Market strategy and recommendations to enhance the USP

food market strategy and recommendations to grow the USP nervous strain Asia dish out damage has been volatile, with the contingent reasons for this volatility. Marketing Discuss the Market Strategy and recommendations to enhance the USP by using Models and diagrams.Ope dimensionn ManagementAnalysis of prioritise operations issues which be of strategical nature for the company and possible solutions. mental faculty Code MGTM IM 002Submitted to Programme Administration Team (Kaplan Financial)Submitted by Group 11Group members Name Student ID No.Chanakya C0346816Buddha C0364220Musharaf C0361333Saif C0360683Submission Date Friday 23rd April, 2010 slacken of ContentsTable of Contents 21. Introduction 32. Company Background 33. Meaning of dispense determine Volatility 33.2. practicable reasons for this volatility 44.2. Mareketing Strategy of picnic Asia 84.3. Environmental Analysis of transport Asia on the basis of Porters Five Forces (Chart-3) 95.1. note Asia Business s erve well 115.2. aerate Asia prioritises issues 125.3. Possible solutions 136. Conclusion 147. References 141. IntroductionThe company chosen for this report is Air Asia assigned by Kaplan Financial and assignment requirements as fol low-tonedA report of no more than 3500 wordsPossible reasons for the partake in volatilityMarket strategy to enhance USPOperational issues and possible solutions2. Company BackgroundAir Asia was initially established in 1996 as a full-service regional air passage offering slightly cheaper fares than its competitors. It was non performing well and its turning heyday was 2001 when it was bought by Tony Fernandes.Tony Fernandes restructured the company and re-established in Malaysia by enrolling whatsoever low cost skyway expert like Connor McCarthy (formal handler of masteryful European LCC Ryan air) in late 2001 as first no -frills, low cost carrier(LCC) in Asia, then it got huge success and become awards winner and giganticst low fare airline s in the Asia. Now Air Asia flies to over 61 domestic and inter discipline destinations with 108 routes with its own 72 aircrafts and operates over 400 flights daily.Air Asia believes in the no-frills, hassle free, low fare business organization concept and feels that keeping costs low requires game efficiency in e real part of the business. by means of its unique selling point (USP), NOW EVERYONE CAN FLY, Air Asia gained a revolution in airline business with more and more population choosing as their preferred choice of transport.3. Meaning of Share expenditure VolatilityMany of us use the word volatility in a loose sense, in a way that belies the accuracy with, which it bear be calculated. In fact, volatility is a statistical measure of the scale of fluctuations in the outlay of a share, a commodity or a stock market index in the recent past. It is generally taken to be a good measure for the congenator riskiness of an asset the higher the volatility, the greater the risk of losing notes. Volatility, however, is not a static thing. It fluctuates sometimes quite sharply over time. (Peter Temple 02.08.2007)3.1 Air Asia Share outlay VolatilityAs per Air Asia compositors case study the share bell of Air Asia has been volatile.Exhibit 5 Case StudyAirlinePrice on3Dec 2007US$Price on11 Jan 2008US$Share PriceChangeAir Asia0.520.43-16%Period of Change in Share PriceIn a very short term of a breaker point share price of Air Asia goes down by -16% in a period of 1 month and 1 week this is extreme change in share price so this is the sign of high volatility in share price.Air Asia Volatility from 2005-2009 (Chart -1)3.2. Possible reasons for this volatilityThere are lots of reasons for share volatility here in our case study of Air Asia. We chip in calculated on the basis of each year that volatility graph of Air Asia shown above.Latest reading in Stock Market Investing on share price needs lots of information about companys lay out situation. Investo r always invests their money if they saw the potential of getting good return from that investment. So information plays vital role to attract the investors. Market adjusts the prices up or down depending on the way the market interprets that the information will affect the companys proximo earnings ability.In Air Asia case study in November 2004 they listed in Malaysia Stock Exchange that air Asia is going to purchase 175-aircrft airbus A320-200 to replace Boeing 737-300s be dress A320-200 more force out efficient.This information attracts the investors to invest their money because market interprets that this will affect the companys future earnings ability.We can see in chart-1 in 2005 how share price go up by +0.63% so it shows the latest information has direct impact on share price volatility.Uncertainty Future is always uncertain some decision is made on the basis of future predictions. Investors are always keen on the past experience, current performance and future expectat ions of the company. Uncertainty is a major barrier for investor to oblige their mind to invest in share market.What exactly had happened in the Air Asia, in 2006 they choose to enter in to a domestic-route rationalising arrangement with MAS. Under this contract Air Asia took over more than two-thirds of MASs vent making routes assuming they can make profit from it as they are the LCC but this decision turns wrong because of uncertainty which is clear in chrat-1 that companys share price goes down by -5.03% .Psychological Issues on Stock Prices Human demeanour is one of the important factor that affect the share price of the company how investor