers to access it anytime with 24x7 bases. AirAsia is the
first airline in Southeast Asia to utilize e-ticketing and bypass conventional travel agents. The
organisation gets to save costs on agent‟s commissions hence reduce intermediary cost, and
issuing physical tickets to save printing cost.

3.1.2   Low-Costs Business Model
AirAsia has been nominated as Asia‟s low cost leader where the organisation has created a
low cost airline mindset among Asian. AirAsia is the low cost leader in Asia. With the help
of AirAsia Academy, AirAsia has successfully created a “low-cost airline mentality” among
their workforce. The workforce is very flexible and high committed and very critical in
making AirAsia the lowest cost airline in Asia. AirAsia is the first airline in Asia to
commence low cost carriers by offering only basic services to travellers. Low operating costs
such as wages, airport fees, and short ground waits are reduced because of the simple
boarding processes. Furthermore, by reducing insignificant operations such as frills and
seating arrangements, the organization is able to maximize sales and minimise operational
costs. With its low operating costs, the service and safety of travellers are still their main
priority (Dawna and Blaise, 2005).

3.1.3   Single Aircraft Type which gives lower turnaround time
        By having a single aircraft type, AirAsia‟s maintenance is made simplified and
cheaper. Due to the same reason, the organization could negotiate aircraft buying terms from
supplier better and get a more reasonable price. Staffs and training needed are lessened and so
does infrastructure, equipment and spare parts. In 2004, as a result of its point-to-point



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services which kept flights to no more than 4 hours, AirAsia managed to operate its aircraft
for an average of approximately 13 hours/day with 2.5 hours more efficient than full-services
airlines which managed to use their aircraft for an average 10.5 hours/day (Abigail Zhu,
2012). Therefore, it is a sustainable competitive advantage for AirAsia as this capability is
unique and hard to imitate (Haddad, 2003).

3.1.4   Strong Management Team
Air Asia has a very strong management team with strong links with governments and airline
industry leaders. This is partly contributed by the diverse background of the executive
management teams which consists of industry experts and ex-top government officials. For
example, Shin Corp (formerly owned by the family of former Thai Prime Minister - Thaksin
Shinawatra) holds a 50% stake in Thai AirAsia. This has helped AirAsia to open up and
capture a sizeable market in Thailand. With their strong working relationship with Airbus,
they managed to get big discount for aircraft purchase which is also more fuel efficient
compared to Boeing 737 planes which is being used by many other airlines

The management team is also very good in strategy formulation and execution. The strategy
that they have formulated at the beginnings was a clever blend of proven strategies by other
low cost airlines is US and Europe. They are Ryanair‟s operational strategy (no frills, landing
in secondary airport), Southwest‟s people strategy- employee comes first, AirAsia staffs may
get lower salaries compare to rivals but staffs are offered ample varieties of incentives
including performance-based bonuses, share offers and free-flights. Staffs are more motivated
and focused on their job as they sense that they are part of the organisation and Easyjet‟s
branding strategy (linking with other service providers like hotels, car rental).

3.1.5   Established Brand and Reputation
AirAsia‟s brand name is well established in Asia Pacific. Besides the normal print media
advertising & promotions, AirAsia‟s top management also capitalised on promotions through
news by being very “media friendly” and freely sharing the latest information on Air Asia as
well as the airline industry. Their partnership with other service providers such as hotels and
hostels, car rental firms, hospitals (medical tourism), Citibank (AirAsia Citibank card) has
created a very unique image among travellers. Alliance with Galileo GDS (Global
Distribution System) that enables travel agents from around the world to check flight details
and make bookings have also contributed to their string brand name. Air Asia‟s local
presence in few countries such as Indonesia (Indonesia AirAsia) and Thailand (Thai AirAsia)
have successfully “elevated” the brand to become a regional brand beyond just Malaysia. The


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links with Manchester United (one of the world‟s most famous football teams) and AT&T
Williams Formula One team have further boosted their image to a greater extend beyond just
the this region (Daniel Chan, 2000).

AirAsia‟s strong establishment in promoting its branding and marketing is partly because of
being Asia‟s first budgeted airline. Promotions capitalise by AirAsia is the regular print
media advertising and sharing updated news about the organization freely through the news.
The organization‟s partnership with hotels and car rental firms has also generated an
exclusive figure and value among travellers. In addition, Manchester United as one of the
world‟s most famous football team having AirAsia‟s major sponsorship including
international sponsorship and advertising uphold the brand even further beyond the region.
July indeed is a month of celebration for AirAsia, where the airline receives not one, but two
international accolades further confirming that AirAsia is the world‟s best in the global
airline industry, as reported in Aviation Week‟s Top-Performing Airlines 2012 (AirAsia,
2012). Besides winning the title of the World‟s Best Low Cost Airline for four consecutive
years, AirAsia was also named Best Low Cost Airline in Asia for four consecutive years as
well in the same award ceremony (AirAsia, 2012).




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3.2     Weaknesses of AirAsia

3.2.1   Over-Relying on Online Sales
AirAsia depends mainly on the process infrastructure of internet technology from booking to
purchasing and to payment methods and finally to ticketing, which the organisation may miss
out the potential prospects within countries with low internet penetration such as Cambodia,
Laos. Most of the time, if there is any flight delays; the organisation will be the one at fault
for not being robust enough to handle the bookings efficiently. Also, too dependent on
internet technology will take up a lot of cost in terms of constantly investing in technological
equipments to sustain its huge network.

3.2.2   Limited Customer Service
When the major aspect of LCC is to reduce cost, AirAsia will need to limit their spending on
resources especially in human resource and only take in employees who can be multitasked.
Because of this, employees wouldn‟t be able to live up to their full potential or focus on a
customer as they have to cater various responsibilities. Furthermore, there are also limitations
to AirAsia‟s services such as not having business class and no frill service when the
organisation couldn‟t provide extra services to meet customer desires and wants. This
resulted AirAsia receives lot complaints from customers on their service. Examples of
complaints are around flight delays, being charged extras and not able to change flight or get
a refund if customers could not make it. Good customer service and management is critical
especially when competition is getting intense.

3.2.3   Too Dependent on Outsourcing
Air Asia does not have its own maintenance, repair and overhaul (MRO) facility to lower
their operational cost. AirAsia depends heavily on outsourcing its various operations to others
It may be a good strategy when they first started with only Malaysia as the hub and few
planes to maintain. But now, with few hubs (Malaysia, Thailand and Indonesia) and over 100
planes currently owned and about another 100 planes to be received in the next few years,
AirAsia have to ensure proper and continuous maintenance of the planes which will also help
to keep the overall costs low. It is a competitive disadvantage not to have its own MRO
facility. This turns out to be powerful risk to AirAsia‟s responsibility for delays and affect
their daily operation if the contractors couldn‟t complete the services on time.




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       4.0      Generating Strategies with TOWS Matrix for AirAsia
                                                  Strengths                               Weaknesses
                                  Exploitation and Accesses to Latest             Over-Relying on Online
                                  Technology                                      Sales
                                  Low-Costs Business Model                        Limited Customer Service
                                  Single Aircraft Type which gives                Too Dependent on
                                  Lower Turnaround Time                           Outsourcing
                                  Strong Management Team
                                  Established Brand and Reputation
          Opportunities            Strengths – Opportunities Strategies         Weaknesses – Opportunities
                                                                                           Strategies
 Rise in the Middle Class      Promoting low costs and lower                   Improve quality and
   Population                     turnaround time to attract the growing          service level with
 Strong domestic growth          domestic market                                 development plan in
   rate                         Utilise strong branding and marketing            aviation sector
 Increase in fuel prices         to target the rise in the middle income        Limited service reduces
   eliminate unprofitable         class and growth in leisure travel in           costs by targeting
   competitors                    Vietnam                                         increment in fuel prices
 Growth in leisure travel      Making full use of exploitation towards          which leads to higher
 Development plan in             internet technology with development            fares
   aviation sector                plan in aviation sector                        Availability of huge
 Availability of large and  Exploitation of internet technology                 amount of skilled
   trained workforce at low       simplifies processes for tourists               workforce reduces much
   cost                                                                           training needed for
                                                                                  handling online sales
            Threats                        Strengths – Threats                    Weaknesses – Threats
                                                  Strategies                               Strategies
   Aviation Rules and           Utilise strong branding and marketing      o Modernize Navitaire with
   Government Policies            which targets the aviation rules and            tragedy recovery targeting
   Macroeconomic                  government policies in Vietnam                  heavy reliance on online
   Instabilities                Promoting low cost, lower turnaround             sales and macroeconomic
                                  time and strong branding in order to            instabilities
                                  cope with the macroeconomic
                                  instabilities



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AirAsia can take the opportunity on promoting its low-costs flight services and less
turnaround time with Vietnam‟s rapid growth in the aviation market as there are not many
low cost carriers rivals yet in Asian market. For its domestic flights - travelling from one
place to another for a short distance or period of time, travellers would often consider more
on costs and convenience. AirAsia‟s low cost concept with no frills where travellers flying at
a short distance normally only require several traditional passenger services and low
turnaround time where there are more flight options is a competitive advantage. Comparing
to road and sea transportation, flights saves more travelling time too (AirAsia, 2010).

In addition, AirAsia‟s low cost leadership strategy as sustainable competitive advantage
could capture the growing middle income class population which drives demand for low cost
flights and leisure travel in Vietnam as well through their strong branding and marketing. As
air transportation is the main transportation mode for leisure travel to Vietnam, AirAsia could
use its exploitation in internet technology to target the market as well. Travellers get to make
reservation for flights and hotels or even for car rentals to make travelling easier and hassle
free. It improves convenience and reduces costs and time. In the aviation sector, “Trust” is a
key factor made by AirAsia in making travellers dealing with the airline‟s website to feel
more secure as they would not have to worry about frauds by agents. Hotels and car rentals
reservation online makes things easier for first time travellers to Vietnam as well as they
might not be used to the environment yet.

Furthermore, with Vietnam‟s move towards ASEAN open skies and development plan for its
aviation sector, AirAsia will be able to fully exploit its usage on internet technology as well
as reducing costs in terms of its technological equipments. In addition, development plan in
aviation sector will also increase the quality and services of the airline to be more efficient
such as handling bookings and online sales (AirAsia, 2008).

Also, with the high availability of huge amount of skilled staffs in Vietnam would enable
AirAsia, meaning efficient and motivated workforce helps reduces training time and learning
curve in dealing with its technological equipments. Although there are limited services
provided by AirAsia due to promoting low cost, but the airline will gain advantage by
targeting the increment in fuel prices. Increase in fuel prices tends to eliminate unprofitable
competitors, and airlines often raise fares and flying with smaller planes as fuel is often the
major cost for airlines. But not AirAsia whom most concern is on sustaining lowest operating
costs.




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For instance, although Vietnam‟s aviation rules and government policies restrict using
foreign airline brands to protect local airlines, AirAsia could still penetrate the local market
with its brand by using an indirect approach by sharing the news of joint venture with a local
airline through print media advertising and news. It might be a challenge to penetrate the
market with a local brand, but with the travellers‟ awareness of the joint venture and the
airline‟s strong brand and trust built among travellers; it would not be seen as a setback.
AirAsia as Manchester United football team‟s major sponsor, the airline could spread the
news even further beyond the region through the international sponsorship and advertising.
AirAsia‟s nomination for four years running as Skytrax World‟s Best Low Cost Airline
would also make the airline the primary choice for air transportation.

