Analyzing Airasia in Business Competition

Analyzing Air Asia in Business Competition Era11 FCU e-Paper (2009-2010)

Figure 5Porter's Five Forces

The five forces analysis of AirAsia as follow:

1.

Rivalry among existing competitors:

As Porter's generic strategies (1985), Airline operation can divide into two kindsof styles: differentiation and cost leadership. Some airlines will try to provide awell-done service to reach differentiation and the others will attempt to reducethe price and AirAsia is position as them. So industry rivalry is moderately highdue to the price competition is really popular in the airline industry.

2.

Threat of new entrants:

Threat of new entry is moderate. Because it requires high capital to support andgovernment barrier is high such as the air service agreement can build barriers tothose new entrants.

3.

Bargaining of suppliers:

The power of supplier is high due to the airplane manufacturers only Boeing andAirbus. The switching cost for the Boeing and Airbus is pretty low because it cansell same standards to another airline. And making airplane needs high techniqueand specialist so it is rarely possible for AirAsia to extend and integrate theiroperation into supplier part.

Analyzing Air Asia in Business Competition Era12 FCU e-Paper (2009-2010)

4.

Bargaining power of buyers:

The power of buyer is moderately high due to almost no switching cost forcustomers. Customers can compare each airline by the Internet so theinformation about the price and service is quite clearly.

5.

Threat of substitute products or service:

Threat of substitutes is moderately low. Due to the archipelago geographicalstructure of Asia customers must have to transport by airplane or cruise. And airtravel is faster and more convenient than cruise.

I. Capabilities Analysis

Once the strategic positioning and direction have been defined, then we are goingto view the capability of AirAsia. As the definition from Applegate, Austin and Soule(2009), "capabilities enable a company to execute current strategy while alsoproviding a platform for future growth. They define the resources needed to executestrategy and define the cost model of an organization. Capabilities also define theassets of a firm