commend about the company will determine whether to invest in it or not.Entering the British tycoon, founder and chairman of the Virgin Group Sir Richard Branson with 20% stake in Air Asia X in 2007. Expansion of business with Sir Richard Branson attracts the large numbers game of investors in the company because psychology of people be lieves the successful image of Richard Branson which as a result there is hike of share price by +6.62% in the year 2007.Inflation The overall general upward price movement of goods and go in an economy, usually as measured by the Consumer Price Index and the Producer Price Index. Over time, as the cost of goods and buy the farm increment, the value of money is going to fall because a person wont be able to purchase as much with that money as they previously could.Inflation is also one of the factors that affects the share price and leads to share volatility. As from the case study fuel cost had a significant impact on Air Asia, as it was the recession time occurs during the year 2008 were the international oil price reached at the high of about US $150 per barrel. So it was very costly for the airlines to purchase fuel at that high price which leads to increase the price of the tickets. As it was the recession time nodes also could not afford the change magnitude price plane fare so they used the alternatives way. Where there is less numbers of customers airline industries had lost Billions of dollars due to that occurrence. So inflation affected the share prices a lot.Although Air Asia tried to cover its operational cost by hedging, buy fuel-efficient airbus A320-200 and cutting fuel consumption by nearly and doubled the number of landing that we get from the tyre. They were not able to sustain on the same price of tickets.As per exhibit 6 case study.Following are the calculation give the sack and oil ratio = fuel and oil cost R regular(a)ue(2008) Fuel and oil ratio= 74164.88146731.5(2008) Fuel and oil ratio= 50.5%(2007) Fuel and oil ratio= 44488.62111346.3(2007) Fuel and oil ratio= 40.0%% = Current year ratio-base year ratio Base year ratio% = 50.5-40.0 40.0% = 26.25%So cost of the fuel increased by 26.25% due to hike in oil price in 2008 the cause of inflation has direct impact on companys net profit ratio if net profit is going to decrease so in vestor dont want to invest their money in non profit company. See chart-1 due to inflation the share price decreased by-45.34% in 2008.Demand and Supply It is another important factor that affects the share price. Demand is willingness and ability to pay where as supply depends on the market demand and suppliers ability. When demand is high supply is less and vice versa and when demand is high price of the product is also high and is low.In case of AirAsia recession caused its demand per share down in 2008, immersion of British tycoon Richard Branson increased the demand of share because of investors psychological beliefs. Restructuring of the no-frills, low cost in Asia increased the numbers of customers travelling with Air Asia which gives the US$6 million of profit celestial latitude 2002 which obviously rise of demand of share which leads to increased in share price.Economic Strength of Market and Peers Doing business in current market everyone should greet the market strength ens and the competitors of the business without considering these things it is impossible to do business. The economic strength of the peers heavily affected the share price of the company.The strong competitor of the Air Asia is MAS, as it is national carrier of Malaysia. To promote healthy competition in 2006 Malaysian government brought MAS and AIRASIA together then government starts with route rationalisation of MAS where Air Asia took 96 loss making routes of MAS while these routes were operated by MAS government used to ply subsidies for the fuel cost. This is totally unfair competition which leads share price down of Air Asia in 2006 you can see in chart 1.In 2008 MAS come up with the unaccepted everyday low fare Campion .It received an over whelming reaction which was funded by the government it was totally win-win position for MAS and that caused negative impact on Air Asia in 2008 which is clear from chart-1.4. Definition of Marketing StrategyA trade strategy is a proces s or model to allow a company or organization to focus limited resources on the best opportunities to increase sales and thereby achieve a sustainable competitive advantage.4.1. Porter generic strategiesStrategy on the dimensions of strategic setting and strategic strength. Strategic scope refers to the market penetration while strategic strength refers to the firms sustainable competitive advantage. The generic strategy framework (porter 1984) comprises two alternatives each with two alternative scopes. These are Differentiation and low-cost leadership each with a dimension of Focus-broad or narrow.Product differentiation (broad)Cost leadership (broad)Market segmentation (narrow)(Chart-2)4.2. Mareketing Strategy of Air AsiaAfter the restructured of the airline, the foundation is based on Low Cost and Strong Cash Flow,strategy is based on Low fare and service so close is obviousely on high margin and sustainable growth and vision is continue to be LOWEST cost. So you can see they are totaly focusing on the Low cost Low Pricing so they getting strong cash flow sustainable growth.So they are following porters generic strategy. Their strategic scope is referring to market penetration and while strategic strength refers to the firms sustainable competitive advantage. (On the basis of chart-2)Product differentiation