Subsequently, if Vietnam were to experience macroeconomic instabilities in the future such
as inflation and corruption, it would be wise for AirAsia to promote its low costs philosophy,
low turnaround time and strong branding as people would go after low cost targeting limited
services with no additional charges but safe flights. Inflation reduces the country‟s
purchasing power meaning people tend to spend lesser and save more. AirAsia‟s low cost
philosophy will be suitable for the rising inflation and having low turnaround time as an
additional advantage to save time. AirAsia could prevail over the issue of corruption in the
country where there‟s reduction in air travel using its strong branding. AirAsia would be
travellers‟ prior choice of air transportation as the airline has built trust and confidence
among travellers for a safe flight.

When AirAsia is highly dependent on its online sales so the airline cannot afford to have the
website down because of maintenance or busy traffic. By setting up tragedy recovery using
Navitaire, a direct sales engine service provider, would improve the efficiency of the website
in finding solutions and fixing them. Although offering travellers free 15kg baggage
allowance for the ones travelling four hours and above would be opposing with the airline‟s
no frills policy, but long term wise would build customer loyalty and retention.




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5.0    Entry Strategies for AirAsia
Based on the analysis done, it is more viable for AirAsia to enter Vietnam market using joint
venture as entry mode in aviation sector because the country forbids 100% of foreign
ownership. Besides that, domestic flights in Vietnam are still guarded by the country‟s law
prohibiting foreign airlines from entering to protect the local airlines. In 2010, AirAsia
officially announced that the airline has successfully bought 30% shares of Vietjet Air.
Vietjet Air was given the authority to start its operation in 2007 but had been influence by the
world economic crisis in the next years to defer their plan numerous times.

Joint venture with a local brand in Vietnam would benefit AirAsia as Asia‟s low cost leader
and largest LCC to be able to expand its operations further in the country, obtaining stronger
position among competitors, increase intra-regional connectivity, and as another opportunity
in backing up the ASEAN region as tourism hub. Moreover, the joint venture will also
contribute to the diversification and needs of air travel in the country and region by offering
additional options. By using the competitive advantage of both airlines AirAsia and Vietjet
Air would also promote a more efficient operation and LCC marketing due to the ideal
combination in terms of organization administration, technological equipments, experiences
in airline industry, strong branding of AirAsia, and market within the reach of Vietjet Air.

In 2007, Vietjet was the first in Vietnam to be formed as a wholly private airline. Now Vietjet
Air with 70% stake held by local partners and 30% by AirAsia is an advantage as rapid
expansions could be made at a faster pace. Whereas government-owned airlines would have
to go through lengthy approval processes by the government in order to emerge new routes or
aircraft. There are various advantages by joint venturing with a local brand in Vietnam but
the major risks faced by AirAsia would be penetrating Vietnam market through a local brand
as the country‟s aviation rules and government policies does not allow foreign airlines to
penetrate domestic market. The second state-owned airline in Vietnam, Pacific Airline after
joint venture with Jetstar Airways holding 30% shares manage to transform into Jetstar
Pacific. AirAsia tried to follow the steps of Jetstar Airways by transforming Vietjet Air to
Vietjet AirAsia parallel with their subsidiary LCCs but the proposal was turn down by Civil
Aviation Autority of Vietnam (CAAV). Thus, AirAsia would not be able to effectively
exploit its brand name through a local brand.




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6.0 Marketing Strategies for AirAsia

6.1 Maximized IT and implementing E-commerce in AirAsia business
Nowadays, E-commerce is becoming a business tool. E-commerce also has become a vital
strategic management and allows a company to sell products, advertise, purchase supplies,
bypass intermediaries, track inventory, eliminate paperwork, and share information. In total,
electronic commerce is minimizing the expense and cumbersomeness, improved products,
and higher profitability. According to this statement, E-commerce can change the way of
doing business nowadays. E-commerce becomes a major success to Airplane Company to
make effectively and efficiency in their business especially for AirAsia expanding in ASEAN
countris like Vietnam.
AirAsia is one of the airplane companies, which is implementing E-commerce and
maximised their information technology usage to make the efficiency and effectively in their
company and make possible low cost carrier in their business. According to Pultorak (2004),
when the business strategy and IT are aligned, the IT infrastructure can continuously sense
the changing business needs and respond by provisioning or redeploying resources to match
the demands of the business.
Moreover, to maximize their IT, AirAsia implemented current IT such as yield management
system (YMS), computer reservation system (CRS), and enterprise resource planning (ERP)
system. Lets we discuss the current IT that AirAsia implemented one by one.
Yield management system as revenue management system it understands, anticipates, and
reacts to the behavior of customer to maximize revenues for the organization. In this system,
AirAsia used it to takes into account the operating costs and aids AirAsia to optimises price
and allocate capacity to maximize expected revenues.

6.2 Generate new Product Package Strategy
AirAsia would be targeting overall middle class population by positioning itself as a low cost
yet quality carrier. The airline itself is the ideal product to draw and convince customers of
their basic needs eyeing on product coverage. Hence, various explorations had been done to
discover the possibilities of expansion for product coverage to complement its air offering.

AirAsia could enhance on its Do-It-Yourself (DIY) package promotion by “Go Holiday”
theme for travellers, introducing travel package including of flight tickets, hotels, and holiday
portal at a valuable price as an online service. It offers travellers hassle-free, affordability and
flexibility as the growing middle class population in Vietnam‟s concern is mainly on
convenience and budgeted products. Vietnam‟s in-home internet has been increased by over



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1000% from 1999 to 2008 (See Appendix 7) and mobile phone ownership increased by 33%
in 2 years on 2008 (See Appendix 8) is a contribution to the package‟s heavy reliance on
internet technology (Matthaes R., 2008).

Travellers are also provided with numerous options from a luxurious five star package to a
budget holiday suiting individual needs. In addition, products ranging from airport transfers,
tours and activities such as spas and theme parks will be marketed online (AirAsia, 2007).
Travellers could conveniently reserve air tickets and hotels at one stop equip with multi
languages to choose from and benefit from having a more attractive rate. With this package,
the airline would be able to convert itself from an ordinary flight centric into a travel dealer
which is a better positioning for the airline competing with channels comprising both online
and offline.

According to the survey done by TNS in 2007, 88% Vietnamese said they are ready to pay a
higher price for healthier foods proving that they are becoming more health conscious. With
AirAsia‟s unique online health package, Go Medic would be able to cater to the growth in
health tourism (AirAsia, 2007). Currently, Go Medic has formed a partnership with three
diagnostic centres with potentially more hospitals and diagnostic centres to be added to the
service (AirAsia, 2007).




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6.0    Conclusion
The competition among airplane industries is very tough. Each of Airplanes Company in the
world trying to conduct some strategies to compete with another competitor in their industry.
To compete with their competitor in the Vietnamese business environment, a company needs
to make a strategy to achieve their long terms objective and can be successful for doing their
business. The strategic management becomes important due to the following reason such as
globalisation to survival their business, and than e-commerce become the critical success to
the company nowadays. a company needs to consider the company ability and how to
integrating it with the as well as main factor in the internal and external factor.

How AirAsia can be a leader in the lowest cost carrier in the airplane industry? To be a leader
in the low cost carrier, firstly, AirAsia need to consider about their strategic management.
The reason why need to consider strategic management because the first reason is because the
airline industry is a unique and complex industry. The second reason, the strategy that
AirAsia need is not just how to reduce cost and make the operational activities running
effectively. But, AirAsia needs to come out with the strategy that can make competitive
position that the company performs different activities from rivals or performing similar
activities in different ways to achieve their business successfully, the third reason because a
globalisation and implementing E-commerce.

The current issues in AirAsia Company are more focused in the competition of the cost
among an airplane industry. AirAsia as an industry company which is more focusing in the
low cost carrier airplane industry need to consider to make the lowest possible cost to
compete with the other competitors in their airplane industry in Vietnam market.

How AirAsia can solve the current issues to be a low cost carrier leader in airplane industry?
The first is to identify and analyse the different strategic analysis, and than to solve the
current issues with some strategies such as Joint Venture Entry Strategy, Product Package
Strategy, Maximized IT and implementing E-commerce in AirAsia business, Operation
effectiveness and outstanding efficiency, and the last one is implemented outsourcing in the
AirAsia business in Vietnam.




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7.0    References
   Abuza, Z. (2004) Vietnam Today [online]. Available from
   http://www.historyplace.com/pointsofview/vietnam.htm [Accessed 15 September 2012]

   AirAsia (2012) Corporate profile [online]. Available from
   http://www.airasia.com/cn/en/corporate/corporateprofile.page [Accessed 15 September
   2012]

   AirAsia (2012) In-flight services [online]. Available from
   http://www.airasia.com/my/en/flightinfo/inflightservices.page [Accessed 15 September
   2012]

   AirAsia Berhad (2007) Annual Report 2007 [online]. Available from
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   or%202011.pdf [Accessed 15 September 2012]

   Anna Aero (2010) China at the forefront of Asian air travel growth; Indonesia and
   Vietnam booming in 2010; Hong Kong, Japan and Thailand struggle [online]. Available




Asia Pacific University of Technology & Innovation                                   Page | 31
CHAN CHEE MANG                           TP 021569                        BM026-3-3-INTSM



   from http://www.anna.aero/2010/05/25/china-at-the-forefront-of-asian-air-travel-growth/
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Asia Pacific University of Technology & Innovation                                    Page | 32
CHAN CHEE MANG                           TP 021569                       BM026-3-3-INTSM



   CAPA (2011) Vietjet launch not affected by AirAsia pullout [online]. Available from
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   pullout-60658 [Accessed 15 September 2012]

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   launches and Jetstar expands [online]. Available from
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   as-vietjet-airasia-launches-and-jetstar-expands-58535 [Accessed 15 September 2012]

   CAPA (2012) Nok prepares to launch international operation in 2013 as Thai Airways
   drops plans for ultra LCC [online]. Available from
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   John Wiley & Sons (Asia) Pte Ltd

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   [Accessed 15 September 2012]




Asia Pacific University of Technology & Innovation                                   Page | 33
CHAN CHEE MANG                           TP 021569                       BM026-3-3-INTSM



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Asia Pacific University of Technology & Innovation                                  Page | 34
CHAN CHEE MANG                           TP 021569                       BM026-3-3-INTSM



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Asia Pacific University of Technology & Innovation                                  Page | 35
CHAN CHEE MANG                          TP 021569                       BM026-3-3-INTSM



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   2012]


Asia Pacific University of Technology & Innovation                                  Page | 36
CHAN CHEE MANG                           TP 021569                        BM026-3-3-INTSM



8.0    Appendices (Please refeer to the attached CD)

8.1    Appendix 1




Source: Private Equity Indonesia, 2011

Available at: http://privateequityindonesia.wordpress.com/investors/




8.2    Appendix 2
Vietnam domestic capacity by airline type (based on seats per week): 10-Oct-2011 to 16-
Oct-2011




Source: CAPA – Centre for Aviation and Innovata, 2011

Available at: http://centreforaviation.com/blogs/aviation-blog/vietjet-launch-not-affected-by-
airasia-pullout-60658


Asia Pacific University of Technology & Innovation                                   Page | 37
CHAN CHEE MANG                           TP 021569                       BM026-3-3-INTSM



8.3    Appendix 3




Source: Airline Network News and Analysis, 2010

Available at: http://www.anna.aero/2010/05/25/china-at-the-forefront-of-asian-air-travel-
growth/




8.4    Appendix 4

Vietnam Visitors - Vital Statistics
(Source: General Statistics Office of Vietnam, Jan 2008 - Oct 2008)

By what means do tourists arrive in Vietnam?




