Background of AirAsia AirAsia is a low-cost airline where headquartered near Kuala Lumpur

Background of AirAsia
AirAsia is a low-cost airline where headquartered near Kuala Lumpur, Malaysia. It is
the largest airline in Malaysia by fleet size and destinations. The main hub of AirAsia
is at the Kuala Lumpur International Airport 2 (KLIA 2), the low-cost carrier terminal
at Kuala Lumpur International Airport (KLIA) in Sepang, Malaysia. AirAsia has a
sister airline, which is called AirAsia X. AirAsia X focuses on the long distance routes.
Its affiliate airlines include AirAsia X, AirAsia China, AirAsia India, AirAsia Vietnam,
AirAsia Japan, Indonesia AirAsia, Philippines AirAsia and Thai AirAsia. AirAsia was
established in 1993, founded by a government-owned conglomerate, DRB-HICOM. In
200, Tune Air Sdn Bhd (Tony Fernandes’ company) bought the heavily indebted airline
at that time for one Ringgit (RM1). AirAsia’s slogan is ‘Now Everyone Can Fly’. It
seeks to keep cost low by offering no frills experience. AirAsia’s vision 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. One of the AirAsia mission is to be
the best company to work for whereby employees are treated as part of a big family.

The macroenvironment is the major external and uncontrollable factors that influence an
organization’s decision making, and affect its performance and strategies. These factors include
the economic factors, demographic factor, legal, political, and social conditions; technological
changes; and natural forces.
The macroenvironment factors that the company practice are:
1. Demographic factor
This process involves taking a larger target audience and breaking it down to a smaller,
more select market. Demographics segmentation is a common strategy where several
economic traits are used to categorize customers, such as age, gender, race or ethnicity,
income, education and occupation..AirAsia is situated in the geographic location where
3 billion people are. Majority of the people never flew before because of high travelling
cost. AirAsia stick to its low cost business model help AirAsia to tap into the market,
this is AirAsia competitive advantage. Southeast Asia provides an advantage to AirAsia
because the region is consisting of different ethnic group that can speak several different
language. For example, our country Malaysia has several different ethnic groups such
as Chinese, Malays, Indians, Thais and etc. So it provides AirAsia with the ability to
find staffs that are able to speak several different languages, something that is very
important and useful as they can rapidly expand their business outside Malaysia.

2. Economic factor
Various economic factors need to be considered when determining the current and
expected future value of a business or investment. For a business, key economic
factors include labour costs, interest rates, government policy, taxes and
management .Economic factor may affect consumer’s decision making. As Kotler says,
‘economic effect consumer’s buying power and spending patterns. The total buying
power depends on income, price, savings and etc of the consumer. In its early stages,
AirAsia create a promotional campaign which is giving away 1 million free tickets and
sales promotion campaign. Example of recent promotional campaign by AirAsia is
‘fare as low as RM39 from Penang to Kula Lumpur’. Malaysians were attracted to it so
hundreds and thousands of people who cannot afford to travel overseas begin to travel
overseas.

3. Technological factor
Technological factors are one of many external factors that can affect businesses. They
can be defined as factors which relate to the presence and development of technology,
on either a local or global scale. By utilizing information technology, airlines have been
able to reduce cost. Implementing e-ticketing system and using e-commerce can avoid
traditional travel agents. AirAsia was the first airline to have a mobile version on its
webpage. It went ticketless and introduce web booking service avoiding long queue and
waiting line at the travel agencies. AirAsia made use of the internet platform effectively
and helping them to reduce cost.
4. Environmental/Legal factor
Refer to how the law affects the way businesses operate and customers behave. Product
transportation, profit margins, and viability of certain markets are all examples of
things which may be influenced by legal factors. AirAsia has the youngest fleet in Asia,
with the new Airbus providing improved fuel efficiency. This is fortunate because
Europe has adopted a new policy that requires all airlines to pay for greenhouse gas
emissions released on journey to and from Europe airports. Labour unions in Asia is
weak compared to Europe or USA (United States of America) and this helps airlines in
Asia to remain competitive by reducing their overhead cost to a minimum.