Airasia Case Study

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1. What is the macro and industry environment in the Southeast Asian region for the entrance of new budget airlines? What opportunities and challenges are associated with that environment?

Macro environmental factors refer to the external forces which may affect the decision making process along with strategies and performance in an organization. Some of these macro factors may include political, economic, social, legal, and technological factors. In the case of AirAsia, certain macro environmental factors are looked at such as political, legal, economic, technological, and demographics.

Political and legal macros are influenced by law and government agencies. AirAsia has faced some issues due to the heavily regulated air travel in Asia.  After Fernandes engaged the support of the former prime minister of Malaysia, they developed an open skies agreement with Indonesia, India, Thailand, and Singapore.

Another macro environmental factor is the economic environment. AirAsia took into consideration the changes in income. In 2001, the timing could not have worked better for AirAsia. People experienced an increase in income and a more stable economic growth. While many could not travel too far, they were willing to travel to nearby countries.

The technological environment was also an advantage for AirAsia. Considering the fast growth of internet usage during that time, they were able to reach more and more customers through online booking.

Finally, when it comes to the demographic environment, AirAsia was able to study their market in order to establish a more resourceful and more efficient way of allowing people to travel. By studying the size, density, location, age and gender, AirAsia was able to successfully include both domestic and international destinations, this way they served the markets that are becoming more diverse both nationally and internationally.

1. How might demand for low-fare service differ in the Asia-Pacific region from North America and Europe?

First off, the demand between Asia-Pacific and North America and Europe differs mainly with the purchasing strategy that each airline use each. Axes Asia reveals that in Southeast Asia it is observed that low-fares are often the deciding factors for budget-conscious travelers. This was primarily driven by the Asian financial crisis in 1997 which put Asia in a tough position to get out of. The Asia-Pacific region continues to have a low average income that allows the anticipation of low fare demands to continue to increase. In the Asia-Pacific region, the population prefers to use alternative forms of transportation such as trains, buses and low-fare flights rather than utilize full-service flights, which are more expensive. However, in America and Europe, low-fare flights are part of a list of options that a consumer can choose from.