By air 2,791,556
By sea 127,481
By road 678,804
Source: Vietnam Travel, 2009
Available at: http://www.vietnamtravel.org/vietnam-tourism-statistics



Asia Pacific University of Technology & Innovation                                  Page | 38
CHAN CHEE MANG                         TP 021569       BM026-3-3-INTSM



8.5    Appendix 5




8.6    Appendix 6




Source: Airasia, 2012

Available at: http://www.airasia.com/my/en/home.page




Asia Pacific University of Technology & Innovation             Page | 39
CHAN CHEE MANG                         TP 021569     BM026-3-3-INTSM



8.7    Appendix 7




8.8    Appendix 8




Asia Pacific University of Technology & Innovation           Page | 40
CHAN CHEE MANG                                                           TP 021569                                             BM026-3-3-INTSM



8.9                 Appendix 9
AirAsia Group Destinations

IATA          Airline



AK      AirAsia



D7      AirAsia X



FD      Thai AirAsia



QZ      Indonesia AirAsia



PQ      AirAsia Philippines



JW      AirAsia Japan




           City               Country                IATA   ICAO                         Airport                AK   D7   FD    QZ   PQ   JW   Refs




                                                                                                                                                [1]
Abu Dhabi                     United Arab Emirates    AUH   OMAA    Abu Dhabi International Airport




Alor Setar                    Malaysia                AOR   WMKA    Sultan Abdul Halim Airport




                                                                                                                                                [2]
Balikpapan                    Indonesia               BPN    WALL   Sepinggan International Airport




Banda Aceh                    Indonesia               BTJ    WITT   Sultan Iskandar Muda Airport




Bandar Seri Begawan           Brunei                  BWN   WBSB    Brunei International Airport




Bandung                       Indonesia               BDO    WICC   Husein Sastranegara International Airport




Bangalore                     India                   BLR    VOBL   Bengaluru International Airport




                                                                                                                                                [3]
Bangkok                       Thailand                BKK    VTBS   Suvarnabhumi Airport




                                                                                                                                                [3]
Bangkok                       Thailand                DMK    VTBD   Don Mueang International Airport




                                                                                                                                                [4]
Batam                         Indonesia               BTH    WIDD   Hang Nadim Airport




                                                                                                                                                [5]
Beijing                       China                   PEK    ZBAA   Beijing Capital International Airport




Asia Pacific University of Technology & Innovation                                                                                         Page | 41
CHAN CHEE MANG                                                TP 021569                                                  BM026-3-3-INTSM




           City             Country       IATA   ICAO                        Airport                      AK   D7   FD    QZ   PQ   JW   Refs




Bintulu                     Malaysia       BTU   WBGB    Bintulu Airport




Busan                                                                                                                                    [6]
                            South Korea    PUS    RKPK   Gimhae International Airport
[begins 28 November 2012]




Chengdu                     China          CTU    ZUUU   Chengdu Shuangliu International Airport




Chennai                     India          MAA   VOMM    Chennai International Airport




Chiang Mai                  Thailand       CNX    VTCC   Chiang Mai International Airport




Chiang Rai                  Thailand       CEI    VTCT   Mae Fah Luang-Chiang Rai International Airport




Chongqing                   China          CKG    ZUCK   Chongqing Jiangbei International Airport




                                                                                                                                          [7][8]
Christchurch                New Zealand    CHC    NZCH   Christchurch International Airport




Clark                       Philippines    CRK    RPLC   Clark International Airport




Colombo                     Sri Lanka      CMB    VCBI   Bandaranaike International Airport




Da Nang                     Vietnam        DAD    VVDN   Da Nang International Airport




                                                                                                                                               [4]
Darwin                      Australia      DRW    YPDN   Darwin International Airport




Davao                       Philippines    DVO   RPMD    Francisco Bangoy International Airport




                                                                                                                                          [9][10]
Delhi                       India          DEL    VIDP   Indira Gandhi International Airport




Denpasar                    Indonesia      DPS   WADD    Ngurah Rai International Airport




                                                                                                                                           [11]
Dhaka                       Bangladesh     DAC    VCBI   Shahjalal International Airport




Asia Pacific University of Technology & Innovation                                                                                   Page | 42
CHAN CHEE MANG                                        TP 021569                                           BM026-3-3-INTSM




          City      Country       IATA   ICAO                         Airport              AK   D7   FD    QZ   PQ   JW   Refs




                                                                                                                           [12]
Fukuoka             Japan          FUK    RJFF   Fukuoka Airport




Gold Coast          Australia      OOL   YBCG    Gold Coast Airport




Guangzhou           China          CAN   ZGGG    Guangzhou Baiyun International Airport




Guilin              China          KWL    ZGKL   Guilin Liangjiang International Airport




                                                                                                                           [13]
Haikou              China          HAK    ZJHK   Haikou Meilan International Airport




Hangzhou            China          HGH    ZSHC   Hangzhou Xiaoshan International Airport




Hanoi               Vietnam        HAN    VVNB   Noi Bai International Airport




Hat Yai             Thailand       HDY    VTSS   Hat Yai International Airport




Ho Chi Minh City    Vietnam        SGN    VVTS   Tan Son Nhat International Airport




Hong Kong           Hong Kong      HKG   VHHH    Hong Kong International Airport




                                                                                                                           [14]
Hyderabad           India          HYD   VOHS    Rajiv Gandhi International Airport




                                                                                                                           [15]
Ipoh                Malaysia       IPH    WMKI   Sultan Azlan Shah Airport




Jakarta             Indonesia      CGK    WIII   Soekarno–Hatta International Airport




Johor Bahru         Malaysia       JHB   WMKJ    Senai International Airport




Kalibo              Philippines    KLO    RPVK   Kalibo International Airport




                                   KTM    VNKT   Tribhuvan International Airport
Kathmandu          Nepal




Asia Pacific University of Technology & Innovation                                                                    Page | 43
INTSM AirAsia in Vietnam
INTSM AirAsia in Vietnam
INTSM AirAsia in Vietnam

