AirAsia X: Can the Low Cost Model Go Long Haul? SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Leadership & Managing People
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of AirAsia X: Can the Low Cost Model Go Long Haul?
By 2007, AirAsia had become one of the most successful budget airlines in the world. Having conquered Southeast Asia, and entered China and India, AirAsia was poised to solidify its place as one of the foremost budget airlines and one of the most consistently profitable globally. But company founder Tony Fernandes had bigger plans. From the outset in 2001, Fernandes had intended to offer long haul service, competing against the largest and most established airlines in the world. However, his advisors had urged him to focus on regional, short to medium distance service. With many successes under his belt, Fernandes was once again ready to tackle long haul. Despite persistent claims from industry insiders that low cost long haul flights would never be profitable, Fernandes pushed forward with the expansion. Hiring 36-year-old Azran Osman-Rani as the CEO for the new long haul venture, nicknamed X, was a critical step in this process. X's inaugural flight to Australia took place in November 2007. In early 2010, X received its eleventh aircraft and was flying to 15 destinations on three continents. However, over time the substantial differences between long haul and short haul operating requirements became more apparent. Consequently, the management decided to formally separate X from AirAsia. This separation, and the inherent challenges for X and its recently appointed head of Commercial Operations, Darren Wright included: (1) how best to leverage the extensive network of the regional sister company AirAsia in selecting new and profitable destinations for X, (2) how to increase revenues without raising ticket prices, (3) how best to globally position the airline's brand in non-Asian markets, (4) how to shift his marketing team's mentality away from a start-up mindset, and (5) how to prepare for a global initial public offering within the next 12 months.
Authors :: Thomas Lawton, Jonathan P. Doh, Andreas Schotter, Ben Forrey
Swot Analysis of "AirAsia X: Can the Low Cost Model Go Long Haul?" written by Thomas Lawton, Jonathan P. Doh, Andreas Schotter, Ben Forrey includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Haul Airasia facing as an external strategic factors. Some of the topics covered in AirAsia X: Can the Low Cost Model Go Long Haul? case study are - Strategic Management Strategies, Entrepreneurship, Growth strategy and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the AirAsia X: Can the Low Cost Model Go Long Haul? casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, there is backlash against globalization, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices,
cloud computing is disrupting traditional business models, wage bills are increasing, etc
Introduction to SWOT Analysis of AirAsia X: Can the Low Cost Model Go Long Haul?
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in AirAsia X: Can the Low Cost Model Go Long Haul? case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Haul Airasia, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Haul Airasia operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of AirAsia X: Can the Low Cost Model Go Long Haul? can be done for the following purposes –
1. Strategic planning using facts provided in AirAsia X: Can the Low Cost Model Go Long Haul? case study
2. Improving business portfolio management of Haul Airasia
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Haul Airasia
Strengths AirAsia X: Can the Low Cost Model Go Long Haul? | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Haul Airasia in AirAsia X: Can the Low Cost Model Go Long Haul? Harvard Business Review case study are -
Ability to lead change in Leadership & Managing People field
– Haul Airasia is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Haul Airasia in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Haul Airasia is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Thomas Lawton, Jonathan P. Doh, Andreas Schotter, Ben Forrey can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Strong track record of project management
– Haul Airasia is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Low bargaining power of suppliers
– Suppliers of Haul Airasia in the sector have low bargaining power. AirAsia X: Can the Low Cost Model Go Long Haul? has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Haul Airasia to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Haul Airasia digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Haul Airasia has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
High brand equity
– Haul Airasia has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Haul Airasia to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Haul Airasia has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Haul Airasia has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Diverse revenue streams
– Haul Airasia is present in almost all the verticals within the industry. This has provided firm in AirAsia X: Can the Low Cost Model Go Long Haul? case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Sustainable margins compare to other players in Leadership & Managing People industry
– AirAsia X: Can the Low Cost Model Go Long Haul? firm has clearly differentiated products in the market place. This has enabled Haul Airasia to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Haul Airasia to invest into research and development (R&D) and innovation.