Air Asia was the first airline street girl in Asia to adopt with the low-fare, no-frills concept. It also becomes the regions first airline to introduce fully ticketless travel and implements free seating policy. Thats Product differentiations makes It a successful airline in the market.Cost leadership Air Asia become the businesses that fully adopted cost leadership through operational effectiveness and efficiency. The cost advantages were enabled Air Asia to offered airfares 40% to 60% lower than those of its rivals. Some even cost less than bus fare. Even in 2008 when oil prices gone up they conditionled over the cost by layered-hedge strategy to pay for fuel in advance and qualify for low price its pilots have cut fuel consumption by nearly 20%.Market Segmentation Air Asia changes the human psychology in Asia by offering low fare and targeting middle class society. Earlier people think that whole rich people can fly but then come with the No frills, Low Cost Carrier under the tagline Now Everyone tooshie Fly. This whole idea captured the middle class and now no one is felling faired to fly.4.3. Environmental Analysis of Air Asia on the basis of Porters Five Forces (Chart-3)The threat of the entryway of stark naked competitors Air Asia is using penetration strategy under this there is always threat of the refreshful entry exist because Air Asia is get success in the field of LCCs so now everyone want to do same business with same strategy.The intensity of competitive rivalry Competition rivalry is currently in Air Asias favour. With price being the main battlefield of competition, Air Asia leads the way due to its low operating costs. However, there are more competitors entering the market that have major carriers as backers or owners which may lead to an unrealistic price war in the future.The threat of substitute products or services Air Asia is domestic carrier so there is existence of substitute services are high customer can go for Bus services either for Railways or for their own transport facilities because of low distance if their services and prices are not effective.The bargaining force-out of customer Today is world of Information Technology and communication everyone can find the world easily so easy availability of information and knowledge can make the bargaining power of consumer strong. E.g. customer can easily switch to other airlines by comparing the fares of different airlines. Even there are now lots competitors in LCCs so customer can easily move.The bargaining power of suppliers For Air Asia bargaining of suppliers is major factor. In the airline industry basically ther e are only two major aircraft provider Boeing and Airbus. Although Air Asia is major customer of Airbus even than the bargaining power of suppliers is high due to expertise and few substitutes.4.4. Unique selling Proposition of Air Asia Fernandes restructured Air Asia in 2001 , with the No Frills, Low Cost Carrier under the tagline Now Everyone Can Fly this unique selling point for Air Asia. This new business model was huge success. With this new unique selling point the company gained impressive profit. Then they come with aristocratic to Book, casual to Pay Easy to Fly to encourage sale through online booking, telephone booking and through co-partner local banks and post offices.4.5. Recommendation Some modification in current market strategy on the bases of Marketing Mix (7Ps) to enhance Unique Selling Point.Product (service) There is a huge opportunity for Air Asia to expand its route and service and numbers of flights, they also lacking in good service in terms of flight de lay. Because of it they get lots of complaints they should work on that to enhance good servicePrice They are working on penetration price strategy and under this they are providing the cheapest price in the market and that is a strengths but if you see the margins per seat is very low it makes turn over high but not the net profit so they should control the operating cost to cover up that margin. So they should go with penetration.Place Presently Air Asias putting more stress on Malaysia. Singapore, Thailand and Indonesia wheresoever Air Asia X only on Australia but low cost concept can also capture the market of India, China, Pakistan and Bangladesh and for long haul they can go for Europe and US.Promotions As LCCs they are moreover targeting the middle class so to keep up the sale and to enhance USP they should come up with the new promotions scheme after a certain period of time because middle class is major customer, they should know they like changes and savings in their purch asing.People From the kickoff they are only providing standard-class service on board its seems they are not targeting business class so if they come up with some of its more business concerned routs with business class they must get positive response. plow Refers to the systems used to assist the organisation in delivering the service. Process must be very easy so that customer feels comfortable and convenient and preferred again and again.Physical Evidence Where the service is provided. Physical Evidence is factor which makes customer to make judgement on the company or service. E.g. Customer accept what he/she spent so from the starting Air Asias tag line is No Frill airline but if you provide the frills even in the low cost it makes everyone happy. My meaning for frills is good service with the outstanding staff presentation and an unexpected intimate of the craft.5. Operation ManagementThe collection of people knowledge, technology, and systems within an organisation that has primary responsibility