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INTSM AirAsia in Vietnam

  • 1. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM BM026-3-3 INTSM INTERNATIONAL STRATEGIC MANAGEMENT Student Name Chan Chee Mang Student ID TP021569 Intake No and Course UC3F1201 IBM Assignment Title and Description AirAsia in Vietnam (Individual Assignment) Module Code BM026-3-3 INTSM Lecturer Halmi Bin Yusoff Hand in Date 19th October 2012 Word Count 2684 Asia Pacific University of Technology & Innovation Page | 1
  • 2. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM Executive Summary AirAsia has been able to engage in foreign markets like Thailand and Indonesia by entry mode of joint venture. As all eyes are on Vietnam now, it is also important for AirAsia to take the opportunity to capture the vibrant and highly potential aviation market in the country. With detail research on the PEST environment in Vietnam, AirAsia could understand the Vietnam market better, exploiting the opportunities and overcoming the threats. Hence, coming up with strategies according to AirAsia‟s strengths and weaknesses, and providing Vietnam AirAsia‟s products that are suitable to the Vietnam market. According to Daniel Chan (2000), since the 1970s, the competition for the Asian air travel market has always been intense. This became more intense in the 1990s as traffic volumes were squeezed. Based on that statement, the competition among airplane industry will become more grow, traffic volume also would be increase, and also the Asian air travel market has always been intense. When the competition in the airplane industry becoming though, complex, and rapidly change, AirAsia company as a company that joined in the airplane industry business need to thinking strategically and also must preparing a good strategic management. The AirAsia strategic management needs to effectively and efficiently prepare and implement in the AirAsia company management. Why AirAsia need to consider strategic management? The first reason is because the airline industry is a unique and complex industry. Based on the statement, the complexity and unique of the airline industry, AirAsia need to come out with the greatest strategy to compete with their rival in the same industry. Without the right strategic management, its possible AirAsia could not be able be compete with the complex business environment in the airline industry. Furthermore, the second reason why AirAsia need to consider a strategic management because in a company nowadays, general management which is the process of achieving organizational goals by engaging in the four major functions of planning, organizing, leading, and controlling may not sufficient and supportive for the organization succeed in the world of complex environments. It concerns about the process to manage the company internally but do not concentrate more on creating competitiveness regarding environments affecting the organization. Even companies adopt general management to sustain profitability by reducing the defects or costs, and improving operations process in order to increase productivity, they may not succeed in the competition because they perform only similar activities better than competitors but do not create distinctive competitiveness. Asia Pacific University of Technology & Innovation Page | 2
  • 3. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM Additionally, they perform only operational effectiveness but not strategy. Operational effectiveness and strategy are both essential to superior performance but they work in very different ways. Strategy is about competitive position that the company performs different activities from rivals or performing similar activities in different ways. To learn how the companies create strategies and put them into action, the executives or strategists should examine carefully an aspect of strategic management. Moreover, the organization or company nowadays is faced with constantly changing external environments and needs to ensure that its own internal resources and capabilities are more than sufficient to meet the needs of the external environment. Organizations or companies do not exist simply to survive in the market place but want to grow and prosper in a competitive environment. In order to make sense of what is going on around them, firms must undertake an analysis of their external and internal environment. To understand and how take an action about external and internal environment, a company needs to support themselves with a good strategic management. Because of this reason, AirAsia need to consider a strategic management as the important things in their company. The strategy that AirAsia need is not just how to reduce cost and make the operational activities running effectively. But, AirAsia needs to come out with the strategy that can make competitive position that the company performs different activities from rivals or performing similar activities in different ways to achieve their business successfully. In addition, the third reason, why AirAsia company needs to consider and stress to a strategic management? This is because, strategic management becomes important in AirAsia due to the following reasons. The first reason why strategic management becomes important is because the globalisation. The globalisation consideration impacts virtually all-strategic decisions in a company. The globalisation also forced AirAsia Company to survival for business. To see and appreciate the world from the perspective of others has become a matter of survival business. The underpinning of strategic management hinge upon managers gaining an understanding of competitors, markets, prices, suppliers, distributors, governments, creditors, shareholders, and customers worldwide. The price and quality of firm‟s products and services must be competitive on a worldwide basis, not just a local basis. The globalization makes a rapid change in the business environment. Every company has a same chance and opportunity for Asia Pacific University of Technology & Innovation Page | 3
  • 4. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM doing their business. For those company doesn‟t aware and take this as important consideration, they will failed to compete with their rival or competitors in their business. Moreover, the strategic management becoming important due to the following reason is because the rapid development in E-Commerce. Nowadays, E-commerce is becoming a business tool. E-commerce also has become a vital strategic management and allows a company to sell products, advertise, purchase supplies, bypass intermediaries, track inventory, eliminate paperwork, and share information. In total, electronic commerce is minimizing the expense and cumbersomeness, improved products, and higher profitability. Asia‟s leading low cost airline, AirAsia started its business journey as a LCC in Malaysia. In 2001, AirAsia began to develop from an airline with debts to now be among the most profitable airline in Asia. Throughout these years, AirAsia has also developed and improved by transforming itself to a travel dealer instead of just an average airline by introducing Do- It-Yourself packages to its travelers. No doubt that AirAsia faced competition from foreign players, but still, AirAsia was able to secure a significant market share in Malaysia. However, in order to gain higher sales volume, AirAsia must begin to penetrate other new foreign markets. From the research being done, it is important for AirAsia to start by entry mode of joint venture and introducing the “Go Holiday” package in order to test the market and analyze the amount of competition that AirAsia will face during its entry into Vietnam market. Then, with knowledge on the competitiveness of the Vietnam market and understanding of Vietnam‟s travellers‟ needs and wants, AirAsia would be able to compete with the major players in Vietnam more efficiently by providing relevant products which could improve its competitiveness by concentrating on low cost and service quality, ultimately increasing the profit of AirAsia. In conclusion, Air Asia is need to aware and consider with the proper international strategic management while expanding their business in Vietnam. The reason of the airline industry is a unique and complex industry, not just how to reduce cost and make the operational activities running effectively. But, AirAsia needs to come out with the strategy that can make competitive position that the company performs different activities from rivals or performing similar activities in different ways to achieve their business successfully, and the last one is because the effect of globalization and E-commerce becoming an effective tool in a company nowadays. Asia Pacific University of Technology & Innovation Page | 4
  • 5. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM Table of Contents Executive Summary ................................................................................................................... 2 1.0 Introduction to AirAsia ................................................................................................... 7 2.0 Analysis of External Environment ................................................................................ 11 2.1 Vietnam Airline Market using PEST Analysis ......................................................... 11 2.1.1 Political Situation ............................................................................................... 11 2.1.2 Economic Condition .......................................................................................... 12 2.1.3 Social-Cultural ................................................................................................... 13 2.1.4 Technology and Infrastructure Factors .............................................................. 15 2.2 Opportunities for AirAsia.......................................................................................... 17 2.2.1 Opportunities of AirAsia in Vietnam Airline Market ............................................. 17 2.3 Threats faced by AirAsia........................................................................................... 19 2.3.1 Threats faced by AirAsia in Vietnam Airline Market ............................................. 19 3.0 Analysis of Internal Environment ................................................................................. 20 3.1 Strengths of AirAsia .................................................................................................. 20 3.1.1 Exploitation and Accesses to Latest Technology .............................................. 20 3.1.2 Low-Costs Business Model ............................................................................... 20 3.1.3 Single Aircraft Type which gives lower turnaround time ................................. 20 3.1.4 Strong Management Team ................................................................................. 21 3.1.5 Established Brand and Reputation ..................................................................... 21 3.2 Weaknesses of AirAsia ............................................................................................. 23 3.2.1 Over-Relying on Online Sales ........................................................................... 23 3.2.2 Limited Customer Service ................................................................................. 23 3.2.3 Too Dependent on Outsourcing ......................................................................... 23 4.0 Generating Strategies with TOWS Matrix for AirAsia ................................................ 24 5.0 Entry Strategies for AirAsia.......................................................................................... 27 6.0 Marketing Strategies for AirAsia ....................................................................................... 28 6.1 Maximized IT and implementing E-commerce in AirAsia business ............................. 28 6.2 Generate new Product Package Strategy ........................................................................ 28 6.0 Conclusion .................................................................................................................... 30 7.0 References ..................................................................................................................... 31 8.0 Appendices .................................................................................................................... 37 8.1 Appendix 1 ................................................................................................................ 37 8.2 Appendix 2 ................................................................................................................ 37 Asia Pacific University of Technology & Innovation Page | 5
  • 6. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM 8.3 Appendix 3 ................................................................................................................ 38 8.4 Appendix 4 ................................................................................................................ 38 Vietnam Visitors - Vital Statistics .................................................................................... 38 8.5 Appendix 5 ................................................................................................................ 39 8.6 Appendix 6 ................................................................................................................ 39 8.7 Appendix 7 ................................................................................................................ 40 8.8 Appendix 8 ................................................................................................................ 40 8.9 Appendix 9 ................................................................................................................ 41 Asia Pacific University of Technology & Innovation Page | 6
  • 7. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM 1.0 Introduction to AirAsia AirAsia was established in the year 1993 and starting its operation in 1996, founded by DRB- Hicom, a government-owned conglomerate (AirAsia, 1996). Time Warner bought over the heavily indebted airline in 2001and latter re-executive by Tony Fernandes‟ corporation- Tune Air Sdn Bhd with 1 Ringgit Malaysia which is USD 0.26 at that time. However, AirAsia still owned a huge debt of RM 40 million which is around USD 11 million (AirAsia, 2001). Tony Fernandes taken his role in turning the company and started to produce the flight service profits in 2002 by launching new routes in Malaysian states from its hub in Kuala Lumpur (the capital city of Malaysia). The market segment of Low-Cost Carrier (LCC) of AirAsia operation had become impactful in the flight service industry with the promotional fares undercutting the former monopoly operator which is Malaysian Airlines (AirAsia, 2002). Later on, Tony Fernandes expanded the flight business internationally and became the first and most successful Low-Fare airline with more than 75 destinations in Asia including Thailand, Indonesia, Philippines, Japan, Australia, India and China (AirAsia, 2008). The spans of route network is the result the leading airline continues to pave the way for low- cost aviation through innovative solutions, efficient processes and passionate approach along with tourism business line together with the associate companies-AirAsiaX (Focusing on the low-cost, long-haul segment), Thai AirAsia, Indonesia AirAsia, Philippines‟ AirAsia Inc and AirAsia Japan believing in “Now Everyone Can Fly” (AirAsia, 2010). As we can see, rhe main competitive advantage of AirAsia is AirAsia.com, using the Internet Infrastructure which is E-Commerce strategy (online transaction) effectively with no boundaries across the nation and works internationally, striking with the globalisation trend. Asia Pacific University of Technology & Innovation Page | 7