Learning organization
- Haul Airasia is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Haul Airasia is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in AirAsia X: Can the Low Cost Model Go Long Haul? Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Haul Airasia has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Highly skilled collaborators
– Haul Airasia has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in AirAsia X: Can the Low Cost Model Go Long Haul? HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses AirAsia X: Can the Low Cost Model Go Long Haul? | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of AirAsia X: Can the Low Cost Model Go Long Haul? are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the AirAsia X: Can the Low Cost Model Go Long Haul? HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Haul Airasia has relatively successful track record of launching new products.
High cash cycle compare to competitors
Haul Airasia has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Increasing silos among functional specialists
– The organizational structure of Haul Airasia is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Haul Airasia needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Haul Airasia to focus more on services rather than just following the product oriented approach.
Skills based hiring
– The stress on hiring functional specialists at Haul Airasia has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
No frontier risks strategy
– After analyzing the HBR case study AirAsia X: Can the Low Cost Model Go Long Haul?, it seems that company is thinking about the frontier risks that can impact Leadership & Managing People strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study AirAsia X: Can the Low Cost Model Go Long Haul?, in the dynamic environment Haul Airasia has struggled to respond to the nimble upstart competition. Haul Airasia has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study AirAsia X: Can the Low Cost Model Go Long Haul?, is just above the industry average. Haul Airasia needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Slow decision making process
– As mentioned earlier in the report, Haul Airasia has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Haul Airasia even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Lack of clear differentiation of Haul Airasia products
– To increase the profitability and margins on the products, Haul Airasia needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners
– Because of the regulatory requirements, Thomas Lawton, Jonathan P. Doh, Andreas Schotter, Ben Forrey suggests that, Haul Airasia is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study AirAsia X: Can the Low Cost Model Go Long Haul?, it seems that the employees of Haul Airasia don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Opportunities AirAsia X: Can the Low Cost Model Go Long Haul? | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study AirAsia X: Can the Low Cost Model Go Long Haul? are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Haul Airasia can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, AirAsia X: Can the Low Cost Model Go Long Haul?, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Loyalty marketing
– Haul Airasia has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Haul Airasia in the consumer business. Now Haul Airasia can target international markets with far fewer capital restrictions requirements than the existing system.
Building a culture of innovation
– managers at Haul Airasia can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Leadership & Managing People segment.
Manufacturing automation
– Haul Airasia can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Developing new processes and practices
– Haul Airasia can develop new processes and procedures in Leadership & Managing People industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Haul Airasia can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Haul Airasia can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Haul Airasia can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Haul Airasia has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study AirAsia X: Can the Low Cost Model Go Long Haul? - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Haul Airasia to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Haul Airasia can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. AirAsia X: Can the Low Cost Model Go Long Haul? suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Haul Airasia can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Haul Airasia has opened avenues for new revenue streams for the organization in the industry. This can help Haul Airasia to build a more holistic ecosystem as suggested in the AirAsia X: Can the Low Cost Model Go Long Haul? case study. Haul Airasia can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help Haul Airasia to increase its market reach. Haul Airasia will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Threats AirAsia X: Can the Low Cost Model Go Long Haul? External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study AirAsia X: Can the Low Cost Model Go Long Haul? are -
Environmental challenges
– Haul Airasia needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Haul Airasia can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Haul Airasia can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study AirAsia X: Can the Low Cost Model Go Long Haul? .
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Haul Airasia in the Leadership & Managing People industry. The Leadership & Managing People industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Haul Airasia can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Consumer confidence and its impact on Haul Airasia demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Haul Airasia in the Leadership & Managing People sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Haul Airasia has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Haul Airasia needs to keep up with the evolution of technology in the Leadership & Managing People sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Shortening product life cycle
– it is one of the major threat that Haul Airasia is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Haul Airasia with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Haul Airasia business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Haul Airasia high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Regulatory challenges
– Haul Airasia needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Leadership & Managing People industry regulations.
Weighted SWOT Analysis of AirAsia X: Can the Low Cost Model Go Long Haul? Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study AirAsia X: Can the Low Cost Model Go Long Haul? needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study AirAsia X: Can the Low Cost Model Go Long Haul? is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study AirAsia X: Can the Low Cost Model Go Long Haul? is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of AirAsia X: Can the Low Cost Model Go Long Haul? is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Haul Airasia needs to make to build a sustainable competitive advantage.