for producing and providing the organizations products or services is referred to as operations. Operations direction is the planning, scheduling, control and co-ordination of the activities that transubstantiate inputs into finished goods and services. It is important because it can reduce costs, differentiate the organizations products and services and impact upon quality and therefore may increase revenue through increased customer satisfaction. (Phil Kelly 2009).This section is a process analysis to identify and prioritise current strategic operation issues and possible solution for Air Asia.5.1. Air Asia Business ProcessAir Asias Operations management is focusing carefully on managing the processes to produce and distribute its services.These processes include-Procurement- buying various materials from suppliers and vendorsManagement control and arrange functions to ensure goals are being met.Product (service)- managing the service- creation, developme nt, distribution and sales.Quality management important to effective operations management by continuous improvement.Inventory management-Method like JUST-IN-TIME inventory control saves costs and improves on quicker delivery to end customers.Logistics management focuses on the flow of services from Air Asia to its customer prioritizing on efficiency and cost effectiveness.Distribution channels.8) Booking by mobiles is also available.5.2. Air Asia prioritises issues1. Air Asia always focused on how to reduce inefficiency and make it low possible fare in the airline business As we know they are operating penetration on market strategy to reduced costs, they even decrease the salaries and incentives of the employees, cutting down the staffs and even cutting down this facilities given to staffs and implementing the new efficient system like YMS, CRS AND ERP, which were helpful to reduced the cost but not to that extent.2. Higher fuel cost around the world Frequent fluctuation in fue l cost is one of the major problem for Air Asia as its emphasis on low cost their profit margin per ticket is low as price of fuel goes up they have to charge tickets price which creates negative effects in customers eyes.3. Complain Its because of delay in flight and even cancellation is one of the major current issues in Air Asia.4. No maintenance, come to and overhaul As we know they dont have their own maintenance, repair and overhaul so they have to spend on maintenance, repair and overhaul.5. Incresing competition At present competition in the airline industries growing day by day many full service airlines start cut costs to compete and new entry of LCC.6. Aviation regulation and government policy Changing rules and regulation in aviation industry and government policies is also one of the issues that Air Asia facing today.7. Easy to buy, easy pay and easy to fly In Malaysia Air Asia company was the first internet ticket seller airlines company. They are offering Easy to Bo ok, Easy to Pay Easy to Fly system for their customers. So customers are easily paying and booking their ticket by online5.3. Possible solutions1. Cost control As we know cost is one of the main possible solutions that can save any organisation from loss and compete in the competitive market. Air Asia can save their cost by starting their own maintenance and repair wing and overhaul routes.2. Implementing the APS system Implementation of APS system will provide several new functions to Air Asia. The followings are several APS functions that can help Air Asia in increasing its performanceAPS system will help Air Asia in assessing suppliers performance and providing the capability to streamline monitoring process. (Aberdeen Group, 2004).Supplier portal will provide information hub for airlines and their suppliers to prevent errors happened during operational activities such as parliamentary law processing (Aberdeen Group, 2004)These functions enable airlines and aircraft manufacture rs and other suppliers to have collaboration strategy in managing inventory (e.g. spare parts), maintenance schedule, and design collaboration. Route profitability analysis tools enable airline companies to conduct analysis for planning efficient routes.3. Outsourcing Air Asia can use outsourcing strategy to be a lowest carrier in airline industry. If they can implement outsourcing strategy then they will get some benefits like,Cost benefitsIt will reduce risk.Outsourcing can give competitive advantage in Air Asia.Air Asia can reduce cost for IT.4. Expansion of Air Asia business As Air Asia is focusing on middle class people its expansion towards Indian and China has potential to gather the huge success. We know the population of Asian middle class are rising very fast. So it is a great opportunity for LCC cost airlines including Air Asia to expand their business in Asia.6. ConclusionAs we know Air Asia is a leading low fare airline in Asia. Its low cost attracts more and more custo mers and its market value and has increased its revenue. But knowing it from near its share price is volatile so management should focused on sustainable development with utilising marketing mix as we discussed above and should focused on customers as customers are key point for the companys success. Only low cost will not sufficient to survive in the competitive market. Providing good services like as they are saying easy to book, easy to buy and easy to fly but it is not always the facts as they are getting complains of delaying flight and even cancellation which makes bad reputation in the eyes of customers. Thats why they need to operates APS systems to overcome such a problems.