  • 8. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM The vision of AirAsia is 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, 2007). Furthermore, AirAsia also has the missions of (1) To be the best company to work for whereby employees are treated as part of a big family, (2) Create a globally recognized ASEAN brand, (3)To attain the lowest cost so that everyone can fly with AirAsia, and (4)Maintain the highest quality product, embracing technology to reduce cost and enhance service levels (AirAsia, 2007). The aviation industry in Vietnam currently is relatively small. However, as year passes, it is growing rapidly due to the trend in globalisation. With this reason, AirAsia will stand out in Vietnam because its low fare offers as there are not many competitors. Also, the government of Vietnam is taking part in privatising large state organisations incorporating Vietnam‟s main airline as one of the step for opening up to foreign direct investment (FDI). AirAsia’s Values Key Strategies Safety First (Partnering The single most important criterion in an area that AirAsia will with the world‟s most never compromise on. AirAsia had complied with the conditions renowned maintenance set by regulators in all the countries where the airline operates. providers and Others than that, AirAsia had also partners with the world‟s most complying with the renowned maintenance providers to ensure that theirs fleet is with world airline always in the best condition. The power of supplier is high due to operations.) the airplane manufacturers only Boeing and Airbus. In addition, the switching cost for the Boeing and Airbus is pretty low because it can sell same standards to another airline. However, to make up an airplane needs high technique and specialist so it is rarely possible for AirAsia to extend and integrate their operation into supplier part. High Aircraft In relates with this term, AirAsia‟s high frequency flights have Utilisation made it more convenient for guests to travel. AirAsia as the fastest (Implementing the in the region, had implements as a quick turnaround of 25 regions fastest turn minutes.T his has resulted for AirAsia in high aircraft utilisation, around time at only 25 lower costs and greater airline and staff productivity, whilst enable minutes, assuring lower them to gain more profits through removed frills service and costs and higher removed chair booking and extensive crew drilling on performing Asia Pacific University of Technology & Innovation Page | 8
  • 9. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM productivity.) quick turnaround. AirAsia had replaced their aging Boeing B737 aircraft with the Airbus A320 aircraft in Thailand and Indonesia. This was led to an all Airbus fleet provides them with an opportunity to stamp their dominance as the ASEAN airline throughout the AirAsia Group by the end of 2010. In addition, with also their unmatched network connectivity, frequency and full- fledged Airbus operation along with their low cost operations and low-fare model, so AirAsia will enjoy a substantial edge over competitors around them. Low Fare, No Frills AirAsia targets guests who are prepared to do away with frills such (Providing guests with as meals, frequent flyer miles or airport lounges in exchange for the choice of fares lower than those currently offered without comprising on customizing services quality and service. For example, the guests of AirAsia have the without compromising choice of buying exclusively prepared meals, snacks and drinks on quality and from their in-flight service at an affordable price. AirAsia put services.) emphasis on lowering all avoidable costs to sustain low fares and remain profitable, even on low yields. What AirAsia do is cut the cost of operating the flights on their chosen routes by flying to and from airports that offer cheaper take-off and landing fees. Besides, AirAsia end free meals and drinks during flights as travellers do not expect excellent service. Also, AirAsia does not allocate specific seats to passengers and there is only one class. Streamline Operations One of the key for AirAsia‟s success was made by the process as (Making sure that simple as possible. AirAsia was worked towards a single aircraft processes are as simple fleet, this actually greatly reduced duplicating manpower as possible.) requirements as well as stocking of maintenance parts. The area is vast, the cultures diverse, the economies vibrant and the travel links – well, that‟s where AirAsia spotted the opportunity. Some are innovative ideas inspired by the talented people of AirAsia and some are simple but functional moves that came from other sources. Asia Pacific University of Technology & Innovation Page | 9
  • 10. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM Lean Distribution AirAsia offers a wide and innovative range of distribution channels System (Offering a to make booking and travelling easier for its guests. AirAsia‟s wide and innovative ticket-less service provides a low cost alternative to their overall range of distribution guest in issued printed tickets. channels to make booking and travelling easier.) Point-to-Point Network The LCC model adopts the simple point-to-point network. In (Applying the point-to- AirAsia, their flights are short haul (four-hour flight radius or less), point network keeps whilst their sister airline AirAsia X focuses more on the medium to operations simple and long haul flights (more than four-hour flight radius). The costs low.) underlying business is to fly a person from point A to B. (Sources from: AirAsia.com) Asia Pacific University of Technology & Innovation Page | 10
  • 11. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM 2.0 Analysis of External Environment 2.1 Vietnam Airline Market using PEST Analysis The following is the PEST analysis including political situation, economic condition, social-cultural situation and technology factors of airline environment in Vietnam. From the information of PEST analysis on Vietnam, various opportunities can be examined for AirAsia entering into Vietnam airline market. Nevertheless, there are also threats that AirAsia may face if AirAsia decide to enter Vietnam airline market. 2.1.1 Political Situation For years, Vietnam‟s government policies have been operating under a communist regime, in actual fact, Vietnam truly welcomes foreign direct investment (FDI) and enhancing trade relations (Thompson G., 2009). “Doi Moi” which means economic renovation is established by Vietnam in the year 1986 aiming to open up the country to foreign investment. The Communist Party of Vietnam remains committed to market-oriented reforms and they do not expect major shifts in policy direction over the next five years. The one-party system implemented in Vietnam is usually contributing to short-term political stability (Business Monitor International, 2011). The ruling communist party‟s authority is often intimidated by the corruption among government bureaucrats (Business Monitor International, 2011). The Communist Party of Viet Nam has held power since unification. The decisions of its leadership constitute national policy that the Executive (Central Committee) and the Legislature (National Assembly) are required to follow. At provincial and city level, People's Committees have considerable influence as their approval is a prerequisite for all development projects and expenditure in their jurisdiction. The official Party policy is "democratisation within a one party state". The powers of the Communist Party were modified in the revised Constitution of 1992, which required Party organisations to act within the law, and gave increased authority to the Prime Minister and the National Assembly. Day- to-day policy advice comes from the Party Secretariat (made up of some 14 Politburo and 160 Central Committee members). The Central Committee considers key policy issues several times per year, and five-yearly Party Congresses ratify major policy changes. The 10th Party Congress, held in April 2006, led to significant changes in the Party leadership, although Nong Duc Manh retained the key position of General Secretary. The National Assembly's June 2006 session subsequently confirmed a new Government leadership, including new President, Prime Minister and key Cabinet ministers. The new Government Asia Pacific University of Technology & Innovation Page | 11
  • 12. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM includes some relatively younger ministers and is considered a first step towards installing a new generation of leaders. Vietnam's human rights record is gradually improving. Government monitoring and control of all facets of the political, social, economic, and religious lives of the people is reducing in some areas but is still intrusive and at times erratic. Satellite television and the internet are now available, though internet use is monitored. Religious and media freedoms are closely controlled, and political pluralism has yet to be accepted. 2.1.2 Economic Condition Vietnam is the world‟s 22nd fastest growing economy with GDP growth estimated to reach 6.3% in 2013 and 6.5% in 2014 (Thanh Nien News, 2012). Urbanization in Vietnam has been accelerating recently, with a UN projection suggests that the urban population will exceed the rural population by 2040 (The World Bank in Vietnam, 2011). Economic lift has brought many people out of poverty in Vietnam, with poverty rate falling from 37.4% in 1998 to 14.5% in 2008 (The World Bank, 2012). A renewed period of economic reform began in 1986 with the goals of improving living standards and encouraging foreign investment through more open economic policies. The initial steps of economic reform "doi moi" had been gradual. But during the 1990s, enhanced institutional support and steadily improving infrastructure made Vietnam's growth rate one of the highest in the region. This growth brought impressive gains in incomes and in the quality of life of the Vietnamese people. The investment-led growth of the mid-1990s began to tail off even before the Asian financial crisis dealt a further blow. Investor expectations were not being met, and many projects suffered from excessive bureaucratic interference. However, the cautious economic policies of the government enabled the economy to avoid the serious balance of payments, fiscal, and banking crises common elsewhere in the region. Since 2000, GDP growth rates have continued to track strongly, reaching 8.3% in 2007, but dropping back to an estimated 6.2% in 2008. In recent times, the Government has had to focus its policy efforts on avoiding a macroeconomic crisis; however, with inflation likely to have peaked and the merchandise trade deficit having eased back, there are now concerns that policymakers will become complacent, with the government potentially shifting its focus back to boosting growth rather than stabilising the economy. The government has started to heed the calls of donor governments and investors for greater transparency, reform of the SOE, financial and trading sectors, and improved public sector governance. Implementation Asia Pacific University of Technology & Innovation Page | 12
  • 13. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM has been slow, however, and Viet Nam retains a strong commitment to state enterprise and outmoded financial and trade regimes. Reforms and restructuring have reduced the numbers of state owned firms to around 6,000, but despite preferential access to credit through the state banking sector, these enterprises are not growing strongly enough to absorb the growing numbers of unemployed. Vietnam's growth over the medium term depends on whether it becomes a truly multi-sector economy in which private businesses are able to grow and compete in an undistorted environment with the same freedoms as state enterprises. In 2007, FDI inflows exceeded government's expectations and credit growth rose by approximately 50 percent. However, forecasts for growth are being scaled down in light of rising inflation and other signs the Vietnamese economy is overheating. 2.1.3 Social-Cultural Annual population growth rate from year 1999-2009 is 1.2%, with total population as of year 2009 is 85.85 million (United Nations, 2012). Gap widens between rich and poor with growth of income inequality since 2002 (KTSG, dtinews, 2012) and availability of large and trained workforce at low cost. If we explore the Vietnamese culture through the lens of the Hofstede 5-D Model, we can get a good overview of the deep drivers of Vietnamese culture relative to other world cultures (Geert Hofstede, 2012). Power distance - This dimension deals with the fact that all individuals in societies are not equal – it expresses the attitude of the culture towards these inequalities amongst us. Power distance is defined as the extent to which the less powerful members of institutions and organisations within a country expect and accept that power is distributed unequally. Vietnam scores high on this dimension (score of 70) which means that people accept a hierarchical order in which everybody has a place and which needs no further justification. Hierarchy in an organisation is seen as reflecting inherent inequalities, centralization is popular, subordinates expect to be told what to do and the ideal boss is a benevolent autocrat. Challenges to the leadership are not well-received (Geert Hofstede, 2012). Individualism - The fundamental issue addressed by this dimension is the degree of interdependence a society maintains among its members. It has to do with whether people´s self-image is defined in terms of “I” or “We”. In Individualist societies people are supposed to look after themselves and their direct family only. In Collectivist society‟s people belong to „in groups‟ that take care of them in exchange for loyalty. Vietnam, with a score of 20 is a Asia Pacific University of Technology & Innovation Page | 13
  • 14. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM collectivistic society. This is manifest in a close long-term commitment to the “member” group, be that a family, extended family or extended relationships. Loyalty in a collectivist culture is paramount and overrides most other societal rules and regulations. Such a society fosters strong relationships, where everyone takes responsibility for fellow members of their group. In collectivistic societies, offence leads to shame and loss of face. Employer or employee relationships are perceived in moral terms (like a family link), hiring and promotion take account of the employee‟s in-group. Management is the management of groups (Geert Hofstede, 2012). Masculinity or Femininity - A high score (masculine) on this dimension indicates that the society will be driven by competition, achievement and success, with success being defined by the winner or best in field – a value system that starts in school and continues throughout organisational behaviour. A low score (feminine) on the dimension means that the dominant values in society are caring for others and quality of life. A feminine society is one where quality of life is the sign of success and standing out from the crowd is not admirable. The fundamental issue here is what motivates people, wanting to be the best (masculine) or liking what you do (feminine). Vietnam scores 40 on this dimension and is thus considered a feminine society. In feminine countries the focus is on “working in order to live”, managers strive for consensus, people value equality, solidarity and quality in their working lives. Conflicts are resolved by compromise and negotiation. Incentives such as free time and flexibility are favoured. Focus is on well-being, status is not shown (Geert Hofstede, 2012). Uncertainty avoidance (UAI) - The dimension Uncertainty Avoidance has to do with the way that a society deals with the fact that the future can never be known: should we try to control the future or just let it happen? This ambiguity brings with it anxiety and different cultures have learnt to deal with this anxiety in different ways. The extent to which the members of a culture feel threatened by ambiguous or unknown situations and have created beliefs and institutions that try to avoid these is reflected in the UAI score. Vietnam scores 30 on this dimension and thus has a low preference for avoiding uncertainty. Low UAI societies maintain a more relaxed attitude in which practice counts more than principles and deviance from the norm is more easily tolerated. In societies exhibiting low UAI, people believe there should be no more rules than are necessary and if they are ambiguous or do not work they should be abandoned or changed. Schedules are flexible, hard work is undertaken when necessary but not for its own sake, precision and punctuality do not come naturally, innovation is not seen as threatening (Geert Hofstede, 2012). Asia Pacific University of Technology & Innovation Page | 14
  • 15. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM Long term orientation - The long term orientation dimension is closely related to the teachings of Confucius and can be interpreted as dealing with society‟s search for virtue, the extent to which a society shows a pragmatic future-oriented perspective rather than a conventional historical short-term point of view. Vietnam scores 80, making it a long term orientation culture. Societies with a long-term orientation show an ability to adapt traditions to a modern context that is pragmatism, a strong propensity to save and invest thriftiness, perseverance in achieving results and an overriding concern for respecting the demands of Virtue. The countries of South East Asia and the Far East are typically found at the long-term end of this dimension (Geert Hofstede, 2012). 2.1.4 Technology and Infrastructure Factors Vietnam is aiming to accomplish its development plan for the aviation sector by 2020 including further expansion for aircraft fleet, building and upgrading airports, and developing better airport operations and air traffic management (Moye E., 2012). According to the International Air Transport Association (IATA), by 2014, Vietnam will become the world‟s third fastest-growing market for international passengers and freight, and the second-fastest in the number of domestic passengers (Moye E., 2012). The World Economic Forum‟s 2010 Global Enabling Trade Report rated Vietnam 103 out of 125 countries for availability and quality of transport infrastructure (Australian Government, 2012). The government has also implemented a 3-year discount scheme in April 2010 to provide charges relief to airlines at Vietnam‟s major airports (IATA, 2011). Now, Vietnam has a world class air navigation service provider (IATA, 2011). Vietnam Foreign Relations From the early 1990s Vietnam moved quickly to restore relations with the international community. 1995 was a historic year for Vietnam, with its entry into the Association of South East Asian Nations (ASEAN), increasing integration into the global economy (especially a framework agreement with the European Union), and the establishment of formal relations with United States. China will continue to be Vietnam's single most important bilateral relationship. The two countries regularly exchange high-level visits and are currently building a closer relationship. A treaty delineating the land border between the two countries was concluded in December 1999, thus resolving a longstanding bilateral dispute. Other tensions, for example over the contested territory of the Spratley Islands in the South China Sea, have been prevented from spilling over into broader high- level relations. Membership of ASEAN is central to Vietnam's economic development and Asia Pacific University of Technology & Innovation Page | 15
  • 16. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM international economic integration strategies. Around 30% of Vietnam's trade is with ASEAN countries. Under the ASEAN Free Trade Area (AFTA) and the ASEAN Investment Area this co-operation is expected to continue to grow. Viet Nam is an increasingly active member of ASEAN, having hosted both the Sixth ASEAN Summit in 1998, the ASEAN Regional Forum (ARF) Post Ministerial Conference in 2001, and successfully hosted the fifth Asia Europe Meeting (ASEM) in 2004. In 1998 Vietnam was admitted to full membership of APEC, and hosted this Summit in November 2006. Vietnam has formally acceded to the WTO (January 2007) and is currently undertaking the role of non-permanent member of the United Nations Security Council for the 2008-2009 year. Asia Pacific University of Technology & Innovation Page | 16
  • 17. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM 2.2 Opportunities for AirAsia There are 2 major events that are taking place now or going to take place in less than 6 months from now. First, is the ever increasing oil price? Second, is the “ASEAN Open Skies” agreement that has been reached? The increasing oil price at the first glance may appear like a threat for AirAsia. But being a low cost leader, AirAsia an upper hand because its cost will be still the lowest among all the regional airlines. Thus, AirAsia has a great opportunity to capture some of the existing customers of full service and other low cost airline‟s customers. However, there will be also some reduction in overall travel especially by casual or budget travellers. The “ASEAN Open Skies” allows unlimited flights among ASEAN‟s regional air carriers beginning December 2008 (AirAsia, 2008). This will definitely increase the competition among the regional airlines. However, with the “first mover” advantage as well as its strengths in management, strategy formulation, strategy execution, strong brand and “low-cost” culture among its workforce, this agreement can be seen as more of an opportunity. There is also some opportunity to partner with other low cost airlines as Virgin to tap into their existing strengths or competitive advantages such as brand name, landing rights and landing slots (time to land). The population of Asian middle class will be reaching almost 700 million by 2010. This creates a larger market and a huge opportunity for all low cost airlines in this region including AirAsia (AirAsia, 2010). 2.2.1 Opportunities of AirAsia in Vietnam Airline Market AirAsia has a vibrant and high potential in the Vietnam aviation market. First, it is because the state constitution of the country itself has planned for expansions and developments of airlines and airports over the next decade (Centre for Aviation, 2012). Also, Vietnam is also moving closer to ASEAN open skies and preparation for necessary steps and following a route to enter such a regional market has been estimated to be done by 2015 (Vietnam.net, 2011). Furthermore, Vietnam is aiming to accomplish its development plan for the aviation sector by 2020 which includes further expansion for aircraft fleet, build and upgrade airports, and develop better airport operations and air traffic management (Moye E., 2012). By the year 2014, Vietnam is assuming to become the world‟s third fastest-growing market for international passengers and freight, and the second-fastest in the number of domestic passengers (Moye E., 2012). Vietnam has a world class air navigation service provider (International Air Transport Association IATA, 2011). According to IATA, improving efficiency will be critical in maintaining Vietnam‟s competitiveness (Hung Q., 2011). Recently, Vietnam has been nominated as one of the fastest emerging economies today having a huge potential for businesses as the growth in GDP (Thanh Nien News, 2012). Asia Pacific University of Technology & Innovation Page | 17
  • 18. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM Meaning that the country had led to the rapid growth of middle class Vietnamese which creates a larger potential market giving the opportunity for AirAsia to become the low-cost leader in Asia, and is driving demand for more low-cost flights. (See Appendix 1) This shows that Vietnam has a strong domestic growth rate coupled with its geography; a country stretching for thousands of kilometres on a north-south axis creates a need for long distance freight haulage (Business Monitor International, 2011). Currently the country has only one Vietnamese LCC which is Jetstar Pacific with account only 16% of total domestic capacity. (See Appendix 2) The other major domestic markets in ASEAN are Indonesia, Malaysia, Philippines and Thailand which are having LCC penetration rates above 50% (Centre for Aviation, 2012). Vietnam goes second for capacity growth in the region, only beaten by Indonesia. (See Appendix 3). In addition, Vietnam‟s domestic market has been growing at double digit clip since 2007, with full-service operator Vietnam Airlines the main beneficiary (Centre for Aviation, 2012). With more low cost carriers (LCC) penetrating Vietnam market, there would be possibility of faster growth which would be a large opportunity for LCC like AirAsia to increase sales growth in the Vietnam market with low fares. Furthermore, AirAsia‟s proposal on joint venture with Vietnam‟s local brand VietJet which is 100% privately owned, with 70% stake held by local partners and 30% by AirAsia, is seen as a comparative advantage. More rapid expansions can be made as there is no need for lengthy approval processes by the government to emerge new routes or aircraft which the government-owned organisations are facing (Centre for Aviation, 2012). According to Vietnam Travel (2009), over the past 10 years Vietnam has seen an extraordinary growth in tourist numbers of 286% rise since 1998 and in recent year‟s growth has been as 20% compared to the previous year. Vietnam Travel stated that the air transportation is the main mode of transport used by tourists travelling to Vietnam. (See Appendix 4) Last but not least, the vital factor for airline costs is fuel. (See Appendix 5) Prices for jet fuel are rising swiftly nowadays, prompting airlines to raise fares, tack on new fees, and to consider offering fewer flights or flying smaller planes (Martin T.W., 2011). As AirAsia‟s focus is on maintaining lowest operating costs, the organisation might not depend much on its fares compared to other airlines. Asia Pacific University of Technology & Innovation Page | 18
  • 19. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM 2.3 Threats faced by AirAsia Certain rates like airport departure, security charges and landing charges are beyond the control of airline operators and this is a threat to all airlines especially low cost airlines which tries to keep their cost as low as possible. For example, Changi airport in Singapore charges SGD21 for every person who departs from Singapore. AirAsia‟s profit margin is about 30% and this has already attracted many competitors. Most of the full service airlines have or planning to create a low cost subsidiary to compete directly with AirAsia. For example, Singapore Airlines has created a low cost carrier Tiger Airways. Because of the low cost business structure, users tend to have the perception that budget airlines may compromise safety to keep costs low. 2.3.1 Threats faced by AirAsia in Vietnam Airline Market Vietnam does not allow usage of foreign airline brands like other ASEAN countries to protect the local airline industry, which is the main threat faced by AirAsia. This is also the main factor of the low LCC penetration rates in the country because when AirAsia can have the same look, strategy and model as its other affiliates; it would not be much challenge for AirAsia as the organization has already built up trust and low cost mentality among travellers all around Asia. Instead, AirAsia might not able to face the competition from the strong competitors using a local brand, hence failing in Vietnam market. Furthermore, the macroeconomic instabilities in the year 2010 and 2011 are likely to weigh on public acceptance of the one-party political system, and operation riot like street demonstrations to protest economic conditions could develop into a full-on challenge of undemocratic rule in Vietnam (Business Monitor International, 2011). In few years to come, Vietnam‟s political condition might not differ much due to the strong domestic control, but the one-party system might be unsustainable over a longer period of time. The changes in Vietnam‟s ruling party of their country‟s political situation would cause impactful effect on the country‟s economy and perception of foreign investors towards the country‟s prospect. Also, the unstable of the country‟s economy will lead to inflation where increase in prices for goods and services, but local‟s income remain the same. Travellers including Vietnamese will tend to decrease the intensity to travel which will have an impact on AirAsia‟s revenue. Asia Pacific University of Technology & Innovation Page | 19
  • 20. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM 3.0 Analysis of Internal Environment 3.1 Strengths of AirAsia 3.1.1 Exploitation and Accesses to Latest Technology The excellent utilization of IT have directly contributed to their promotional activities such as email alerts and desktop widget which was jointly developed with Microsoft for new promotions, brand building exercise with over 3 million hits per month and on the most widely surfed booking engines in the world as well keep the cost low by enabling direct purchase of tickets by consumer thus saving on airline agent fees. Also, flight tickets can be reserve online via AirAsia‟s website (see Appendix 6) or through mobile booking via mobile.airasia.com. Travellers could check their flight status and other promotion items online. In addition, boarding passes are also available on mobile phones which make it more convenient and save time for travellers to access it anytime with 24x7 bases. AirAsia is the first airline in Southeast Asia to utilize e-ticketing and bypass conventional travel agents. The organisation gets to save costs on agent‟s commissions hence reduce intermediary cost, and issuing physical tickets to save printing cost. 3.1.2 Low-Costs Business Model AirAsia has been nominated as Asia‟s low cost leader where the organisation has created a low cost airline mindset among Asian. AirAsia is the low cost leader in Asia. With the help of AirAsia Academy, AirAsia has successfully created a “low-cost airline mentality” among their workforce. The workforce is very flexible and high committed and very critical in making AirAsia the lowest cost airline in Asia. AirAsia is the first airline in Asia to commence low cost carriers by offering only basic services to travellers. Low operating costs such as wages, airport fees, and short ground waits are reduced because of the simple boarding processes. Furthermore, by reducing insignificant operations such as frills and seating arrangements, the organization is able to maximize sales and minimise operational costs. With its low operating costs, the service and safety of travellers are still their main priority (Dawna and Blaise, 2005). 3.1.3 Single Aircraft Type which gives lower turnaround time By having a single aircraft type, AirAsia‟s maintenance is made simplified and cheaper. Due to the same reason, the organization could negotiate aircraft buying terms from supplier better and get a more reasonable price. Staffs and training needed are lessened and so does infrastructure, equipment and spare parts. In 2004, as a result of its point-to-point Asia Pacific University of Technology & Innovation Page | 20
  • 21. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM services which kept flights to no more than 4 hours, AirAsia managed to operate its aircraft for an average of approximately 13 hours/day with 2.5 hours more efficient than full-services airlines which managed to use their aircraft for an average 10.5 hours/day (Abigail Zhu, 2012). Therefore, it is a sustainable competitive advantage for AirAsia as this capability is unique and hard to imitate (Haddad, 2003). 3.1.4 Strong Management Team Air Asia has a very strong management team with strong links with governments and airline industry leaders. This is partly contributed by the diverse background of the executive management teams which consists of industry experts and ex-top government officials. For example, Shin Corp (formerly owned by the family of former Thai Prime Minister - Thaksin Shinawatra) holds a 50% stake in Thai AirAsia. This has helped AirAsia to open up and capture a sizeable market in Thailand. With their strong working relationship with Airbus, they managed to get big discount for aircraft purchase which is also more fuel efficient compared to Boeing 737 planes which is being used by many other airlines The management team is also very good in strategy formulation and execution. The strategy that they have formulated at the beginnings was a clever blend of proven strategies by other low cost airlines is US and Europe. They are Ryanair‟s operational strategy (no frills, landing in secondary airport), Southwest‟s people strategy- employee comes first, AirAsia staffs may get lower salaries compare to rivals but staffs are offered ample varieties of incentives including performance-based bonuses, share offers and free-flights. Staffs are more motivated and focused on their job as they sense that they are part of the organisation and Easyjet‟s branding strategy (linking with other service providers like hotels, car rental). 3.1.5 Established Brand and Reputation AirAsia‟s brand name is well established in Asia Pacific. Besides the normal print media advertising & promotions, AirAsia‟s top management also capitalised on promotions through news by being very “media friendly” and freely sharing the latest information on Air Asia as well as the airline industry. Their partnership with other service providers such as hotels and hostels, car rental firms, hospitals (medical tourism), Citibank (AirAsia Citibank card) has created a very unique image among travellers. Alliance with Galileo GDS (Global Distribution System) that enables travel agents from around the world to check flight details and make bookings have also contributed to their string brand name. Air Asia‟s local presence in few countries such as Indonesia (Indonesia AirAsia) and Thailand (Thai AirAsia) have successfully “elevated” the brand to become a regional brand beyond just Malaysia. The Asia Pacific University of Technology & Innovation Page | 21
  • 22. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM links with Manchester United (one of the world‟s most famous football teams) and AT&T Williams Formula One team have further boosted their image to a greater extend beyond just the this region (Daniel Chan, 2000). AirAsia‟s strong establishment in promoting its branding and marketing is partly because of being Asia‟s first budgeted airline. Promotions capitalise by AirAsia is the regular print media advertising and sharing updated news about the organization freely through the news. The organization‟s partnership with hotels and car rental firms has also generated an exclusive figure and value among travellers. In addition, Manchester United as one of the world‟s most famous football team having AirAsia‟s major sponsorship including international sponsorship and advertising uphold the brand even further beyond the region. July indeed is a month of celebration for AirAsia, where the airline receives not one, but two international accolades further confirming that AirAsia is the world‟s best in the global airline industry, as reported in Aviation Week‟s Top-Performing Airlines 2012 (AirAsia, 2012). Besides winning the title of the World‟s Best Low Cost Airline for four consecutive years, AirAsia was also named Best Low Cost Airline in Asia for four consecutive years as well in the same award ceremony (AirAsia, 2012). Asia Pacific University of Technology & Innovation Page | 22
  • 23. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM 3.2 Weaknesses of AirAsia 3.2.1 Over-Relying on Online Sales AirAsia depends mainly on the process infrastructure of internet technology from booking to purchasing and to payment methods and finally to ticketing, which the organisation may miss out the potential prospects within countries with low internet penetration such as Cambodia, Laos. Most of the time, if there is any flight delays; the organisation will be the one at fault for not being robust enough to handle the bookings efficiently. Also, too dependent on internet technology will take up a lot of cost in terms of constantly investing in technological equipments to sustain its huge network. 3.2.2 Limited Customer Service When the major aspect of LCC is to reduce cost, AirAsia will need to limit their spending on resources especially in human resource and only take in employees who can be multitasked. Because of this, employees wouldn‟t be able to live up to their full potential or focus on a customer as they have to cater various responsibilities. Furthermore, there are also limitations to AirAsia‟s services such as not having business class and no frill service when the organisation couldn‟t provide extra services to meet customer desires and wants. This resulted AirAsia receives lot complaints from customers on their service. Examples of complaints are around flight delays, being charged extras and not able to change flight or get a refund if customers could not make it. Good customer service and management is critical especially when competition is getting intense. 3.2.3 Too Dependent on Outsourcing Air Asia does not have its own maintenance, repair and overhaul (MRO) facility to lower their operational cost. AirAsia depends heavily on outsourcing its various operations to others It may be a good strategy when they first started with only Malaysia as the hub and few planes to maintain. But now, with few hubs (Malaysia, Thailand and Indonesia) and over 100 planes currently owned and about another 100 planes to be received in the next few years, AirAsia have to ensure proper and continuous maintenance of the planes which will also help to keep the overall costs low. It is a competitive disadvantage not to have its own MRO facility. This turns out to be powerful risk to AirAsia‟s responsibility for delays and affect their daily operation if the contractors couldn‟t complete the services on time. Asia Pacific University of Technology & Innovation Page | 23
  • 24. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM 4.0 Generating Strategies with TOWS Matrix for AirAsia Strengths Weaknesses Exploitation and Accesses to Latest Over-Relying on Online Technology Sales Low-Costs Business Model Limited Customer Service Single Aircraft Type which gives Too Dependent on Lower Turnaround Time Outsourcing Strong Management Team Established Brand and Reputation Opportunities Strengths – Opportunities Strategies Weaknesses – Opportunities Strategies  Rise in the Middle Class  Promoting low costs and lower  Improve quality and Population turnaround time to attract the growing service level with  Strong domestic growth domestic market development plan in rate  Utilise strong branding and marketing aviation sector  Increase in fuel prices to target the rise in the middle income  Limited service reduces eliminate unprofitable class and growth in leisure travel in costs by targeting competitors Vietnam increment in fuel prices  Growth in leisure travel  Making full use of exploitation towards which leads to higher  Development plan in internet technology with development fares aviation sector plan in aviation sector  Availability of huge  Availability of large and  Exploitation of internet technology amount of skilled trained workforce at low simplifies processes for tourists workforce reduces much cost training needed for handling online sales Threats Strengths – Threats Weaknesses – Threats Strategies Strategies Aviation Rules and  Utilise strong branding and marketing o Modernize Navitaire with Government Policies which targets the aviation rules and tragedy recovery targeting Macroeconomic government policies in Vietnam heavy reliance on online Instabilities  Promoting low cost, lower turnaround sales and macroeconomic time and strong branding in order to instabilities cope with the macroeconomic instabilities Asia Pacific University of Technology & Innovation Page | 24
  • 25. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM AirAsia can take the opportunity on promoting its low-costs flight services and less turnaround time with Vietnam‟s rapid growth in the aviation market as there are not many low cost carriers rivals yet in Asian market. For its domestic flights - travelling from one place to another for a short distance or period of time, travellers would often consider more on costs and convenience. AirAsia‟s low cost concept with no frills where travellers flying at a short distance normally only require several traditional passenger services and low turnaround time where there are more flight options is a competitive advantage. Comparing to road and sea transportation, flights saves more travelling time too (AirAsia, 2010). In addition, AirAsia‟s low cost leadership strategy as sustainable competitive advantage could capture the growing middle income class population which drives demand for low cost flights and leisure travel in Vietnam as well through their strong branding and marketing. As air transportation is the main transportation mode for leisure travel to Vietnam, AirAsia could use its exploitation in internet technology to target the market as well. Travellers get to make reservation for flights and hotels or even for car rentals to make travelling easier and hassle free. It improves convenience and reduces costs and time. In the aviation sector, “Trust” is a key factor made by AirAsia in making travellers dealing with the airline‟s website to feel more secure as they would not have to worry about frauds by agents. Hotels and car rentals reservation online makes things easier for first time travellers to Vietnam as well as they might not be used to the environment yet. Furthermore, with Vietnam‟s move towards ASEAN open skies and development plan for its aviation sector, AirAsia will be able to fully exploit its usage on internet technology as well as reducing costs in terms of its technological equipments. In addition, development plan in aviation sector will also increase the quality and services of the airline to be more efficient such as handling bookings and online sales (AirAsia, 2008). Also, with the high availability of huge amount of skilled staffs in Vietnam would enable AirAsia, meaning efficient and motivated workforce helps reduces training time and learning curve in dealing with its technological equipments. Although there are limited services provided by AirAsia due to promoting low cost, but the airline will gain advantage by targeting the increment in fuel prices. Increase in fuel prices tends to eliminate unprofitable competitors, and airlines often raise fares and flying with smaller planes as fuel is often the major cost for airlines. But not AirAsia whom most concern is on sustaining lowest operating costs. Asia Pacific University of Technology & Innovation Page | 25
  • 26. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM For instance, although Vietnam‟s aviation rules and government policies restrict using foreign airline brands to protect local airlines, AirAsia could still penetrate the local market with its brand by using an indirect approach by sharing the news of joint venture with a local airline through print media advertising and news. It might be a challenge to penetrate the market with a local brand, but with the travellers‟ awareness of the joint venture and the airline‟s strong brand and trust built among travellers; it would not be seen as a setback. AirAsia as Manchester United football team‟s major sponsor, the airline could spread the news even further beyond the region through the international sponsorship and advertising. AirAsia‟s nomination for four years running as Skytrax World‟s Best Low Cost Airline would also make the airline the primary choice for air transportation. Subsequently, if Vietnam were to experience macroeconomic instabilities in the future such as inflation and corruption, it would be wise for AirAsia to promote its low costs philosophy, low turnaround time and strong branding as people would go after low cost targeting limited services with no additional charges but safe flights. Inflation reduces the country‟s purchasing power meaning people tend to spend lesser and save more. AirAsia‟s low cost philosophy will be suitable for the rising inflation and having low turnaround time as an additional advantage to save time. AirAsia could prevail over the issue of corruption in the country where there‟s reduction in air travel using its strong branding. AirAsia would be travellers‟ prior choice of air transportation as the airline has built trust and confidence among travellers for a safe flight. When AirAsia is highly dependent on its online sales so the airline cannot afford to have the website down because of maintenance or busy traffic. By setting up tragedy recovery using Navitaire, a direct sales engine service provider, would improve the efficiency of the website in finding solutions and fixing them. Although offering travellers free 15kg baggage allowance for the ones travelling four hours and above would be opposing with the airline‟s no frills policy, but long term wise would build customer loyalty and retention. Asia Pacific University of Technology & Innovation Page | 26
  • 27. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM 5.0 Entry Strategies for AirAsia Based on the analysis done, it is more viable for AirAsia to enter Vietnam market using joint venture as entry mode in aviation sector because the country forbids 100% of foreign ownership. Besides that, domestic flights in Vietnam are still guarded by the country‟s law prohibiting foreign airlines from entering to protect the local airlines. In 2010, AirAsia officially announced that the airline has successfully bought 30% shares of Vietjet Air. Vietjet Air was given the authority to start its operation in 2007 but had been influence by the world economic crisis in the next years to defer their plan numerous times. Joint venture with a local brand in Vietnam would benefit AirAsia as Asia‟s low cost leader and largest LCC to be able to expand its operations further in the country, obtaining stronger position among competitors, increase intra-regional connectivity, and as another opportunity in backing up the ASEAN region as tourism hub. Moreover, the joint venture will also contribute to the diversification and needs of air travel in the country and region by offering additional options. By using the competitive advantage of both airlines AirAsia and Vietjet Air would also promote a more efficient operation and LCC marketing due to the ideal combination in terms of organization administration, technological equipments, experiences in airline industry, strong branding of AirAsia, and market within the reach of Vietjet Air. In 2007, Vietjet was the first in Vietnam to be formed as a wholly private airline. Now Vietjet Air with 70% stake held by local partners and 30% by AirAsia is an advantage as rapid expansions could be made at a faster pace. Whereas government-owned airlines would have to go through lengthy approval processes by the government in order to emerge new routes or aircraft. There are various advantages by joint venturing with a local brand in Vietnam but the major risks faced by AirAsia would be penetrating Vietnam market through a local brand as the country‟s aviation rules and government policies does not allow foreign airlines to penetrate domestic market. The second state-owned airline in Vietnam, Pacific Airline after joint venture with Jetstar Airways holding 30% shares manage to transform into Jetstar Pacific. AirAsia tried to follow the steps of Jetstar Airways by transforming Vietjet Air to Vietjet AirAsia parallel with their subsidiary LCCs but the proposal was turn down by Civil Aviation Autority of Vietnam (CAAV). Thus, AirAsia would not be able to effectively exploit its brand name through a local brand. Asia Pacific University of Technology & Innovation Page | 27
  • 28. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM 6.0 Marketing Strategies for AirAsia 6.1 Maximized IT and implementing E-commerce in AirAsia business Nowadays, E-commerce is becoming a business tool. E-commerce also has become a vital strategic management and allows a company to sell products, advertise, purchase supplies, bypass intermediaries, track inventory, eliminate paperwork, and share information. In total, electronic commerce is minimizing the expense and cumbersomeness, improved products, and higher profitability. According to this statement, E-commerce can change the way of doing business nowadays. E-commerce becomes a major success to Airplane Company to make effectively and efficiency in their business especially for AirAsia expanding in ASEAN countris like Vietnam. AirAsia is one of the airplane companies, which is implementing E-commerce and maximised their information technology usage to make the efficiency and effectively in their company and make possible low cost carrier in their business. According to Pultorak (2004), when the business strategy and IT are aligned, the IT infrastructure can continuously sense the changing business needs and respond by provisioning or redeploying resources to match the demands of the business. Moreover, to maximize their IT, AirAsia implemented current IT such as yield management system (YMS), computer reservation system (CRS), and enterprise resource planning (ERP) system. Lets we discuss the current IT that AirAsia implemented one by one. Yield management system as revenue management system it understands, anticipates, and reacts to the behavior of customer to maximize revenues for the organization. In this system, AirAsia used it to takes into account the operating costs and aids AirAsia to optimises price and allocate capacity to maximize expected revenues. 6.2 Generate new Product Package Strategy AirAsia would be targeting overall middle class population by positioning itself as a low cost yet quality carrier. The airline itself is the ideal product to draw and convince customers of their basic needs eyeing on product coverage. Hence, various explorations had been done to discover the possibilities of expansion for product coverage to complement its air offering. AirAsia could enhance on its Do-It-Yourself (DIY) package promotion by “Go Holiday” theme for travellers, introducing travel package including of flight tickets, hotels, and holiday portal at a valuable price as an online service. It offers travellers hassle-free, affordability and flexibility as the growing middle class population in Vietnam‟s concern is mainly on convenience and budgeted products. Vietnam‟s in-home internet has been increased by over Asia Pacific University of Technology & Innovation Page | 28
  • 29. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM 1000% from 1999 to 2008 (See Appendix 7) and mobile phone ownership increased by 33% in 2 years on 2008 (See Appendix 8) is a contribution to the package‟s heavy reliance on internet technology (Matthaes R., 2008). Travellers are also provided with numerous options from a luxurious five star package to a budget holiday suiting individual needs. In addition, products ranging from airport transfers, tours and activities such as spas and theme parks will be marketed online (AirAsia, 2007). Travellers could conveniently reserve air tickets and hotels at one stop equip with multi languages to choose from and benefit from having a more attractive rate. With this package, the airline would be able to convert itself from an ordinary flight centric into a travel dealer which is a better positioning for the airline competing with channels comprising both online and offline. According to the survey done by TNS in 2007, 88% Vietnamese said they are ready to pay a higher price for healthier foods proving that they are becoming more health conscious. With AirAsia‟s unique online health package, Go Medic would be able to cater to the growth in health tourism (AirAsia, 2007). Currently, Go Medic has formed a partnership with three diagnostic centres with potentially more hospitals and diagnostic centres to be added to the service (AirAsia, 2007). Asia Pacific University of Technology & Innovation Page | 29
  • 30. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM 6.0 Conclusion The competition among airplane industries is very tough. Each of Airplanes Company in the world trying to conduct some strategies to compete with another competitor in their industry. To compete with their competitor in the Vietnamese business environment, a company needs to make a strategy to achieve their long terms objective and can be successful for doing their business. The strategic management becomes important due to the following reason such as globalisation to survival their business, and than e-commerce become the critical success to the company nowadays. a company needs to consider the company ability and how to integrating it with the as well as main factor in the internal and external factor. How AirAsia can be a leader in the lowest cost carrier in the airplane industry? To be a leader in the low cost carrier, firstly, AirAsia need to consider about their strategic management. The reason why need to consider strategic management because the first reason is because the airline industry is a unique and complex industry. The second reason, the strategy that AirAsia need is not just how to reduce cost and make the operational activities running effectively. But, AirAsia needs to come out with the strategy that can make competitive position that the company performs different activities from rivals or performing similar activities in different ways to achieve their business successfully, the third reason because a globalisation and implementing E-commerce. The current issues in AirAsia Company are more focused in the competition of the cost among an airplane industry. AirAsia as an industry company which is more focusing in the low cost carrier airplane industry need to consider to make the lowest possible cost to compete with the other competitors in their airplane industry in Vietnam market. How AirAsia can solve the current issues to be a low cost carrier leader in airplane industry? The first is to identify and analyse the different strategic analysis, and than to solve the current issues with some strategies such as Joint Venture Entry Strategy, Product Package Strategy, Maximized IT and implementing E-commerce in AirAsia business, Operation effectiveness and outstanding efficiency, and the last one is implemented outsourcing in the AirAsia business in Vietnam. Asia Pacific University of Technology & Innovation Page | 30
  • 31. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM 7.0 References Abuza, Z. (2004) Vietnam Today [online]. Available from http://www.historyplace.com/pointsofview/vietnam.htm [Accessed 15 September 2012] AirAsia (2012) Corporate profile [online]. Available from http://www.airasia.com/cn/en/corporate/corporateprofile.page [Accessed 15 September 2012] AirAsia (2012) In-flight services [online]. Available from http://www.airasia.com/my/en/flightinfo/inflightservices.page [Accessed 15 September 2012] AirAsia Berhad (2007) Annual Report 2007 [online]. Available from http://www.airasia.com/iwov- resources/my/common/pdf/AirAsia/IR/AA%20Corporate%202007b.pdf [Accessed 15 September 2012] AirAsia Berhad (2007) Bringing ASEAN Closer [online]. Available from http://www.airasia.com/iwov- resources/my/common/pdf/AirAsia/IR/AA%20Corporate%202007.pdf [Accessed 15 September 2012] Airline Leader (2012) Accelerating airline business model realignment [online]. Available from http://www.airlineleader.com/this-months-highlights/accelerating-airline- business-model-realignment [Accessed 15 September 2012] Airline Leader (2012) Vietnam: sowing the seeds for future growth [online]. Available from http://www.airlineleader.com/country-in-focus/vietnam-sowing-the-seeds-for- future-growth [Accessed 15 September 2012] Anh, H. (2011) Vietnam: Opportunities in Aviation Sector – 2011 [online]. Available from http://www.agentschapnl.nl/sites/default/files/bijlagen/Vietnam%20%20Aviation%20sect or%202011.pdf [Accessed 15 September 2012] Anna Aero (2010) China at the forefront of Asian air travel growth; Indonesia and Vietnam booming in 2010; Hong Kong, Japan and Thailand struggle [online]. Available Asia Pacific University of Technology & Innovation Page | 31
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  • 35. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM http://blogs.crikey.com.au/planetalking/2010/02/11/jetstar-now-on-collision-course-with- vietjet-air-asias-new-venture-in-vietnam/ [Accessed 15 September 2012] Sidhu, B.K. (2012) Tony Fernandes speaks to StarBiz on AirAsia’s future plans [online]. Available from http://biz.thestar.com.my/news/story.asp?file=/2012/6/15/business/11484860&sec=busine ss [Accessed 15 September 2012] Thanh Nien News (2010) Vietnam Airlines protests AirAsia joint venture [online]. Available from http://www.thanhniennews.com/2010/pages/vietnam-airlines-protests- airasia-joint-venture.aspx [Accessed 15 September 2012] Thanh Nien News (2012) Vietnam is world’s 22nd fastest growing economy [online]. Available from http://www.thanhniennews.com/index/pages/20120622-vietnam-among- 29-fastest-growing-economies-in-the-world.aspx [Accessed 15 September 2012] The Economist (2011) Missing BRIC in the wall [online]. Available from http://www.economist.com/node/18989153 [Accessed 15 September 2012] The World Bank Group (2012) Vietnam [online]. Available from http://data.worldbank.org/country/vietnam [Accessed 15 September 2012] Tirasatayapitak, A., ASEAN Image Positioning: The Case Study Of Vietnam [online]. Available from http://www.ttresearch.org/home/images/2553_4/8.pdf [Accessed 15 September 2012] Travel to Vietnam (2011) AirAsia plans low-cost airline in Vietnam [online]. Available from http://traveltovietnam.cc/Vietnam-Travel-Tips/Vietnam-Travel-News/Vietnam- Lastest-news/590/AirAsia-plans-low-cost-airline-in-Vietnam.aspx [Accessed 15 September 2012] TTRweekly (2011) Thai visits rank 9th in arrivals to Vietnam [online]. Available from http://www.ttrweekly.com/site/2011/03/thai-visits-rank-9th-in-arrivals-to-vietnam/ [Accessed 15 September 2012] Tu, B.D. (2012) Vietnam Airlines adjusts series of business indicators [online]. Available from http://www.intellasia.net/vietnam-airlines-adjusts-series-of-business-indicators- 225530 [Accessed 15 September 2012] Asia Pacific University of Technology & Innovation Page | 35
  • 36. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM United Nations (2012) About Vietnam [online]. Available from http://www.un.org.vn/en/about-viet-nam/basic-statistics.html [Accessed 15 September 2012] US Commercial Service (2012) Doing Business in Vietnam: 2012 Country Commercial Guide for U.S. Companies [online]. Available from http://export.gov/vietnam/build/groups/public/@eg_vn/documents/webcontent/eg_vn_05 1747.pdf [Accessed 15 September 2012] US Commercial Service (2012) Vietnam Market for Airport and Ground Support Equipment, Air Traffic Management Systems, and Aircraft Landing Parts [online]. Available from http://export.gov/vietnam/build/groups/public/@eg_vn/documents/webcontent/eg_vn_05 1754.pdf [Accessed 15 September 2012] Verghese, V. (2012) Asian low-cost airlines think big [online]. Available from http://www.smarttravelasia.com/smallairlines.htm [Accessed 15 September 2012] Vexler, D. (2012) Poor People in Fewer Poor States [online] Available from http://globalbrief.ca/blog/2012/06/06/many-poor-people-in-fewer-poor-states/ [Accessed 15 September 2012] Vietnam Freight Transport Report; Includes BMI’s Forecast (2011) Business Monitor International Ltd Vietnam Travel (2009) Vietnam Tourism Statistics [online]. Available from http://www.vietnamtravel.org/vietnam-tourism-statistics [Accessed 15 September 2012] Vietnam.net (2011) Vietnam moves closer to ASEAN open skies [online]. Available from http://english.vietnamnet.vn/en/travel/13314/vietnam-moves-closer-to-asean-open- skies.html [Accessed 15 September 2012] World Bank (2011) Vietnam Urbanization Review [online]. Available from https://openknowledge.worldbank.org/bitstream/handle/10986/2826/669160ESW0P1130 Review000Full0report.pdf?sequence=1 [Accessed 15 September 2012] World Economic Forum, Asian middle-class to drive growth [online]. Available from http://www.weforum.org/news/asian-middle-class-drive-growth [Accessed 15 September 2012] Asia Pacific University of Technology & Innovation Page | 36
  • 37. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM 8.0 Appendices (Please refeer to the attached CD) 8.1 Appendix 1 Source: Private Equity Indonesia, 2011 Available at: http://privateequityindonesia.wordpress.com/investors/ 8.2 Appendix 2 Vietnam domestic capacity by airline type (based on seats per week): 10-Oct-2011 to 16- Oct-2011 Source: CAPA – Centre for Aviation and Innovata, 2011 Available at: http://centreforaviation.com/blogs/aviation-blog/vietjet-launch-not-affected-by- airasia-pullout-60658 Asia Pacific University of Technology & Innovation Page | 37
  • 38. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM 8.3 Appendix 3 Source: Airline Network News and Analysis, 2010 Available at: http://www.anna.aero/2010/05/25/china-at-the-forefront-of-asian-air-travel- growth/ 8.4 Appendix 4 Vietnam Visitors - Vital Statistics (Source: General Statistics Office of Vietnam, Jan 2008 - Oct 2008) By what means do tourists arrive in Vietnam? By air 2,791,556 By sea 127,481 By road 678,804 Source: Vietnam Travel, 2009 Available at: http://www.vietnamtravel.org/vietnam-tourism-statistics Asia Pacific University of Technology & Innovation Page | 38
  • 39. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM 8.5 Appendix 5 8.6 Appendix 6 Source: Airasia, 2012 Available at: http://www.airasia.com/my/en/home.page Asia Pacific University of Technology & Innovation Page | 39
  • 40. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM 8.7 Appendix 7 8.8 Appendix 8 Asia Pacific University of Technology & Innovation Page | 40
  • 41. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM 8.9 Appendix 9 AirAsia Group Destinations IATA Airline AK AirAsia D7 AirAsia X FD Thai AirAsia QZ Indonesia AirAsia PQ AirAsia Philippines JW AirAsia Japan City Country IATA ICAO Airport AK D7 FD QZ PQ JW Refs [1] Abu Dhabi United Arab Emirates AUH OMAA Abu Dhabi International Airport Alor Setar Malaysia AOR WMKA Sultan Abdul Halim Airport [2] Balikpapan Indonesia BPN WALL Sepinggan International Airport Banda Aceh Indonesia BTJ WITT Sultan Iskandar Muda Airport Bandar Seri Begawan Brunei BWN WBSB Brunei International Airport Bandung Indonesia BDO WICC Husein Sastranegara International Airport Bangalore India BLR VOBL Bengaluru International Airport [3] Bangkok Thailand BKK VTBS Suvarnabhumi Airport [3] Bangkok Thailand DMK VTBD Don Mueang International Airport [4] Batam Indonesia BTH WIDD Hang Nadim Airport [5] Beijing China PEK ZBAA Beijing Capital International Airport Asia Pacific University of Technology & Innovation Page | 41
  • 42. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM City Country IATA ICAO Airport AK D7 FD QZ PQ JW Refs Bintulu Malaysia BTU WBGB Bintulu Airport Busan [6] South Korea PUS RKPK Gimhae International Airport [begins 28 November 2012] Chengdu China CTU ZUUU Chengdu Shuangliu International Airport Chennai India MAA VOMM Chennai International Airport Chiang Mai Thailand CNX VTCC Chiang Mai International Airport Chiang Rai Thailand CEI VTCT Mae Fah Luang-Chiang Rai International Airport Chongqing China CKG ZUCK Chongqing Jiangbei International Airport [7][8] Christchurch New Zealand CHC NZCH Christchurch International Airport Clark Philippines CRK RPLC Clark International Airport Colombo Sri Lanka CMB VCBI Bandaranaike International Airport Da Nang Vietnam DAD VVDN Da Nang International Airport [4] Darwin Australia DRW YPDN Darwin International Airport Davao Philippines DVO RPMD Francisco Bangoy International Airport [9][10] Delhi India DEL VIDP Indira Gandhi International Airport Denpasar Indonesia DPS WADD Ngurah Rai International Airport [11] Dhaka Bangladesh DAC VCBI Shahjalal International Airport Asia Pacific University of Technology & Innovation Page | 42
  • 43. CHAN CHEE MANG TP 021569 BM026-3-3-INTSM City Country IATA ICAO Airport AK D7 FD QZ PQ JW Refs [12] Fukuoka Japan FUK RJFF Fukuoka Airport Gold Coast Australia OOL YBCG Gold Coast Airport Guangzhou China CAN ZGGG Guangzhou Baiyun International Airport Guilin China KWL ZGKL Guilin Liangjiang International Airport [13] Haikou China HAK ZJHK Haikou Meilan International Airport Hangzhou China HGH ZSHC Hangzhou Xiaoshan International Airport Hanoi Vietnam HAN VVNB Noi Bai International Airport Hat Yai Thailand HDY VTSS Hat Yai International Airport Ho Chi Minh City Vietnam SGN VVTS Tan Son Nhat International Airport Hong Kong Hong Kong HKG VHHH Hong Kong International Airport [14] Hyderabad India HYD VOHS Rajiv Gandhi International Airport [15] Ipoh Malaysia IPH WMKI Sultan Azlan Shah Airport Jakarta Indonesia CGK WIII Soekarno–Hatta International Airport Johor Bahru Malaysia JHB WMKJ Senai International Airport Kalibo Philippines KLO RPVK Kalibo International Airport KTM VNKT Tribhuvan International Airport Kathmandu Nepal Asia Pacific University of Technology & Innovation Page | 43